ROHIT PULP AND PAPER MILLS LTD. v. COLLECTOR OF CENTRAL EXCISE, BARODA

Citation: [1990] 2 S.C.R. 797

Court: Supreme Court of India

Bench: S. RANGANATHAN, A.M. AHMADI

Case summary

They arise out of the claim of Mis Rohit Pulp and Paper Mills /

Judgment text

ROHIT PULP AND PAPER MILLS LTD. v. COLLECTOR OF CENTRAL EXCISE, BARODA r'. - APRIL 26, 1990 [S. RANGANATHAN AND A. M. AHMADI, JJ. ] Central Excises And Salt Act, 1944/Central Excise Rules, 1944: Sections 4, 35C/First Schedule, Item 17, Rule 8(1), and Notifica- ''1" lion Nos. 24 of 1984. 25 of 1984 and Provisoes and 45 of 1985-Excise Duty-Concessional rates on paper and paper board-Exception clause-Interpretation of-Art paper, and chromo paper-Whether entitled to exemption-Principle ofnoscitur a sociis-Applicability of. Notifications No. 24 and 25 of 1984 under rule (1) of the Central ·~ Excise Rules, were issued on 1. 3. 1984 in respect of paper and paper board falling_under item 17(1) of the first schedule to the Central Excises and Salt Act, 1944. While notification No. 24 of 1984 restricted the excise duty on certain items, notification No.

25 of 1984 provided for a concession in respect of paper and paper boards manufactured out of pulp containing not less than 50 per cent by weight of pulp made from materials (other than bamboo, hardwoods, softwoods, neds or rags) and cleared on or after the 1st day of April in any financial year, subject to certain important conditions set out in the provisoes to the notifies- :/ tion. Under the provisoes, the concessional rates were applicable only if the factory did not have plant attached to it for making bamboo, wood pulp and the exemption would not apply to cigarette tissue, glassine paper, grease proof paper, coated paper (including waxed paper) and paper of a substance not exceeding 25 grammes per square metre. Another notification No. 45 of 1985 dated 17. 3. 1985 was also issued ).. _ prescribing rates on paper and paper board falling under the aforesaid I item including coated paper.

+- The appellant-assessee had a factory in which different varieties of paper and paper board were being manufactured, using waste paper and cereal straw containing more than 50 per cent by weight of pulp made from the unconventional raw materials. The factory did not have a bamboo pulp plant. . A.... The assessee was manufacturing art paper and chromo paper. These two types of paper generally fell under category of printing and writing paper. These two articles also fell under the description coated 798 SUPREME COVRT REPORTS [1990] 2 S. C. R. paper used in the second proviso to the notification No. 25 of 1984. The appellant initially paid excise duty on the goods manufactured by it in terms of notification No. 24 of 1984, but later claimed concessional rates prescribed by notification No. 25 of 1984. Since coated paper was taken out of the purview of notification No.

25 of 1984, by the proviso, the Excise Department refused to permit the assessee to avail ofthis concession in respect of its manufactured goods. This was confirmed by the Central Excise and Gold Control Appellate Tribunal. In the appeal before this Court, on behalf of the appellantassessee it was contended that though the expression 'coated paper' had generally a wide connotation and included coated papers ofall varieties, it should be given a restricted meaning in the context in which it appeared in the proviso, that in the paper business, paper was broadly two varieties, "industrial paper" and "cultural paper", that wl!

lle paper used for printing or writing was treated as cultural paper that used for various purposes, broadly described as industrial purposes, such as wrapping, packing, sanitary use and the like_, was industrial paper, that since a common strain ran through all the five categories mentioned in the proviso, inasmuch the fu-st three varieties, admittedly fell under the category of industrial paper and the last one was invariably used for industrial purposes, and so found by the Tribunal, the word 'coated paper', must be read in that context, and should be interpreted by applying the principle of "Noscitur A Sociis" or on the analogy of the "Ejusdem generis" principle and that even if the words of the proviso were capable of being construed in a wider manner so as to deny exemption to all kinds of coated paper, the Court should apply the well-established principle of construction of taxing statutes that an ambiguous provision should be interpreted in favour of the subject.

