P L D 1988 Lahore 282 (PLP)

This is a constitutional petition filed by Sethi Straw Board Mills Ltd., and the Ghakkhar Co‑operative Agricultural and Industrial Development Society Ltd., petitioners, seeking a declaration that the action taken by the Collector of Central Excises and Land Customs, Lahore, the Central Board of Revenue, Islamabad, and the Government of Pakistan, Ministry of Finance, respondents Nos.1 to 3, declaring that straw board and chip board are liable to Central Excise duty is without lawful authority and of no legal effect and that straw board be declared not to be liable to Central Excise duty upto 30‑6‑1979 and chip board be declared not to be liable to the said duty at all.

2. Sethi Straw Board Mills Ltd. under liquidation, petitioner No. 1, is under lease with the Ghakkhar Co‑operative Agricultural and Industrial Development Society Ltd., petitioner No.

2. In 1970 when the Finance Act of the same year was enacted, items 36 and 37 to section IX of the First Schedule of the Central Excises and Salt Act made "Paper all sorts" and "Paper Board all sorts" chargeable to Central excise duty. When the officers of the Central Excise visited the mills and informed the petitioners that Central excise duty would be livable on straw board and chip board manufactured by them, petitioner No.1 wrote a letter on 6‑7‑1970 to the Collector of Central Excise, respondent No.1, intimating that they were not liable to duty. The petitioner mills began paying the duty under protest. Further letters were also written by petitioner No.1 on 18‑2‑1973 and 17‑6‑1973 to respondent No.l. Finally on 24‑7‑1973, respondent No.1 intimated that straw board and chip board manufactured by the petitioner mills would be liable to duty. The petitioner mills preferred an appeal before the Central Board of Revenue, respondent No.2. In 1977, respondent No.1 secured samples of the straw board and chip board prepared by the petitioner mills, which it sent to the Ministry of Industries, Central Testing Laboratories, Karachi, for its opinion, which also opined, vide its report dated 27‑9‑1977, that the products were not paper board. The appeal was ultimately argued before the Central Board of Revenue, which rejected the appeal of the petitioner mills on 20‑8‑1979. The petitioners moved a revision petition before the Government of Pakistan, which was heard by the Secretary Finance, who also rejected the same on 20‑1‑1986. Being aggrieved by the said orders, the petitioner mills filed the present writ petition, which is now before me for disposal.

3. The only question involved in this petition is whether straw board and chip board manufactured in the mills falls under the description "paper board all sorts" so as to be liable for Central excise duty under the First Schedule annexed to the Central Excises and Salt Act, 1944.

