http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 2  

CASE NO.: Appeal (civil) 4658 1998

PETITIONER: KHATEMA FIBRES LTD.

       Vs.

RESPONDENT: STATE OF UTTAR PRADESH & ANR.

DATE OF JUDGMENT:       12/12/2000

BENCH: S.R.Babu, R.C.Lahoti

JUDGMENT:

RAJENDRA BABU, J.  : L.....I.........T.......T.......T.......T.......T.......T..J

     Leave granted in S.L.P.  (C) NO.  7302-7303 OF 1999.

     The  appellants  manufacture craft papers  which  is claimed  to  be  used  as  packing/wrapping  material.   The appellants applied for Recognition Certificate under Section 4-B  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 purchase 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 Allhabad  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  manufactures are not entitled to any exemption thereof, respondent No.  2 issued notice to delete craft paper from the  Recognition Certificate 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.  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 manufacturing  process of the craft paper manufactured by it

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

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.

     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 exclusive 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 pleadings  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 understood to be packing material and if the facts can be established 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.

     In  the circumstances, we set aside the order made  by the  High Court in the case 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.

     The appeals are disposed of accordingly.