KHATEMA FIBRES LIMITED Vs. STATE OF UTTAR PRADESH

JUDGEMENT

(1.) Leave granted in S.L.P. (C) Nos. 7302-7303 of 1999.

(2.) 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 Allahabad High Court in M/s. Lalji Board Industries vs. State of U.P. (1998 (1) UPTC 311) 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 manufacturers 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.

(3.) 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 or had made any averment that the product is so adapted 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.