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the goods produced by them, namely, computer stationery, business forms and other allied products fall under sub-Heading Nos. 4901.90 and 4820.00 of the Schedule to the Central Excise Tariff Act, 1985 [for short “the Tariff Act”] and, therefore, the said articles are chargeable to NIL rate of duty.

Continuous stationery, Endlospapier

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 REPORTABLE

 IN THE SUPREME COURT OF INDIA

 CIVIL APPELLATE JURISDICTION

 CIVIL APPEAL NOS. 4077 OF 2003

COMMNR. OF CENTRAL EXCISE, MEERUT-II ...APPELLANT 

 VERSUS

M/S. SUNDSTRAND FORMS P. LTD. 

...RESPONDENT

 JUDGMENT

Dr. MUKUNDAKAM SHARMA, J.

1. The present appeal arises out of the judgment and order 

 dated 14.5.2002 of Customs, Excise and Gold [Control] 

 Appellate Tribunal, New Delhi [for short "the Tribunal"] 

 allowing the appeal filed by the Respondent-assessee and 

 Page 1 of 23

 setting aside the order dated 28.12.2000 of the 

 Commissioner, Central Excise, Meerut-II, U.P..

2. In order to decide the issues arising in the present case in 

 proper perspective, basic facts leading to filing of the 

 present appeal are being recapitulated hereunder. 

3. Respondent is a firm engaged in the manufacture of 

 computer stationery, business forms, etc., [carbonless or 

 with carbon]. The respondent claims that the goods 

 produced by them, namely, computer stationery, business 

 forms and other allied products fall under sub-Heading Nos. 

 4901.90 and 4820.00 of the Schedule to the Central Excise 

 Tariff Act, 1985 [for short "the Tariff Act"] and, therefore, 

 the said articles are chargeable to NIL rate of duty.

4. Multi copies of computer stationery are manufactured either 

 by inserting carbon paper between the two sheets of paper 

 or by chemical treatment of the paper to make itself copying 

 [carbonless stationery]. 

 Page 2 of 23

5. The carbonless paper is a chemically treated paper used for 

 producing impression of the writing or manuscript of the 

 original paper on the other paper sheet. Such carbonless 

 paper, which is a kind of copying paper is processed firstly 

 by printing, which is done at pre-fixed places of the paper 

 with the purpose of printing names of the buyers, logo or 

 some other words as desired by the buyers and after the 

 said process is over the printing paper is then passed 

 through coating unit for applying chemical to develop the 

 character of self-copying paper. The backside of the paper is 

 coated to obtain top copy and front coating is done on the 

 sheet which is to be used as bottom copy. The next step, 

 which is the final step, is to get chemically coated copy 

 passed through the coating unit for perforation, punching 

 and fan-folding. 

6. There is also no dispute with regard to the fact that the 

 carbonless paper or self-copy paper emerges at the 

 intermediate stage and has its own life but the same could 

 be further used in the manufacture of stationery in 

 Page 3 of 23

 continuous process. There is also no dispute with regard to 

 the fact that the carbonless paper is a well known 

 marketable commodity as is evident from the process of 

 manufacturing. The carbonless paper or other paper 

 cannot be treated as the computer stationery unless it is 

 subjected to the second stage of processing, i.e., the process 

 of perforation, punching and fan-folding etc. Therefore, in 

 common trade parlance the computer stationery is 

 processed through various modes of processing as indicated 

 hereinbefore. 

7. On intelligence, a team of Central Excise Officers visited the 

 factory premises of the respondent herein at Noida and 

 examined the manufacturing process of the carbonless 

 stationery. It was found that the respondent-company was 

 purchasing carbonless paper in roll form, coated with 

 chemical on backside or front side or on both sides, from 

 the market and such carbonless paper was subjected to the 

 process of only printing and perforation, etc., for the 

 manufacture of the stationery. 

