M/S. COASTAL PAPER LTD.versusCOMMNR. OF CENTRAL EXCISE, VISAKHAPATNAM

                       [2015] 8 S.C.R. 486


A                  M/S. COASTAL PAPER LTD.
                                v.
      COMMNR. OF CENTRAL EXCISE, VISAKHAPATNAM
                  (Civil Appeal No.4908 of2005)
B
                          JULY21, 2015
              [A.K. SIKRI AND R. F. NARIMAN, JJ.]
       Central Excise Tariff Act, 1985: Notification No. 22194-
C CE dated 01.03.1994 - Entitlement to exemption under-
  Paper manufactured out of pulp of waste gunny bags/jute
  waste - Revenue denied exemption on the ground that pulp
  of waste gunny bags/jute waste is nothing but pulp of rags - .
  Held: Assessee entitled to exemption under the said
0 Notification - Pulp from the waste ofjute bags or gunny bags
  would not be covered by the term 'rags' appearing in
  Notification dated 01-03-1994 as it could never be the
  intention to exclude non-conventional material from the
  benefit of the said Notification when that was precisely the
E purpose for which the said Notification was issued to
  encourage use of non-conventional materia/forthe purposes
  of manufacturing paper or paper products.

      Interpretation of statutes: Purposive interpretation -
F Exemption notification - Held: It is necessary to go behind
  the objective for which Notification itself is issu_ed.

        Allowing the appeal, the Court

      HELD: 1. The expression 'rags' appearing in the
G Notification has to be construed having regard to the
  attendant circumstances, the context in which the same
  is used in the said Notification as well as the purpose
  for which this term has appeared in the Notification. At

H                              486
   COASTAL PAPER LTD. v. COMMNR. OF CENTRAL                487
            EXCISE, VISAKHAPATNAM

the same time, it is also neces.sary to go behind the A
objective for which Notification itself is issued thereby
giving it a purposive interpretation, which has become
cardinal rule of interpretation. Right from 1977, the Central
Government prescribed concessional rates of excise
duty for paper made from non-conventional raw material, B
subject to certain conditions. The purpose for issuing
such Notifications is cl.ear, nainely, to encourage the
manufacturers of the paper and paper products to use
non-conventional technology in contrast with the
conventional technology of using pulping bamboo or C
wheat. The reason is too obvious. Use of bamboo or·
wheat for the manufacture of paper and paper products .
needs cutting of trees which in turn has the devastating
effect of deforestation. It leads to degradation of
                                                              0
environment and the adverse impact of deforestation
with serious consequences are now well-known. On the
other hand with the adoption of non-conventional
methods of production by taking pulp from the waste of
gunny bags/jute waste, mesta, rice straw, wheat straw, E
bagasse etc., not only the said waste is utilised in a
useful and constructive manner, it saves the environment
as well. Such a benevolent purpose for issuing these
Notifications has been emphasized by the Finance
 Ministers themselves from time to time in the budget F
speeches. [paras 12, 13] [500-D-H; 501-A-D]

     2. The tenor and language of various Notifications
issued in this behalf from time to time also reflect the
experience which was gained over a period of time. G
Whereas in the beginning, Notification(s) prescribed the
'Positive List' of the materials that had to be used to get
the benefit of concessional rate of duty, the thrust
underwent a conceptual transformation and changed to
the 'Negative List', i.e. mentioning only those materials H
488          SUPREME COURT REPORTS              [2015] 8 S.C.R.


A use whereof will not entail the benefit, thereby making
    the benefit available to all other forms of non-
    conventional materials. This was because of the reason
    that experience has shown that it was not proper to
    mention the non-conventional material by putting them
B in a st1·aitjacket and to provide that all kinds of non-
    conventional materials used for the manufacture of
    paper should qualify for concessional rate excepting
    only those which need not be given such a benefit. This
    thrust, therefore, from 'Positive List' to 'Negative List' is
C of great significance and has to be kept in mind. The pulp
    made from jute, jute waste including hessian waste and
    old gunny bags waste are specifically included in the
    'Positive List' contained in Notification dated 17.09.1990.
  . Thus, as per the said Notification if the paper is
0
    manufactured from the pulp made from the waste of the
    aforesaid materials, the benefit of concessional rate was
    admissible. To put-it otherwise, it has always been
    clearly understood that jute or jute waste including old
E gunny bag waste is non-conventional material. Once that
    is accepted, the intention could not be to exclude this
    non-conventional material with the insertion of the word
    'rags' in the 'Negative List'. [paras 14, 15] [501-E-H; 502-
      A-C]
 F
       3. Notification 22/94-CE mentions 'bamboo, hard
  woods, soft woods, reeds (other than Sarkanda) or rags'.
  What is intended by mentioning that pulp made from the
  aforesaid material would not entail benefit. Obviously,
G all other materials, namely, bamboo, hard woods, soft
  woods, and reeds are conventional raw materials. These
  are the materials which have direct bearing on cutting
  of trees and in turn on environment Therefore, 'rags' has
  to be read ejusdem generis. It has to be the specie of the
H earlier kind of materials mentioned therein. Otherwise,
  it would not make any sense. Admittedly, jute waste or
       COASTAL PAPER LTD. v. COMMNR. OF CENTRAL                    489
                EXCISE, VISAKHAPATNAM

  for that matter gunny bag waste have no adverse impact            A
  on environment. Significantly, while mentioning reeds,
  the Sarkanda is specifically excluded therefrom. Prior
  to 1984, the exemption to paper made from
  unconventional raw materials was available only when
  the paper is manufactured from the specified non-                 B
· conventional raw materials. For example, Notification
  No. 46/83-CE dated 01-03-1983 prescribed concessional
  rate of excise duty for paper containing not less than
  fifty per cent by weight of pulp made from bagasse, jute
  stalks, cereal straw, elephant grass (lmperata Cylindrica),       C
  mesta (Kneaf) or waste paper.. Thus, jute stalks was
  specified as a non-conventional raw mate~ial in the
  notification itself. However, vide Budget of 1984, the
. scope of the exemption to paper made from non-
                                                                    0
  conventional raw materials was widened. Thus, right
  from the year 1984, the coverage of the Notification was
  widened inasmuch as any materials other than the
  specified ones would be considered as non-
  conventional raw materials and the paper made                     E
  therefrom would be eligible for the exemption. Thus, all
  the above materials and the notifications clearly suggest
  that the Government itself distinguished between jute
  bags/gunny bags and rags and the exemption was being
  extended to paper made from old jute/gunny bags.                  F
  [paras 16, 17, 19) [502-D-H; 503-A, B, 0-E; 504-C-D]

       H. M. M Limited v. Coliector of Central Excise, New Delhi
 1996 (7) Suppl. SCR 535: (1996) 11 SCC 332; Collector of
 Central Excise and Others v. Himalayan Cooperative Milk G
 Product Union Ltd. and Others 2000 (4) Suppl. SCR 431:
 (2000) 8 SCC 642; Rohit Pulp and Paper Mills Ltd. v.
 Col/ectorofCentral Excise 1990 (47) ELT 491 (SC)- relied
 on.
                                                                    H
       Rohit f'ulp and Paper Mills Ltd. v. Collector of Central
490         SUPREME COURT REPORTS                   [2015] 8 S.C.R.


A     Excise, Baroda 1990 (2) SCR 797: (1990) 3 SCC 447 -
      referred to.                   ·

       4. Almost all the books on the subject uniformly
   define 'rag' or 'rag pulp' as one which is made from cotton
 B waste or cotton textile material. [para 27] (511-B]

           The Dictiqnary of Paper by American Paper and Pulp
      Association; 'Pulp and Paper Chemistry and Chemical
      Technology'by James P. Casey; Dictionary of Paper by TAPPI;
c     Indian Standard Glossary of Tenns used in Paper Trade and
      Industry- IS 4661 : 1999 - referred to.

                         Case Law Reference

       1990 (2) SCR 797               Referred to         Para 10
D
       1996 (7) Suppl. SCR 535        Relied on           Para 20

       2000 (4) Suppl. SCR 431        Relied on           Para 21

       1990 (47) ELT 491 (SC)         Relied on           Para 21
 E
         CIVIL APPELLATE JURISDICTION: Civil Appeal No.
      4908 of 2005.             ·
           From the Judgment and Order No. 239 of 2005 dated
 F    04.02.2005 of the Customs, Excise and Service TaxAppellate
      Tribunal, South Zonal Bench, Bangalore in Appeal No. E/669/
      03.
          V. Lakshmikumaran, M.P. Devanath, Vivek Sharma, L.
  Charanaya, R. Ramchandran,Aditya Bhattacharya, Hemant
G Bajaj,Ar.Anandh K. andAmbarish PandeyfortheAppellant.

          K. Radhakrishnan, P.K. Mullick, Shirin Khajuria and B.
      Krishna Prasad for the Respondent.

          The Judgment of the Court was delivered by
H
          A.K. SIKRI, J. 1. The appellant (hereinafter referred to as
    COASTAL PAPER LTD. v. COMMNR. OF CENTRAL                         491
       EXCISE, VISAKHAPATNAM [AK. Sll~RI, J.]

the "assessee") is a paper mill which is engaged, inter alia, in         A·
the manufacture of paper. For the manufacture of paper, the
assessee uses various conventional raw materials and also
non-conventional raw materials, namely, waste gunny bags,
jute waste etc. The assessee is exigible to Central Excise on
the aforesaid product, namely, paper manufactured by it, which           B
the assessee has been paying to the respondent (hereinafter
 referred to as the "Revenue") from time to time. Ir) order to
                ,
encourage production      of paper by use of non-conventional raw
 material, the Government of India issued Notification No. 22/
94-CE dated 01.03.1994 which assures concessional rate of                C
duty at 5% for "paper and paperboard or articles made from
 non-conventional material". The condition which is contained
 in the said Notification that needs to be fulfilled in order to avail
the benefit thereof to pay the concessional rate of duty reads           D
asunder:

     "If such paper and paperboard or articles made therefrom
     have been manufactured, starting from the stage of pulp,
     in a factory, and such pulp contains not less than 75 per
     cent by weight of pulp made from materials other than E
     bamboo, hard woods, soft woods, reeds (other than
     sarkanda) or rags."

     2) As per the aforesaid Notification, following conditions
     are to be satisfied in order to avail the benefit:                  F

     (i) Manufacture of paper and paperboard or articles made
     therefrom should start from stage of pulp, in a factory,

     (ii) Such pulp should contain not less than 75% by weight G
     of pulp made from materials other than bamboo, hard
     woods, soft woods, reeds (other than sarkanda) or rags.

     It, thus, specifies certain materials which are excluded from
the Notification, meaning thereby, if the pulp is made from those H
492         SUPREME COURT REPORTS                     [2015] 8 S.C.R.


A specific materials, namely, bamboo hard woods, soft woods,
  reeds (other than sarkanda) or rags then the manufacturer
  would not be entitled to the benefit of this Notification.

           3) The assessee herein is manufacturing paper out of pulp
B     of waste gunny bags/jute waste and on the manufacture of
      paper from the pulp of the aforesaid waste, the assessee wants
      to pay c.oncessional rate of excise duty as its contention is
      that pulp of waste gunny bags or jute waste does not fall in any
      of the materials mentioned in the Notification. The Revenue,
C     on the other hand, has taken the position that the pulp of waste
      gunny bags/jute waste is nothing but pulp of 'rags' and since
      the Notification, particularly, disentitles the benefit thereof if
      the pulp is made from rags, the assessee is not covered by
      the said Notification. The question. therefore, that falls for
D     consideration is as to whether pulp of waste gunny bags{jute
      waste is to be treated as the pulp made from the material 'rags'.
      Before we answer this question, it is deemed necessary to
      take note of the other related Notifications touching upon the
      subject matter as well as history ofthe present litigation which
E     has lauded the matter to this Court..

       4) Notification No. 22/94-CE dated 01.03.1994, with which
  we are concerned, is not the first Notification which permitted
  concessional rate of excise duty in case of manufacture of
F paper or paper products by using non-conventional raw
  material. First Notification, in this behalf, was issued on
  01. 03. 1973, i.e. Notification No. 42/73-CE wherein such kind
  of lesser rate of duties was prescribed in respect of all sorts of
  paper other than newsprint and all varieties of boards,
G containing not less than 40% by weight of bagasse, jute stalks
  or cereals straw in the form of pulp. This Notification was
  replaced by another Notification No. 128/77-CE dated 18-06-
  1977 where the manufacture of the paper (other than some
H specified kinds of papers mentioned therein) contained not
  less than 50% by weight of pulp made from bagasse, jute stalks,
    COASTAL PAPER LTD. v. COMMNR. OF CENTRAL                    493
       EXCISE, VISAKHAPATNAM [A.K. SlKRI, J.]

.cereals straw or waste paper. Certain other conditions were A
  also mentioned in this Notification pertaining to the description
  of paper mills manufacturing such paper with which we are not
  concerned. There have been further Notifications from time to
  time modifying/amending the aforesaid conditions which again
  need not be referred to as not relevant for our purposes. It B
  would, however, be necessary to refer to the Notification 48/
  91-CE dated 25.07.1991 which held the field prior to issuance
  of Notification No. 22/94-CE with which are concerned. In this.
  Notification No. 48/91-CE, concessional rate of duty was
  provided in respect of writing and printing paper falling under C
  the heading No. 48.02 and uncoated kraft paper, falling under
  heading No. 48.04 of the First Schedule to the Central Excise
  Tariff Act, 1985 (for short, 'CETA, 1985') on certain conditions
  mentioned in the proviso contained in the said Notification
                                                                    0
· which was to the following effect.

     "Provided that such paper contains not less than 75% by
     weight of pulp made from jute, jute waste (including
     hessian waste and old gunny bag waste), mesta, rice
     straw, wheat straw or bagasse or mixture thereof or mixture E
     of two or more of the pulps of the aforementioned
     materials."

     The purpose of mentioning to the aforesaid Notification
is to point out this Notification listed those materials, the use F
whereof to manufacture paper and paper products entitled the
manufacturer to get the benefit of the Notification. Thus the
requirement was to show that the pulp was made from any of
the said materials or from the mixtures thereof. It can be termed
as 'Positive List'. In contrast, Notification No. 22/94-CE did G
not contain the list of those materials from which pulp was
required to be made and used for the purpose of manufacture
of paper. On the contrary, this Notification contained excluded
category of materials, i.e., if the pulp was made from those H
specified materials (which included rags as well) then the
494       SUPREME COURT REPORTS                  [2015] 8 S.C.R.


A benefit of Notification was not available. The effect of this
  Notification is that if the pulp is made from any other non-
  conventional material which is not spelt out in the proviso, it
  would qualify for concessional rate of duty in terms of the said
  Notification. The materials mentioned in this list, for the sake
B ~f convenience, can be classified as 'Negative List'. Now the
  requirement was to show that paper is not manufactured from
  the pulp of any of the enlisted material. Thus, according to
  Notification No. 22/94-CE, the exemption is available if the
  paper is made from pulp which contains not less than 75% by
C weight made from non-conventional materials. The prohibited
  material which disqualifies from said concessional rate is
  bamboo or hardwood or softwood or reed or rags.

       5) There have been some amendments in the Notification
D No. 22/94-CE in the subsequent years. During the financial
  years 1995-96, 1997-98 and 1999-2000 (till October 1999),
  the concessional rate of duty is provided for paper made of
  pulp containing not less than 75% by weight of pulp made from
  materials other than bamboo, hard wood, soft wood, reeds or
E rags. But in respect of the year 1996-97, the concession was
  given to paper made of pulp containing not Jess ttian 50% by
  weight of pulp made from materials other than bamboo, hard
  wood, soft wood, reeds or rags.

F      6) Reverting to the case of the assessee, it has been using
  old or used gunny bags/jute waste forthe manufacture of paper.
  It was availing the benefit of the aforesaid notification and
  paying concessional rate of duty. However, on 28.04.2000, a
  show-cause notice was issued by the Revenue to the appellant
G stating therein that the paper manufactured by using jute bags/
  gunny bags are not eligible for exemption under the said
  notifications or successor notifications whereby the aforesaid
  notification was amended from time to time. Extended period
H of limitation was invoked under proviso to Section 11A of the
  Central Excise Act, 1944 (for short, "Act") and demand of
     COASTAL PAPER LTD. v. COMMNR. OF CENTRAL                        495
        EXCISE, VISAKHAPATNAM [A.K. SIKRI, J.]

 differential central excise duty for the period from 01.04.1995      A
 to 31.10.1999 was given. This show cause notice was followed
 by two more show ca.use notices dated 16.05:2000 and
 13.03.2001 covering the period f~om .November, 1999 to May,
 2000. The assesses contested the stand taken by the Revenue
 in these show cause notices, taking the position that pulp made      B
 out of jute bags/gunny bags entitled the assessee to avail the
 benefit of the said Notification as the paper from the waste of
 jute bags was non-conventional method. In support, the
 assessee also gave material in the form of technical literature
 and expert opinion. Personal hearing was provided by the             C
 Commissioner of Central Excise, Visakhapatnam. Thereafter,
 the Commissioner passed Order-in-Original dated 02.05.2005
 accepting the contention ofthe assessee and dropping all the
 three show cause notices. He also held that show cause notice
                                                                      0
 dated 28.04.2000 is barred by limitation as well under Section
  11AoftheAct as the Revenue was not entitled to invoke the
 proviso to Section 11A and claim extended period of limitation.
        7) A perusal of the order of the Commissioner would
  disclose that the Commissioner was persuaded by the fact            E
  that the purpose of issuing such Notification was to encourage
  the use of waste from non-conventional materials as raw
  materials forthe purpose of manufacture and in, particular, use
. of such raw materials like jute waste, mesta, baggase, hessain,     F
  old gunyy bag waste, rice straw, wheat straw etc. and reduce
  the use of bamboo, hard wood, soft wood etc. to save forest.
   He also noted that before 1994, Notifications contained list of
  those materials use whereof QU!ilified for the concessional rate
  (i.e. the 'Positive Usf) and from 1994, the 'Negative List' was     G
  prescribed by excluding only the set of raw materials, use of
  which did not qualify for the benefit of the Notification. The
  Commissioner also referred to the speech of the Finance
  Minister to emphasize that the Notification has evolved in a
  eco-friendly manner with more and more encouragement for            H
496         SUPREME COURT REPORTS                     (2015] 8 S.C.R.


  A use of non-conventional materials. Going by the aforesaid spirit
     of the Notification, when it is found that jute and gunny bags
    were included in the 'Positive Lisf and waste therefrom is widely
     known as non-conventional method of producing paper and
     paper products, these materials should not be treated as 'rags',
· B inasmuch as while including rags in the 'Negative List' intention
    could not be to encompass waste of gunny bags and jute bags
    within said expression. In the Order-in-Original passed by the
    Commissioner, he pointed out that there is no definition of 'rags'
    in the Notification and, similarly, there is no definition of jute
 C pulp in any Notification which could help in tracing any
    description of gunny bags waste. The Commissioner opined
    that for this reason, it was prudentto fall back upon the definition
    or standard text or other notifications which define these words.
    Thereafter, he referred to the 'Glossary of Terms used in Paper
 0
    Trade and Industry' for the adoption of definition/description of
    jute, jute paper, jute pulp, rag pulps, rags etc. and on that basis
    concluded as under:

         "37. The meaning of the word Rags as they have not been
E        defined in the notification itself, has to be derived from
         the contemporaneous evidence. From the definitions of
         Rag pulp, jute pulp available in the IS Glossary of Terms
         used in Paper Trade and Industry, the definition of Rags
         appended with the Notification No. 8/96-CE and the
F
         definition of rag in various judgments mentioned in para
         26.A it conveys the meaning, in unambiguous terms, that
         old used gunny bags would not be equated with rags.

          38. The show cause notice has gone to add that jute waste
G         is not gunny bag waste and as the party has not mentioned
          in their record jute waste and not gunny bag waste, there
          has been suppression of information. So long as we hold
         .that rags are not gunny bag waste and gunny bags are
          not excluded raw materials for the purpose of concession,
H
          it does not matter how the gunny bag is described in
   COASTAL PAPER LTD. v. COMMNR. OF CENTRAL                  497
      EXCISE, VISAKHAPATNAM [A.K. SIKRI, J.]

    documents. The amendments to Central Excise A
    Notification No. 48/91 dated 25.7.91 vide 30/93 shows
    unambiguously that Jute Waste shall include old gunny bag
    waste. Therefore, it still remains correct that gunny bag
    waste can be described as waste of jute products and in
    extension would be includible in Jute Waste. Therefore, B
    there is no mis-declaration in raw material account. In
    addition, this description by itself would not prove the point
    of the show cause notice. As the basic.premises on which
    the SCN stands is not available, other allegations of
    suppression and application of extended period and C
    attraction under Section 11AC and 11AB or violations
    under Rule 226 and 1730 are not sustainable.

    39. Therefore, the allegation listed in Para42 of the show
    cause notice regarding violation of Rule 173B by b
    misdeclaring gunny waste as jute waste, Rule 173G
    regarding willful suppression of Raw Material Account.
    Rule 9(1) regarding discharge of appropriate duty and
    173F regarding determination of correct rate of duty
    pertaining to clearances of goods out of gunny bag pulp E
    do not stand on basis of above evidence of disclosure.

     8) The Revenue was not satisfied with the aforesaid
outcome and, therefore, preferred an appeal against the order·
of the Commissioner before the Customs, Excise and Service F
TaxAppellate Tribunal (for short, 'CESTAT'). The CESTAT has,
vide impugned order dated 04.02.2005, upset the decision of
the Commissioner on merits, holding that the waste of jute/
gunny bags amounts to 'rags' and, therefore, pulp made out of
it and use for manufacture of paper would not be covered by G
the said Notification.

     9) While arriving at this conclusion, the Tribunal remarked
that inferences drawn by the Commissioner from the Finance
Minister's Budget speech or Board's circular do not appear H
498       SUPREME COURT REPORTS                     [2015] 8 S.C.R.


A to be flowing either from the said speech or from Board's
  clarification and the reasoning of the Commissioner in this
  resf)ect was false. It also rejected the contention of the
  assessee predicated on HSN Chapter Headings. According
  to the Tribunal, pulp out of rags was specifically excluded from
B the Notification. 'Rag' is understood to be worn out, soiled and
  torn of a textile material. In view thereof, it was not necessary ·
  to refer to any dictionary, Glossary of Terms used in Paper
  and Paper Industry or words and phrases to find out the
  meaning of 'rags'. The relevant portion, discussing this aspect
C reads as under:

        "11. We are unable to agree with this contention. There
        is no denying the fact that gunny bags/jute bags are articles
        of textiles. Admittedly, such jute bags which shows signs
D       of wear and tear are excluded from heading 63.09 and
        are classified with the corresponding new articles under
        heading 63.05. But there is another category of old gunny
        bags which are so worn out, soiled or tom beyond clearing
        or repairs and are generally fit only for the recovery of the
E       fibres for the manufacture of paper etc. This is the separate
        category of old gunny bags which is different from gunny
        bags showing only signs of wear. Thus a rag is one which
        is worn out, soiled and torn of a textile material.. If that is
        the meaning of rags, there is no need to refer to any
F
        dictionary, ·glossary of terms used in paper and paper
        industry or S.B. Sarkar's Words and Phrases to find out
        the meaning of rags. The respondent uses torn, soiled
        etc. gunny bags to make pulp. Gunny bag is a textile
G       material. We agree with the Revenue's contention that
        rags can be made of any textile material or textile articles
        and are not limited to pieces of cotton or articles made of
        cotton."
        10) However, on the issue of limitation, the Tribunal has
H
    COASTAL PAPER LTD. v.. COMMNR. OF CENTRAL                    499
       EXCISE, VISAKHAPATNAM [AK. SIKRI, J.]

concurred with the order of the Commissioner and rejected A
the appeal of the Revenue to that extent. The net result is that
the demand contained in show cause notice which pertained
to the period from 01.04.1995 to 31.10.1999 is concerned,
the same is treated as time barred. Insofar as learned counsel
for the assessee is concerned, in his endeavour to B
demonstrate that waste of jute bags/gunny bags cannot be
termed as 'rags'. in the sense the term is used in the Notification,
he laid great stress on the principle of purposive interj:lretation
that needs to be given to the Notification. Thus main thrust of
his argument was that the objective of the Notification to give C
its benefit to those who are using waste from non-conventional
materials. He submitted that it was well-known that jute/gunny
bags were the non-conventional methods which was well .
recognised in the commercial world. To put it in nutshell, he
                                                                     0
based his arguments on the reasons given by the
Commissioner. He also submitted that the reasons given by
the Tribunal were faulty and in the absence of any definition of
'rags' in the Notification, dictionary meaning could be relied
upon as was held by the Supreme Court in the case of Rohit E
Pulp and Pape.r Mills Ltd. v. Colle.ctor of Central Excise.,
Baroda1•

      11) Mr. K. Radhakrishnan, learned senior counsel
 appearing for the respondent, likewise, did the same exercise F
 but in reverse, i.e., he supported the reasons given by the
 Tribunal with the submission that it was a blemished decision
 of the Commissioner based on faulty reasoning which has
 rightly been reversed by the Tribunal. Apart from relyirig upon
 the reasons which persuaded the Tribunal to conclude the G
matter in favour of the Revenue, he strenuously argued that
since the excise duty is leviable on the product, any asses!lee
taking advantage ofthe exemption notification had to strictly

1 (1990) 3 sec 447            •
                                                                   H
500       SUPREME COURT REPORTS                   [2015] 8 S.C.R.


A come within the four corners of the said Notification to get the
  benefit thereof. Adopting this line of argument, he also
  submitted that the Notification mentions the word 'rags'
  simplicitorwithout any qualifications or exceptions. Therefore,
  wherever it is found that pulp is from the waste material known
B as 'rags', the said product would come in the excepted
  category. He emphasized that since it could not be denied
  that waste of gunny bags/jute bags is known as 'rags', if the
  paper is manufactured from the pulp from the waste of gunny
  bags/jute bags, the assessee would be disentitled to claim
C the benefit of the Notification.

         12) We have considered the aforesaid submissions with
   reference to record and the plethora of material produced
 · before us by both the sides. It cannot be denied that if one has
D to look into the ordinary meaning of the expression 'rags' and
   on that basis construe the Notification in question, the
   assessee would not be entitled to the concessional rate of
   excise duty inasmuch as the waste of gunny bags or jute bags
   would be. called 'rags' in ordinary sense of the term. However,
E whether case can be decided with such simplistic overtones,
   is the question. We are of the view that the expression 'rags'
   appearing in the Notification has to be construed having regard
   to the attendant circumstances, the context in which the same
F is used in the said Notification as well as the purpose for which
   this term has appeared in the Notification. At the same time, it
   is also necessary to go behind the objective for which
   Notification itself is issued thereby giving it a purposive
   interpretation, which has become cardinal rule of interpretation.
G In our opinion, it is only after examining all these factors that
   the final decision should be arrived at.

       13) Right from 1977, the Central Government prescribed
  concessional rates of excise duty for p;:iper made from non-
H conventional raw material, subject to certain conditions. History
  of these Notifications, in brief, has already been traversed by
    COASTAL PAPER LTD. v. COMMNR. OF CENTRAL                             501
       EXCISE, VISAKHAPATNAM [A.K. SIKRI, J.]

us in the beginning. The purpose for issuing such Notifications A
is clear, namely, to encourage the manufacturers of the paper
and paper products to use non-conventional technology in
yontrast with the conventional technology of using pulping
bamboo or wheat. The reason is too obvious. Use of bamboo
or wheat for the manufacture of paper and paper products B
needs cutting of trees which in tum has the devastating effect
of deforestation. It leads to degradation of environment and
the adverse impact of deforestation with serious consequences
are now well-known. On the other hand with the adoption of
non-conventional methods of production by taking pulp from C
the waste of gunny bags/jute waste, mesta, rice straw, wheat
straw, bagasse etc., not only the said waste is utilised in a
useful and constructive manner, it saves environment as well ..
Such a benevolent purpose for issuing these Notifications has
                                                                0
been emphasized by the Finance Ministers themselves from
time to time in the budget speeches.
       14) The tenor and language of various Notifications issued
 in this behalf from time to tim·e also reflect the experience which
 was gained over a period of time. Whereas in the beginning,              E
 Notification(s) prescribed the 'Positive List' of the materials
 that had to be used to get the benefit of concessi9nal rate of
'duty, the thrust underwent a conceptual transformation and
 changed to the 'Negative Ust', i.e. mentioning only those                F
 materials use whereof will not entail the benefi~ thereby making
 the benefit available to all other forms of non-conventional
 materials. This was because of the reason that experience
 has shown that it was not proper to mention the non-
 conventional material by putting them in a straitjacket and to           G
 provide that all kinds of non-conventional mliterials used for
 the manufacture of paper should qualify for concessional rate
 excepting only those which need not be given such a benefit.
 This thrust, therefore, from 'Positive List' to 'Negative List' is of
 great significance and has to be kept in mind.                           H
502       SUPREME COURT REPORTS                   [2015) 8 S.C.R.


A       15) Proceeding further therefrom, it is important to note
  that the pulp made from jute, jute waste including hessian waste
  and old gunny bags waste are specifically included in the
  'Positive List' contained in Notification dated 17.09.1990.
  Thus, as per the said Notification if the paper is manufactured
B from the pulp made from the waste of the aforesaid materials,
  the benefit of concessional rate was admissible. To put it
  otherwise, it has always been clearly understood that jute or
  jute waste including old gunny bag waste is non-conventional
  material. Once that is accepted, could the intention behind .
C Notification No. 22/1994-CE be to exclude this non-
  conventional material with the insertion of the word 'rags' in
  the 'Negative List'. It seems difficult to comprehend such a
  kind of outcome or situation.

D      16) With the aforesaid introduction, we reproduce the
  'Negative List' of the materials specified in the Notification 22/
  94-CE. It mentions 'bamboo, hard woods, soft woods, reeds
  (other than Sarkanda) or rags'. What is intended by mentioning
  that pulp made from the aforesaid material would not entail
E benefit. Obviously, all other materials, namely, bamboo, hard
  woods, soft woods, and reeds are conventional raw materials.
  These are the materials which have direct bearing on cutting
  oftrees and in tum on environment. Therefore, 'rags' has to be
F read ejusdem generis. It has to be the specie of the earlier
  kind of materials mentioned therein. Otherwise, it would not
  make any sense. Admittedly, jute waste or for that matter gunny
  bag waste have no adverse impact on environment.
  Significantly, while mentioning reeds, the Sarkanda is
G specifically excluded therefrom.

      17) It needs to be emphasized that prior to 1984, the
  exemption to paper made from unconventional raw materials
  was available only when the paper is manufactured from the
H specified non-conventional raw materials. For example,
  Notification No. 46/83-CE dated 01-03-1983 prescribed
   COASTAL PAPER LTD. v. COMMNR. OF CENTRAL                   503
      EXCISE, VISAKHAPATNAM [A.K. SIKRI, J.]

concessional rate of excise duty for paper containing not less A
than fifty per cent by weight of pulp made from bagasse, jute
stalks, cereal straw, elephant grass (lmperata Cylindrica),
mesta (Kneaf) or waste paper. Thus, jute stalks was specified
as a non-conventional raw material in the notification itself.
However, vide Budget of 1984, the scope of the exemption to B
paper made from non-conventional raw materialswas widened
and rel~vant portion of Notification No. 25/84-CE dated 01-
03-1984 reads as under:

     "In exercise of the powers , ... the Central Government C
     hereby exempts paper and paperboards .... manufactured
     out of pulp containing not less than 50 per cent by weight
     of pulp made from materials (other than bamboo,
     hardwoods, softwoods, reeds or rags) ... "
                                                                D
     Thus, right from the year 1984, the coverage of the
Notification was widened inasmuch as any materials other than
the specified ones would be considered as non-conventional
raw materials and the paper made therefrom would be eligible
for the exemption. This is also evident from the Finance E
Minister's speech while presenting the FJnance Bill, 1984,
relevant portion of which reads as under:

    "108 ... As a further measure of relief, I proposed to reduce
    the basic excise duty on printing and writing paper and F
    also kraft paper produced by large paper mills by Rs. 425
    per metric tonne, and corresponding concessions are
    being given on the duty leviable on such paper when
    unconventional raw materials are used in their
    manufacture. Simultaneously, the range of permissible G
    unconventional raw materials is being expanded."

     18) The Budget Explanatory Notes to Finance Bill, 1984
(at para 8.6) reads as under:
                                                               H
    "8.6 Another change made is with regard to extending
504          SUPREME COURT REPORTS                 [2015] 8 S.C.R.


A          the scope of unconventional raw materials by paper mills
           for the purpose of duty concessions. It has not been
           proided that the concessions would be available for use
           of any raw materials (other than bamboo, hard woods,
           soft woods, reeds and rags) to the extent of at feast 50%
B          by weight of pulp in the manufacture of paper (with few
           exceptions) or paperboard. In other words, so long as
           the percentage by weight of pulp bamboo, hard woods,
           soft woods, reeds or rags is not more .than 50%, the
           concessional rates of excise duty would apply."
c
          19) Thus, all the above materials and the notifications
      clearly suggest that the Government itself distinguished
      between jute bags/gunny bags and rags and the exemption
      was being extended to paper made from old jute/gunny bags.
D
       20) No doubt, such exemption Notifications call for strict
  interpreta.tion. However, at the same time when the expression
  'rags' is not defined in the Notification, it has to be assigned a
  particular meaning which defines the purpose for which such
E a Notification was issued giving by plain meaning, even when
  there is a total disconnect between the said meaning and the
  Notification, may lead to absurd results as it would exclude
  the non-conventional material in the form of waste from jute
  bags or gunny bags even when this very material was there in
F the 'Positive List' and qualified for exemption. This Court has
  held in the case of H.M.M Limited v. Collector of Central
  Excise, New DelhP that the benefit of Notifications has to be
  interpreted by going into the purpose of beneficial notifications
  and that one does not have to go only by the language
G employed therein.

          21) To the same effect is the judgment of this Court in
      Collector of Central Excise and Others v. Himalayan

H     2 (1996) 11 sec 332
    COASTAL PAPER LTD. v. COMMNR. OF CENTRAL                     505
       EXCISE, VISAKHAPATNAM [AK. SIKRI, J.]

Cooperative Milk Product Union Ltd. and Others3 where A
this Court remarked that 'purpose and policy decision behind
the notification should not be defeated by giving it some
meaning other that what is clearly and plainly flowing from it.
At this ~tage, it would also be pertinent to refer to another
judgment of this Court in Rohit Pulp and Paper Milis Ltd. v. · B
Collector of Central Excise', wherein the Court held that there
would be circumstances where a generic word is to be given
limited meaning by reason of its context. We would like to
borrow the following discussions therefrom:

      "10. The principle of statutory interpretation by which a
      generic word receives a limited interpretation by reason
      of its context is well established. In the context with which
      we are concerned, we can legitimately draw upon the
      "noscitur a sociis" principle. This expression simply D
      means that "the meaning of a word is to be judged by the
      company it keeps." Gajendragadkar, J. explained the
      scope of the rule in State v. Hospital Mazdoor Sabha
      (1960-2 S.C.R. 866) in the following words:
                                                                    E
      "This rule, according to Maxwell, means that, when two
      or more words which are susceptible of analogous
      meaning are coupled together they are understood to
      be used in their cognate sense. They take as it were
      their colour from each other, that is, the more general is F
      restricted to a sense analogous to a less general. The
      same rule is thus interpreted in "Words and Phrases"
      (Vo. XIV, p. 207): "Associated words take their meaning
      from one another under the doctrine of nosciture a sociis,
      the philosophy of which is that the meaning of a doubtful G
      word may be ascertained by reference to the meaning
      of words associated with it; such doctrine is broader than

3 (2000) a sec 642

4 1990 (47) ELT 491 (SC)                                           H
506    SUPREME COURT REPORTS                     [2015] 8 S.C.R.


A     the maxim Ejusdem Generis." In fact the latter maxim "is
      only an illustration or specific application of the broader
      maxim noscitur a sociis". The argument is that certain
      essential features or attributes are invariably associated
      with the words "business and trade" as understood in
B     the popular and conventional sense, and it is the colour
      of these attributes which is taken by the other words used
      in the definition though their normal import may be much
      wider. We are not impressed by this argument. It must
      be borne in mind that noscitur a sociis is merely a rule of
c     construction and it cannot prevail in cases where it is
      clear that the wider words have been deliberately used
      in order to make the scope of the defined word
      correspondingly wider. It is only where the intention of
      the Legislature in associating wider words with words of
D
      narrower significance is doubtful, or otherwise not clear
      that the present rule of construction can be usefully
      applied. It can also be applied where the meaning of the
      words of wider import is doubtful; but, where the object
E     of the Legislature in using wider words is clear and free
      of ambiguity, the rule of construction in question cannot
      be pressed into service."

      This principle has been applied in a number of contexts
      in judicial decisions where the Court is clear in its mind
F
      that the larger meaning of the word in question could not
      have been intended in the context in which it has been
      used. The cases are too numerous to need discussion
      here. It should be sufficient to refer to one of them by way
G     of illustration. In Rainbow steels Ltd. v. C.S. T., (1981) 2
      SCC 141 this Court had to understand the meaning of
      the word 'old' in the context of an entry in. a taxing tariff
      which read thus:

      "Old, discarded, unserviceable or absolute machinery,
H
COASTAL PAPER LTD. v. COMMNR. OF CENTRAL                          507
   EXCISE, VISAKHAPATNAM [A.K. SIKRI, J.)

 stores or vehicles including waste products ..... "               A

 Though the tariff item started with the use of the wide
 word 'old', the Court came to the conclusion that "in order
 to fall within the expression 'old machinery' occurring in
 the .entry, the machinery must be old machinery in the B
 sense that it has become non-functional or non-usable".
 In other words, not the mere age of the machinery, which
 would be relevant in the wider sense, but the condition of
 the machinery analogous to that indicated by the words
 following it, was considered relevant for the purposes of C
 the statute.

  11. The maxim of noscitur a sociis has been described
  by Diplock, C.J. as a ''treacherous one unless one knows
  the societas to which the socii belong" (vide: Letang v.         o
  Coopeic, 1965-1 Q.B. 232). The learned Solicitor
  General also warns that one should not be carried away
  by labels and Latin maxims when the word to be
  interpreted is clear and has a wide meaning. We entirely
  agree that these maxims and precedents are not to be             E
  mechanically applied; they are of assistance only in so
  far as they furnish guidance by compendiously summing
  up principles based on rules of common sense and logic.
  As explained in Collector of Central Excise v. Parle
. Exports(P)Ltd., 1989(38)E.L.T. 741 (S.C.)=(1989-1                F
  S.C.C. 345 at p.357) and Tata Oif.Mills Co. Ltd. v. C.C.E.,
  1989 (43}E.L.T. 183 (S.C.) = (1989-4 sec 541 at p.
  545-6) in interpreting the scope of any notification, the
  Court has first to keep in mind the object and purpose of
  the notification. All parts of it should be read harmoniously    G
  in aid of, and not in derogation, of that purpose. In this
  case, the aim and object of the notification is to grant a
  concession to small scale factories which manufacture
  paper with unconventional raw materials. The question            H
508      SUPREME COURT REPORTS                     (2015] 8 S.C.R.


A        naturally arises: Could there have been any particular
         object intended to be achieved by introducing the
         exceptions set out in the proviso? Instead of proceeding
         on the premise that it is not necessary to look for any
         reason in a taxing statute, it is necessary to have a closer
B        look at the wording of the proviso. If the proviso had
         referred only to 'coated paper', no special object or
         purpose would have been discernible and perhaps there
         would have been no justification to look beyond it and
         enter into a speculation as to why the notification should
c        have thought of exempting only 'coated paper'
         manufactured by these factories from the purview of the
         exemption. But the notification excepts not one but a
         group of items. If the items mentioned in the group were
         totally dissimilar and it were impossible to see any
D
         commori thread running through them again, it may be
         permissible to give the exceptions their widest latitude.
         But when four of them-undoubtedly, at least three of them-
         can be.brought under an intelligible classification and it
E        is also conceivable that the Government might well have
         thought that these small scale factories should not be
         eligible for the concession contemplated by the
         notification where they manufacture paper catering to
         industrial purposes, there is a purpose in the limitation
F        prescribed and there is no reason why the rationally
         logical restriction should not be placed on the proviso
         based on this classification. In our view, the only
         reasonable way of interpreting the proviso is by
         understanding the words 'coated paper' in a narrower
G        sense consistent with the other expressions used therein."

       22) The aforesaid discussion would be sufficient to hold
  that pulp from the waste of jute bags or gunny bags would not
  be covered by the term 'rags' appearing in Notification dated
H 01-03-1994 as it could never be the intention to exclude non-
   COASTAL PAPER LTD. v. COMMNR. OF CENTRAL                         509
      EXCISE, VISAKHAPATNAM [A.K. SIKRI, J.]

conventional material from the benefit of the aforesaid A
Notification when that was precisely the purpose for which this
Notification was issued to encourage use of non-conventional
material for the purposes of manufacturing paper or paper
products. Still, we would now like to take note of the dictionary
meanirig that is assigned to the aforesaid terms, that too from B
the 'Dictionary of Paper' by American Paper and Pulp
Association, which obviously is the most relevant and
authenticated dictionary for the purpose of the present case
as what is in vogue and understood in paper industry is
contained in such a dictionary.                                   C

     23) The Dictionary of Paper by American Paper and Pulp
Association clearly makes a distinction between rag pulp and
jute. Relevant portion of the book (contained at pages 22 and
26) is reproduced below:.                                            D

    "Cotton fibre or rag pulps are used principally in the
    manufacture offine and technical papers as listed below,
    and in the manufacture of roofing papers .. "
                                                                     E
    Jute Pulp is used in the.manufacture of wrapping paper
    and tag stock. It is also used to some extent in buff drawing
    paper. The major supply of jute comes from old sacking,
    burlap and string ... "
                                                                     F
    Jute ... Old gunny and sacking are used as raw materials
    in paper-making"

    24) The book 'Pulp and Paper Chemistry and Chemical
Technology' by James P. Casey again distinguishes between
rags and jute in the following manner:                    G

    "Use of Rags for Papermaking

    High-grade cotton and, to some extent, linen rags are used
    to make the best grades of bond, writing and technical           H
510         SUPREME COURT REPORTS                     [2015] 8 S.C.R.


A         papers, where permanence, high strength, and distinctive
          quality are of interest.

          Pulping of Jute

          Whole jute is rarely used for pulp and papermaking.
B
          Salvaged products, such as old jute sacks and burlap,
          are the materials available to the paper mills. Waste jute
          is cut into small pieces and dusted before cooking .. Jute
          pulps are used for the manufacture of high-strength bags,
c         wrappings, drawing papers, and tags."

          25) Dictionary of Paper by TAPP! defines 'rag pulps' as
      under:

          "Papermaking fibers made from new or old cotton textile
D         cuttings. The term may also apply to cotton !inters, i.e.,
          the short fibers which adhere to the cotton seed after the
          ginning process. Rag pulps are used in papers where
          permanence and durability are needed, e.g., ledger,
          blueprint, map, currency papers etc."
E
          26) Indian Standard Glossary of Terms used in Paper
      Trade and Industry - IS 4661 : 1999 defines Jute' and 'rag
      pulp' as under:

F         "Jute : (a) An Indian bast fibre, white jute (Corchorus
          Capsularis) and tossajute (C. Olitorius) which is used for
          the manufacture of coarse sacking and bags (gunny sack).
          Old gunny and sacking are used as raw materials in
          papermaking ...
G
          Rag Pulps: Papermaking fibres of cotton made from
          materials like new or old cotton textile cuttings or cotton
          !inters, mill run, fly cotton, cotton waste etc. Rag pulps are
          used in papers where permanence and durability are
H         needed, for example, ledger, blueprint, map, currency
                                               ,.

    COASTAL PAPER LTD. v. COMMNR. OF CENTRAL                          511
       EXCISE, VISAKHAPATNAM [AK. SIKRI, J.)

     papers etc."                                                      A.

      27) Thus, almost all the books on the subject uniformly
define 'rag' or 'rag pulp' as oni;i which is made from cotton waste
or cotton textile material. On the other hand, the learned
counsel appearing for the Revenue could not point out to a             B
single dictionary or could take us through any technical
literature which even remotely suggests that jute gunny bags
come under the category of 'rags' in the context of paper
technology.
                                                                       c
    28) The Tribunal has simply brushed aside the aforesaid
material with a mere observation that it is not relevant and this
approach of the Tribunal cannot be justified.

     29) The upshot of the aforesaid discussion is to hold that
                                                                0
the impugned decision of the Tribunal does not stand judicial
scrutiny and warrants to be set aside. We, thus, allow this
appeal, quash the order of the Tribunal and restore the order
that was passed by the Commissioner.

     No costs.                                                         E

Devika Gujral                                       Appeal allowed.