http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 8  

PETITIONER: BAKELITE HYLAM LIMITED

       Vs.

RESPONDENT: COLLECTOR OF CENTRAL EXCISE, HYDERABAD

DATE OF JUDGMENT:       14/07/1998

BENCH: S.C. AGRAWAL, S. SAGHIR AHMAD

ACT:

HEADNOTE:

JUDGMENT:           [WITH CIVIL APPEAL NOS. 2448-51 of 1986]                       J U D G M E N T S.C. AGRAWAL, J.:      M/s Bakelite  Hylam Limited,  the  appellant  in  these appeals,  [hereinafter   referred  to  as  ’the  appellant], manufactures laminated  boards and  sheets.   The  laminated sheets  are  paper  based  and  glass  fabric  based.    For manufacturing paper  based laminated  sheet paper  is passed through or  immersed in  a resin  bath (phenol  formaldehyde resin) and  as a result the paper is impregnated with resin. This paper  is then  dried.   The paper which is impregnated with resin is known as ’Prepeg-P’.  Layers of ’Prepeg-P’ are then stacked  and the  sheets so  stacked are  then  pressed together in  a hydraulic press applying pressure and heat to make a laminated sheet.  The process of manufacturing cotton fabric and  glass fabric  based laminated sheets is similar. In case  of cotton  fabric  based  laminated  sheets  cotton fabric is  impregnated with  resin and  dried.  Such  fabric which is  so impregnated is known as ’Prepeg-F’.  It is also described as  ’Prepeg-C’.   In glass  fabric based laminated sheets glass  fabric  is  impregnated  with  resin  and  the impregnated sheet  is known  as ’Prepeg-G’.    The  question which fails  for consideration  in  these  appeals  is  with regard to  the classification  of  these  products,  namely, ’Prepeg-P’, ’Prepeg-F  and ’Prepeg-G’,  for the  purpose  of levy of  excise duty  under  the  erstwhile  Central  Excise Tariff [hereinafter  referred to  as ’the Tariff’] contained in the  First Schedule  to the  Central excises  & Slat Act, 1944.      The  Central   Excise  and   Gold  (Control)  Appellate Tribunal [hereinafter  referred to as ’the Tribunal’] in its judgment dated  march 25,  1986  has  held  that  ’Prepeg-F’ (described as ’Prepeg-C’) is assessable under Tariff Item 19 (III), ’Prepeg-P’  is assessable under Tariff Item 17(2) and ’Prepeg-G’ is  assessable under  Tariff  Item  22-F  of  the Tariff.   Civil Appeals Nos. 2448-51 of 1986 have been filed by the appellant against the said judgment of the Tribunal.      The matter  came up  for consideration  again before  a Bench of three Members of the Tribunal and by judgment dated June 3,  1991 the  Tribunal by  majority [Shri  G. Sankaran,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 8  

President and Shri N.K. Bajpai, Member (Technical)] took the same view  as that  taken by  the Tribunal  in  the  earlier judgment dated  March  25,1986  and  held  that  ’Prepeg-P’, ’Prepeg-F fell  under Items 17(1),19(III) and 22-F(4) of the Tariff respectively.  Shri S.L.  Peeran, Member  (Judicial), however, took  a different  view  and  held  that  the  said products could  not be  classified under  the aforementioned Items of  the Tariff  and were assessable under the residual entry in Item 68 of the Tariff.  Civil Appeal Nos. 2676-2678 of 1992  have been  filed by  the appellant against the said judgment of the Tribunal.      We will  first take up ’Prepeg-F which has been held to fall under  Item 19(III)  of the  Tariff.  In the Tariff, as applicable in  the year  1977-78 (period  relevant for Civil Appeals Nos. 2448-51 of 1985), Item 19(III) read as under :-      "COTTON FABRICS      "Cotton    fabrics"    means    all      varieties  of  manufactured  either      wholly or  partly from  cotton  and      includes dhoties  sarees, chadders,      bed-sheets,  bed-spreads,  counter-      panes, table-cloths,  embroidery in      the piece,  in strips  or in motifs      and fabrics  impregnated, coated or      laminated  with   preparations   of      cellulose derivatives  or of  other      artificial  plastic  materials  but      does not include any such fabric if      it contains-      (i) 40  per cent  or more by weight           of wool;      (ii) 40  per cent or more by weight           of silk;      (iii) 60 per cent or more by weight           of rayon  or artificial  silk;           or      (iv) 50  per cent or more weight of           jute (including Bilipatam jute           or mesta fibre):           Provided that  in the  case of      embroidery in  the piece, in strips      or   in    motifs    and    fabrics      impregnated,  coated  or  laminated      with  preparations   of   cellulose      derivatives or  of other artificial      plastic materials,  the percentages      referred to  in (i)  and (iv) above      shall be  in relation  to the  base      fibrics which  are  embroidered  or      impregnated or  coated, as the case      may be.      III.  Cotton  fabrics  impregnated,      coated    or     laminated     with      preparations      of      cellulose      derivatives or  of other artificial      plastic materials."      In the  year 1984-85 (period relevant for Civil Appeals Nos. 2676-2678  of 1992)  there was  some change in the main part but the same has no bearing because there was no change in clause  III of  Item 19. Item 19(III), as amended, was in these terms:      "COTTON FABRICS      ’Cotton    fabrics’    means    all      varieties of  fabrics  manufactured      either wholly or partly from cotton