On behalf of the respondent it was contended that there was no 1 principle of interpretation by which the plain and natural meaning of the word 'coated paper' could be abridged nor was there anything in the context to warram such a limitation, that there was no clear cut distinction between industrial and cultural paper, and that it could not be said that light paper could only be industrial paper. Allowing the appeals, this Court, HELD: 1. 'Coated paper' in the second proviso to notification No. 25 of 1984 refers only to coated paper used for industrial purposes and not to coated varieties of printing and writing paper. The . ROHJT PAPER MILLS v. C. C. E 799 " appellant is, therefore, entitled to concessional rates specified in the notification. l812F-G] I ---'- 2.

1 The expression 'coated paper' in the proviso should draw colour from the context in which it is employed and receive an interpretation consistent therewith than its literal one, which in its widest sense, may be comprehensive enough to include all coated paper, industrial or otherwise. [809G-Hj ·... ,... - 2. 2 The concession of the notification is denied to five kinds of paper. Three of them are varieties of industrial paper. The fourth is light paper, not exceeding a particular weight. Light paper is by and _-f large industrial paper and is also used occasionally for cultural purposes also. The five varieties of paper are found in serial Nos. 3 and 4 of the 1985 notification and serial Nos. l and 3, reflect a contrast between ~/ coated paper and light paper used for cultural purposes (item No. l) and that used for other (industrial) purposes (item No. 3).

On this basis, it is clear that four out of the five varieties of paper which are denied the benefit of the concession constitute industrial paper. In fact, even if, only three of these items are of the industrial variety, while . the other two could be either, it will not still be unreasonably (though may be, a little less plausible) to draw an inference that only industrial paper falling in those two categories are intended to be comprehended in the classification rather than assume, for no detectable / reason, that all paper of these two varieties alone are excluded from the concession. [809E-G] 2. 3 Though no meticulous reasons can always be made available or discovered for variations in rates of duty as between various types of goods and the absence of some common thread· in relation .

to a set of goods treated alike may not necessarily render the classification irrational or arbitrary, it can legitimately be postulated that the denial of ·~ concession to a group proceeds on the basis of some aspect or feature common to all items in the group. Ifsuch a principle can be conceived of which would rationalise the inclusion of all the items, it would be quite reasonable and proper to give effect to a construction of the notification as will accord with that principle. [808F-G] 2. 4 In interpreting the scope of any notification, the Court has ? - first to keep in mind the object and purpose of the notification. All parts of it should be read harmoniOusly in aid of, and not in derogation, of that purpose. [811FJ Collector of Central Excise v. Parle Exports (P) Ltd. , [1989] -i sec 345 and Tata Oil Mills Co. Ltd. v. C. C. E. , [1989] 4 SCC 541, \ referred to.

In the instant case, the aim and object of the notification is to grant a concession to small scale factories which manufacture paper with unconventional raw materials. If the proviso had referred only to coated paper no special object or purpose would have been discernible and perhaps there would have been no justification to look beyond it and enter into a speculatfon as to why the notification should have thought of exempting only coated paper manufactured by these factories from the purview of the eyemption. But the notification excepts not one but a group of items. If the items mentioned in the -(.! group were totally dissimilar and it were impossible to see any common thread running throu~h them, again, it may be permissible to give the exceptions their widest latitude.

But when four of them-undoubtedly, at least three of them-can be brought under an intelligible classification and it is also conceivable that the Government might well have thought that these small scale factories should not be eligible for the concession contemplated by the notification where they manufacture paper catering to industrial purposes, there is a purpose in the limitation prescribed and there is no reason why the rationally logical restriction should not be placed on the proviso based on this classification. [811H; 812A-e] The only reasonable way of interpreting the proviso is by understanding the words 'coated paper' in a narrower sense consistent with the other expressions used therein. [812D] 3. The principle of statutory interpretation IJy which a generic word receives a limited interpretation by reason of its context is well established.

