social justice was done to the lease holders - Under these circumstances, we are unable to agree with any one of the submissions made by the appellants, on the other hand, we are in entire agreement with the stand of the respondents and reasonings and conclusion arrived at by the High Court. We direct the respondents, particularly, the Municipal Corporation, Gwalior and the officers concerned to implement the directions of the High Court within the parameters of the statutory provisions considering the interest of the general public as well all the shop keepers of the existing market. In view of the disposal of the civil appeals, Municipal Corporation is free to proceed with the construction as directed in the impugned order of the High Court and in the light of the above observations, as early as possible, and we 25 also direct that all the directions of the High Court shall be adhered to. It is further directed that as soon as construction up to ground floor level is completed along with the required parking facilities at the basement level those shops are to be allotted to the old shop keepers in the Gandhi Market within a period of six months after completion of such construction, unless an individual shop keeper becomes ineligible for the known reason.

                                                             REPORTABLE


                IN THE SUPREME COURT OF INDIA


                 CIVIL APPELLATE JURISDICTION


           CIVIL APPEAL NOs.  7520-7523   OF 2011

       (Arising out of S.L.P. (C) Nos.26197-26200 of 2008)




Rakesh Sharma & Ors.                                         .... Appellant (s)



             Versus



State of M.P. & Ors.                                     .... Respondent(s)





                             J U D G M E N T


P. Sathasivam, J.


1)    Leave granted.



2)    These   appeals   are   directed   against   the   judgment   and



final   order   dated   18.01.2008   passed   by   the   High   Court   of



Judicature of Madhya Pradesh, Jabalpur, Bench at Gwalior in



Writ   Petition   Nos.   1873,   1878   and   2101   of   2003   and   310   of



1999   whereby   the   High   Court   disposed   of   the   writ   petitions



and   issued   various   directions   to   the   Municipal   Corporation,





                                                                              1


Gwalior in paragraph 8 of the impugned order for construction



of a market complex known as "New Gandhi Market Building".


3)     Brief facts:


(a)    According   to   the   appellants-shopkeepers,   after   the



partition   of   the   country,   in   the   year   1952,   the   Government



constructed   Gandhi   Market   in   Gwalior   with   250   shops   and



allotted   them   to   the   appellants   herein,   who   were   migrated   to



India   from   Pakistan   at   the   time   of   partition,   as



tenants/licensees.  Each shop covers 60 sq.ft. space + 30 sq.ft.



Verandah, in total 90 sq.ft. area and has in front a 5 ft. wide



footpath and then a public road.  In the year 1975, notice was



issued   by   the   Municipal   Corporation   of   Gwalior   to   the



shopkeepers   proposing   to   increase   the   rent   from   Rs.7/-   to



Rs.220/-   per   month.     However,   on   18.03.1977,   the   State   of



Madhya   Pradesh   as   well   as   the   Municipal   Corporation,



Gwalior   agreed   to   increase   the   rent   only   by   7%   from   the



original   rent   and   also   clarified   that   the   enhanced   rent   would



cover   area   in   front   of   the   shops   and   no   additional   charges



were to be paid in that respect.  On 24.05.1994, the Municipal





                                                                            2


Corporation   passed   Resolution   No.40   by   which,   area   of   the



shop was treated as 90 sq. ft. including the verandah.



(b)    On 28.02.1999, a public interest litigation petition, being



Writ   Petition   No.   310   of   1999   was   filed   by   a   lawyer,   G.S.



Tomar, against encroachment and erection of wooden stalls by



the   Municipal   Corporation   over   the   land   of   the   Madhya



Pradesh   Housing   Board   in   Nazar   Bagh   Market,   which   is



described   as   "the   heart   of   the   city".     By   order   dated



15.12.2000,   the   High   Court   directed   that  the   said   structures



erected by the Municipal Corporation would be removed.   The



petition was listed before the Division Bench on various dates



and   several   directions   were   issued   by   the   High   Court.



Thereafter,   on   04.02.2003,   the   High   Court   directed   the



Municipal   Corporation   to   furnish   information   regarding   the



steps being taken to remove encroachments on public streets.



In May/June, 2003, the Municipal Corporation issued notices



to the appellants alleging that they were in illegal occupancy of



the   front   portion   of   their   shops   and   directed   them   to   remove



the   alleged   encroachments   with   the   threat   for   demolition   of



offending construction, if any.  Consequently, the shopkeepers




                                                                             3


of Gandhi Market filed petitions before the High Court praying



that  they  have not  made any encroachment  of the Verandah.



The   shopkeepers   of   various   markets   also   filed   writ   petitions



before   the   High   Court.       All   the   petitions   were   directed   to   be



listed along with Writ Petition No. 310 of 1999.



(c)    During   the   pendency   of   the   writ   petitions,   the   High



Court,   by   order   dated   04.07.2003,   appointed   District   Judge



(Vigilance)   as   a   Local   Commissioner   in   respect   of   the   illegal



encroachments and constructions and directed the Municipal



Corporation   to   continue   with   the   removal   of   encroachment



from the footpaths and public streets which were identified by



the   District   Judge   (Vigilance).     It   further   directed   that



objections, if any, would be submitted to the District Judge.