 Page 4 of 23

8. The Commissioner, Central Excise, Meerut-II issued a show 

 cause notice dated 30.04.1998 wherein it was alleged that 

 the respondents were engaged in evasion of duty on 

 carbonless paper which emerged at the intermediate stage 

 during the course of manufacture of carbonless stationery 

 from the plain paper. Therefore, they were asked to show 

 cause as to why duty amounting to Rs. 49,05,335.00 which 

 was allegedly not paid on the carbonless paper 

 manufactured and removed from their factory during the 

 period from 1993-94 to 1997-98 [upto 12/97] should not be 

 recovered from them under Rule 9(2) of the Central Excise 

 Rules, 1944 read with provisions of Section 11A(1) of the 

 Central Excise Act, 1944 invoking extended period of 5 

 years and also to show cause as to why penalty and interest 

 on the evaded duty should not be imposed upon it. The said 

 notice proposed to charge duty on the said carbonless paper 

 emerging at the intermediate stage under sub-heading No. 

 4816.00 to the Schedule to the Central Excise Tariff Act, 

 1985. 

 Page 5 of 23

9. Simultaneously, proceedings were initiated against MD and 

 Deputy MD of the respondent-company for imposing 

 penalty upon them. Thereafter, six other show cause notices 

 were also issued on the same issue to the respondents for 

 raising the demand of duty in terms of Rule 9(2) of the 

 Central Excise Rules, 1944 read with Section 11A of the 

 Central Excise Act, 1944 and invoking penal provisions.

10. Notice issued by the Department mentioned that the 

 respondent-company is engaged in evasion of duty on 

 carbonless paper which emerged at the intermediate stage 

 during the course of manufacture of carbonless stationery 

 from the plain paper. Therefore, the Department demanded 

 Central Excise duty at the intermediate stage when the 

 paper is coated to make it carbon less paper or self-copying 

 paper. Notice alleged that the carbonless paper is a separate 

 commodity, different from plain paper, and its user is also 

 different from the ordinary paper. The carbonless paper 

 emerged on subjecting certain process, i.e., application of 

 chemicals and printing which was done to describe the 

 Page 6 of 23

 name of the buyer and other details relating to which 

 ultimately the paper was to be used for in the present case. 

 The printing was only incidental to the carbonless paper 

 emerging at the intermediate stage and that the printing 

 was not in any way necessary for the manufacturing of 

 carbonless paper which emerged at intermediate stage. 

 According to the Department, such carbonless papers could 

 be further used into the manufacturing of the stationery in 

 continuous process, as it was evident from the process of 

 manufacture and statement of the party that the process of 

 perforation, punching and fan folding, etc., was responsible 

 to convert carbonless paper/other paper into computer 

 stationery. 

11.The Department classified the product as "the coated 

 paper" at the intermediate stage under Heading 48.16 of the 

 Tariff Act which applies to carbon paper, self-copying paper 

 and other copying or transfer papers. Notice alleged that the 

 printing of certain words only specified the buyer but it 

 would not in any way make them unmarketable, as the 

 Page 7 of 23

 carbonless paper which emerged at the intermediate stage 

 in the course of the manufacture of the carbonless 

 stationery was similar to carbonless paper purchased from 

 the market and the only difference was that in the case of 

 the respondent the carbonless paper manufactured at their 

 end was printed with some words relating to the buyers. 

12. Thereafter, the Commissioner in its Order-In-Original dated 

 28.12.2000 confirmed the demand of the department and 

 imposed penalty of Rs. 50 lakhs on the respondent-

 assessee.

13. Aggrieved by the same the respondent-assessee filed an 

 appeal before the Customs, Excise and Gold [Control] 

 Appellate Tribunal, New Delhi which vide its order dated 

 14.05.2002 held that the impugned product is not 

 classifiable under heading 48.16 as carbonless paper and 

 allowed the appeal of the respondent. 

14. Being aggrieved by the said order of the Tribunal, the 

 Department has filed the present appeal, on which we heard 

 Page 8 of 23

 learned counsel appearing for the parties, who have taken 

 us through all the materials available in the record.

15. There are two specific issues which arise for our 

 consideration in the present appeal and the same were also 

 argued extensively by the counsel appearing for the parties. 

 The first issue, relates to under which particular heading 

 the intermediary product would fall or is it to be treated as 

 a final or end product, under heading 4820.00 of the 

 Schedule to the Central Excise Tariff Act. The second issue 

 arising for our consideration is as to whether or not the 

 intermediary product in question has a marketability 

 prospect and capability. 

16. The counsel appearing for the appellant argued that the 

 intermediary product with which we are concerned falls 

 under Heading No. 48.09 read with 48.16 of the Schedule to 

 the Central Excise Tariff Act whereas according to the 

 counsel appearing for the respondent-company the same 

 falls under the Heading 48.20 or under sub heading 

 4901.90 of the Schedule. 