The expression noscitur a sociis simply means that the meaning of a word is to be judged by the company it keeps [SIOA-B) In the context of the instant case, this principle_ can be legitimately drawn upon. However, the Jatin maxims and precedents are not to be mechanically applied; they are of assistance only in so far as they furnish guidance by compendiously summing up principles based on rules of common sense and logic. [811E-F] - State v. Hospital Mazdoor Sabha, [1960] 2 SCR 866; Rainbow Steels Ltd. v. C. S. T. , [1981] 2 sec 141 and Lethang v. Coopex, [1965] 1 QB 232, referred to. RBHIT·PAPER MILLS v. C. C. E IRANGANATHAN. fl 8Gl I 11 ''The Dictionary of Paper published by the American Paper-and ! PulpAsso y it, The assessee is having a factory at Khadki in which different varieties ot paper and paper boards are manufactured. The factory ~ does not have a bamboo pulp plant.

It uses waste paper and cereal ~ straw which are considered to be unconventional raw materials for the mafinfaeture of paper and paper board. The pulp used by the assessee contains more _than 50% by weight of pulp made from these unconventionalrawmatetials. 'Pa1>er and paper board' are goods falling under item 17(1) of the first schedwe to the Act. Two notifications were issiied on. lsi March, ,>-- 1984 under rule 8(1) of the Central Excises Rules, 1944 in respect of the above item. The· first of them, being notification No. 24 of 1984, restricted the excise duty on items falling under the aforesaid item in the manner following: \ S. No. Description Rate \ ·-'--- 1. Printing and writing paper. Ten per cent ad valorem paper plus one thousand and five rupees per metric tonnes. 2.

All sorts of paper commonly Ten per cent ad valorem plus known as kraft paper (includ- one thousand three hundred T ing paper and paper boards of and eighty five rupees per the type known as kraft liner metric tonne. or corrugating medium) of a ~c_ substance equal to or exceeding 65 grammes per square metre. )' 3. Paper board of the following Ten per cent ad valorem plus varieties, namely, pulp board one thousand eight hundred duplex board and triplex and ten rupees per metric board. tonne. 4. Paper and paper boards, other Ten per cent ad varlorem plus than those specified in S. Nos. 1 one thousand four hundred and . , to 3. thirty rupees per metric tonne. . ~ The second notification, notification No. 25 of 1984, is the one with which we are directly concerned here.

It provides for a concession in respect of paper and paper boards falling under item 17(1) of the Schedule, manufactured out of pulp containing not less than 50 per cent by weight of pulp made from materials (other than bamboo, ~ hardwoods, softwoods, reeds or rags) and cleared on or after the 1st day of April in any financial year. The concessional rates prescribed 4. were as below: S. No. Description Rate Conditions 1. (i) Printing and writ- Rs. 450per Provided that the total ingpaper metric tonne quantity of clearances, if any, of all varieties ~ (ii)All sorts of paper Rs. 450 per of paper and paper ' commonly known as metric tonne boards in the. pr. eceding kraft paper (includ- financial year, by or on ing paper & papet benhalf of a manufac- ROHIT PAPER MILLS v. C. C. E [RANGANATHAN, J.

] 803 I boards of the type turer, from one or more J __:- known as kraft liners factories, or from a or corrugating medium) factory by or on behalf of a substance equal to of one or more manufacor exceeding 65 turers did not exceed grammes per square 3,000 metric tonnes. metre. 'T' (iii) Others Rs. 560per metric tonne. 2. (i) Printing and writing Rs. 730per Provided that the total -1 writing paper metric tonne quantity of clearances of all varieties of paper & (ii) All sorts of papers Rs. 730 per paper boards in the precommonly known as metric tonne ceding financial year, .. ,,,.... - _, kraft paper (including by or on behalf of a paper and paper boards manufacture, from one or of the type known as more factories or from a kraft liners or corrugating factory by or on behalf of medium) of a substance one or more manufac- .. equal to or exceeding 65 turers, exceedings 3,000 grammes per square metric tonnes but did not metre. exceed 7,500 metric tonnes. (iii) Others Rs.

