KHATEMA FIBRES LTD. versus STATE OF UTTAR PRADESH AND ANR.

Citation: [2000] SUPP. 5 S.C.R. 568 · Decided: 12-12-2000 · Supreme Court of India · Bench: S. RAJENDRA BABU · Disposal: Disposed off
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Judgment (excerpt)

A 
KHATEMA FIBRES LTD. 
v. 
ST A TE OF UTT AR PRADESH AND ANR. 
DECEMBER 12, 2000 
B 
[S. RAJENDRA BABU AND R.C. LAHOTI, JJ.] 
U.P. Trade Tax Act, 1948-Section 4-8-Exemption for paper used as 
packing material-Craft paper-Packing material or paper- -Held, exemption 
C is available on paper used only as packing material and since appellants 
failed to prove the fact, matter remitted back to High Court. 
Appellants are manufactures of craft paper. They applied for Recognition 
Certificate under Section 4-B of U.P. Trade Tax Act, 1948 to avail exemption 
claiming the craft paper as packing material. The appellants were granted 
D the Recognition Certificate, which enabled them to purchase raw materials, 
packing materials or machinery without payment of tax or at concessional 
rate of tax. Subsequently, a Full Bench decision of the High Court held that 
craft paper is paper and not packing material and the manufactures of craft 
paper are not entitled for the exemption under the ·Act. The authorities issued 
notices to the appellants for deleting craft paper from the Recognition 
E Certificate and withdrawing exemption. The appellants filled writ petitions 
before the High Court against the notices, which were dismissed on the basis 
of the Full Bench judgment. Hence these appeals. 
Disposing of the appeals, the Court 
F 
HELD: I.I. 'Paper' or 'packing material' has not been defined under 
the U.P. Trade Tax Act, 1948. The High Court in the Full Bench decision 
proceeded to State that the common parlance meaning or commercial sense 
of the term is to be taken for determination whether the craft paper is a 
packing material or a paper. The High Court further observed that the 
G petitioner did not prove that the craft paper manufactured by it is used 
exclusively as packing material and not as paper. The word 'paper' in the 
exclusionary clause of the notification 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, in common parlance and 
H 
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KHA TEMA FIBRES LTD. v. ST A TE 
569 
commercial sense, can be used for writing, printing, packing and wrapping A 
purposes and therefore the craft paper does not cease to be a paper merely 
because it is also used for packing purposes. Any type of paper can be used 
for the purpose of packing am.I packing material used in the notification refers 
to a product, which by its manufacturing process or adaptation is used only 
as packing material. (570-F, G, H; 571-A, B] 
1.2. The High Court in its Full Bench decision observed that the 
petitioner did not prove that the craft paper manufactured by it is used 
exclusively for packing and not for writing or other purposes. Therefore, the 
High Court held that the craft paper manufactured by the petitioner was paper 
B 
and not a packing material. The Full Bench decision of the High Court is C 
based on the pleadings arising in the case and material placed before the Court. 
The High Court observed that the burden is on the petitioner claiming the 
exemption or concessional rate to establish the 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 craft paper does not cease to be paper 
merely because it is also used for packing purposes. It is shown that craft D 
paper can be used only for packing purpo5es and in commercial parlance 
understood to be packing material and if the facts can be established the 
concessions arising under the law can be claimed. The Full Bench decision 
of the High Court does not come in the way of the appellants claiming and 
establishing this fact. (571-C, D, El 
E · 
1.3. The order of the High Court is set aside and is remitted back for a 
fresh decision in accordance with law after, allowing the parties to place the 
necessary material before the Court. (571-F( 
Mis. lalji Board Industries v. State of UP., (W.P. No. 763of1994 decided 
on 11.12.1997 by the Allahabad High Court, referred to. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4658 of 1998. 
From the Judgment and Order dated 4.3.98 of the Allahabad High Court 
in C.M.W.P. No. 1841of1993. 
WITH 
Civil Appeal Nos. 7308-7309 of2000. 
Joseph Ve!lapally, Sr. Adv. Manish Garg, Srilok Nath Rath, Tarun Gulati, 
F 
G 
R. Sasiprabhu, K.R. Sasiprabhu, Aruneshwar Gupta, R.C. Verma and H 
570 
SUPREME COL:RT REPORTS [2000) SUPP. 5 S.C.R. 
A C.
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