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Arunachal Forests Products Ltd. v. Union Of India
Court Opinion Summary — Block Board Tariff Classification
Factual and Procedural Background
The writ petitions concern the correct tariff classification of Block Board manufactured by the petitioners. The petitioners contended that their Block Board falls under entry 4410.90 of Chapter 44 of the Central Excise Tariff Act, 1985 (the "1985 Act"); the Department contended that it falls under entry 4408.90.
Some petitions (Civil Rule Nos. 1500/89, 1666/89, 1668/89, 246/90, 1594/90 and 362/90) relate to periods prior to 19-3-1990; other petitions relate to the period from 20-3-1990 to 28-2-1992. Before the 1985 Act (i.e., under the 1944 Act), Block Board was explicitly listed under Item 16(B) of the 1st Schedule (together with plywood, lamin board, etc.) attracting a 30% ad valorem duty.
When the 1985 Act came into force on 28-2-1986 it contained two relevant headings: 44.08 ("Plywood, veneered panels and similar laminated wood") with entry 4408.90 ("Others") at 30%, and 44.10 ("Articles of wood not elsewhere specified") with entry 4410.90 ("Others") at 12%. A dispute arose whether Block Board should be classified under 4408.90 or 4410.90.
A CEGAT decision in Wood Craft Products Ltd. v. Collector of Central Excise, 1992 (60) E.L.T. 668 (Tribunal) (an appeal to the Supreme Court was stated to be pending) sided with manufacturers, holding that Block Board did not fall under "similar laminated wood" as understood in trade and thus fell under 4410.90. The Finance Act, 1990 later added a Note 5 to Chapter 44 defining "similar laminated wood" to include Block Board whose core is "glued together", and the Finance Act, 1992 further amended Note 5 to read "glued or otherwise joined together."
The excise authorities thereafter classified certain Block Board under 4408.90 for 1992, provoking further writ petitions. One writ (Civil Rule No. 833/92) was dismissed by a Single Judge and that dismissal was confirmed on appeal by a Division Bench (including the Chief Justice). The present opinion decides the batch of writ petitions by interpreting the statutory entries and the Notes as they stood at the relevant times.
Legal Issues Presented
- Whether Block Board manufactured by the petitioners falls under entry 4408.90 ("Plywood, veneered panels and similar laminated wood") or under entry 4410.90 ("Articles of wood not elsewhere specified") of Chapter 44 of the 1985 Act, as the entries stood at the relevant times.
- What is the legal effect of Note 5 inserted into Chapter 44 by the Finance Act, 1990 (defining "similar laminated wood" to include Block Board whose core is "glued together") and the subsequent amendment by the Finance Act, 1992 (substituting "glued or otherwise joined together") on the classification of Block Board.
- Whether the commercial/trade meaning (including the ISI Glossary definitions) of "laminated wood", "lamin board", and "block board" controls classification in the absence of a statutory technical definition.
Arguments of the Parties
Petitioners' Arguments
- Block Board manufactured by them is not "plywood" or a "veneered panel" and, as understood in the trade and by the Indian Standards Institution (ISI) definitions, is distinct from "similar laminated wood".
- Accordingly, Block Board should be classified under entry 4410.90 (articles of wood not elsewhere specified) as that was the correct heading under the 1985 Act prior to the 1990 Note and for cases where the Note does not apply.
Department's Arguments
- The Department maintained that Block Board is "similar laminated wood" and therefore falls under entry 4408.90.
- After insertion of Note 5 by the Finance Act, 1990, the Department relied on that inclusive definition (which referred to Block Board in which the core is composed of blocks "glued together") to classify certain Block Board under 4408.90.
- The Department argued (as reported) for a broader reading of "glued together" in Note 5; the court records that the Department suggested a wider sense for "glued" (the opinion records the Department's suggestion without asserting who advanced it in detail).
