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M/S Jajal Plastic Industries And Others v. Union Of India And Others
Factual and Procedural Background
The petitions before the Court were filed by manufacturers of plastic bangles. The material out of which the bangles are manufactured is methyl methacrylate monomer (referred to in the opinion as "the monomer"). Monomer may be either virgin or regenerated (produced from plastic scraps); the petitioners either purchased regenerated monomer from the market or manufactured it themselves.
Prior to the dispute, Central Excise authorities treated bangles made from regenerated monomer as falling under residuary Tariff Item 68 (not under Tariff Item 15A). The petitioners, being small manufacturers, were exempt from excise duty under item 68 and therefore did not pay duty. On April 11, 1980, the Central Government issued a circular stating that if manufacturers produced regenerated monomer themselves they should be exempted under a May 29, 1971 notification; but if they purchased regenerated monomer from others, exemption would not be available.
The petitioners challenged the impact of that circular/notification in two petitions. The Court allowed both petitions, quashed the impugned orders and notices, and granted costs. The Court also granted a certificate of fitness under Article 133(1) of the Constitution to enable the respondents to appeal to the Supreme Court.
Legal Issues Presented
- Whether plastic bangles manufactured out of regenerated monomer purchased from the market are liable to payment of excise duty under Tariff Item 15A.
- If Tariff Item 15A is attracted to such bangles, whether the petitioners are entitled to exemption under the notification dated May 29, 1971.
- More generally, the construction of Tariff Item 15A (particularly sub-item (2) "articles made of plastics" read with Explanation 1 and sub-item (1)).
Arguments of the Parties
Appellant / Petitioners' Arguments (Mr. Nanavati)
- Plastic bangles manufactured from regenerated monomer purchased in the market are not liable to excise duty under Tariff Item 15A because the monomer is not itself a "plastic".
- If Tariff Item 15A were held to be attracted, the petitioners would nevertheless be entitled to exemption under the notification dated May 29, 1971.
- Sub-item (2) must be read in the light of Explanation 1 and sub-item (1); because monomer is not a polymerisation or co-polymerisation product, it cannot be treated as a plastic within the meaning of sub-item (1)(ii).
Respondents / Central Excise Authorities' Arguments (Mr. Mehta)
- Plastic bangles are "articles made of plastics" within the meaning of sub-item (2) of Tariff Item 15A because the finished articles consist of plastic material (the monomer is polymerised in the manufacturing process and thus results in plastic articles).
- The expression "articles made of plastics" should be taken to mean an article which consists of plastic material, irrespective of the stage at which the plastic material came into being (i.e., whether the plastic was produced by polymerisation of monomer during the manufacturing process).
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Miscellaneous Petition No. 491 of 1964 (Bombay High Court), Tulzapurkar J., decided April 30, 1970 | The referenced authority (as reported in a secondary source) concerned polymer chips produced at an intermediate stage in a continuous and integrated process of manufacturing nylon yarn and held that such intermediate polymer chips did not fall within Tariff Item 15A because they were not commercially known as plastics or resins. | The Court made a brief reference to this decision, noting that copies were not produced, and cited the secondary source (Law of Central Excise by Taraporevala and Parikh) summarising the holding. The decision was used to support the understanding that intermediate products not commercially known as plastics may fall outside item 15A. |
| Civil Writ No. 115-D of 1963 (Delhi High Court), Rajendra Sacher J., decided August 18, 1970 | As reported in the same secondary source, this decision held that polymer chips produced at an intermediate stage in a continuous and integrated process of manufacturing nylon yarn did not fall within Tariff Item 15A for the reason they were not commercially known as plastics or resins. | The Court cited this authority (again noting copies were not produced) via the secondary source to illustrate existing judicial treatment of intermediate polymer products and to support its conclusion concerning the scope of Tariff Item 15A. |
Court's Reasoning and Analysis
The Court's reasoning proceeded in the following steps (expressed in the opinion):
- Identify the relevant statutory text: the principal issue required construction of Tariff Item 15A, particularly sub-item (2) which refers to "articles made of plastics, all sorts, ... including ..." and Explanation 1 which defines "plastics" for the purpose of sub-item (2) by reference to sub-item (1).
- Note the undisputed factual premise: plastic bangles are undisputedly plastic articles in their finished form, but the monomer (methyl methacrylate monomer) out of which they are made is undisputedly not a plastic; it becomes a plastic only upon polymerisation.
-
Consider competing interpretive approaches:
- One approach (advanced by the Central Excise authorities/ Mr. Mehta) reads "articles made of plastics" as referring to articles which consist of plastic material, irrespective of when the plastic came into existence (including where polymerisation occurs during the manufacturing process).
