JUDGMENT

KASLIWAL, J.:— This appeal by special leave is directed against the order of Bombay High Court, dt. 2-12-1987 (Reported in (1988) 33 ELR 292 (Bom) ). Brief facts of the case are that respondent is the sole proprietor of a concern known as Neptune Water-proof Manufacturing Company (in short the company) and carries on business of manufacturing Water-proof Kraft Paper. The company manufactures the following products:

i) Bitumanised Water-proof packing paper.

ii) Polythene-lined kraft.. packing paper.

iii) Waxed Kraft packing paper.

iv) Jute-lined - bitumanised water-proof packing paper.

v) Waxed kraft packing paper

vi) Hessain-lined kraft paper.

The company purchases kraft paper from the open market as well as other materials like bitumine, polythene, jute fibre and wax and thereafter combines these materials with kraft paper in its factory. Till October 30, 1980 the company classified its products under Item 17(2) of the schedule to the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act) and paid duty accordingly. On October 30, 1980 the company discovered that none of its products were liable to payment of duty as the same did not fall within the expression "m