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Wood Craft Products Ltd. v. Collector of Central Excise, 1992 (60) E.L.T. 668 (Tribunal) | Held that Block Board was not "similar laminated wood" as understood in trade and therefore fell under the residuary entry (4410.90) as it stood. | The Court noted that six writ petitions relating to the period before the Finance Act, 1990 are covered by this CEGAT judgment; it treated that decision as supporting the petitioners' contention for those periods. |
| Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd., (1987) 1 SCC 424 | Authority on interpreting the purpose of an inclusive definition and on construing the purpose of legislative definitions in context. | The Court relied on the principle that an inclusive definition's purpose depends on text and context to decide whether Note 5's inclusive definition was meant to enlarge "similar laminated wood" so as to include Block Board and, if so, to what extent. |
| Writ Appeal No. 11 of 1993 and connected appeals (Calcutta High Court) | The Court's earlier appellate reasoning on whether Block Board where blocks are merely laid or not glued together could be treated as "otherwise joined together" for the purpose of Note 5 as later amended. | The opinion references that prior judgment's conclusion that blocks merely laid without glue or fasteners can be regarded as "otherwise joined together" under the later (1992) wording; the present Court distinguished the 1990 Note (which used only "glued together") from the 1992 amendment. |
Court's Reasoning and Analysis
The Court's analysis proceeds in sequential steps, applying textual, contextual and trade-meaning principles:
- Historical and textual starting point: Under the 1944 Act, Block Board was explicitly listed in Item 16(B) together with plywood and other wood articles (30% duty). When the 1985 Act replaced that schedule (effective 28-2-1986) the legislature created separate headings: 44.08 for "Plywood, veneered panels and similar laminated wood" (entry 4408.90 at 30%) and 44.10 for "Articles of wood not elsewhere specified" (entry 4410.90 at 12%). The legislature deliberately omitted any explicit reference to "Block Board" under 44.08.
- Trade meaning and ISI definitions: Because the 1985 Act provision did not define "laminated wood" or "Block Board", the court held that the correct guide is text, context and the trade meaning. The Court cited the ISI Glossary definitions for "Laminated Wood", "Lamin Board" and "Block Board". The ISI definition shows Block Board to be materially distinct from laminated wood (Block Board has a core made of strips or blocks of wood laid separately or "glued or otherwise joined together").
- Pre-1990 position: Applying the ISI meaning and the deliberate omission in the 1985 Act, the Court concluded that Block Board is "totally different" from plywood or laminated wood in the commercial sense. Thus, for the relevant pre-1990 cases (including the six writ petitions referred to), Block Board did not fall under entry 4408.90 and instead fell under entry 4410.90 as the entry stood at that time. This conclusion was consistent with the earlier CEGAT decision in Wood Craft Products Ltd.
- Effect of Note 5 (Finance Act, 1990): Note 5 was an inclusive definition introduced to enlarge the meaning of "similar laminated wood" so as to take in certain types of Block Board. The Note, as introduced in 1990, included Block Board "in which the core is thick and composed of blocks, laths or battens of wood glued together...". The Court analysed the precise wording—focusing on the phrase "glued together".
- Construction of "glued together": The Court rejected the Department's suggestion that "glued together" should be read metaphorically or given a very broad meaning. The Court applied the natural and ordinary meaning of the words in context (and rejected reading a figure of speech into taxing/fiscal legislation). It held that "glued together" means cases where adhesive is applied between each set of adjoining blocks — i.e., an artificial application of glue between blocks — and does not include cores where blocks are merely laid side-by-side and the inner veneer surfaces are glued to the veneer but the blocks themselves are not glued to each other.
- Effect of the 1992 amendment to Note 5: The Finance Act, 1992 amended Note 5 by adding the words "or otherwise joined together". The Court considered that amendment to be a deliberate legislative step to enlarge the scope of the inclusive definition so as to include Block Board where blocks are "otherwise joined together" (including those merely laid and joined by the action of the outer veneers under glue and pressure). The Court observed that the 1990 Note did not contain these words and therefore had a narrower scope.
- Final application to the petitions: Given the textual reading and the legislative history, the Court held that Note 5 as it stood in 1990 did not apply to Block Board manufactured by the petitioners (where the core was not formed by blocks glued together). Therefore, for the periods when Note 5 was in the 1990 form, the petitioners' Block Board fell under entry 4410.90. Where the later 1992 amendment applies, some types of Block Board could be covered by 4408.90, but that change post-dates the 1990 Note and is distinct.
