Khatema Fibres Ltd. Vs. State of Uttar Pradesh & Anr.
EmailAppeal: Civil Appeal No. 4658 of 1998
With
Civil Appeal Nos. 7308-7309 of 2000
(Arising out of S.L.P. (C) No. 7302-7303 of 1999)
(From the Judgment and Order dated 4.3.98 of the Allahabad High Court in C.M.W.P. No. 1841 of 1993)
With
Civil Appeal Nos. 7308-7309 of 2000
(Arising out of S.L.P. (C) No. 7302-7303 of 1999)
(From the Judgment and Order dated 4.3.98 of the Allahabad High Court in C.M.W.P. No. 1841 of 1993)
Petitioner: Khatema Fibres Ltd.
Respondent: State of Uttar Pradesh & Anr.
Apeal: Civil Appeal No. 4658 of 1998
With
Civil Appeal Nos. 7308-7309 of 2000
(Arising out of S.L.P. (C) No. 7302-7303 of 1999)
(From the Judgment and Order dated 4.3.98 of the Allahabad High Court in C.M.W.P. No. 1841 of 1993)
With
Civil Appeal Nos. 7308-7309 of 2000
(Arising out of S.L.P. (C) No. 7302-7303 of 1999)
(From the Judgment and Order dated 4.3.98 of the Allahabad High Court in C.M.W.P. No. 1841 of 1993)
Judges: S. RAJENDRA BABU & R.C. LAHOTI, JJ.
Date of Judgment: Dec 12, 2000
Appearances:
Mr. Joseph Vellapally, Senior Advocate, Mr. Manish Garg, Mr. Srilok Nath Rath, Mr. Tarun Gulati, Mr. R. Sasiprabhu, Mr. K.R. Sasiprabhu, Mr. Aruneshwar Gupta, Mr. R.C. Verma, Mr. C. Siddharth, Advocates with him for the appearing parties.
Head Note:
TRADE TAX / INCOME TAX
U.P. Trade Tax Act, 1948 (15 of 1948)
Section 4B – Manufacture of craft paper used in wrapping – Recog-nition Certificate granted – Exemption – If “craft paper” is packing material or only “paper” – Lack of pleadings to show that paper manufactured, is exclusively used for packing. Held that if it can be shown that it is meant only for packing, then exemp-tion can be availed. Matter remitted for fresh decision after placing material.
Held:
‘Paper’ or ‘packing material’ has not been defined under the Act. The word ‘paper’ in the exclusionary clause of the notification dated 31.12.1976 is used in its generic sense and the term as understood in the common parlance and commercial sense includes ‘craft paper’ manufactured by the appellants. ‘Paper’ as understood in common parlance and commercial sense can be used for writing, printing, packing and wrapping purposes and, therefore, ‘craft paper’ does not cease to be ‘paper’ merely because it is also used for packing purposes. If it is shown that ‘craft paper’ can be used only for packing purposes or mainly for packing purposes and in commercial parlance under-stood to be packing material and if the facts can be estab-lished, the concessions arising under the law can be claimed. In that view of the matter we think that the view taken by the High Court in M/s Lalji Board Industries (supra) does not come in the way of the appellants claiming and establishing this fact. (Para 3, 4)
Cases Reffered:
1. M/s Lalji Board Industries v. State of U.P. in Civil Miscellaneous Writ Petition No. 763 of 1994 decided on December 11, 1997. (Para 2)
JUDGEMENT:
RAJENDRA BABU, J.
1. Leave granted in S.L.P. (C) NO. 7302-7303 of 1999.
2. The appellants manufacture ‘craft papers’ which is claimed to be used as packing/wrapping material. The appellants applied for Recognition Certificate under Section 4B of the U.P. Trade Tax Act, 1948 (hereinafter referred to as ‘the Act’) to avail of the exemption provided thereunder. The appellants were granted the Recognition Certificate which enabled them to pur-chase raw material and packing material without payment of any tax in respect of machinery for which the purchase was to be made at concessional rate. On the basis of a Full Bench of the Allahabad High Court in M/s Lalji Board Industries v. State of U.P. in Civil Miscellaneous Writ Petition No. 763 of 1994 decided on December 11, 1997 held that ‘craft paper’ is not a ‘packing material’ and it is a ‘paper’ and, therefore, the manufacturers are not entitled to any exemption thereof. Respondent no. 2 issued notice to delete ‘craft paper’ from the Recognition Cer-tificate as it was not packing material. Against the said notice, writ petition was filed which was dismissed on the basis of the Full Bench decision in M/s Lalji Board Industries (supra). The parties in Full Bench case did not challenge the correctness of the decision.
3. The question is whether the craft paper manufactured by the petitioner is a ‘packing material’ or it is ‘paper’. If it is the former the petitioner would be entitled to purchase raw materials and packing materials or machinery without payment of tax or at concessional rate of tax and the Recognition Certificate could have been properly issued, and if it is the latter then the petitioner was not entitled to any exemption from payment of tax and the Recognition Certificate was liable to be cancelled. ‘Paper’ or ‘packing material’ has not been defined under the Act. Therefore, the High Court proceeded to state that the common parlance meaning or commercial sense of the term is to be taken for determination of the question and referred to certain dictionaries. The High Court noticed that the petitioner had not laid any foundation in pleadings to show that the manufactur-ing process of the craft paper manufactured by it or had made any averment that the product is so adopted that it is meant to be used exclusively as packing material and cannot be used as paper. The word ‘paper’ in the exclusionary clause of the notification dated 31.12.1976 is used in its generic sense and the term as understood in the common parlance and commercial sense includes ‘craft paper’ manufactured by the appellants. ‘Paper’ as understood in common parlance and commercial sense, can be used for writing, printing, packing and wrapping purposes and, therefore, ‘craft paper’ does not cease to be ‘paper’ merely because it is also used for packing purposes. Indeed, any type of paper can be used for the purpose of packing and packing material as used in the notification in question is such a product which by its manufacturing process or adaptation is meant to be used only as packing material.
