UNION OF INDIA AND ANR versus BABUBHAI NYLCHAND MEHTA

Citation: [1990] SUPP. 3 S.C.R. 559 · Decided: 18-12-1990 · Supreme Court of India · Bench: N.M. KASLIWAL · Disposal: Appeal(s) allowed

Judgment (excerpt)

UNION OF INDIA AND ANR. 
v. 
BABUBHAINYLCHANDMEHTA 
DECEMBER 18, 1990 
[N.M. KASLIWAL AND S.C. AGRAWAL, JJ.] 
Central Excises & Salt Act, 1944: Section 2([) and Schedule Item 
17(2)-Processed Kraft Paper-Assessability to duty. 
A 
B 
The respondent is the proprietor of a company which carried on C 
business of manufacturing Waterproof Kraft Paper. The company 
purchased kraft paper as well as other material from the open market 
and combined these materials with kraft paper In its factory. The com-
pany claimed that as the manufacturing process was not carried out In 
bringing Into existen'Ce various kinds of kraft papers, it was not liable to 
pay any excise duty In respect of the products produced In its factory. 
D 
The Assistant Collector of Central Excise held that the kraft 
paper marketed by the company was bituminised water proof packing 
papers which were different and distinct products than the original 
kraft paper and hence were liable to payment of excise duty. 
The company filed a writ petition in the High Court. The teamed 
Single Judge held that the process carried on by the company could not 
be considered as manufacture of a new commodity with a different 
name and different use. On appeal, the Division Bench affirmed the 
judgment of the learned Single Judg-.. 
E 
F 
Before this Court it was contended on behalf of the Revenue that 
the case was covered by the recent decision of this Court in Laminated 
Packings (P) Ltd. v. Collector of Central Excise, Guntur, (1990] Vol. 4 
sec 51 in which, In similar circumstances, it was held that by the G 
process of lamination of Kraft paper with polyethylene, different goods 
came Into being. 
The learned counsel on behalf of the company tried to distinguish 
the Laminated Packings case. In the alternative, it was urged that no 
evidence was placed on record by the appellant to show that the goods in H 
559 
560 
SUPREME COURT REPORTS 
[1990] Supp. 3 S.C.R. 
A question were known in the market having distinct, separate and identi-
fiable function. 
Allowing the appeal, this Court, 
B 
HELD: (1) The coating and lamination and other process applied 
by the company in its factory amounted to manufacture, because kraft 
paper did not remain an ordinary kraft paper, and as such it was liable 
to excise duty under Central Excise Tariff Item No. 17(2). [564G I 
c 
D 
E 
Laminated Packings (P) Ltd. v. Collector of Central Excise, 
Guntitr, [1990] Vol. 4 SCC 51, followed. 
Standard Packaging Na/lore v. Union of India, [1984] ECR 2639, 
referred to. 
(2) In the facts and circumstances of this case there could be no 
controversy that new goods came into being, and laminated papers were 
sold in the market as distinct, separate and different goods. [565B] 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3743 
of 1988. 
From the Judgment and Order dated 2.12.1987 of the Bombay 
High Court in Appeal No. 414 of 1986. 
M. Chandrashekhar, Additional Solicitor General, P. Parmesh-
F 
war, C. V. Rao and Ms. Sushma Suri for the Appellants. 
G 
H 
U.R. Lalit and G.B. Sathe for the Respondent. 
The Judgment of the Court was delivered by 
KASLIW AL, J. This appeal by special leave is directed against 
the order of Bombay High Court dated 2.12.1987. Brief facts of the 
case are that respondent is the sole proprietor of a concern known as 
Neptune Water-proof Manufacturing Company (in short the. com-
pany) and carries on business of manufacturing Water-proof Kraft 
Paper. The company manufactures the following products: 
I 
U.0.1. v. B.N. MEHTA [KASLIWAL, J.] 
i) Bitumi.nised Water-proof packing paper 
ii) Polythene-lined kraft packing paper 
iii) Waxed kraft packing paper 
iv) Jute-lined bituminised water-proof packing paper 
v) Waxed kraft packing paper 
vi) Hessian-lined kraft paper 
561 
A 
B 
The company purchases kraft paper from the open market as well as 
other materials like bitumine, polythene, jute fibre and wax and there-
after combines these materials with kraft paper in its factory. Till. C 
October 30, 1980 the company classified its products under Item 17(2) 
of the schedule to the _central Excise and Salt Act, 1944 (hereinafter 
referred to as the Act) and paid duty accordingly. On october 30, 1980 
the company discovered that none of its products were liable to pay-
ment of duty as the same did not fall within the expression 
"manufactured" under Section 2(f) of the Act. The company in these D 
circumstances filed classified list. before the Assistant Collector and 
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