Holding and Implications
Holding:
The writ petitions are allowed: the Court held that Block Board manufactured by the petitioners falls under entry 4410.90 (articles of wood not elsewhere specified) as the relevant entry stood when Note 5 inserted by the Finance Act, 1990 did not apply to their products.
Consequences and implications:
- The respondents are directed to classify the petitioners' Block Board in accordance with the Court's conclusions (i.e., under entry 4410.90 for the relevant periods where the 1990 Note does not apply to their products).
- Parties will bear their own costs, as ordered by the Court.
- The opinion confines itself to the statutory text, trade meaning (via ISI definitions), and the specific legislative amendments (1990 and 1992). The Court's decision is a textual and contextual construction of Note 5 as it stood in 1990 and does not purport to establish a broader principle beyond that statutory and factual matrix; the opinion does not assert that it sets any sweeping new precedent beyond the classifications decided for the petitions before it.
U.L Bhat, C.J:— The dispute projected in these writ petitions relates to the correct classification and entry relating to Block Board manufactured by the petitioners. According to the petitioners, Block Board manufactured by them falls under entry 4410.90 in Chapter 44 of the Central Excise Tariff Act, 1985 (for short, the 1985 Act), while according to the Department the same falls under entry 4408.90
2. Civil Rule Nos. 1500/89, 1666/89, 1668/89, 246/90, 1594/90 and 362/90 relate to the period prior to 19-3-1990 while other writ petitions relate to the period falling within the period beginning from 20-3-1990 to 28-2-1992. Levy of excise duty prior to 28-2-1986 was governed by the provisions of 1st Schedule to Central Excises and Salt Act, 1944 (for short, the 1944 Act). Relevant portion of Item 16(B) of the 1st Schedule read as follows:—
“WOOD and articles of wood, the following namely:
Plywood, Block Board (including flush doors), Lamin Board, Batten Board, hard or soft wall boards or insulating board and veneered panels, whether or not containing any material other than wood: cellular wood panels, building boards or wood pulp……….”. Thirty per cent ad valorem.
3. No other entry in the first schedule of the 1944 Act took in any other type of articles of wood. Entry 16(B) was the only entry relating to articles of wood. Entry 68, the residuary clause, related to “all other goods, not elsewhere specified…………” the duty being 12% ad valorem. It is therefore crystal clear that under 1944 Act Block Board of any type or description and irrespective of the manufacturing process adopted fell under entry 16(B) along with plywood, Lamin Board, Cellular Wood Panels etc.
4. The 1985 Act came into force with effect from 28-2-1986. Relevant entries in Chapter 44 of the Act dealing with wood and articles of wood, as they originally stood were:
44.08 Plywood Veneered panels and Similar laminated wood.
****** ****** 4408.90 Others 30%.
44.10 Articles of wood not elsewhere specified.
****** ****** 4410.90 Others 12%
5. Controversy arose between manufacturers and Excise authorities regarding the entry applicable to Block Board, whether it was 4408.90 or 4410.90 Some of the manufacturers filed appeals before the Collector of Appeals, Calcutta and ultimately before the CEGAT, CEGAT by judgment dated 18-10-1989 in Wood Craft Products Ltd. v. Collector of Central Excise, 1992 (60) E.L.T 668 (Tribunal) upheld the contention of the manufacturers that entry 4410.90 was applicable on the ground that Block Board is not laminated wood as understood in the commercial sense and according to the specifications of the Indian Standards Institution and, therefore, did not fall under the heading “similar laminated wood” in entry 44.08 and would fall under residuary entry 4410.90 in the absence of any contra evidence adduced by the Department to show that Block Board is known in the trade as laminated wood similar to plywood and veneered panels. We are told that an appeal against the judgment is pending in the Supreme Court. Six writ petitions in this batch relate to the period when the relevant entry stood as mentioned above and are covered by the CEGAT judgment.
6. The Finance Act, 1990 amended Chapter 44 of the Tariff Act in certain respects. Notes 5 and 6 were renumbered as Notes 6 and 7 respectively and the following Note was inserted as Note 5:
“For the purpose of Heading No. 44.08 the expression ‘similar laminated wood’ includes block board, lamin board and batten board, in which the core is thick and composed of blocks, laths or battens of wood glued together and surfaced with the outer plies and also panels in which the wooden core is replaced by other materials such as layer or layers of particles Board, fibre board, wood waste glued together, asbestos or cork.”