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 8  

    and   includes   dhoties,   sarees,      chadders, bed-sheets,  bed-spreads,      counter-panes,        table-cloths,      embroidery in  the piece, in strips      or in  motifs, fabrics impregnated,      coated    or     laminated     with      preparations      of      cellulose      derivatives or  of other artificial      plastic   materials   and   fabrics      covered  partially  or  fully  with      textile flocks or with preparations      containing textile  flocks, if  (i)      in such fabrics cotton predominates      in weight,  or  (ii)  such  fabrics      contain more  than 40  per cent  by      weight of cotton and 50 per cent or      more by  weight  of  non-cellulosic      fibres or yarn or both:           Provided that  in the  case of      embroidery in  the piece, in strips      or in  motifs, fabrics impregnated,      coated    or     laminated     with      preparations      of      cellulose      derivatives or  of other artificial      plastic  materials,   and   fabrics      covered  partially  or  fully  with      textile flocks or with preparations      containing textile  flocks or  with      preparations containing  textile or      percentages, as  the case  may  be,      shall be  in relations  to the base      fabrics which  are  embroidered  or      impregnated, coated or laminated or      covered, as the case may be-      (III)Cotton  fabrics   impregnated,           coated   or   laminated   with           preparations   of    cellulose           derivatives   or    of   other           artificial plastic materials."      Before the  Tribunal it  was urged  on  behalf  of  the appellant  that   ’Prepeg-F,  which  is  impregnated  cotton fabric, cannot  be regarded  as cotton  fabric falling under Item 19(III)  of the  Tariff.   It was  also urged that Item 19(III) refers  to cotton  fabrics  impregnated,  coated  or laminated with  preparations of  cellulose derivations or of other plastic  materials and  that the  materials with which ’Prepeg-F is  impregnated are  not plastic  materials.   The Tribunal has  rejected the said contention and has held that it  could   not  be   proved  that  the  proportion  of  the impregnated materials  had  reached  such  a  level  in  the impregnated fabrics  that the  final product  had ceased  to contain the characteristics of a fabric so as to take it out of the  purview of  the cotton  fabric as  set out  in  Item 19(III) of  the Tariff.   The  Tribunal was of the view that the term  "cotton fabric"  covers a  wide range.  As regards the submission that phenol formaldehyde resin with which the fabric  is  impregnated  is  not  a  plastic  material,  the Tribunal  held   that  the  expression  "artificial  plastic materials" in Item 19(III) embraces within itself resin also since plastic is a generic term and as understood in popular sense it covers resin.      The said  finding recorded  by the  Tribunal  has  been assailed by  Shri J.  Vellapally, the learned senior counsel appearing for the appellant. Shri Vellapally has invoked the ’common parlance  test’ and  has submitted  that  in  common