 Page 9 of 23

17. In support of his contention, counsel appearing for the 

 respondent-assessee relied upon the Circular dated 

 15.10.1991 issued by the Central Board of Excise and 

 Customs, Government of India, New Delhi, which was 

 issued in relation to classification of paper printed with a 

 format of air line tickets or embarkation/disembarkation 

 cards and submitted that they were under a bona fide belief 

 in view of the said circular that no duty was attracted on 

 the printed coated paper arising at the inter mediate stage 

 during the continuous process of manufacture of carbonless 

 computer stationery and that in the said circular it was 

 clarified that formats (of airline tickets, embarkation cards, 

 etc.) which have ink deposited at appropriate places on the 

 reverse side, instead of being classified under Heading 

 48.09 or 48.16, would be classifiable under sub-Heading 

 4820.00 or 4901.90 attracting nil rate of duty and that the 

 Department is bound by its own Circular issued by the 

 Board. 

 Page 10 of 23

18. On the other hand, counsel appearing for the appellant 

 vehemently argued that the said Circular has no application 

 to the facts of the present case as the Circular neither deals 

 with continuous carbonless computer stationery paper nor 

 with the carbonless stationery and that it actually deals 

 with plain continuous computer stationery.

19. It is the case of the appellant that the product 

 manufactured by the respondent company is carbonless 

 paper/self-copying paper, which is coated and therefore the 

 same should fall under Heading 48.09 for which excise duty 

 at the rate of 20% is payable. However, heading 48.09 

 prescribes a particular size of paper in rolls of a width 

 exceeding 36 cm or in rectangular (including square) sheets 

 with at least one side exceeding 36 cm in unfolded state. 

 Consequently, the said heading would not be applicable 

 exactly to the product of the respondent in the present case. 

 However, what is applicable is Heading 48.16, which reads 

 as follows:

 Page 11 of 23

 "48.16 4816.00 Carbon paper, self-copy paper 

 and other copying or transfer 

 papers (other than those of 

 heading No. 48.09), duplicator 

 stencils and offset plates, of 

 paper, whether or not put in 

 boxes. 

 Rate of Duty 20%"

20. The respondent, however, submitted that they manufacture 

 Registers, account books, note books and other allied 

 products for which Nil duty is prescribed under Heading 

 49.01 of the Schedule, where the description of goods is 

 printed books, newspapers, pictures and other products of 

 the printing industry; manuscripts, typescripts and plans. 

 According to the counsel appearing for the respondent the 

 products manufactured by them should be treated falling 

 under Heading No. 49.01. Reference was also drawn to the 

 opinion of the Institute of Paper Technology, Saharanpur, 

 U.P. 

21. The said opinion clearly indicates that computer stationery 

 is different from carbonless paper and self copying paper. It 

 was also indicated therein that carbonless papers or self 

 Page 12 of 23

 copying papers are fully coated throughout and are 

 available in reel/sheet form. 

22. There is a set of Interpretative Rules for interpreting 

 headings of the Schedule to the Central Excise Tariff Act. 

 Para 2A of the same provides that any reference in a 

 heading to the goods shall be taken to include a reference to 

 those goods incomplete or unfinished, provided that, the 

 incomplete or unfinished goods have the essential character 

 of the complete or finished goods. Para 3 thereof provides 

 that when goods are classifiable under two or more 

 headings, classification should be effected by relying on the 

 heading which provides the most specific description and 

 the same would be preferred to headings providing a more 

 general description. 

23. In the tariff provided under Chapter 48, there are certain 

 notes which are relevant for the purpose of interpreting the 

 subject matter of various headings. Note 7 thereof, 

 provides, that paper, paperboard, cellulose wadding and 

 webs of cellulose fibres answering to a description in two or 

 Page 13 of 23

 more of the heading nos. 48.01 to 48.11 are to be classified 

 under one of such headings which occurs last in the 

 numerical order in the Schedule. Note 11 thereof also 

 provides that except for the goods of Heading No. 48.14 or 

 48.21, paper, paperboard, cellulose wadding and articles 

 thereof, printed with motifs, characters or pictorial 

 representations, which are not merely incidental to the 

 primary use of the goods, fall in Chapter 49. 