900 per metric tonne. 3. (i) Printing and writ- Rs. 900per Provided that the total ing paper metric tonne quantity of clearances of . __. all varieties of paper & (ii) All sorts of paper Rs. 900per paper boards in the pre- ' commonly known as metric tonne ceding financial year, by + Kraft paper (includ- or on behalf of a manuing paper & paper facturer, from one or boards of the type more factories or from a known as kraft liners factory or on behalf of or corrugating medium) one or more manufacuof a substance equal rers, exceeding 7,500 to or exceeding 65 gram· metric tonne but did not )..... __ mes per square metre. exceed 16,500 metric tonnes: (iii) Others Rs. l,120 per metric tonne. 4. [This para, added by notification no. 92/84 dated \ 18. 4.

84 added another concessional rate where the clearance• exceeded 10,500 but did not exceed 24,000 metric tonnes on the same lines as above but this does not need to be set out here]" The grant of the above concessional rates were, however, subject to certain important conditions set out in the provisoes to the notification. These provisoes read: I - "Provided that the factory does not have a plant attached thereto for making bamboo or wood pulp. -(.. : Provided further that the exemption contained in this notification shall not apply to cigarette tissue, glassine . ,, paper, grease proof paper, coated paper (including waxed paper) and paper of a substance not exceeding 25 grammes per square metre. " Another notification No. 45 of 1985 dated 17. 3. 1985 bas been relied upon in support of the contention of the Union of India and hence this may also be set out here. It prescribed rates on paper and paper hoard falling under item 17(1) in the following manner: ~ S. No, Description Rate 1.

Printing and writing paper- (i) coated paper Ten per cent ad valorem plus one thousand five hudred and ~ five rupees per metric tonne. -1. (ii) of a substance not exceeding Ten per cent ad valorem plus 25 grammes per square metre one thousand five hundred and five rupees per metric tonn. e (iii)Others Ten per cent ad valorem plus one thousand tive hundred and 1 five rupees per metric tonne. _,.. _ 2. All sorts of paper commonly Ten per cent ad va/orem plus known as kraft paper (includ- one thousand five hundred and ing paper and paper boards eighty-five rupees per metric ROHIT PAPER_MILLS v. C. C. E [RANGANATIIAN, J. ] 805 ot the type known as. kraft tonne. I context in which it is employed and receive an interpretation consistent therewith than its literal one, which in its widest sense, may be comprehensive enough to include all coated paper, industrial or otherwise.

The principle of statutory interpretation by which a generic word receives a limlled interpretation by reason of its context is well established. In the context with which we are concerned, we can legitimately draw upon the "noscitur a sociis" principle. This expression simply means that "the meaning of a word is to be judged by the company it keeps. " Gajendragadkar, J. explained the scope of the rule in State v. Hospital Mazdoor Sabha, [1960] 2 SCR 866 in the following words: "This rule, according to Maxwell, means that, when two or more words which are susceptible of analogous meaning are coupled together they are understood to be used in their cognate sense. They take as it were their colour from each other, that is, the more general is restricted to a sense analogous to a less general. The same rule is thus interpreted in "Words and Phrases" (Vo. XIV, p.

207): "Associated words take their meaning from one another under the doctrine of nosciture a sociis, the philosophy of which is that the meaning of a doubtful word may be ascertained by reference to the meaning of words associated with it; such doctrine is broader than the maxim Ejusdem Generis. " In fact the letter maxim "is only an illustration or specific application of the broader maxim noscitur a sociis". The argument is that certain essential features or attributes are invariably associated with the words "business and trade" as understood in the popular and conventional sense, and it is the colour of these attributes which is taken by the other words used in the definition though their normal import may be much wider. We are not impressed by this argument.

It must be borne in mind that noscitur a sociis is merely a rule of construction and it cannot prevail in cases where it is clear that the wider words have been deliberately used in order to make the scope of the defined word correspondingly wider. It is only where the intention of the Legislature in associating wider words with words of narrower significance is doubtful, or otherwise not clt:ar that the present rule of construction can be usefully applied. It can also be applied where the meaning of the words of wider import is dobtful; but, where the object of the Legislature in usin~ wider words is elem and free of ambiguity, the rule <Jf construction in question cannot be pressed into service. " RUHIT PAPER MILLS v. C. C. E [RANGANATHAN, J. ] 811 This principle has been applied in a number of contexts in judicial I decisions where the Court is clear in its mind that the larger meaning -- of the word in question could not have been intended in the context in which it has been used.