- Opposing approach (advanced by Mr. Nanavati) focuses on the raw material from which the article is made and contends that because monomer is not a polymerisation product, articles manufactured from monomer polymerised in the manufacturing process are not "made of plastics" within the meaning of sub-item (2).
-
Analyze statutory language and structure:
- The Court observed that sub-item (2) is comprehensive and illustrative (use of "all sorts" and "including" shows an inclusive, illustrative list), and that Explanation 1 directs attention to sub-item (1) for the meaning of "plastics".
- The Court examined sub-item (1), including clause (ii) which lists polymerisation and co-polymerisation products and uses the phrase "such as" to introduce examples, concluding the examples are illustrative and not exhaustive.
- Reach interpretive conclusion: Having scanned sub-item (2) read with Explanation 1 and sub-item (1), the Court concluded that the expression "articles made of plastics" means "articles for the manufacture of which some plastic material has been used as a raw material." The Court expressly held that the phrase does not suggest a non-plastic raw material which is polymerised in the course of the manufacturing process.
- Apply conclusion to facts: Because monomer is not a plastic material and the petitioners manufactured bangles by subjecting monomer to polymerisation during manufacture, the Court held that such bangles are not liable to excise duty under Tariff Item 15A.
- Ancillary considerations: The Court relied on an affidavit filed by an Assistant Collector (D.N. Anerao) which stated that monomer is polymerised in the process to become plastic material and that therefore the articles in question were covered by T.I. 15A; the Court used that averment to highlight the factual premise (monomer is not itself plastic and becomes plastic by polymerisation) but did not accept the legal conclusion urged by the respondents.
- Additional authorities: The Court made brief reference to two High Court decisions (summarised in a secondary source) holding that intermediate polymer chips in an integrated process did not fall within Tariff Item 15A; copies of those judgments were not produced, but the referenced summaries supported the Court's interpretation.
- Consequential procedural determination: Because the Court decided the primary interpretive question in favour of the petitioners, it found it unnecessary to decide the petitioners' second contention (entitlement to exemption under the May 29, 1971 notification).
Holding and Implications
Holding: The Court issued the following rulings:
- Core ruling: The expression "articles made of plastics" in sub-item (2) of Tariff Item 15A (read with Explanation 1 and sub-item (1)) means articles for the manufacture of which some plastic material has been used as a raw material, and does not extend to articles manufactured from a non-plastic raw material (monomer) which is polymerised during the manufacturing process.
- As a direct consequence, the Court held that plastic bangles manufactured by the petitioners out of monomer that was polymerised in the course of manufacture do not attract excise duty under Tariff Item 15A.
- The Court allowed both petitions, quashed the impugned orders and notices, and made the rule absolute with costs in each petition.
- The Court granted the respondents a certificate of fitness under Article 133(1) of the Constitution to enable an appeal to the Supreme Court, noting that the Court had interpreted Tariff Item 15A(2) read with Explanation 1 for the first time, that there was no Supreme Court decision governing the field, and that the question was of all-India importance.
Implications:
- Direct effect on the parties: The impugned Central Excise orders and notices against the petitioners were quashed; the petitioners were held not to be liable to pay excise duty under Tariff Item 15A for the bangles manufactured from monomer polymerised during manufacture.
- Further appellate prospect: Because the Court interpreted Tariff Item 15A(2) and Explanation 1 apparently for the first time and considered the issue to be of all-India importance, it granted a certificate under Article 133(1) for the respondents to appeal to the Supreme Court; consequently, the decision may be considered by the Supreme Court on appeal.
- On precedent: The Court relied on (and briefly referenced) two earlier High Court decisions (as reported in a secondary source) consistent with its view about intermediate products; the Court did not state that it was creating binding Supreme Court precedent and in fact enabled appellate review by the Supreme Court.
Note: Certain portions of the original opinion contained redactions or missing text (represented in the source by "???"). This summary confines itself to the information that was explicitly available in the provided opinion.
S.H Sheth, J.:— The petitioners in both these petitions are manufacturers of plastic bangles. It is not in dispute that plastic bangles are manufactured out of monomer which is technically called methyl methacrylate monomer. It is hereinafter referred to as “the monomer”. Monomer is of two kinds. It may be virgin monomer or it may be regenerated monomer. Regenerated monomer is produced out of plastic scraps. It is the case of the petitioners that regenerated monomer is either purchased from indigenous manufacturers or it is imported. In some cases, the manufacturers of plastic bangles themselves, manufacture it.
2. Until the present dispute arose, the Central Excise authorities had been taking the view that bangles manufactured out of regenerated monomer were not liable to payment of the excise duty under Tariff Item 15A in the First Schedule to the Central excises and Salt Act, 1944 (hereinafter referred to as “the Act”), but that they fell under residuary item-Tariff item 68. The petitioners were not paying excise duty on them under Tariff item 68, because they were small manufacturers and were, therefore, exempted from payment. On April 11, 1980 the Central Government issued, a circular to all Central Excise Collectorates in which they stated that if the manufacturers of plastic bangles themselves manufacture regenerated monomer, they should be exempted from payment of excise duty under tariff item 15A by virtue of the notification issued on May 29, 1971. However, if they purchase regenerated monomer from others and manufacture bangles out of them exemption would not be available to them.
3. It is the impact of this notification which is challenged in these two petitions. Mr. Nanavati who appears on behalf of the petitioners has raised before us only two contentions. They are as follows:
(1) Plastic bangles manufactured out of regenerated monomer which the manufacturers purchase from the market are not liable to payment of excise duty under tariff item 15A;
(2) If tariff item 15A is attracted to plastic bangles, the petitioners are entitled to exemption under notification dated May 29, 1971.
4. The principal question which has arisen before us relates to the construction, of tariff item 15A. It deals with plastic. Plastic has been amplified to mean “artificial, or synthetic resins and plastic materials and cellulose esters and others, and articles thereof”. The case which has been pleaded by the Central Excise authorities is that plastic bangles are “articles made of plastic” within the meaning of that expression, used in sub-item (2) of tariff item 15A. In order to appreciate the contentions which Mr. Nanavati has raised, it is necessary to reproduce sub-item (2) of tariff item 15A. It reads as follows:
“(2) articles made of plastics, all sorts, mending, tubes, rods, sheets, fails, sticks, other rectangular or profile shapes, whether laminated or not and whether rigid or flexible, including lay-flat tubings, and Polyvinyl chloride sheets, not otherwise specified.”
5. In order to render plastic bangles liable to payment of excise duty, they must satisfy the requirements of the expression “articles made of plastics.” sub-item (2) of item 15A is very comprehensive because it uses the expression “all sorts” and then illustrates which items are included amongst articles made of plastics. We say that several articles of plastics enumerated in sub-item (2) are merely illustrative because the expression which has been used in sub-item (2) is “including tubes………” It is this inclusive character which renders the list of plastic articles illustrative. We say that it is very comprehensive because the expression “all sorts” which goes with the word “articles” brings within its sweeps each and every article made of plastic. There is no doubt or dispute about the fact that plastic bangles are plastic articles. However, the question which we have to answer is whether they are made of plastics? The words “made of” suggest, in our opinion, the raw material out of which they are made. Bearing this in mind we now turn to Explanation I which defines expression “plastics” used in sub-item (2) of tariff item 15A. It reads as follows:
“Explanation 1:— For the purpose of sub-item (2), ‘plastics’ means the various artificial or synthetic resins or plastic materials or cellulose esters and others included in sub-item (1).”
6. This Explanation takes us to sub-item (1). It is necessary to bear in mind that it is undisputed that plastic bangles themselves are plastics. It is also undisputed that monomer out of which they are made is not plastic. In the affidavit-in-reply filed in Special Civil Application No. 1477 of 1980 this is what has been stated by Mr. ??? N. Anerao, Assistant Collector of Central Excise, Ahmedabad in paragraph (10):
“I say that in the process of production of plastic tubes and bangles, monomer is to be polymerised into a plastic material out of which plastic tubes and bangles are produced. The articles in question are thus articles of plastic and covered by T.I 15A.”
7. This averment makes it clear beyond all doubts that monomer is not a plastic material and that it becomes a plastic material when it is polymerised. ??? there is no dispute about two ends, ??? out of which plastic bangles are made is not plastic; it is anything but ???. Plastic bangles are nothing but ???. Now, the extract from the affidavit-in-reply of Mr. D.N Anerao, which we have quoted shows that the ??? which is not plastic undergoes the process of manufacture transformation and becomes polymerised. This ??? process turns it into plastic out which plastic bangles are manufactured.
8. Upon this data in respect of ??? there is no dispute, can we say at plastic bangles are “articles made of ???” within the meaning of sub-item ??? of tariff item 15A Whereas Mr. ??? has contended before us that we cannot read sub-item (2) of tariff item ??? in isolation and that it must be read light of Explanation I, it has been ??? by Mr. Mehta on behalf of the Central Excise authorities that we must ??? to the Immediate material out of ??? bangles are manufactured. ??? his arguments further Mr. Nanavati ??? submitted that by virtue of ??? to tariff item 15A, we must look ??? sub-item (1). Both the learned advocates have tried to analyse before us the ??? of sub-item (1) of tariff item 15A. According to both of them whereas clause ??? in sub-item (1) enumerates artificial ??? synthetic resins, clause (ii) enumerates ??? materials and clause (iii) ??? cellulose acetate (Including cellulose ??? or cellulose triacetate). Both ??? learned advocates have, therefore, ??? us to confine our attention to Clause (ii) of sub-item (1) of tariff item 15A which enumerates plastic materials. It reads as follows:
“(ii) Polymerisation and co-polymerisation products such as polyethylene Polytetrahaloethlenes, Potyisobutylene Polystyrene, Polyvinyl Chloride, Polyvinyl acetate. Polyvinyl Chloroacetate and other ployvinyl derivatives. Polyacrylic and Polymethacryaiic derivatives and Coumarone Indene Resins;”
9. It appears to us that the expression “such as” used in clause (ii) merely illustrate Potymerisation and co-polymerisation products. The enumeration, in our opinion, of the products which follows the expression “such as” is therefore not exhaustive.
10. Mr. Nanavati has argued that since indisputably monomer is not plastic, it can never be said to be a polymerisation or co-polymerisation product. Therefore, according to Mri Nanavati since the expression “articles made of plastics” used in sub-item (2) of tariff item 15A suggests that the product ought to have been made out of raw material which is not plastic, plastic bangles do not attract excise duty under tariff item 15A. Mr. Mehta on the other hand has argued that even if we read sub-item (2) with Explanation I and bear in mind specifications given in clause (ii) of sub-item (1) of tariff item 15A, no difference is made by virtue of the fact that monomer is not a plastic material. According to him the expression “articles made of plastics” means an article which consists of plastic and not an article for the manufacture or production of which plastic material has been used. If we take the view that the expression “articles made of plastics” means an article made out of a raw material which is not a plastic, then the contention raised by Mr. Nanavati must be unheld. If, however, we take the view that the said expression means an article which consists of plastic material itself, irrespective of the stage at which that plastic material came into being whether upon transformation of monomer, in course of manufacturing process or otherwise, then the argument advanced by Mr. Mehta must be upheld.
11. Having carefully scanned sub-item (2) of tariff item 15A in light of Explanation I read with sub-item (1) of tariff item 15A, we are of the opinion that the expression “articles made of plastics” means articles for the manufacture of which some plastic material has been used as a raw material. It does not suggest, in our opinion, a non-plastic raw material which has undergone polymerisation process in course of manufacturing process.
12. Since indisputably monomer, is not a plastic material and since the petitioners have been manufacturing plastic bangles out of monoemr by subjecting it to a polymerisation process, they are not, liable to pay excise duty on the bangles manufactured by them under tariff item, 15A. Therefore, plastic bangles manufactured by the petitioners out of monomer which has been subjected to the polymerisation process in course of manufacturing bangles, do not attract excise duty under tariff item 15A. In the view of the matter it is not necessary for us to answer the second contention raised by Mr. Nanavaty.
13. In this context we may make a brief reference to two decisions. Unfortunately, copies of those judgments have not been produced before us. One judgment is in Miscellaneous Petition No. 491 of 1964 decided by Tulzapurkar J. (High Court of Bombay) on April 30, 1970, and another judgment is in Civil writ No. 115-D of 1963 decided by Rajendra Sacher, J. (High Court of Delhi) on August 18, 1970. A reference made to these two decisions in the Law of Central Excise by Taraporevala and Parikh shows that polymer chips produced at an intermediate stage in the continuous and integrated process of manufacturing nylon yarn did not fall within tariff item 15A, because they were not commercially known as plastics or resins.
14. In the result, we allow both the petitions and quash the impugned orders and notices. Rule is made absolute with costs in each of the two petitions.
15. Mr. H.M Mehta applies for a certificate of fitness under Article 133(1) of the Constitution to enable the respondents to appeal against this decision to the Supreme Court. We have interpreted Tariff Item 15A(2) read with Explanation 1 for the first time. There is no decision of the Supreme Court which governs the field. The question which we have decided is a question of all India importance. We, therefore, think that is a fit case for the Supreme Court to decide. Accordingly, we grant the certificate of fitness under Article 133(1) of the Constitution to the respondents in each of the two petitions in order to enable them to appeal against this decision to the Supreme Court. Petitions Allowed.
16. Certificate to Appeal to Supreme Court.
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