4. The case of the petitioners is that straw board and chip board do not fall in the category "paper board all sorts" for a number of reasons. First, that samples of the straw board and chip board were submitted to the Central Testing Laboratories, Government of Pakistan, Lahore, which, vide its reports dated 7‑7‑1970, held that both the samples were not paper board and vide its report dated 18‑8‑1977 gave its finding that the straw board and chip board samples had been manufactured from straw pulp and not from paper pulp or paper ingredients. It is submitted that these reports were submitted to the Collector of Central Excise, Lahore. Second, that the petitioner submitted samples of straw board and chip board to the Joint Direction. of Industries (Quality Control and Research), Government Industrial Research Laboratories, Lahore, who gave his findings, vide his reporter dated 18‑8‑1970, that these samples were not paper board. The said, report and samples were also submitted to the Collector, Central Excise, Lahore. Third, that the Ministry of Industries, Central Testing Laboratories, took samples of the straw board and chip board of their petitioner mills through the office of the Collector of Central Excise Lahore, respondent No.l. who, vide its report dated 27‑9‑1977r' submitted to respondent No.1, held that the same were not paper ' board. Fourth, that the process of manufacture and the plats) 4 which straw board and chip board are manufactured are totally different from the process and plant required for paper board, as straw board and chip board have different characteristics from paper board. Fifth, that straw board, chip board and paper board are separately categorized in the publications of the Government of 3 ,Pakistan, namely, the Monthly Statistical Bulletin, issued by the( Central Statistical Office under the Economic Affairs Division, the 4 Statistical Year Book, issued every year by the Central Statistical. Office under the Economic Affairs Division, and the Pakistan Economic Survey, issued by the Ministry of Finance at the time of the annual: budget. Sixth, that products listed in the First Schedule to the Central Excises and Salt Act, 1944, are with reference to those which everybody conversant with trade, business or transaction in Pakistan. Know and understand to have a particular meaning, as opposed to their ordinary or popular meaning. In this connection, learned counsel has referred to Civil and Military Press Limited v. Pakistan (1985 E CLC 1021), Usmania Glass Sheet Factory v. Sales Tax Officer (P L DE 1971 S C 205), Collector of Customs (Appraisement) Karachi v. M/s. Abdul Majid Khan (1977 S C M R 371), M/s. Hoechst Pakistan Ltd. v. Government of Pakistan (P L D 1980 Kar. 434). Indo‑National] Industries v. Commissioner of Sales Tax (1981 Excise Law Times 3251 S.C. India) and Sayee Industries Madoorayee v. Collector of Central Excise, Madoorayee (1983 Excise Law Times 2405 'Tribunal). Seventh. . that in 1979, the category covered by item 7.1 relating to 11 paper and paper board all sorts" was amended to include "paste board, mill] board, straw board and such other paper and paper board which are laminated, bonded, coated, corrugated, cropped, crinkled, sensitized, , impregnated, surface colored or surface decorated". Since thee definition was enlarged by the use of the word "including", it obviously y shows that earlier straw board and chip board were not products s falling within the scope and ordinary meaning of "paper board" and d that by enlarging the scope of the definition, the said items were e made chargeable. In this connection, learned counsel has cited Usmania Glass Sheet Factory Ltd. v. Sales Tax Officer (P L D 1971 S C 205) and Colony Textile Mills v. Commissioner of Sales Tax (P L D 1976 Lah. 243) to show that the word "including" enlarges the scope of the definition.

5. On behalf of the Federal Government it is submitted that the classification of any product in the Monthly Statistical Bulletin or the Statistic year book or the Pakistan Economic Survey or other publication of the Government does not affect the classification of the said product under the Central Excises and Salt Act, 1944. It is submitted that item "paper board all sorts" is wide enough to incorporate paper board of any sort. It is contended that all types of paper and paper board are manufactured from vegetable fibers, though various names are given to these products either on the basis of thickness, color, the extent to which the vegetable fiber is cooked or washed from lignum, the use to which the products may be put or its strength, but as a specie all these are covered by the expression "paper and paper board all sorts'. As for chip board and straw board being paper board, the Dictionary of Paper, Third Edition, published by the American Paper and Pulp Association has been read, where straw board has been defined at page 423 to mean "paper board made largely from straw for specialty purposes" and chip board at page 115, which has been defined to mean "paper board used for many purposes that may or may not have specifications of strength, color, or other characteristics", but which is "normally made from paper stock with a relatively low density in thickness of .006 of an inch and up." The Brussels nomenclature has also been read, where straw board is classified as paper board consisting essentially of vegetable fibers felted together in sheet form to which colour may be added.

6. This case has been argued at length by the learned counsel for both the parties. Both the learned counsel agreed that this petition should be disposed of as a notice case. In these circumstances, whilst admitting this petition, I would dispose of this case as a notice case.

7. I have given my ..anxious consideration to this ‑case. The word' "paper" in a generic sense includes all kinds of matted or felted sheets of cellulose fibre (usually vegetable matter) formed on a fine screen from a water suspension. However, paper stands divided into two broad sub‑divisions i.e. paper and paper board. The distinction is not sharp, but generally paper is lighter, thinner and more flexible than paper board, In the market in general, paper having weight below 100 grams per square' meter is treated as paper, that having weight between 100 to 180 grams per square meter falls in the category of both paper and paper board and that having weight above 180 grams per square meter is treated as paper board. In both the sub‑divisions i.e. paper and paper board the quality can be both rough and weak at the lowest level, to fine and strong at the highest level. Where it is cooked and chemically treated to remove lignum A (the binding agent that is found in organic matter), pith (which is the filler in baggage and different types of straw) and chlorophyll (which is a coloring matter), the paper or the paper board tends to become finer, purer and stronger. Paper board, therefore, is basically made from waste paper, as it is purer form of cellulose fibre, with, other fibrous material, such as straw, wood pulp, grass, etc.