24. Strong reliance was placed by the counsel appearing for the 

 respondent on the Circular dated 15th October, 1991, issued 

 by the Central Board of Excise and Customs, Government 

 of India, New Delhi. The said circular relates to levy of duty 

 on paper sheets printed with format of airline tickets or 

 embarkation/disembarkation cards and classification 

 thereof. The said circular clarifies and relates to airline 

 tickets. A bare glance on the aforesaid circular makes it 

 crystal clear that the intermediary products referred to in 

 the present appeal are not directly relatable to airlines 

 tickets or embarkation/disembarkation cards. Besides, the 

 Page 14 of 23

 aforesaid circular deals with the end product, namely, the 

 computer stationery which is classifiable under Heading 

 48.20. If the end product is classifiable under Heading 

 48.20 then it would be difficult to say that the intermediary 

 product would also fall under heading 48.20. In our view, 

 the appropriate specific heading for the intermediary 

 product would be Heading 48.16.

25. The Commissioner of Customs, who has passed the Order-

 In-Original was conscious of the aforesaid fact. According 

 to him, the carbonless paper/self copying paper, which is 

 an intermediary product is classifiable under Headings 

 48.09 and 48.16 depending upon the size of the papers 

 manufactured by the respondent company whereas the end 

 product i.e. the computer stationery is classifiable under 

 Heading 48.20, which attracts NIL rate of duty. According 

 to him although the final product is not dutiable, as the 

 same is classifiable under Heading 48.20, where NIL rate of 

 duty is prescribed, but so far as intermediary product is 

 concerned it is to be classifiable under Heading 48.16 and 

 Page 15 of 23

 the duty payable for such intermediary goods is prescribed 

 as 20%.

26. The Commissioner has given cogent reasons as to why the 

 carbonless paper emerging at intermediate stage would be 

 classifiable under heading 48.16. According to him goods 

 covered under Headings 48.09 and 48.16 are of same kind 

 except that in latter heading the goods, other than in roll 

 form or in rectangular sheet with at least one side exceeding 

 36 cm fall and that applying the principle of ejusdem 

 generis, the carbonless paper whether printed or not which 

 is not in roll form or in the sheet form with one side 

 exceeding 36 cm would be covered under sub heading No. 

 4816.00. 

27. Having decided the aforesaid classification in the aforesaid 

 manner, so far, intermediary product is concerned the 

 Commissioner also considered the scope of marketability of 

 the intermediary product in question. Relying on the 

 statements made by the Director of the respondent-

 company themselves and other relevant documents on 

 Page 16 of 23

 record the Commissioner came to a finding that the 

 carbonless paper even in printed form could be sold or 

 purchased although the number of the customers is 

 restricted. He also found on appreciation of the documents 

 on record that carbonless paper invariably emerges during 

 the course of manufacture of computer stationery and such 

 carbonless paper emerging at the intermediary stage is 

 known to the market, has a distinct and very well-identified 

 market and is capable of being marketed.

28. It has been indicated from the findings of the Commissioner 

 that the respondent company not only manufactures the 

 end product but it also manufactures the intermediary 

 products which are sold by them even in the roll form in the 

 market. Invoices indicating sale by the respondent have 

 also been placed on record and from scrutiny of the same it 

 appears that such intermediary products were sold in roll 

 forms only. It is also an undisputed fact in the present case 

 that the respondent themselves purchased intermediary 

 products from the open market. But then only difference 

 Page 17 of 23

 even according to them also is that such carbonless paper 

 with coating purchased from the market is of inferior 

 quality. 

29. The Tribunal, however, while dealing with the appeal filed 

 before it upset the aforesaid findings holding that 

 respondent- assessee was engaged in the manufacture of 

 printed computer stationery and not self copying paper, and 

 therefore, the intermediary products of the respondent 

 cannot be classified under Heading 48.16. 

30.The Tribunal also relied upon the Circular dated 

 15.10.1991 issued by the Central Board of Excise and 

 Customs for coming to a finding that provided tickets, 

 printed circulars, letters, forms etc. which are essentially 

 printed matters requiring filing up of only minor details 

 would be covered by sub heading 4901.90.