4. The Full Bench in the case of M/s Lalji Board Industries (supra) took the view that there were no pleadings in the case set out to show that the manufacturing process of the craft paper manufactured by the petitioner nor as to its adaptation or exclu-sive use in respect of packing and further that it cannot be used for writing or other purposes. The question formulated by the petitioner in that case was, therefore, answered that the ‘paper’ manufactured by the petitioner was ‘paper’ and not ‘packing material.’ Therefore, the whole decision of the Full Bench in M/s Lalji Board Industries (supra) rested on the plead-ings arising in that case and material placed before the Court. The Court took the view that the burden lay upon the person claiming the exemption or concessional rate to establish that fact and in the absence of any pleading and material to show the manufacturing process involved and its usage not being clear, took the view that the ‘craft paper’ does not cease to be ‘paper’ merely because it is also used for packing purposes. If it is shown that ‘craft paper’ can be used only for packing purposes or mainly for packing purposes and in commercial parlance under-stood to be packing material and if the facts can be estab-lished, the concessions arising under the law can be claimed. In that view of the matter we think that the view taken by the High Court in M/s Lalji Board Industries (supra) does not come in the way of the appellants claiming and establishing this fact.
5. In the circumstances, we set aside the order made by the High Court in the case of appellants and remit the matter to it for a fresh decision in accordance with law after allowing the parties to place the necessary material before the Court to take the view one way or the other, as indicated by us above.
6. The appeals are disposed of accordingly.
1. Leave granted in S.L.P. (C) NO. 7302-7303 of 1999.
2. The appellants manufacture ‘craft papers’ which is claimed to be used as packing/wrapping material. The appellants applied for Recognition Certificate under Section 4B of the U.P. Trade Tax Act, 1948 (hereinafter referred to as ‘the Act’) to avail of the exemption provided thereunder. The appellants were granted the Recognition Certificate which enabled them to pur-chase raw material and packing material without payment of any tax in respect of machinery for which the purchase was to be made at concessional rate. On the basis of a Full Bench of the Allahabad High Court in M/s Lalji Board Industries v. State of U.P. in Civil Miscellaneous Writ Petition No. 763 of 1994 decided on December 11, 1997 held that ‘craft paper’ is not a ‘packing material’ and it is a ‘paper’ and, therefore, the manufacturers are not entitled to any exemption thereof. Respondent no. 2 issued notice to delete ‘craft paper’ from the Recognition Cer-tificate as it was not packing material. Against the said notice, writ petition was filed which was dismissed on the basis of the Full Bench decision in M/s Lalji Board Industries (supra). The parties in Full Bench case did not challenge the correctness of the decision.
3. The question is whether the craft paper manufactured by the petitioner is a ‘packing material’ or it is ‘paper’. If it is the former the petitioner would be entitled to purchase raw materials and packing materials or machinery without payment of tax or at concessional rate of tax and the Recognition Certificate could have been properly issued, and if it is the latter then the petitioner was not entitled to any exemption from payment of tax and the Recognition Certificate was liable to be cancelled. ‘Paper’ or ‘packing material’ has not been defined under the Act. Therefore, the High Court proceeded to state that the common parlance meaning or commercial sense of the term is to be taken for determination of the question and referred to certain dictionaries. The High Court noticed that the petitioner had not laid any foundation in pleadings to show that the manufactur-ing process of the craft paper manufactured by it or had made any averment that the product is so adopted that it is meant to be used exclusively as packing material and cannot be used as paper. The word ‘paper’ in the exclusionary clause of the notification dated 31.12.1976 is used in its generic sense and the term as understood in the common parlance and commercial sense includes ‘craft paper’ manufactured by the appellants. ‘Paper’ as understood in common parlance and commercial sense, can be used for writing, printing, packing and wrapping purposes and, therefore, ‘craft paper’ does not cease to be ‘paper’ merely because it is also used for packing purposes. Indeed, any type of paper can be used for the purpose of packing and packing material as used in the notification in question is such a product which by its manufacturing process or adaptation is meant to be used only as packing material.
4. The Full Bench in the case of M/s Lalji Board Industries (supra) took the view that there were no pleadings in the case set out to show that the manufacturing process of the craft paper manufactured by the petitioner nor as to its adaptation or exclu-sive use in respect of packing and further that it cannot be used for writing or other purposes. The question formulated by the petitioner in that case was, therefore, answered that the ‘paper’ manufactured by the petitioner was ‘paper’ and not ‘packing material.’ Therefore, the whole decision of the Full Bench in M/s Lalji Board Industries (supra) rested on the plead-ings arising in that case and material placed before the Court. The Court took the view that the burden lay upon the person claiming the exemption or concessional rate to establish that fact and in the absence of any pleading and material to show the manufacturing process involved and its usage not being clear, took the view that the ‘craft paper’ does not cease to be ‘paper’ merely because it is also used for packing purposes. If it is shown that ‘craft paper’ can be used only for packing purposes or mainly for packing purposes and in commercial parlance under-stood to be packing material and if the facts can be estab-lished, the concessions arising under the law can be claimed. In that view of the matter we think that the view taken by the High Court in M/s Lalji Board Industries (supra) does not come in the way of the appellants claiming and establishing this fact.
5. In the circumstances, we set aside the order made by the High Court in the case of appellants and remit the matter to it for a fresh decision in accordance with law after allowing the parties to place the necessary material before the Court to take the view one way or the other, as indicated by us above.
6. The appeals are disposed of accordingly.