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 8  

parlance ’Prepeg-F cannot be regarded as cotton fabric.  The learned counsel  has placed reliance on the decision of this court in  Purewal Associates  Ltd. V.  Collector of  Central Excise, 1996  (10) SCC  752. We do not fine any substance in the  said   contention  of   shri  Vellapally.   In  Purewal Associated Ltd.  [supra] this  court has  taken note  of the earlier decision  in Plasmac  machine Mfg.  Co. (P)  Ltd. v. Collector of  Central Excise, 1991 supp. (1) SCC 57, wherein it was  held that  ’where definition  of a word has not been given, it  must be  construed in its popular sense". So also in M/s  Indo International  Industries  v.  Commissioner  of Sales Tax, Uttar Pradesh, 1981 (2) SCC 528, it has been held that "if  any term  or expression  has been  defined in  the enactment then  it must  be understood in the sense in which it is  defined but  in the  absence of  any definition being given in  the enactment  the meaning  of the  term in common parlance or  commercial parlance has to be adopted". [p.530] In term  19 the expression "cotton fabrics" has been defined to include  "fabrics impregnated  coated or  laminated  with preparations of cellulose derivatives or of other artificial plastic material".  In view  of the  inclusive clause in the definition of  "cotton fabrics"  contained  in  Item  19  it cannot be  said that  ’Prepeg-G’ which is impregnated cotton fabric cannot  be regarded  as cotton fabric for the purpose of Item 19(III) of the Tariff.      Item 19(III)  came up  for consideration before a Bench of three  Judges of  this  Court  in  Collector  of  Central Excise, Hyderabad  v. Fenoplast (P) Ltd., 1994 supp. (2) SCC 678. In  that case,  the question  was whether  rexine cloth which was  manufactured by coating of cotton fabric with PVC resin, plasticizers  and other  materials could  be held  to fall  under  Item  19(III)  of  the  Tariff.    One  of  the contentions urged  on behalf of the manufacturer was that in interpreting the  meaning of  the words  in a taxing statute like the  Excise Act,  the meaning  assigned to the words by the trade and its popular meaning should be accepted and the test to  be applied  is to see how the product is identified by the class or section of people who deal in the product or who use the product. The said contention was rejected by the Court on  the view that the said proposition is applied only when the  words in  question are  not defined in the Act and reliance was  placed on  the observations  aforementioned in the case  of M/s  Indo International Industries [supra]. The contention that  after coating  the cotton  fabric no longer retains its  identity  as  cotton  fabric  and  that  a  new distinct commodity  emerges as  a result  of coating and the resulting product  cannot be  regarded as  cotton fabric was rejected and it was observed:-      "This argument  does not  take into      account the  fact  that  Parliament      has   chosen    to   include    the      coated/laminated fabrics within the      ambit  and   purview   of   ’cotton      fabrics’ and  parliament’s power to      do  so   is  not   questioned   and      probably cannot  be questioned. The      fact remains  that to start with it      is  a   cotton  cloth   upon  which      certain   coating    material    is      applied." [p.687]      In  Fenoplast   (P)  Ltd.   [supra]  this   Court  also considered the  question whether PVC resin that was used for coating the  cotton fabric  could  be  regarded  as  plastic material for  the purpose  of Item  19(III) and  it was held that PVC  resin is also a plastic since synthetic resin is a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 8  

