2015 Supreme(SC) 731

SUPREME COURT OF INDIA
A.K. SIKRI, ROHINTON FALI NARIMAN, JJ.
M/S. COASTAL PAPER LTD. – APPELLANTS
VERSUS
COMMNR. OF CENTRAL EXCISE, VISAKHAPATNAM - RESPONDENTS
CIVIL APPEAL NO. 4908 OF 2005
Decided On : 21.7.2015.

IMPORTANT POINTS
When common parlance meaning leads to absurd results, resort has to be made to purposive interpretation.
In the Notification No. 22/1994-CE dated 01-03-1994 mentioning 'bamboo, hard woods, soft woods, reeds (other than Sarkanda) or rags'; ‘rags’ has to be read ejusdem generis to mean as made up of only those materials having direct bearing on environment. Will not include jute bags or gunny bags.

Headnote:(a) Statutory interpretation – Rags – Ordinary common parlance meaning and contextual purposive meaning – If common parlance meaning of the word ‘rags’ is used – Respondent-assesee would not be entitled to concessional rate of tax – However, reading the Notification as a whole makes it necessary to interpret the word in keeping in view of the objective of the Notification – Hence adopting the common parlance meaning would not be proper. (Para 12)

       (1990) 3 SCC 447 – Relied upon impliedly

       (b) Statutory interpretation – External aids – Rags – Whether includes waste of gunny bags – Survey of previous notification granting concessional rate of tax for use of non-conventional sources to alleviate use of bamboo etc. – Shifting of concept from positive list to negative list – Indication of broadening the range of such materials – Jute or jute waste including old gunny bag waste always understood as non-conventional material at least since 1990 – Merely by introducing the word ‘rags’ in the Notification No. 22/1994-CE these material cannot be considered in the negative list. (Para 15, 17, 22)

       (c) Statutory interpretation – Rags – Notification No. 22/1994-CE dated 01-03-1994 – 'Bamboo, hard woods, soft woods, reeds (other than Sarkanda) or rags' – Words preceding ‘rags’ are conventional raw materials having direct bearing on cutting of trees and in turn on environment – Therefore ‘rags’ has to be read ejusdem generis to these words – Rags should be made up of only those materials having direct bearing on environment – Will not include jute bags or gunny bags. (Para 16)

       (d) Statutory interpretation – Word not defined in the Notification – Common parlance meaning giving absurd result – Particular meaning defining purpose of Notification has to be assigned. (Para 20)

       (1996) 11 SCC 332; (2000) 8 SCC 642 – Relied upon

       (e) Words and Phrases – Rags in context of paper manufacturing – All books on paper technology define 'rag' or 'rag pulp' as one which is made from cotton waste or cotton textile material – No material produced by Revenue showing inclusion of jute or gunny bags under the category ‘rags’. (Para 27)

       Facts of the case:

       The appellant-assessee is a paper mill which is engaged in the manufacture of paper using various conventional raw materials and also non-conventional raw materials, namely, waste gunny bags, jute waste etc. The assessee is exigible to Central Excise on the paper manufactured by it.

       In order to encourage production of paper by use of non-conventional raw material, the Government of India issued Notification No. 22/94-CE dated 01.03.1994 which assures concessional rate of duty at 5% for “paper and paperboard or articles made from non-conventional material”.

       The assessee wants to pay concessional rate of excise duty as its contention is that pulp of waste gunny bags or jute waste does not fall in any of the materials mentioned in the Notification.

       The Revenue, on the other hand, has taken the position that the pulp of waste gunny bags/jute waste is nothing but pulp of 'rags' and since the Notification, particularly, disentitles the benefit thereof if the pulp is made from rags, the assessee is not covered by the said Notification. The question, therefore, that falls for consideration is as to whether pulp of waste gunny bags/jute waste is to be treated as the pulp made from the material 'rags'.

       On 28.04.2000, a show-cause notice was issued by the Revenue to the appellant stating therein that the paper manufactured by using jute bags/ gunny bags are not eligible for exemption under the said notifications or successor notifications whereby the aforesaid notification was amended from time to time. Extended period of limitation was invoked under proviso to Section 11A of the Central Excise Act, 1944 and demand of differential central excise duty for the period from 01.04.1995 to 31.10.1999 and November, 1999 to May, 2000 was given.

       The Commissioner passed Order-in-Original accepting the contention of the assessee and dropping all the three show cause notices. He also held that show cause notice dated 28.04.2000 is barred by limitation as well under Section 11A of the Act as the Revenue was not entitled to invoke the proviso to Section 11A and claim extended period of limitation.

       The CESTAT has upset the decision of the Commissioner on merits, holding that the waste of jute/gunny bags amounts to 'rags' and, therefore, pulp made out of it and use for manufacture of paper would not be covered by the said Notification.

       

       Finding of the Court:

       Jute or gunny bags are not rags within the meaning of the Notification No. 22/1994-CE dated 01-03-1994.

       Result: Appeal allowed.