8. Paper and paper board manufactured are sophisticated processes, beyond the comprehension to the normal and average person. The printing and packaging industries have also not lagged behind. The subtle differences and distinctions in the paper and board that are manufactured and the different and sophisticated uses to which they are put, are now more within the comprehension of the tectonic experts and experienced persons engaged in the manufacture of the said products, or those connected with the printing and packaging industries at some qualitative level, rather than ordinary' people that buy and sell or use one or more of them of the simpler types. The words "paper all sorts" or "paper board all sorts", as used in the paper business and trade, must, therefore, be understood as applying to such types of paper or paper board which persons having some gumption regarding their manufacture or use, particularly treat as covered by those names. The expression "paper all sorts" in the paper business and trade is understood to apply to all types of, paper which is normally used for writing, printing or wrapping, excepting very specific types such as waste paper, wall paper sensitized paper, tissue paper, toilet paper, etc. The expression "paper board all sorts" in the paper market and trade is understood to apply to purer and refined forms of thick paper, which have multifold uses, such as for making boxes, etc., and on which final printing can also be done. It is, therefore, thick paper which has been properly prepared, where the fibre has been more refined or more properly cooked and chemically or mechanically treated.

9. Chip board basically is thick paper made from waste paper, or mixture of recycled waste paper and other fibbers, such as straw, etc. Chip board is used for cheep quality boxes, cartons etc. In the, paper market and trade, chip board of the highest quality comes in the category of paper board. In short, the best quality of chip board, is the lower quality of paper guard. Where the chip board is lower in, quality i.e. made from a mixture of recycled waste paper and straw, where the straw has not been cooked properly or chemically treated, then it begins to acquire the characteristics of straw board and falls outside the category of paper board.

10. Straw board is thick paper basically made from hundred per cent straw, or where the major constituent is straw. The straw is semi or mildly cooked with chemicals. The board is rough, in which specks of raw straw can be seen. It is the yellow coloured rough thick paper commonly called "gatta". It is generally used in packing, or as partition medium between goods, or as filling in attach cases and in cheap quality shoes, or as outside covers for exercise books. Being rough, it tends to crack when folded. In the paper market, and trade, straw board is not treated as paper board at all.

11. It is obvious that in the technical sense, paper board, straw! board and chip board can all be treated as member products of the same family as paper, but the question for determination is really to whether scientifically straw board and chip board fall in the same genus as paper board, but whether, in the paper business and trade, straw board and chip board are treated as paper board. As held in Two Hundred Chests of Tea (U.S. 6 Lawyers Edition 430) the object of fiscal laws is to raise revenue and for that purpose to B class substances according to the general usage and known determination of trade. The legislating body applies its attention to the description of articles as they are known in its own domestic markets as well as in its own foreign traffic. In Usmania Glass Sheet Factory's case PLD 1971 S C 205, the Supreme Court observed that] the primary rule is that general statutes are prima facie presumed to use words in their popular sense, but that where the statute is passed with reference to a particular trade. business or transaction and words are used therein which everyday conversant with the trade, business or transaction know or understand to have a particular meaning, then the words must be construed as having that particular meaning, even though they may differ from the ordinary and popular meaning. The view was also followed by the Supreme Court in Abdul Majid's case 1977 S C M R

371. As observed above, in the paper business and trade, straw board, in any case, is not treated as paper board. With regard to chip board, it remains to be determined whether the chip board manufactured by the petitioner company was at the highest qualitative level, so as to be treated as paper board. The report of the Central Testing Laboratories, Government of Pakistan, Ministry of Industries, dated 27‑9‑1977, which was taken at the instance of the Collector of Central Excise himself, shows that the chip board was not of the highest quality. It was made of recycled waste paper and straw (containing lignum) in the ratio of 50:

50. The report also shows that no delignification by chlorinating or any other process was carried out. This shows that it was medium quality chip board, something intermediary between paper board and straw board. The ship board, therefore, manufactured by the petitioner mills obviously was not paper board. The report of the Central Testing Laboratories dated 27‑9‑1977 also confirms that the sample of chip board manufactured by the petitioner company cannot be said to be paper board. In this view of the matter, on the basis of the principle laid down by the Supreme Court, I have no hesitation in holding that the straw board and chip board manufactured by the petitioner mills was not paper board. This accounts for the reason why the various Laboratories which tested the petitioner mills, products held the same not to be paper board. The separate categorization of straw board, chip board and paper board by various Government agencies in their publication is, therefore, not without meaning, though by itself it may not be ‑decisive. The expansion of the definition of "paper and paper board all sorts" in the Central Excises and Salt Act, 1944, in 1979 by the Federal Government now assumes significance, in that the Central Board of even felt that the earlier definition was restricted and did not cover a variety of paper and paper boards which deserved to be brought into the tax net. The petitioner mills are, therefore, not liable for any Central excise duty upto 1979. Even the Karachi High Court, in the case of the Civil & Military Press Ltd. 1985 C L C 1021, held corrugated board as not falling in the category of paper board.

12. The only question that now arises is whether from 1‑7‑1979, the petitioner mills are not liable for any Central excise duty on chip board. This is the date from which the expression "paper and paper board all sorts" was redefined as "including paste board, mill board, straw board and such other paper and paper board which are laminated, bonded, coated, corrugated, cropped, crinkled, sensitized, impregnated, surface colored and surface decorated." Lord Watson in Dilworth v. Commissioner of Stamps 1899 A C 99 held that the word "include" was generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it was so used, those words or phrases were to be construed as comprehending, not only such things as they signified according to their natural import, but also those things which the interpretation clause declared that they would include. Lord Watson held that the word "include" was also susceptible of another construction, which could become imperative, if the context of the Act was sufficient to show that it was not merely employed for the purpose of adding to the natural significance of the words or expressions defined, in which case it could be equivalent to 'mean and include,' and in that case it could afford an exhaustive explanation, of the meaning which, for the purposes of the Act, would invariably be attached to those words or expressions. As already discussed above, we Central Excises and Salt Act, 1944, deals with matters pertaining to trade and business and words used therein are obviously defined with particular reference to the meaning which persons conversant with the particular trade and business would know or understand them to have. The expression "paper all sorts", "paper board ‑1i sorts" and "paper and paper board all sorts", are not treated in the paper business and trade as covering all types of paper and paper board falling under the genus of paper or paper board, but only to such types of paper or paper board which persons in the said business and trade understand or know to have that particular meaning. In this view of the matter, the fact that the Finance Act, 1979. expanded the definition by using the word "including" cannot be stated to have made the definition exhaustive, but only to have enlarged the meaning by including some other types of paper and paper board which otherwise would not have fallen within the general language of the definition. What has been added to the. definition are three particular types of paper board, namely, paste board, mill board and straw board and any other type of E paper board, provided it is laminated, bonded, coated, corrugated, crepped, crinkled, sensitized, impregnated, surface coloured or surface decorated. Paste board, as defined in Pulp and Paper Stationery by John R. Lavigne, 1986 Edition, is "a rigid paper board, lined with sheets of paper pasted to its surface". Mill board, as defined in the said book, is "a type of heavy paper board extensively used for box manufacturing and in the binding of books". The chip board, as manufactured by the petitioner mills is neither mill board, as it is not a heavy type of paper board, nor paste ‑board, as it does, not have sheets of paper pasted on its side. The chip board, therefore, manufactured by the petitioner mills does not come into the three distinct categories of board listed in the definition. The next question is whether the chip board manufactured by the petitioner mills can be treated as paper board which is laminated, bonded, coated, corrugated, crepped, crinkled, sensitized, impregnated, surface coloured or surface decorated. I am afraid it does not come into this category either. In this view of the matter, chip board manufactured, by the petitioner mills was not liable for any Central excise duty even after 1979.

13. For the foregoing reasons, this writ petition is accepted and the orders of respondents Nos.1, 2 and 3 dated 24‑7‑1973, 20‑8‑1979 and 20‑1‑1986 respectively are declared to be illegal and without lawful authority and of no legal effect and it is hereby declared that straw board was not liable to any Central excise duty upto 30‑6‑1979 and chip board was not liable to any Central excise duty at all. The petitioner mills shall be entitled to the refund of the Central excise duty paid by them.

14. The petitioner mills shall be entitled to their costs.

15. Before concluding, I would like to mention that I have placed on the record of the case samples of the straw board and chip board alleged to have been manufactured by the mills during the period 1970 upto the date of the filing of this petition, on which this judgment is based. The said samples have been signed and dated by me. A.A./S‑195/L Petition accepted.