The levy of excise duty on bitumenised waterproof paper is not valid as it amounts to double taxation, as both kraft paper and bitumen have already suffered excise duty.

The question that arises in all these writ petitions for consideration is whether bitumenised waterproof paper is liable to be assessed to excise duty under entry 17(2) of the First Schedule to the Central Excises and Salt Act, 1944.

2.The petitioner in each of these petitions is manufacturer of bitumenised waterproof paper. The bitumenised waterproof paper is obtained by bonding together the layers of kraft paper with bitumen. In obtaining such bitumenised waterproof paper, the base paper viz, the kraft paper is subjected to various processes and treatment. Accordingly to the petitioners, no excise duty was being levied on bitumenised waterproof paper till 27-5-1976. On 27-5-1976 the Government of India issued notification M.F. (D.R.B.) No. 184/76-C.E. By this notification the Government of India fixed the duty at 121/2% for the bitumenised waterproof paper under entry 17(2) of the first schedule to the Act. Consequently, the petitioners have filed these writ petitions for the issue of a certiorari fied mandamus forbearing the respondents from collecting excise duty on the bitumenised waterproof paper as per notification dated 27-5-1976 and for quashing the notification dated 27-5-1976.

3.Mr. K. Doraisami, the learned Counsel for the petitioners in all these writ petitions contended that the bitumenised waterproof paper was nothing but ordinary kraft paper. No manufacturing process was involved in bringing into existence bitumenised waterproof paper. The process involved in bringing into existence bitumenised waterproof paper is only by bonding together the kraft paper with bitumen. The bitumenised waterproof paper still retains its identity as paper. The kraft paper which is one of the constituents of bitumenised waterproof paper, has already suffered excise duty under entry 17(2) of the First Schedule to the Act. Similarly, bitumen has also suffered excise duty. The kraft paper forms 95% of the content of bitumenised waterproof paper, while bitumen forms 5%. In the circumstances, excise duty if levied on bitumenised waterproof paper will amount to levying excise duty twice on paper which is not warranted by the provisions of the Act.

4.Mr. K. N. Balasubramanian, on the other hand, submitted that entry 17(2) takes in paper and paper board of all sorts. By treating kraft paper with bitumen under high pressure the petitioners are bringing into existence a distinct commercial commodity into the market. The bitumenised waterproof paper is not known in the market as ordinary kraft paper. Consequently, the bitumenised waterproof paper is liable to excise duty.

5.The real question in issue is whether in treating kraft paper with bitumen, the petitioners can be said to be manufacturing paper within the meaning of entry 17(2) of the First Schedule to the Act. By treating kraft paper, with bitumen the kraft paper does not lose its essential character as kraft paper. The identity remains the same even after it being treated with bitumen. Consequently it cannot be said that a manufacture is involved in the process of treating kraft paper with bitumen. In other words, the process does not involve a change in the character of paper and transform it into another product which can be described as a manufacture of some other product. InS.B. Sugar Millsv.Union of India 1978 E.L.T. is 336) the Supreme Court observed as follows with reference to the meaning of 'manufacture' as defined in the Act.

"The Act charges duties on manufacture of goods. The word 'manufacture' implies a change but every change in the raw material is not manufacture. There must be such a transformation that a new and different article must emerge having a distinctive name, character or use. The duty is levied on goods. As the Act does not define goods, the Legislature must be taken to have used the word in its ordinary dictionary meaning. The dictionary meaning is that to become goods it must be something which can ordinarily come to the market to be bought and sol