polymer itself  while plastic is polymer plus such additives as fillers, coloured plasticizers, etc. Insofar as ’Prepeg-F is assessable under Item 19(III) of the Tariff.      We may  now come  to ’Prepeg-P’  which has been held to fall under  Item  17  of  the  Tariff.  In  1977-78  [period relevant for Civil Appeal Nos. 2448-2451 of 1986] Item 17(2) of the Tariff was in these terms:-      "Paper and  Paper Board,  All Sorts      (including  pasteboard,  millboard,      straw-board,     cardboard      and      corrugated   board,)   in   or   in      relation  to   the  manufacture  of      which  any  process  is  ordinarily      carried on with the aid of power-      x      x      x    x       x      (2)  Paper  board   and  all  other           kinds  of   paper   (including           paper or  paper  boards  which           have been subjected to various           treatments  such  as  coating,           impregnating,     corrugation,           creping and  design printing),           not elsewhere specified." In 1984-85  [period relevant  for Civil  Appeal  Nos.  2676- 2678/92] Item 17 of the Tariff read as under:-      "Paper and  Paper Board,  all Sorts      (including paste-board, mill-board,      straw-board,     cardboard      and      corrugated  board)   and   articles      thereof specified  below, in  or in      relation  to   the  manufacture  of      which  any  process  is  ordinarily      carried on with the aid of power-      (1)   Paper    and   paper   board,           (including  paper   or   paper           boards   which    have    been           subjected      to      various           treatments  such  as  coating,           impregnating,     corrugation,           creping and  design printing),           not elsewhere specified.           x      x    x             x"      Before the Tribunal it was urged that ’Prepeg-P’ is not known as  paper in  the industry  and  as  such  it  is  not assessable under  Item 17  of the Tariff. Rejecting the said contention the  Tribunal held  that Item  17(2)/17(1) covers all categories  of impregnated  paper and  that ’impregnated paper’ has  been expressly included in Item 17(2)/(1) by the word "including".      Shri vellapally  has assailed  the  said  view  of  the Tribunal and has placed reliance on the minority judgment of the Judicial  Member of  the Tribunal  wherein reference has been made  to the  Trade  Advice  No.  51/75  dated  October 31,1975 issued  by the  Central Board of Excise and Customs, to the  effect that "treated paper which is claimed to be an intermediary product  in the  manufacture of  decorative and laminates sheets  falling under  Tariff item  15A of Central Excise Tariff  is not  classifiable under  Tariff Item 17 of Central Tariff". We are unable to accept the said contention of Shri  Vellapally passed  on the said Trade Advice because shortly thereafter  the Central Board of Excise and Customs, in its  letter No. 61/13/76-cx 2, dated October 13,1976, has expressed the  view that  resin impregnated  paper which  is marketable would  merit  classification  under  Tariff  Item 17(2). The  same view  was repeated  by the Central Board of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 8  

Excise and  Customs, Tariff  Advice No.  2/84 dated  January 12,1984 wherein  it was stated that craft paper subjected to the process  of impregnation  with synthetic  resins for the manufacture of  plastic  laminated  sheets  is  classifiable under Tariff  Item 17(2) as converted paper and eligible for exemption  under   Notification  63/82-C.E.   dated  28.2.82 subject to the condition stated therein.      Shri Vellapally  has also  submitted  that  impregnated paper is  different from ’Prepeg-P’ because impregnate paper does not  cease to  remain paper, while ’Prepeg-P’ cannot be regarded as  paper and  has invited  our  attention  to  the Explanatory  Notes   (Vol.2)  to  the  Harmonised  Commodity Description and  coding  system  published  by  Customs  Co- operation Council, Brussels wherein it is stated:-      "Impregnated Paper and Paperboard           Most  of   these  papers   and      paperboards   are    obtained    by      treatment   with    oils,    waxes,      plastics, etc., in such a manner as      to  permeate  them  and  give  them      special qualities  (e.g. to  render      them waterproof,  greaseproof,  and      sometimes      translucent       or      transparent). They are used largely      for  protective   wrapping  or   as      insulating materials.           Impregnated     papers     and      paperboards include, oiled wrapping      paper,  oiled   or  waxed  manifold      paper,  stencil   paper,  indicator      papers  such  as  litmus  or  pole-      finding  papers,  insulating  paper      and paperboard  impregnated,  e.g.,      with  plastics,  rubberised  paper,      paper   and    paperboard    merely      impregnated with tar or bitumen.           Certain   papers    such    as      wallpaper base  may be  impregnated      with  insecticides  or  chemicals."      9pp. 667-668, First Edition (1986)]      It is  no doubt true that impregnated paper referred to in  the  said  notes  is  one  which  is  used  largely  for protective wrapping  or as insulating materials. But it does not mean  that paper which is impregnated with resin for the purpose of manufacturing laminated sheets cannot be regarded as impregnated paper under item 17(2)/17(1) of the Tariff.      ’Prepeg-G’ has been held to fall under Item 22F/22-F(4) of the Tariff. In 1977-78 [period relevant for Civil Appeal Nos. 2448-2451/86] Item 22 of the Tariff read as under:-      "Mineral Fibres      Mineral  fibres   and  yarns,   and      manufactures therefrom,  in  or  in      relation  to   the  manufacture  of      which  any  process  is  ordinarily      carries on with the aid of power.      Explanation I.- "Mineral fibres and      yarns, and  manufactures therefrom"      shall be deemed to include-      (i)  glass fibre and yarn including           glass tissues and glasswool;      (ii) asbestos fibre and yarn;      (iii) any  other mineral  fibre  of           yarn,  whether  continuous  or           otherwise  such  as  slag-wool           and rock-wool; and