31. Having examined the record and the description of the 

 goods in the headings and upon noticing rules of 

 interpretation of the Schedule to the Central Excise Tariff 

 Act, we are of the considered opinion that although the 

 Page 18 of 23

 respondent company may be registered for newspapers, 

 etc., but it cannot be said that either the end product or the 

 intermediary product would fall under Chapter 49, heading 

 49.01. End product here is admittedly computer stationery 

 which would specifically fall under Chapter 48, heading 

 48.20, sub heading 4820.00. 

32. When we read heading 48.16 with sub heading 4816.00, we 

 find that it includes within its extent carbon paper, self-

 copy paper and other copying or transfer papers but other 

 than those articles included in heading 48.09 which is 

 specifically relatable to a particular size of paper and 

 therefore we are in agreement with the findings recorded by 

 the Commissioner that the intermediary products in the 

 present case would fall and are classifiable under heading 

 48.16. 

33.The next issue that is required to be decided is as to 

 whether the intermediary products are marketable or not. 

34. Evidence in the nature of documents and statements 

 recorded in that regard indicates that such intermediary 

 Page 19 of 23

 products are available in the market and are brought and 

 sold in the open market. The Commissioner has referred to 

 such evidence on record and even the invoices of the 

 respondents themselves clearly indicate that they have sold 

 intermediary products of the nature in question in the open 

 market in roll forms. 

35. In the present case, there is enough evidence available on 

 record to show that not only the intermediary products in 

 the present case are capable of being bought and sold in the 

 market but they are in fact sold and purchased in the open 

 market. Even the respondents have admitted that they have 

 themselves purchased such intermediary products from the 

 market although the products available in the market were 

 of inferior quality. But the fact remains that there are 

 enough people like the respondents willing to purchase 

 such material from the market. 

36. During the course of arguments reference was made to a 

 number of decisions of this Court on the issue relating to 

 marketability of a product. 

 Page 20 of 23

37. We have a recent decision of this Court in the case of 

 Medley
 P
 harmaceuticals Ltd. Vs. The Commissioner of 

 Central Excise and Customs, Daman, reported in (2011) 

 2 SCC 601. This Court in the said decision has very 

 carefully considered almost all the previous decisions of this 

 Court on the issue of the levy/payment of Excise Duty 

 Valuation on articles manufactured by the assessee 

 company therein. After referring to practically all the 

 decisions on the issue this Court in the aforesaid case held 

 that the consistent view of this Court is that the 

 marketability is an essential criteria for charging duty and 

 that the test of marketability is that the product which is 

 made liable to duty must be marketable in the condition in 

 which it emerges. This Court also held that the word 

 `Marketable' means saleable or suitable for sale and that it 

 need not in fact be marketed but then the article should be 

 capable of being sold to consumers, as it is without 

 anything more. This Court further went on to hold that the 

 essence of marketability of goods is neither in the form nor 

 in the shape or condition in which the manufactured article 

 Page 21 of 23

 is found but it is the commercial identity of the article 

 known to the market for being bought and sold. The Court 

 further held that the product in question is generally not 

 being bought or sold or has no demand in the market, 

 would be irrelevant. The aforesaid conclusions are arrived 

 at after considering almost all the previous decisions of this 

 Court on the issue. 

38. When we apply the ratio of the aforesaid decision of this 

 Court in the case of Medley Pharmaceuticals Ltd. (supra) 

 to the facts of the present case it becomes crystal clear that 

 the intermediary product in question is generally being 

 bought and sold and there is a demand of such articles in 

 the market as the respondents themselves have purchased 

 it from the open market for manufacturing the end product.

39. In terms of findings arrived at and on appreciation of the 

 materials on record, we are of the view that the findings 

 arrived at by the Tribunal by upsetting the findings of the 

 Commissioner vide its order dated 14.05.2002 were 

 unjustified and uncalled for. The Judgment and Order 

 Page 22 of 23

 passed by the Tribunal is therefore set aside and we 

 restore the order dated 28.12.2000 passed by the 

 Commissioner Central Excise, Meerut-II, U.P. 

40.Accordingly, the appeal is allowed but leaving the parties to 

 bear their own costs. 

 .......................................

 .....J

 [Dr. Mukundakam Sharma]

 ............................................J

 [Anil R. Dave]

New Delhi

August 30, 2011

 Page 23 of 23

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