(Emphasis supplied)
7. Tariff relating to entry 4410.90 was changed to 15%. The statement of objects and reasons of the Finance Bill, 1990 indicated that it was proposed to introduce a new chapter Note to provide a definition of “similar laminated wood”. The Excise authorities once again took the view that the duty leviable on Block Board was under entry 4408.90 and not entry 4410.90 and the manufacturers persisted in their contention that 4410.90 was applicable. This dispute arises in these writ petitions except the six referred to in paragraph 2 supra.
8. The 1985 Act was further amended by the Finance Act, 1992. Note 5 of Chapter 44 was amended substituting the words “glued or otherwise joined together” for the words “glued together”. The amended Note 5 reads as follows:—
“For the purpose of Heading No. 44.08 the expression ‘similar laminated’ include block Board, lamin Board and batten board, in which the core is thick and composed of blocks, laths or battens of wood ‘glued or otherwise joined together’ and surfaced with the outer plies and also panels in which the wooden core is replaced by some other materials such as layer or layers of particles board, fibre board, wood waste glued together, asbestos or cork”.
(Emphasis supplied)
9. The excise authorities took steps to classify Block Board manufactured by these manufacturers under entry 4408.90 for the year 1992. This led to a batch of writ petitions including Civil Rule No. 833/92 which was dismissed by one of us (Hon'ble Manisana J.) and the dismissal was confirmed by a Division Bench consisting of one of us (Chief Justice) and Baruah J. in Writ Appeal No. 11 of 1993 and other writ appeals.
10. The six writ petitions in the present batch referred to earlier have to be decided on the basis of the provisions of 1985 Act as they stood before the amendment in 1990. Entry 44.08 related only to “Plywood veneered panels and similar laminated wood”. It is common ground that Block Board involved in these cases is not plywood or veneered panel. According to the Department, it is “similar laminated wood”. The provision under consideration in these six cases does not contain any definition of “laminated wood”, or of “Block Board”. Therefore, the correct guide for understanding is the text, context and the trade meaning which is prevalent in the particular trade where these articles are known, in the absence of any evidence either way. There is nothing in the provision to indicate that legislature intended any particular technical meaning to be assigned to “laminated wood.” We have to consider the meaning attached to these words in the particular trade. For this purpose we can look into the description or classification given by the Indian Standards Institution, Glossary of Terms published by the I.S.I states:—
“Laminated Wood: An assembled product made up of layers of wood and adhesive in which the grains of adjacent layers are parallel. Lamin Board: A Board having a core of strips, each not exceeding 7 mm in thickness, glued together face to face to form a slab which in turn is glued between two or more outer veneers, with the direction of the grain of the core strips running at right angles to that of the adjacent outer veneers”.
“Block Board: A board having a core made up of strips of wood, each not exceeding in width, laid separately or glued or otherwise joined to form a slab which is glued between two or more outer veneers with the direction of the grain of the core blocks running at right angles to that of the adjacent outer veneers”.
(Emphasis supplied)
11. The meaning given in the Glossary of Terms can in the absence of other evidence, be regarded as reflecting the sense in which the particular trade understands the names. Going by the meaning in the Glossary for the various names there can be no doubt that Block Board is something totally different from Plywood or laminated wood, as understood in the commercial sense or in the particular trade. Block Board has no similarity to laminated wood. Legisla ture could not have intended to include “Block Board” also within the meaning of the words “similar laminated wood.” When the 1985 Act was enacted, Legislature had before it the entries contained in entry 16(B) of the 1944 Act which specifically referred to Plywood, Block Board, Lamin Board, Batten Board, Veneered Panels etc. Nevertheless the legislature deliberately omitted any reference to “Block Board” in entry 44.08 in the 1985 Act. This is another indication in support of the conclusion that Block Board cannot fall under the category of “similar laminated wood” in entry 44.08 in the 1985 Act. We therefore uphold the contention of the petitioners in the six writ petitions referred to above that Block Board manufactured by them does not fall within the entry 4408.90 but falls under the entry 4410.90 as the entry stood in 1989.