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 8  

    (iv) manufactures  in which mineral           fibres   or   yarn   or   both           predominate or predominates in           weight.      Explanation II.- this item does not      include asbestos cement products."      In 1984-85 [period relevant for Civil Appeal Nos. 2676- 2678/92] Item 22F(4) was in these terms:-      "Mineral Fibres      Mineral fibres  and yarn  and other      manufactures therefrom,  in  or  in      relation  to   the  manufacture  of      which  any  process  is  ordinarily      carried on  with the  aid of power,      the following, namely:-      x            x    x               x      (4)  Other  manufactures  in  which           mineral fibres or yarn or both           predominate or predominates in           weight."      Shri Vellapally  has submitted  that  Item  22-F/22F(4) refers to  mineral fibres  and yarn  and other  manufactures therefrom in  or in relation to the manufacture of which any process is  ordinarily carried  on with the aid or power and that glass  fabric, which  is made  out of mineral fibre and yarn would fall under item 22-F of the Tariff, but ’Prepeg-G which is obtained by impregnation of glass fabrics would not fall within  the ambit  of Item  22-F because  it is neither mineral fibres or yarn nor is it a product manufactured from mineral fibres  or yarn.  In support of this submission Shri Vellapally has placed reliance on the decision of this Court in Mahindra  Engineering and  Chemical Products Ltd.v. Union of India  & Ors. 1992 (1) SCC 727. In that case the question was whether  tubular shaped  are chamber housings which were manufactured from glass fabrics purchased from manufacturers were  assessable   to  duty  under  Item  22-F(4)  or  under residuary Item  68 of  the First  Schedule  to  the  Central Excises and  Salt Act,  1944. This  Court held that the said product did not fall under Item 22-F(4) and that it would be assessable under residuary Item 68. It was observed:-      The entry  is in  two  parts,  one,      descriptive    and     the    other      explanatory. Both  are to  be  read      together to bring out the scope and      extent of  its applicability fully.      The first  declares the items which      are   assessable   to   duty.   But      restricts  it   to  only  those  in      relation  to   the  manufacture  of      which  any  process  is  ordinarily      carried on  with the  aid of power.      Having thus specified the items and      the condition  on which it would be      covered in the entry it proceeds to      amplify it  in the  second part  by      using the  words ’following namely’      thus explaining the items that were      intended  to  be  covered  in  this      entry. Use of expressions ’namely’,      or ’that  is to  say’  followed  by      description  of  goods  is  usually      exhaustive unless  there are strong      indications   to    the   contrary.      Language of  serial No.  4 is plain      and simple.  It intends  to clarify

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 8  

    the     expression     ’manufacture      therefrom’  by   expanding  it   to      include in  its  ambit  even  those      manufactures in which fibre or yarn      predominated in  weight. But it did      not go  beyond it  and purported to      include   manufactures    out    of      manufacture of a commodity in which      mineral fibre or yarn predominated.      "[pp. 729, 730.]      "Thus glass fabric manufactured out      of mineral  fibre is  assessable to      duty under  Item 4  but are chamber      housing  manufactured   from  glass      fabric cannot be placed at par with      glass   fabric    and   cannot   be      considered as  ’other  manufacture’      of glass fibre or yarn." [p.730]      In  view   the  decision  of  this  Court  in  Mahindra Engineering and  Chemical Products  Ltd. [supra]  it must be held that  ’Pregpeg-G’ manufactured from glass fabrics would not fall  in Item  22-F/22-F(4) as found by the Tribunal and that ’Prepeg-G’  was assessable  to excise  duty during  the relevant   period under residuary Item 68 of the Tariff. The impugned judgment  of the Tribunal in so far as it held that Prepeg-G under  Item 22-F/22-F(4)  of the  Tariff cannot  be upheld and has to be set aside.      In the  result, the  appeals are partly allowed and the impugned judgment  of the  Tribunal to  the extent they hold that ’Prepeg-G’ manufactured by the appellant was assessable to excise  duty at the relevant time under Item 22-/F22-F(4) of the  Tariff are  set aside and it is held that ’Prepeg-G’ was assessable  to duty  under  residuary  Item  68  of  the Tariff. No order as to costs.