The cases are too numerous to need discussion · here. it should be sufficient to refer to one of them by way of illustration. In Rainbow Steels Ltd. v. C. S. T. , [1981] 2 SCC 141 this Court had to understand the meaning of the word 'old' in the context of an entry in taxing tariff which read thus: "Old, discarded, unserviceable or absolute machinery, stores or vehicles including waste products ..... " Though the tariff item started with the use of the wide word 'old', the Court came to the conclusion that "in order to fall within the expression 'old machinery' occurring in the entry, the machinery must be old machinery in the sense that it has become non-functional or nonusable". In other words, not the mere age of the machinery, which would be relevant in the wider sense, but the condition of the machinery analogous to that indicated by the words following it, was considered relevant for the purposes of the statute. The maxim of noscitur a sociis has been described by Diplock, C. J.

as a "treacherous one unless one knows "the societas to which the socii belong" (vide: Letang v. Coopex, [1965] 1 QB 232). The learned I Solicitor General also warns that one should not be carried away by labels and Latin maxims when the word to be interpreted is clear and has a wide meaning. We entirely agree that these maxims and precedents are not to be mechanically applied; they are of assistance only in so far as they furnish guidance by compendiously summing up principles based on rules of common sense and logic. As explained in Collector of Central Excise v. Parle Exports (P) Ltd. , [1989] 1 SCC 345 at p. 357 and Tata Oil Mills Co. Ltd. v. C. C. E. , [1989] 4SCC541atp. 545-6in ··~ interpreting the scope of any notification, the Court has first to keep in mind the object and purpose of the notification. All parts of it should be read harmoniously in aid of, and not in derogation, of that purpose.

In this case, the aim and object of the notification is to grant a concession to small scale factories which manufacture paper with unconventional raw materials. The question naturally arises: Could there have been any particular object intended to be achieved by introducing the exceptions set out in the proviso? Instead of proceeding on the premise that it is not necessary to look for any reason in a taxing statute, it is necessary to have a closer look at the wording of the proviso. If the proviso had referred only to 'coated paper', no special object or 812 {199()) 2 3. C. R. purpose would have been discernible and i)erhaps there would have been no justification to look beyond it and enter into a speculation as to wny the notification should nave thought of exempting only 'coated paper' manufactured by these factories from the purview of the exemption. But the notification excepts not one but a group of items.

If the items mentioned in the group were totaily dissimilar and it were impossible to see any common thread running through them again, it may be permissible to give the exceptions their widest latitude. But when tour of them-undoubtedly, at least three of them-can be brought under an intelligible classification and it is also conceivabl! ' that the Government might well have thought that these small scale factories should not be eligible for the concession contemplated by the notification where they manufacture paper catering to industrial purposes, there is a purpose in the limitation prescribed and there is no reason why the rationally logical restriction should not be placed on the proviso based on this classification. In our view, fhe only reasonable. way of interpreting the proviso is by understanding the words 'coated paper' in a narrower sense oonsistent with the other expres sions used therein.

In the view we have taken it is unnecessary to consider the other contedtions urged before us: (i) whether the words "(including waxed paper)" are words indicative of the limitation sought to be placed on \. the words "coated paper" or they are only intended to make it dear ...... , that even paper impregnated wit1!. wax will not be entitled to exemption; and (ii) whether, if the notification is capable of two equally plausible interpretations, the one in favour of the subject should be upheld or the one taken by the Tribunal should be confitnied· For the reasons discussed above, we accept the appellant's submission that 'coated paper' in the second proviso refers,pn! y to coated paper used for industrial purposes and not to ooated vaneties of printing and writing paper. The Tribunal's order is set aside and the appellant held entitled to the concessional rates specified in notification No. 25/84. The. appeals are allowed. But we make no order as to costs. N. P. V. Appeal allowed: