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Wednesday, August 31, 2011

Respondent is a firm engaged in the manufacture of computer stationery, business forms, etc., [carbonless or with carbon]. The respondent claims that the goods produced by them, namely, computer stationery, business forms and other allied products fall under sub-Heading Nos. 4901.90 and 4820.00 of the Schedule to the Central Excise Tariff Act, 1985 [for short "the Tariff Act"] and, therefore, the said articles are chargeable to NIL rate of duty. 4. Multi copies of computer stationery are manufactured either by inserting carbon paper between the two sheets of paper or by chemical treatment of the paper to make itself copying [carbonless stationery].


                                                             REPORTABLE


                IN THE SUPREME COURT OF INDIA

                  CIVIL APPELLATE JURISDICTION



                 CIVIL APPEAL NOS. 4077 OF 2003





COMMNR. OF CENTRAL EXCISE, MEERUT-II     ...APPELLANT




                                 VERSUS




M/S. SUNDSTRAND FORMS P. LTD.                        

...RESPONDENT





                                 JUDGMENT




Dr. MUKUNDAKAM SHARMA, J.





1.    The   present   appeal   arises   out   of   the   judgment   and   order


      dated   14.5.2002   of   Customs,   Excise   and   Gold   [Control]



      Appellate   Tribunal,   New   Delhi   [for   short   "the   Tribunal"]



      allowing   the   appeal   filed   by   the   Respondent-assessee   and





                                  Page 1 of 23


      setting   aside   the   order   dated   28.12.2000   of   the



      Commissioner, Central Excise, Meerut-II, U.P..




2.    In order to decide the issues arising in the present case in


      proper   perspective,   basic   facts   leading   to   filing   of   the



      present appeal are being recapitulated hereunder.




3.    Respondent   is   a   firm   engaged   in   the   manufacture   of


      computer   stationery,   business   forms,   etc.,   [carbonless   or



      with   carbon].     The   respondent   claims   that   the   goods



      produced   by   them,   namely,   computer   stationery,   business



      forms and other allied products fall under sub-Heading Nos.



      4901.90 and 4820.00 of the Schedule to the Central Excise



      Tariff   Act,   1985   [for   short   "the   Tariff   Act"]   and,   therefore,



      the said articles are chargeable to NIL rate of duty.




4.    Multi copies of computer stationery are manufactured either


      by inserting carbon paper between the two sheets of paper



      or by chemical treatment of the paper to make itself copying



      [carbonless stationery].





                                     Page 2 of 23


5.    The carbonless paper is a chemically treated paper used for


      producing   impression   of   the   writing   or   manuscript   of   the



      original   paper   on   the   other   paper   sheet.     Such   carbonless



      paper, which is a kind of copying paper is processed firstly



      by   printing,   which   is   done   at  pre-fixed  places   of  the  paper



      with   the   purpose   of   printing   names   of   the   buyers,   logo   or



      some   other   words   as   desired   by   the   buyers   and   after   the



      said   process   is   over   the   printing   paper   is   then   passed



      through   coating   unit   for   applying   chemical   to   develop   the



      character of self-copying paper. The backside of the paper is



      coated to  obtain top  copy  and front coating is done  on the



      sheet   which   is   to   be   used   as   bottom   copy.   The   next   step,



      which   is   the   final   step,   is   to   get   chemically   coated   copy



      passed   through   the   coating   unit   for   perforation,   punching



      and fan-folding.




6.    There   is   also   no   dispute   with   regard   to   the   fact   that   the


      carbonless   paper   or   self-copy   paper   emerges   at   the



      intermediate stage and has its own life but the same could



      be   further   used   in   the   manufacture   of   stationery   in





                                     Page 3 of 23


      continuous process.  There is also no dispute with regard to



      the   fact   that   the   carbonless   paper   is   a   well   known



      marketable   commodity   as   is   evident   from   the   process   of



      manufacturing.     The   carbonless   paper   or   other   paper



      cannot   be   treated   as   the   computer   stationery   unless   it   is



      subjected to the second stage of processing, i.e., the process



      of  perforation,   punching   and  fan-folding   etc.     Therefore,   in



      common   trade   parlance   the   computer   stationery   is



      processed through various modes of processing as indicated



      hereinbefore.




7.    On intelligence, a team of Central Excise Officers visited the


      factory   premises   of   the   respondent   herein   at   Noida   and



      examined   the   manufacturing   process   of   the   carbonless



      stationery.   It  was  found   that  the   respondent-company   was



      purchasing   carbonless   paper   in   roll   form,   coated   with



      chemical   on   backside   or   front   side   or   on   both   sides,   from



      the market and such carbonless paper was subjected to the



      process   of   only   printing   and   perforation,   etc.,   for   the



      manufacture of the stationery.





                                    Page 4 of 23


8.    The Commissioner, Central Excise, Meerut-II issued a show


      cause   notice   dated   30.04.1998   wherein   it   was   alleged   that



      the   respondents   were   engaged   in   evasion   of   duty   on



      carbonless   paper   which   emerged   at   the   intermediate   stage



      during   the   course   of   manufacture   of   carbonless   stationery



      from   the   plain   paper.   Therefore,   they   were   asked   to   show



      cause as to why duty amounting to Rs. 49,05,335.00 which



      was   allegedly   not   paid   on   the   carbonless   paper



      manufactured   and   removed   from   their   factory   during   the



      period from 1993-94 to 1997-98 [upto 12/97] should not be



      recovered  from  them  under  Rule  9(2)  of the Central Excise



      Rules,   1944   read   with   provisions   of   Section   11A(1)   of   the



      Central   Excise   Act,   1944   invoking   extended   period   of   5



      years and also to show cause as to why penalty and interest



      on the evaded duty should not be imposed upon it. The said



      notice proposed to charge duty on the said carbonless paper



      emerging   at   the   intermediate   stage   under   sub-heading   No.



      4816.00   to   the   Schedule   to   the   Central   Excise   Tariff   Act,



      1985.





                                   Page 5 of 23


9.    Simultaneously, proceedings were initiated against MD and


      Deputy   MD   of   the   respondent-company   for   imposing



      penalty upon them. Thereafter, six other show cause notices



      were  also  issued  on  the  same  issue  to  the   respondents  for



      raising   the   demand   of   duty   in   terms   of   Rule   9(2)   of   the



      Central   Excise   Rules,   1944   read   with   Section   11A   of   the



      Central Excise Act, 1944 and invoking penal provisions.




10. Notice   issued   by   the   Department   mentioned   that   the



      respondent-company   is   engaged   in   evasion   of   duty   on



      carbonless   paper   which   emerged   at   the   intermediate   stage



      during   the   course   of   manufacture   of   carbonless   stationery



      from the plain paper. Therefore, the Department demanded



      Central   Excise   duty   at   the   intermediate   stage   when   the



      paper is coated to make it carbon less paper or self-copying



      paper. Notice alleged that the carbonless paper is a separate



      commodity,  different from  plain paper, and  its user  is also



      different   from   the   ordinary   paper.   The   carbonless   paper



      emerged   on   subjecting   certain   process,   i.e.,   application   of



      chemicals   and   printing   which   was   done   to   describe   the





                                    Page 6 of 23


  name   of   the   buyer   and   other   details   relating   to   which



  ultimately the paper was to be used for in the present case.



  The   printing   was   only   incidental   to   the   carbonless   paper



  emerging   at   the   intermediate   stage   and   that   the   printing



  was   not   in   any   way   necessary   for   the   manufacturing   of



  carbonless   paper   which   emerged   at   intermediate   stage.



  According to the Department, such carbonless papers could



  be further used into the manufacturing of the stationery in



  continuous   process,   as   it   was   evident   from   the   process   of



  manufacture and statement of the party that the process of



  perforation, punching and fan folding, etc., was responsible



  to   convert   carbonless   paper/other   paper   into   computer



  stationery.




11.The   Department   classified   the   product   as   "the   coated



  paper" at the intermediate stage under Heading 48.16 of the



  Tariff Act which applies to carbon paper, self-copying paper



  and other copying or transfer papers. Notice alleged that the



  printing   of   certain   words   only   specified   the   buyer   but   it



  would   not   in   any   way   make   them   unmarketable,   as   the





                               Page 7 of 23


   carbonless   paper   which   emerged   at   the   intermediate   stage



   in   the   course   of   the   manufacture   of   the   carbonless



   stationery  was similar  to carbonless paper purchased  from



   the  market and  the  only  difference  was  that  in  the   case   of



   the respondent the carbonless paper manufactured at their



   end was printed with some words relating to the buyers.




12. Thereafter, the Commissioner in its Order-In-Original dated



   28.12.2000   confirmed   the   demand   of   the   department   and



   imposed   penalty   of   Rs.   50   lakhs   on   the   respondent-



   assessee.




13. Aggrieved   by   the   same   the   respondent-assessee   filed   an



   appeal   before   the   Customs,   Excise   and   Gold   [Control]



   Appellate   Tribunal,   New   Delhi   which   vide   its   order   dated



   14.05.2002   held   that   the   impugned   product   is   not



   classifiable   under   heading   48.16   as   carbonless   paper   and



   allowed the appeal of the respondent.




14. Being   aggrieved   by   the   said   order   of   the   Tribunal,   the



   Department has filed the present appeal, on which we heard





                                Page 8 of 23


   learned   counsel   appearing   for   the   parties,   who   have   taken



   us through all the materials available in the record.




15. There   are   two   specific   issues   which   arise   for   our



   consideration in the present appeal and the same were also



   argued extensively by the counsel appearing for the parties.



   The   first   issue,   relates   to   under   which   particular   heading



   the intermediary product would fall or is it to be treated as



   a   final   or   end   product,   under   heading   4820.00   of   the



   Schedule to the Central Excise Tariff Act.  The second issue



   arising   for   our   consideration   is   as   to   whether   or   not   the



   intermediary   product   in   question   has   a   marketability



   prospect and capability.




16. The   counsel   appearing   for   the   appellant   argued   that   the



   intermediary   product   with   which   we   are   concerned   falls



   under Heading No. 48.09 read with 48.16 of the Schedule to



   the   Central   Excise   Tariff   Act  whereas   according   to   the



   counsel   appearing   for   the   respondent-company   the   same



   falls   under   the   Heading   48.20   or   under   sub   heading



   4901.90 of the Schedule.





                                 Page 9 of 23


17. In   support   of   his   contention,   counsel   appearing   for   the



   respondent-assessee   relied   upon   the   Circular   dated



   15.10.1991   issued   by   the   Central   Board   of   Excise   and



   Customs,   Government   of   India,   New   Delhi,   which   was



   issued   in   relation   to   classification   of   paper   printed   with   a



   format   of   air   line   tickets   or   embarkation/disembarkation



   cards and submitted that they were under a bona fide belief



   in   view   of   the   said   circular   that   no   duty   was   attracted   on



   the printed  coated  paper arising at  the inter  mediate stage



   during the continuous process of manufacture of carbonless



   computer   stationery   and   that   in   the   said   circular   it   was



   clarified that formats (of airline tickets, embarkation cards,



   etc.) which have ink deposited at appropriate places on the



   reverse   side,   instead   of   being   classified   under   Heading



   48.09   or   48.16,   would   be   classifiable   under   sub-Heading



   4820.00 or 4901.90 attracting nil rate of duty and  that the



   Department   is   bound   by   its   own   Circular   issued   by   the



   Board.





                                  Page 10 of 23


18. On   the   other   hand,  counsel   appearing   for   the   appellant



   vehemently argued that the said Circular has no application



   to the facts of the present case as the Circular neither deals



   with   continuous   carbonless  computer   stationery   paper   nor



   with   the   carbonless   stationery   and   that   it   actually   deals



   with plain continuous computer stationery.




19. It   is   the   case   of   the   appellant   that   the   product



   manufactured   by   the   respondent   company   is   carbonless



   paper/self-copying paper, which is coated and therefore the



   same should fall under Heading 48.09 for which excise duty



   at   the   rate   of   20%   is   payable.     However,   heading   48.09



   prescribes   a   particular   size   of   paper   in   rolls   of   a   width



   exceeding 36 cm or in rectangular (including square) sheets



   with   at   least   one   side   exceeding   36   cm   in   unfolded   state.



   Consequently,   the   said   heading   would   not   be   applicable



   exactly to the product of the respondent in the present case.



   However, what is applicable is Heading 48.16, which reads



   as follows:





                                Page 11 of 23


     "48.16 4816.00        Carbon   paper,   self-copy   paper

                           and   other   copying   or   transfer

                           papers   (other   than   those   of

                           heading   No.   48.09),   duplicator

                           stencils   and   offset   plates,   of

                           paper,   whether   or   not   put   in

                           boxes.


                                               Rate of Duty 20%"





20. The respondent, however, submitted that they manufacture



  Registers,   account   books,   note   books   and   other   allied



  products   for   which   Nil   duty   is   prescribed   under   Heading



  49.01   of   the   Schedule,   where   the   description   of   goods   is



  printed   books,  newspapers, pictures  and other  products  of



  the   printing   industry;   manuscripts,   typescripts   and   plans.



  According   to   the   counsel   appearing   for   the   respondent   the



  products   manufactured   by   them   should   be   treated   falling



  under Heading No. 49.01. Reference was also drawn to the



  opinion   of   the   Institute   of   Paper   Technology,   Saharanpur,



  U.P.




21. The said opinion clearly indicates  that computer stationery



  is different from carbonless paper and self copying paper.  It



  was   also   indicated   therein   that   carbonless   papers   or   self



                              Page 12 of 23


   copying   papers   are   fully   coated   throughout   and   are



   available in reel/sheet form.




22. There   is   a   set   of   Interpretative   Rules   for   interpreting



   headings   of   the  Schedule   to   the   Central   Excise   Tariff   Act.



   Para   2A   of   the   same   provides   that   any   reference   in   a



   heading to the goods shall be taken to include a reference to



   those   goods   incomplete   or   unfinished,   provided   that,   the



   incomplete or unfinished goods have the essential character



   of the complete  or finished goods.     Para  3 thereof  provides



   that   when   goods   are   classifiable   under   two   or   more



   headings, classification should be effected by relying on the



   heading   which   provides   the   most   specific   description   and



   the same  would be  preferred to headings providing a more



   general description.



23. In   the   tariff   provided   under   Chapter   48,   there   are   certain



   notes which are relevant for the purpose of interpreting the



   subject   matter   of   various   headings.     Note   7   thereof,



   provides,   that   paper,   paperboard,   cellulose   wadding   and



   webs of cellulose fibres answering to a description in two or





                                 Page 13 of 23


  more of the heading nos. 48.01 to 48.11 are to be classified



  under   one   of   such   headings   which   occurs   last   in   the



  numerical   order   in   the   Schedule.     Note   11   thereof   also



  provides that except for the goods of Heading No. 48.14   or



  48.21,   paper,   paperboard,   cellulose   wadding   and   articles



  thereof,   printed   with   motifs,   characters   or   pictorial



  representations,   which   are   not   merely   incidental   to   the



  primary use of the goods, fall in Chapter 49.





24. Strong reliance was placed by the counsel appearing for the



  respondent on the Circular dated 15th October, 1991, issued



  by   the  Central   Board   of   Excise   and   Customs,   Government



  of India, New Delhi.  The said circular relates to levy of duty



  on   paper   sheets   printed   with   format   of   airline   tickets   or



  embarkation/disembarkation   cards   and   classification



  thereof.       The   said   circular   clarifies   and   relates   to   airline



  tickets.     A   bare   glance   on   the   aforesaid   circular   makes   it



  crystal   clear   that   the   intermediary   products   referred   to   in



  the   present   appeal   are   not   directly   relatable   to   airlines



  tickets  or  embarkation/disembarkation   cards.   Besides,   the





                                Page 14 of 23


  aforesaid   circular   deals   with   the   end   product,   namely,   the



  computer   stationery   which   is   classifiable   under   Heading



  48.20.     If   the   end   product   is   classifiable   under   Heading



  48.20 then it would be difficult to say that the intermediary



  product   would   also   fall   under   heading   48.20.   In   our   view,



  the   appropriate   specific   heading   for   the   intermediary



  product would be Heading 48.16.





25. The Commissioner of Customs, who has passed the Order-



  In-Original   was   conscious   of   the   aforesaid   fact.     According



  to   him,   the   carbonless   paper/self   copying   paper,   which   is



  an   intermediary   product   is   classifiable   under   Headings



  48.09   and   48.16   depending   upon   the   size   of   the   papers



  manufactured by the respondent company whereas the end



  product   i.e.   the   computer   stationery   is   classifiable   under



  Heading 48.20, which attracts NIL rate of duty.   According



  to   him   although   the   final   product   is   not   dutiable,   as   the



  same is classifiable under Heading 48.20, where NIL rate of



  duty   is   prescribed,   but   so   far   as   intermediary   product   is



  concerned it is  to be classifiable under  Heading 48.16  and





                               Page 15 of 23


   the duty payable for such intermediary goods is prescribed



   as 20%.





26. The  Commissioner   has  given   cogent   reasons   as to   why  the



   carbonless   paper   emerging   at   intermediate   stage  would   be



   classifiable   under   heading   48.16.     According   to   him   goods



   covered under Headings 48.09 and 48.16 are of same kind



   except   that   in   latter   heading   the   goods,   other   than   in   roll



   form or in rectangular sheet with at least one side exceeding



   36   cm   fall   and   that   applying   the   principle   of  ejusdem



   generis, the carbonless paper whether printed or not which



   is   not   in   roll   form   or   in   the   sheet   form   with   one   side



   exceeding  36   cm  would  be  covered   under   sub  heading   No.



   4816.00.




27. Having   decided   the   aforesaid   classification   in   the   aforesaid



   manner,   so   far,   intermediary   product   is   concerned   the



   Commissioner also considered the scope of marketability of



   the   intermediary   product   in   question.     Relying   on   the



   statements   made   by   the   Director   of   the   respondent-



   company   themselves   and   other   relevant   documents   on




                                 Page 16 of 23


  record   the   Commissioner   came   to   a   finding   that   the



  carbonless   paper   even   in   printed   form   could   be   sold   or



  purchased   although   the   number   of   the   customers   is



  restricted.  He also found on appreciation of the documents



  on  record   that carbonless   paper   invariably   emerges  during



  the course of manufacture of computer stationery and such



  carbonless   paper   emerging   at   the   intermediary   stage   is



  known to the market, has a distinct and very well-identified



  market and is capable of being marketed.





28. It has been indicated from the findings of the Commissioner



  that   the   respondent   company   not   only   manufactures   the



  end   product   but   it   also   manufactures   the   intermediary



  products which are sold by them even in the roll form in the



  market.       Invoices   indicating   sale   by   the   respondent   have



  also been placed on record and from scrutiny of the same it



  appears   that   such   intermediary   products   were   sold   in   roll



  forms only. It is also an undisputed fact in the present case



  that   the   respondent   themselves   purchased   intermediary



  products  from  the  open market.       But then  only difference





                              Page 17 of 23


   even according to  them   also is that such carbonless  paper



   with   coating   purchased   from   the   market   is   of   inferior



   quality.




29. The   Tribunal,   however,   while   dealing   with   the   appeal   filed



   before   it   upset   the   aforesaid   findings   holding   that



   respondent-   assessee   was   engaged   in   the   manufacture   of



   printed computer stationery and not self copying paper, and



   therefore,   the   intermediary   products   of   the   respondent



   cannot be classified under Heading 48.16.




30.The   Tribunal   also   relied   upon   the   Circular   dated



   15.10.1991   issued   by   the   Central   Board   of   Excise   and



   Customs   for   coming   to   a   finding   that   provided   tickets,



   printed   circulars,   letters,   forms   etc.   which   are   essentially



   printed   matters   requiring   filing   up   of   only   minor   details



   would be covered by sub heading 4901.90.




31. Having   examined   the   record   and   the   description   of   the



   goods   in   the   headings   and   upon   noticing   rules   of



   interpretation   of   the  Schedule   to   the   Central   Excise   Tariff



   Act,   we   are   of   the   considered   opinion   that   although   the



                                Page 18 of 23


   respondent   company   may   be   registered   for   newspapers,



   etc., but it cannot be said that either the end product or the



   intermediary product would fall under Chapter 49, heading



   49.01.  End product here is admittedly computer stationery



   which   would   specifically   fall   under   Chapter   48,   heading



   48.20, sub heading 4820.00.




32. When we read heading 48.16 with sub heading 4816.00, we



   find   that   it   includes   within   its   extent   carbon   paper,   self-



   copy  paper  and other  copying  or transfer  papers but other



   than   those   articles   included   in   heading   48.09   which   is



   specifically   relatable   to   a   particular   size   of   paper   and



   therefore we are in agreement with the findings recorded by



   the   Commissioner   that   the   intermediary   products   in   the



   present   case   would   fall   and   are   classifiable   under   heading



   48.16.




33.The   next   issue   that   is   required   to   be   decided   is   as   to



   whether the intermediary products are marketable or not.




34. Evidence   in   the   nature   of   documents   and   statements



   recorded   in   that   regard   indicates   that   such   intermediary



                                Page 19 of 23


   products   are   available   in   the   market   and   are   brought   and



   sold in the open market.  The Commissioner has referred to



   such   evidence   on   record   and   even   the   invoices   of   the



   respondents themselves clearly indicate that they have sold



   intermediary products of the nature in question in the open



   market in roll forms.




35. In   the   present   case,   there   is   enough   evidence   available   on



   record   to   show   that   not   only   the   intermediary   products   in



   the present case are capable of being bought and sold in the



   market but they are in fact sold and purchased in the open



   market. Even the respondents have admitted that they have



   themselves purchased such intermediary products from the



   market although the products available in the market were



   of   inferior   quality.   But   the   fact   remains   that   there   are



   enough   people   like   the   respondents   willing   to   purchase



   such material from the market.




36. During   the   course   of   arguments   reference   was   made   to   a



   number   of   decisions   of   this   Court   on   the   issue   relating   to



   marketability of a product.





                                 Page 20 of 23


37. We   have   a   recent   decision   of   this   Court   in   the   case   of



   Medley
               P
               harmaceuticals   Ltd.   Vs.  The   Commissioner   of


   Central Excise and Customs, Daman, reported in  (2011)


   2   SCC   601.     This   Court   in   the   said   decision   has   very



   carefully considered almost all the previous decisions of this



   Court   on   the   issue   of   the   levy/payment   of   Excise   Duty



   Valuation   on   articles   manufactured   by   the   assessee



   company   therein.       After   referring   to   practically   all   the



   decisions on the issue this Court in the aforesaid case held



   that   the       consistent   view   of   this   Court   is   that   the



   marketability   is   an  essential  criteria   for   charging   duty   and



   that   the   test   of   marketability   is   that   the   product   which   is



   made liable to duty must be marketable in the condition in



   which   it   emerges.   This   Court   also   held   that   the     word



   `Marketable' means saleable or suitable for sale and that it



   need not in fact be marketed but then the article should be



   capable   of   being   sold   to   consumers,   as   it   is   without



   anything more. This Court further went on to hold that the



   essence of marketability of goods is neither in the form nor



   in the shape or condition in which the manufactured article




                                 Page 21 of 23


   is   found   but   it   is   the   commercial   identity   of   the   article



   known to the market for being bought and sold. The Court



   further   held   that   the   product   in   question   is   generally   not



   being   bought   or   sold   or   has   no   demand   in   the   market,



   would   be   irrelevant.   The   aforesaid   conclusions   are   arrived



   at after considering almost all the previous decisions of this



   Court on the issue.




38. When   we   apply   the   ratio   of   the   aforesaid   decision   of   this



   Court in the case of Medley Pharmaceuticals Ltd.  (supra)



   to the facts of the present case it becomes crystal clear that



   the   intermediary   product   in   question   is   generally   being



   bought and sold and there is a demand of such articles in



   the market as the respondents themselves have purchased



   it from the open market for manufacturing the end product.




39. In   terms   of   findings   arrived   at   and   on   appreciation   of   the



   materials   on   record,   we   are   of   the   view   that   the   findings



   arrived   at   by   the   Tribunal   by   upsetting   the   findings   of  the



   Commissioner   vide   its   order   dated   14.05.2002   were



   unjustified   and   uncalled   for.     The   Judgment   and   Order





                                 Page 22 of 23


  passed   by   the   Tribunal     is     therefore     set     aside   and   we



  restore   the   order   dated   28.12.2000   passed   by   the



  Commissioner Central Excise, Meerut-II, U.P.




40.Accordingly, the appeal is allowed but leaving the parties to



  bear their own costs.




                                                    .......................................

                                                                                    .....J

                                               [Dr. Mukundakam Sharma]





                                             ............................................J

                                              [Anil R. Dave]

New Delhi

August 30, 2011





                                    Page 23 of 23


The issue which falls for consideration in the present appeal is whether the treatment given or the process undertaken by the appellant to Helium gas purchased by it from the open market would amount to manufacture, rendering the goods liable to duty under Chapter Note 10 of Chapter 28 of the Central Excise Tariff Act, 1985 (hereinafter referred to as `the Act'). Chapter Note 10 of Chapter 28 of the Act, in relation to `manufacture', reads as under: "10. In relation to products of this chapter, labelling or relabelling of containers and repacking from bulk packs to retail packs or adoption of any other treatment to render the product marketable to the consumer shall amount to manufacture."



                                        1



                                                                      REPORTABLE


                IN THE SUPREME COURT OF INDIA


                 CIVIL APPELLATE JURISDICTION


                    CIVIL APPEAL NO. 43  OF 2005




M/S. AIR LIQUIDE NORTH INDIA

PVT. LTD.                                               .....APPELLANT.


                                  VERSUS


COMMISSIONER, CENTRAL EXCISE,

JAIPUR-I                                                  .....RESPONDENT.





                              J U D G M E N T




ANIL R. DAVE, J.



1.    This appeal has been filed against the Judgment and Order dated 31.8.2004


passed in Final  Order No 595/2004-NB(C) by the Customs, Excise & Service Tax


Appellate Tribunal, New Delhi   in Appeal No. E/247/2004-NB(C),   whereby the


Tribunal  has allowed the appeal filed by the Department and reversed the findings


of the Commissioner(Appeals).


                                                  2



2.       The issue which falls for consideration in the present appeal is whether the


treatment   given   or   the   process   undertaken   by   the   appellant   to   Helium   gas


purchased by it from the open market would amount to manufacture,  rendering the


goods liable to duty under Chapter Note 10 of Chapter 28 of the Central  Excise


Tariff Act, 1985 (hereinafter referred to as `the Act').  Chapter Note 10 of Chapter


28 of the Act,  in relation to `manufacture', reads as under:




                "10.    In   relation   to   products   of   this   chapter,   labelling   or

                relabelling of containers and repacking from bulk packs to retail

                packs or adoption of any other treatment to render the product

                marketable to the consumer shall amount to manufacture."


In order to answer the aforesaid issue which arises for our consideration, it would


be necessary to set out some facts giving rise to the present appeal.  The appellant


is   engaged   in   the   manufacture   of   Oxygen,   Nitrogen,   Carbon-di-oxide   and   other


gases   classifiable   under   Chapter   28   of   the   Act.   The   appellant   had   purchased


Helium  gas  during  the  period   commencing  from December,  1998 to  31st  March,


2001, from the market in bulk and repacked the same into smaller cylinders after


giving   different   grades   to   it   and   then   sold   the   same   in   the   open   market.   The


appellant   purchased   the   said   gas   for   Rs.520/-   per   Cum.   Various   tests   were


conducted on the gas so purchased and on the basis of the tests and some treatment


given, the gas was segregated into different grades having distinct properties and


sold at different rates to different customers.


                                                   3



3.      The   adjudicating   authorities   held   that   these   processes   undertaken   by   the


appellants amounted to manufacture and consequently confirmed the demand with


penalty. An appeal filed by the appellant before the Commissioner (Appeals) was


allowed.   Thereafter,   an appeal was filed by the   Department before the Tribunal


and the Tribunal, by its impugned judgment held that the process undertaken or the


treatment given by the appellant amounted to "manufacture"   in terms of Chapter


Note   10   of   Chapter   28   of   the   Act.   The   aforesaid   conclusion   arrived   at   by   the


Tribunal is under challenge in this appeal.




4.      On behalf of the appellant it was vehemently argued that the appellant had


only   conducted   various   tests   like   moisture   test,   etc.   to   determine   quality   and


quantity of Helium gas in the cylinders.  It was further submitted that even after the


activity   of   testing,   Helium   gas   remained   as   Helium   gas   only   and   there   was   no


change in the chemical or physical properties.  No new product,  other than Helium


gas   came   into   existence   and,   therefore,   it   cannot   be   said   that   the   appellant   had


carried on any manufacturing activity.




5.      It was further submitted that the gas, when purchased by the appellant, was


already marketable and, therefore,   it cannot be said that the testing of the gas by


the   appellant   had   rendered   the   product   marketable.     In   the   circumstances,     the


process   of   testing   cannot   be   said   to   be   a   manufacturing   process,   rendering   the


                                                    4



product   marketable.     It   was   also   submitted   that   the   crucial   requirement   for   the


application of the last portion of Chapter Note 10 of Chapter 28 of the Act is that


by   adoption   of   some   treatment,   the   product   should   become   marketable   to   the


consumer.     According   to   the   learned   counsel,   the   product,   i.e.   Helium   gas   was


already   in   a   marketable   state   when   it   was   purchased   by   the   appellant   and,


therefore, it cannot be said that the appellant made it marketable.   To substantiate


his   claim,   the   learned   counsel   for   the   appellant     relied   on   the   cases   of  CCE  v.


LUPIN LABORATORIES  2004 (166) A116 (SC) and LAKME LEVER LTD.  v.


CCE  2001 (127) ELT 790 (T).




6.      The learned counsel for the appellant brought to our attention  a decision of


this Court rendered in the case of  BOC (I) Ltd. v.  CCE  2003 (160) ELT 864  to


substantiate his claim that the issuance of certificate along with the cylinder at the


time of sale does not amount to re-labelling.  He also contended that as there was


no suppression of facts of any sort on the part of the appellant, extended period of


limitation could not have been  invoked in the present case.




7.      Per contra, the learned counsel for the respondent submitted that the testing


of Helium gas comes under the category of "treatment" as mentioned in Chapter


Note 10 of Chapter 28 of the Act and that the Tribunal has clearly given a finding


to that effect.   He also submitted that issuance of a separate certificate along with


                                                          5



cylinder   at   the   time   of   sale   containing   all   the   details   regarding   moisture,


purification, etc.  amounted to re-labelling of the gas cylinders.  He also submitted


that the revenue authorities were fully justified in invoking the extended period of


limitation as there had been willful suppression of facts on the part of the appellant


with an intent to evade payment of duty.




8.            We have heard the learned counsel for the parties and perused the records. In


view   of   Chapter   Note   10   to   Chapter   28   of   the   Act,     the   manufacturing   activity


would mean either;




       (a)        Labelling or re-labelling of containers and repacking from bulk packs to


                  retail packs;  OR


       (b)        An adoption of any other treatment to render the product marketable to


                  the consumer.




9.            Thus,   either   an   activity   of   labelling   or   relabelling   of   containers   and


repacking from bulk packs to retail packs OR adoption of any treatment so as to


render the product marketable to the consumer would amount to "manufacture".




10.           It   is   not   in   dispute   that   the   appellant   had   purchased   Helium   gas   from   the


open   market   and   that   its   quality   control   officer   had   conducted   various   tests   and


issued analysis report/quality test report stating the results of the tests carried out.


                                                    6



It is also not in dispute that the appellant issued  certificates of quality at the time


of sale on the basis of tests carried out by it to the effect that the gas supplied by it


confirmed a level of purity and specifications in conformation with the orders of


the customers. Another undisputed fact is that the appellant had purchased  Helium


gas   under   a   generic   description   but   after   the   tests   and   analysis,   it   was   sold   to


different customers based on their specific requirements at profit margin ranging


from 40% to 60%  in different cylinders.




11.     It is pertinent to note that when the appellant was asked about the process


which was being carried out on Helium gas before selling it to its customers, the


representative   of   the   appellant   had   refused   to   give   any   detail   with   regard   to   the


process because, according to him, that process was a trade secret and he would


not like to reveal the same.   Thus,   the respondent or his subordinate authorities


were   not   informed   as   to   what   was   being   done   by   the   appellant   to   Helium   gas


purchased or what treatment was given to the said gas before selling the same to


different   customers   at   different   rates   with   different   certifications   in   different


containers/cylinders.  It is also pertinent to note that the gas which was purchased


at the rate of about Rs.520/- per Cum. was sold by the appellant at three different


rates namely Rs.700/-, Rs.826/- and Rs.1000/- per Cum. and thereby the appellant


used to get 40% to 60% profit.


                                                     7



12.     From the above undisputed facts, it is clear that the gas cylinders were not


sold as such but they were sold only after certain tests or processes as specified by


the customers of the appellant.   It is also clear that only after the analysis and tests,


it could be ascertained as to whom the gas was to be supplied and at what rate. The


various tests resulted into categorization  of the gas into different  grades  namely,


Helium label 4, high purity Helium and Helium of technical grade. Helium label 4


was sold at higher rate as it matched superior standards.




13.     In the instant case,  Helium gas was having different marketability,  which it


did   not   possess   earlier   and   hence   the   gas   sold   by   the   appellant   was   a     distinct


commercial commodity in the trade, rendering it liable to duty under Chapter Note


10   of   Chapter   28   of   the   Act.       If   the   product/commodity,   after   some   process   is


undertaken or treatment is given, assumes a distinct marketability,   different than


its   original   marketability,     then   it   can   be   said     that   such   process   undertaken   or


treatment   given   to   confer   such   distinct   marketability   would   amount   to


"manufacture" in terms of Chapter note 10 to Chapter 28 of the Act.




14.     The only conclusion from the above is that the tests and "process" conducted


by   the   appellant   would   amount   to   "treatment"   in   terms   of   Chapter   Note   10   of


Chapter   28   of   the   Act.     The   fact   that   the   gas   was   not   sold   as   such   is   further


established from the fact that the gas,   after the tests and treatment, was sold at a


                                                 8



profit of 40% to 60%.  If it was really being sold as such, then the customers of the


appellants   could   have   purchased   the   same   from   the   appellant's   suppliers.   When


this question was put to the officer of the appellant,  he could not offer any cogent


answer but merely stated that it was the customers' preference.  Further, he did not


give proper answer as to how the profit margin was so high.   The appellant  had


supplied   the   gas   not   as   such   and   under   the   grade   and   style   of   the   original


manufacturer but under its own grade and standard. Further, while selling the gas,


different   cylinders   were   given   separate   certificates   with   regard   to   the   pressure,


moisture, purification and quality of the gas. This explains the high price at which


the appellant was selling the gas.




15.    Therefore,   in   our   opinion,   the   Tribunal   has   rightly   observed   that   if   no


treatment   was   given   to   the   gas   purchased   by   the   appellant,   customers   of   the


appellant   would   not   have   been   purchasing   Helium   from   the   appellant   at   a   price


40%  to 60% above the price at which the appellant was purchasing.




16.    As stated hereinabove, it is clear that the appellant was purchasing Helium at


the rate of Rs.520/- per Cum. and was selling the same after adding 40% to 60%


profit.     Further,   the   gas   was   segregated   in   different   cylinders   with   different


properties and,  therefore,  the rate at which the gas was purchased by the appellant


and the rate at  which it was sold to its customers was substantially different.


                                                   9



17.     In the circumstances,   it cannot be said that no treatment was given to the


gas   purchased by the appellant.   For the said reasons, it cannot be said that the


appellant was not carrying out any manufacturing activity within the meaning of


Chapter Note 10 of Chapter 28 of the Act.




18.     It is also pertinent to elucidate on the phrase "marketable to the consumer".


The word "consumer" in this clause refers to the person who purchases the product


for   his   consumption,   as   distinct   from   a   purchaser   who   trades   in   it.   The


marketability of the product to "the purchaser trading in it" is distinguishable from


the   marketability   of   the   product   to   "the   purchaser   purchasing   the   same   for   final


consumption" as in the latter case, the person purchases the product for his own


consumption   and   in  that   case,   he   expects   the   product   to   be  suitable   for   his   own


purpose and the consumer might purchase a product  having  marketability,  which


it did not possess earlier.




19.       Therefore, the phrase "marketable to the consumer" would naturally mean


the marketability of the product to "the person who purchases the product for his


own consumption".  Hence, the argument of the appellant that as the product was


already marketable, the provisions of Chapter Note 10   of Chapter 28 of the Act


would not be attracted,  will have to be rejected.


                                                  1



 20.    For the aforetasted reasons, we agree with the Tribunal in holding that the


appellant   is   liable   to   pay   excise   duty   for   the   reason   that   it   has   manufactured


Helium   within   the   meaning   of   the   term   `manufacture'   as   explained   in   terms   of


Chapter Note 10 of Chapter 28 of the Act.




21.     So   far   as   the   issue   with   regard   to   relabelling   is   concerned,   we   are   in


agreement   with   the   view   expressed   by   the   Tribunal   that   relabelling   would   not


mean   mere   fixing   of   another   label.     When   the   appellant   was   selling   different


cylinders with different marking or different certificates to its different customers,


we   can   say   that   the   appellant   was   virtually   giving   different   marks   or   different


labels to different cylinders having different quality and quantity of gas.




22.     It can be very well said that the Helium purchased by the appellant was in a


marketable   state   but   it   is   equally   true   that   by   giving   different   treatment   and


purifying the gas, the appellant was manufacturing a commercially  different type


of gas or a new type of commodity which would suit a particular purpose.   Thus,


the treatment given by the appellant to the gas sold by it would make a different


commercial   product   and,   therefore,   it   can   surely   be   said   that   the   appellant   was


engaged in  a manufacturing activity.




23.     So   far   as   the   issue   with   regard   to   limitation   is   concerned,   we   are   in


agreement   with   the   findings   arrived   at   by   the   Tribunal   to   the   effect   that   the


                                                         1



appellant did not disclose details about the activities or treatment given to the gas


by the appellant.  No duty was ever paid by the appellant on the Helium sold by it


after giving some treatment so as to make it a different commercial product.  We,


therefore,   do   not   see   any   reason   to   interfere   with   the   finding   with   regard   to


limitation also.




24.       For   the   reasons   stated   hereinabove,   we   are   in   agreement   with   the   order


passed by the Tribunal and dismiss the appeal but without any order as to costs.





                                                              ................................................J.

                                                              (Dr. MUKUNDAKAM SHARMA)





                                                                ....................................................J.

                                                                        (ANIL R. DAVE)

New Delhi

August   30,  2011.




The parties to a suit - whether plaintiff or defendant - must cooperate with the court in ensuring the effective work on the date of hearing for which the matter has been fixed. If they don't, they do so at their own peril. Insofar as present case is concerned, if the stakes were high, the plaintiff ought to have been more serious and vigilant in prosecuting the suit and producing its evidence. If despite three opportunities, no evidence was let in by the plaintiff, in our view, it deserved no sympathy in second appeal in exercise of power under Section 100 CPC. In the month of May, 1991, the 1st respondent -- M/s. Tirgun Auto Plast Private Limited - applied to the Punjab Financial Corporation (for short, `Corporation') for a term loan of Rs. 47.60 lac and special capital assistance (soft loan) of Rs. 4 lac. The term loan of Rs. 46 lac and soft loan of Rs. 4 lac was disbursed by the Corporation to the 1st respondent in the month of October, 1991 on execution of the mortgage deed. Vide this mortgage deed, the 1st respondent mortgaged its various assets in favour of the Corporation. On the 1st respondent's failure to pay the due amount along with interest, the Corporation on March 19, 1998 took over the mortgaged property comprising land, building and machinery in exercise of its power under Section 29 of the State Financial Corporations Act, 1951 (for short, `1951 Act'). 4. The 1st respondent (hereinafter referred to as `plaintiff'), on February 17, 2001, filed a suit for declaration, mandatory injunction and other reliefs against the Corporation - 2nd respondent in the Court of Civil Judge (Junior Division), Chandigarh. Inter alia, the plaintiff prayed that the takeover of its assets and all subsequent sale proceedings by the Corporation be declared illegal, null and 2 void and inoperative; the direction be issued to the Corporation to charge interest at the rate of 12.5 per cent per annum (prevailing rate) on the loan from the date of commencement of production to the date of takeover and the Corporation be also directed to restore back the possession of the suit property to it.



                                                             REPORTABLE





                 IN THE SUPREME COURT OF INDIA

                   CIVIL APPELLATE JURISDICTION


                   CIVIL  APPEAL NO.  7532    OF 2011

             (Arising out of SLP (Civil) No. 30105 of 2010)



M/s. Shiv Cotex                                             .... Appellant


                                   Versus


Tirgun Auto Plast P. Ltd. & Ors.                              ....Respondents





                                JUDGMENT



   

R.M. Lodha, J.




             Leave granted.




2.           The   purchaser,   who   was   not   party   to   the   suit   but


impleaded as 2nd  respondent in the first appeal and was arrayed as


such in the second appeal, is the appellant being   aggrieved by  the


judgment   and   order   of   the   High   Court   of   Punjab   and   Haryana


whereby the Single Judge of that Court allowed the second appeal


preferred   by   the   plaintiff   (1st  respondent)   and   set   aside   the


concurrent judgment and decree of the courts below and remanded

                                                                              1


the suit to the trial court for fresh disposal after giving the plaintiff an


opportunity to lead evidence.



3.            In   the   month   of   May,   1991,   the   1st  respondent   --


M/s.   Tirgun   Auto   Plast   Private   Limited   -   applied   to   the   Punjab


Financial   Corporation   (for   short,   `Corporation')   for   a   term   loan   of


Rs. 47.60 lac and special capital assistance (soft loan) of Rs. 4 lac.


The term loan of Rs. 46 lac and soft loan of Rs. 4 lac was disbursed


by   the   Corporation   to   the   1st  respondent   in   the   month   of   October,


1991 on execution of the mortgage deed.  Vide this mortgage deed,


the   1st  respondent   mortgaged   its   various   assets   in   favour   of   the


Corporation.  On the 1st respondent's  failure to pay the due amount


along with interest, the Corporation on March 19, 1998 took over the


mortgaged   property   comprising   land,   building   and   machinery   in


exercise   of   its   power   under   Section   29   of   the   State   Financial


Corporations Act, 1951 (for short, `1951 Act').



4.            The 1st  respondent (hereinafter referred to as `plaintiff'),


on   February   17,   2001,     filed   a   suit   for   declaration,   mandatory


injunction and other reliefs against the Corporation - 2nd respondent


in the Court of Civil Judge (Junior Division), Chandigarh. Inter alia,


the plaintiff prayed that the takeover of its assets and all subsequent


sale   proceedings   by   the   Corporation   be   declared   illegal,   null   and

                                                                                     2


void and inoperative;  the  direction be issued to the  Corporation to


charge   interest   at   the   rate   of   12.5   per   cent   per   annum   (prevailing


rate) on the loan   from the date of commencement of production to


the date of takeover and the Corporation be also directed to restore


back the  possession of the suit property to it.




5.            The   Corporation   (sole   defendant)   in   the   suit   traversed


the plaintiff's claim and set up the plea that plaintiff could not pay the


due   amount   under   the   loan   despite   repeated   notices   necessitating


the   action   under   Section   29   of   the   1951   Act.   The   Corporation


asserted   that   fair   procedure   was   followed   and   no   illegality   was


committed by it in proceeding under Section 29 of the 1951 Act. The


Corporation   also raised   objections regarding the maintainability of


the suit on the grounds of limitation and jurisdiction of the Civil Court.



6.            The   trial   court   having   regard   to   the   pleadings   of   the


parties framed issues (six  in all) on July 19, 2006.  Issue no. 1 was


to the following effect:


              "Whether   impugned   action   of   defendant   is   illegal

              and   if   it   is   proved,   whether   plaintiff   is   entitled   for

              decree of declaration and mandatory injunction?"




The burden to prove the above issue was kept on the plaintiff.





                                                                                           3


7.             Thereafter,   the   suit   was   fixed   for   the   evidence   of   the


plaintiff on November 1, 2006. However, no evidence was let in on


that   day.   The   matter   was   then   adjourned   for   the   evidence   of   the


plaintiff   on   March   2,   2007.   On   that   day   also   the   plaintiff   did   not


produce evidence and the matter  was adjourned to May 10, 2007.


On May 10, 2007 again plaintiff did not produce any evidence. The


trial court was, thus, constrained to proceed under Order XVII Rule


3(a)   of   the   Code   of   Civil   Procedure,   1908   (for   short,   `CPC')   and


passed the following order :


         "Matter is fixed for conclusion of the plaintiff's evidence

        being   last   opportunity.   No   plaintiff's   witness   is   present

        and   neither   any   cogent   reason   has   been   put   forth   for

        such failure fully knowing the fact that today is the third

        effective   opportunity   for   conclusion   of   plaintiff's

        evidence.   Hence,   matter   is   ordered   to   be   proceeded

        under   Order   17,   Rule   3(a)   C.P.C.   and   plaintiff's

        evidence is  deemed to be  closed. Heard. To come  up

        after lunch for orders."




8.             On   May   10,   2007   itself   in   light   of   the   above   order,   the


trial court dismissed the suit in its post lunch session.




9.             After   dismissal   of   the   suit,   the   Corporation   sold   the


mortgaged   property   by   auction   to   the   appellant   for   Rs.   64.60   lac


(Sixty four lac and sixty thousand only).  





                                                                                          4


10.            Against   the   judgment   and   decree   of   the   trial   court


passed   on   May   10,   2007,   the   plaintiff   preferred   civil   appeal   in   the


court   of   Additional   District   Judge,   Chandigarh.     In   the   appeal,   the


plaintiff made an application on December 21, 2007 for impleadment


of   the   appellant   and   its   partners   as   respondent   nos.   2   to   5.     The


application   for   impleadment   was   granted   and   the   appellant   and


respondent nos. 3 to 5 herein were added as parties.




11.            The   Additional   District   Judge,   Chandigarh   after   hearing


the parties, dismissed the civil appeal on March 20, 2008.




12.            Being   not   satisfied   with   the   concurrent   judgment   and


decree of the two courts below, the plaintiff preferred second appeal


before the High Court which, as noticed above, has been allowed by


the   Single   Judge   on   September   20,   2010   and   the   suit   has   been


remanded to the trial court for fresh decision in accordance with law.




13.            The   judgment   of   the   High   Court   is   gravely   flawed   and


cannot be sustained for more than one reason.     In the first place,


the High Court, while deciding the second appeal, failed to adhere to


the necessary requirement of Section 100 CPC and interfered with


the   concurrent   judgment   and   decree   of   the   courts   below   without




                                                                                        5


formulating   any   substantial   question   of   law.     The   formulation   of


substantial   question   of   law   is   a   must   before   the   second   appeal   is


heard   and   finally   disposed   of   by   the   High   Court.     This   Court   has


reiterated   and   restated   the   legal   position   time   out   of   number   that


formulation of   substantial question of law is a condition precedent


for   entertaining   and   deciding   a   second   appeal.       Recently,   in   the


case   of  Umerkhan  v.  Bismillabi   @   Babulal   Shaikh   and   Ors.  (Civil


Appeal   No.   6034   of   2011)   decided   by   us   on   July   28,   2011,   it   has


been held   that the judgment of the High Court is rendered patently


illegal,   if   a   second   appeal   is   heard   and   judgment   and   decree


appealed   against   is   reversed   without   formulating   the   substantial


question of law. The legal position with regard to second appellate


jurisdiction of the High Court was stated by us thus:





          "13.    In our view, the very jurisdiction of the High Court in

          hearing a second appeal is founded on the formulation of

          a substantial question of law.     The judgment of the High

          Court   is   rendered   patently   illegal,   if   a   second   appeal   is

          heard   and   judgment   and   decree   appealed   against   is

          reversed without formulating a substantial question of law.

          The second appellate  jurisdiction of the High Court  under

          Section 100 is not akin to the appellate jurisdiction under

          Section 96 of the Code; it is restricted to such substantial

          question   or   questions   of   law   that   may   arise   from   the

          judgment   and   decree   appealed   against.     As   a   matter   of

          law,   a  second  appeal  is  entertainable  by  the  High   Court

          only upon its satisfaction that a substantial question of law

          is   involved   in   the   matter   and   its   formulation   thereof.

          Section 100 of the Code provides that the second appeal


                                                                                          6


         shall   be   heard   on   the   question   so   formulated.   It   is,

         however,   open   to   the   High   Court   to   reframe   substantial

         question of law or frame substantial question of law afresh

         or  hold  that  no  substantial question  of  law is  involved  at

         the time of hearing the second appeal but reversal of the

         judgment   and   decree   passed   in   appeal   by   a   court

         subordinate  to it   in exercise of  jurisdiction under  Section

         100   of   the   Code   is   impermissible   without   formulating

         substantial   question   of   law   and   a   decision   on   such

         question. This Court has been bringing to the notice of the

         High   Courts   the   constraints   of   Section   100   of   the   Code

         and the mandate of the law contained in Section 101 that

         no   second   appeal   shall   lie   except   on   the   ground

         mentioned   in   Section   100,   yet   it   appears   that   the

         fundamental   legal   position   concerning   jurisdiction   of   the

         High   Court   in   second   appeal   is   ignored   and   overlooked

         time  and  again. The  present appeal  is  unfortunately  one

         of   such   matters   where   High   Court   interfered   with   the

         judgment   and   decree   of   the   first   appellate   court   in   total

         disregard of the above legal position."




14.           Unfortunately,  the High Court failed to keep in view the


constraints of second appeal and overlooked the requirement of the


second   appellate   jurisdiction   as   provided   in   Section   100   CPC   and


that   vitiates its decision.




15.           Second, and equally important, the High Court upset the


concurrent   judgment   and   decree   of   the   two   courts   on   misplaced


sympathy and non - existent justification.  The High Court observed


that the stakes in the suit being very high, the plaintiff should not be


non-suited on the basis of no evidence. But, who is to be blamed for


this lapse?  It is the plaintiff alone. As a matter of fact, the trial court



                                                                                         7


had given more than sufficient opportunity to the plaintiff to produce


evidence in support of its case.    As noticed above, after the issues


were   framed   on   July   19,   2006,   on   three   occasions,   the   trial   court


fixed   the   matter   for   the   plaintiff's   evidence   but   on   none   of   these


dates   any   evidence   was   let   in   by   it.     What   should   the   court   do   in


such circumstances?   Is the court obliged to give adjournment after


adjournment   merely   because   the   stakes   are   high   in   the   dispute?


Should the court be a silent spectator and leave control of the case


to a party to the case who has decided not to take the case forward?


It   is   sad,   but   true,   that   the   litigants   seek   -   and   the   courts   grant   -


adjournments at the drop of the hat.  In the cases where the judges


are   little   pro-active   and   refuse   to   accede   to   the   requests   of


unnecessary adjournments, the litigants deploy all sorts of methods


in protracting the litigation.  It is not surprising that civil disputes drag


on   and   on.     The   misplaced   sympathy   and   indulgence   by   the


appellate and revisional courts compound the malady further.   The


case in hand is a case of such misplaced sympathy.   It is high time


that courts become sensitive to delays in justice delivery system and


realize that adjournments do dent the efficacy of judicial process and


if   this   menace   is   not   controlled   adequately,   the   litigant   public   may


lose  faith  in   the   system   sooner   than   later.     The  courts,   particularly



                                                                                               8


trial   courts,   must   ensure   that   on   every   date   of   hearing,   effective


progress takes place in the suit.




16.            No litigant has a right to abuse the procedure provided in


the CPC. Adjournments have grown like cancer corroding the entire


body of justice delivery system. It is true that   cap on adjournments


to a party during the hearing of the suit provided in proviso to Order


XVII   Rule   1   CPC   is   not   mandatory   and   in   a   suitable   case,   on


justifiable cause, the court may grant more than three adjournments


to   a   party   for   its   evidence   but   ordinarily   the   cap   provided   in   the


proviso to Order XVII Rule 1 CPC should be maintained. When we


say `justifiable cause' what we mean to say is,  a cause which is not


only `sufficient cause' as contemplated in sub-rule (1) of Order XVII


CPC   but   a   cause   which   makes   the   request   for   adjournment   by   a


party   during   the   hearing   of   the   suit   beyond   three   adjournments


unavoidable and sort of a compelling necessity like sudden illness of


the litigant or the witness  or the lawyer;   death  in  the  family  of any


one of them; natural calamity like floods, earthquake, etc. in the area


where any of these persons reside; an accident involving the litigant


or the witness or the lawyer on way to the court and such like cause.


The list is only illustrative and not exhaustive. However, the absence


of the lawyer or his non-availability because of professional work in

                                                                                        9


other court or elsewhere or on the ground of strike call or the change


of a lawyer or the continuous illness of the lawyer (the party whom


he   represents   must   then   make   alternative   arrangement   well   in


advance)   or   similar   grounds   will   not   justify   more   than   three


adjournments   to   a   party   during   the   hearing   of   the   suit.   The   past


conduct of a party in the conduct of the proceedings is an important


circumstance   which   the   courts   must   keep   in   view   whenever   a


request for adjournment is made.  A party to the suit is not at liberty


to proceed with the trial at its leisure and pleasure and has no right


to determine when the evidence would be let in by it or the matter


should   be   heard.     The   parties   to   a   suit   -   whether   plaintiff   or


defendant - must cooperate with the court in ensuring the effective


work on the date of hearing for which the matter has been fixed.   If


they don't, they do so at their own peril. Insofar as present case is


concerned, if the stakes were high, the plaintiff ought to have been


more   serious   and  vigilant  in  prosecuting  the  suit   and   producing   its


evidence.   If   despite   three   opportunities,   no   evidence   was   let   in   by


the plaintiff, in our view, it deserved no sympathy in second appeal


in   exercise   of   power   under   Section   100   CPC.     We   find   no


justification   at   all   for   the   High   Court   in   upsetting   the   concurrent


judgment of the courts below. The High Court was clearly in error in



                                                                                     10


giving   the   plaintiff   an   opportunity   to   produce   evidence   when   no


justification for that course existed.




17.          In   the   result,   the   appeal   is   allowed   and   judgment   and


order of the High Court passed on September 20, 2010 is set aside.


There shall be no order as to costs.


 





                                                         .........................J.

                                                             (Aftab Alam)





                                                          .......................... J.

                                                              (R.M. Lodha)


NEW DELHI.

AUGUST 30, 2011.





                                                                                   11