12. We now turn to the effect of Note 5 introduced by the Finance Act, 1990. Note 5 provided in an inclusive definition of the words “similar laminated wood”. According to this inclusive definition, the expression “similar laminated wood”, in so far as it is relevant for the purpose of these case, included Block Board in which core is composed of strips of Block of wood glued together. There is no controversy regarding the rest of the definition. The con troversy relates to the meaning of the words “glued together”. Even going by “Glossary of Terms” issued by the I.S.I Block Board must have a core made up of strips of wood, laid separately or glued or otherwise joined together to form a slab and this slab must be glued between two or more outer veneers. In the judgment in Writ Appeal No. 11 of 1993 and connected appeals this Court has pointed out that there are differences in the meaning given in the Glossary of Terms and in the description given in Note 5. Note 5 did not include Block Board as such, it includes only Block Board in which core is composed of strips of wood glued together. The Legislature must have a purpose in giving the explanatory description of this nature. The Legislature did not say that “similar laminated wood” included Block Board. There is no dispute that Block Board can be manufactured by different processes. Whatever be the process adopted, the common factor is that Block Board is “made up of strips of wood”. The difference in the process lies in the manner in which the blocks of wood are kept or connected together. In the Judgment in the Writ Appeals this Court noticed the three different kinds of processes referred to by I.S.I, namely, (i) glueing blocks of wood together, that is, applying glue artificially in between every set of two adjacent Blocks, (ii) laying them separately and (iii) otherwise joining them together, and came to the conclusion that the core or slab is formed even where blocks of wood are laid without applying glue between every set of adjoining blocks or without connecting every set of adjoining blocks by metal fastener or the like and are merely laid in between outer veneers in which the inner surface is applied with glue and pressure is applied; and such core or slab is one in which blocks of wood can be said to be “joined together.” This Court held that where no artificial means by way of glue or metal fastener is used to hold the Blocks together and where the Blocks of woods are separately laid, they are “otherwise joined together” to form a slab. Therefore, it was held that such Blocks Board would fall under Entry 4408.90 in the light of Note 5 as amended by Finance Act, 1992.
13. In the Note 5 introduced by the Finance Act, 1990 the words “otherwise glued or joined together” were absent. Note 5 therefore took in only Block Board in which the core is composed of blocks of wood “glued together”. The purpose of an inclusive definition may be either to enlarge the meaning of the words so as to take in the ordinary, popular and natural sense of the words or to include within its meaning something about which there might be any dispute or to bring under the heading items having similar features but going by different names. What is the purpose sought to be achieved in a given case depends on the text and context, see Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd., (1987) 1 SCC 424.
14. The purpose of the inclusive definition in Note 5 was definitely to enlarge the meaning of the words “similar laminated wood”, as without the definition these words will not take in Block Board. There is no controversy about this aspect. The controversy is whether by using the words “glued together” the Legislature intended to include Block Board where the core is formed of blocks of wood which are not glued together or which are not fastened together or which are laid separately. Construing the words “glued together” in the setting in which they occur and attributing their natural and ordinary meaning to the words, the only conclusion could be that the words will apply only if Blocks of wood are put together by using adhesive or glue in between. The word “glue” cannot, as suggested on behalf of the Department, be given the wider meaning which it may have when used in a sentence like this:— ‘Eyes are glued to the television.’ It is obvious that the eyes are not glued but the sight is glued to the television. The words used in the context indicate a figure of speech. It is not possible to read a figure of speech in fiscal legislation. Ascribing their natural meaning, in the particular context, the words “glued together” must take in only those cases where every set of adjoining blocks are put together by applying glue or adhesive in between them. It must follow that in Block Board where the core is formed by merely placing blocks of wood in between veneer sheets, in the inner surface of which glue is applied cannot fall within the inclusive definition given in Note 5 introduced by the Finance Act, 1990.
15. This view is also supported by the legislative exercise conducted in the Finance Act, 1992 by adding the words “otherwise joined together” for the purpose of enlarging the scope of the inclusive definition. In these circumstances we hold that as Note 5 stood at the relevant time it did not attract Block Board manufactured by the Petitioners. The Block Board manufactured by the petitioners fell only in Entry 4410.90
16. We allow the writ petitions directing the respondents to classify the Blocks Board manufactured by the petitioners on the basis of the above conclusions. Parties will bear their costs.
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