(d)      Against   the   order   dated   04.07.2003,   some   of   the



shopkeepers  of   other   markets   filed   Special   Leave  Petition   No.



12446   of   2003   before   this   Court   wherein   this   Court   issued



notice and stayed the demolition until further orders.



(e)    On   25.08.2003,   the   Local   Commissioner   submitted   his



report before the High Court and the High Court directed that



it   may   not   be   open   to   the   parties   to   raise   any   further




                                                                                 4


objections to the report.  Against the said order, the appellants



herein filed S.L.Ps. before this Court which were directed to be



tagged   with   the   earlier   S.L.P.(C)   No.   12446   of   2003.     This



Court disposed of all the petitions on 25.10.2004 by directing



the High Court to dispose of the writ petitions as expeditiously



as possible after taking into consideration the objections of the



appellants and directed to maintain the status quo as on that



date till the disposal of the writ petitions.



(f)    On   19.01.2005,   the   High   Court   directed   the   Municipal



Corporation   to   submit   a   plan   and   map   for   development   of



Gandhi Market as a shopping complex having first and second



floor and a parking area.  As the appellants agreed to pay Rs.1



lakh each in four instalments for construction of the first floor



shops,   the   High   Court   further   directed   that   the   amounts



deposited   by   the   shopkeepers   would   be   kept   in   a   separate



fund   by   the   Corporation   and   its   use   would   be   considered   at



the time of final hearing.  



(g)    On   08.07.2005,   the   High   Court   directed   that   since   the



shopkeepers   have   not   deposited   the   remaining   three



instalments,   they   shall   pay   the   same   and   clarified   that   in




                                                                            5


default,  the  Municipal  Corporation  is at liberty  to remove the



shopkeepers  who  are  not  willing  to  deposit their   instalments.



On   24.03.2006,   the   High   Court   further   directed   that   the



Municipal   Corporation   shall   auction   the   shops   excluding



verandah   by   an   auction   notice   for   the   Court   to   know   the



actual   rental   value   and   submit   the   price   offered   and   the



valuation report of each shop.  In pursuance of the said order,



the Municipal Corporation published notice but no one applied



for the same.



(h)    Against   the   order   dated   24.03.2006,   the   shopkeepers



filed applications before the High Court for recalling the order



and for refund of the amount deposited by them with interest



and   the   same   were   dismissed   by   the   High   Court   on



05.05.2006.     Since   the   shopkeepers   were   not   willing   for   the



reconstruction of the market, the petitions were directed to be



listed along with W.P.(C) No. 310 of 1999.   The Commissioner



was also required to give a proposal for reconstruction.  By the



impugned order dated 18.01.2008, the High Court disposed of



all   the   writ   petitions   with   various   directions   as   found   in



paragraph 8 of the impugned order.




                                                                          6


(i)    Aggrieved by the said order, the appellants-shop keepers



have filed these appeals by way of special leave petitions before



this Court.



4)     Heard   Mr.   Sunil   Gupta,   learned   senior   counsel   for   the



appellants, Mr. K.K. Venugopal and Dr. Rajiv Dhavan,  learned



senior counsel for the Municipal Corporation, Gwalior and Mr.



Vikas Upadhyay, learned counsel for the State of M.P.



5)     According to Mr. Sunil Gupta, learned senior counsel for



the appellants, several interim orders and the impugned final



order of the High Court are wholly outside the legitimate scope



and   jurisdiction   of   PIL   as   stipulated   in   various   decisions   of



this   Court.     He   further   contended   that   the   directions   of   the



High   Court   by   which   the   appellants-shopkeepers   have   to



vacate their  legally  rented  shops for  construction  of a new  7-



storey   shopping   complex   in   their   place   are   opposed   to   and



outside the legitimate jurisdiction of a writ court under Article



226   of   the   Constitution.     He   also   contended   that   the   High



Court   over-stepped   its   jurisdiction   while   continuing   to   pass



order   after   order   constituting   a   Committee   to   supervise   the



construction   of   shopping   complex   and   requiring   various




                                                                            7


authorities   to   facilitate   by   sanctioning   necessary   permission



and so on.



6)    On   the   other   hand,   Mr.   K.K.   Venugopal   and   Dr.   Rajiv



Dhavan, learned senior counsel for the Municipal Corporation



submitted   that   at   every   stage   even   at   the   time   of   passing



various   directions,   the   appellants   consented   the   same   and



taking   note   of   the   interest   of  all   the   shopkeepers  and   for   the



convenience of the general public making provision for parking



etc.,   the   High   Court   issued   various   directions   which   are   not



only   consented   by   the   shopkeepers   but   also   in   consonance



with   the   decisions   of   the   Town   and   Country   Planning



Department   as   well   as   the   State   Government.     They   also



submitted   that   by   the   impugned   directions,   the   appellants-



shopkeepers   are   not   going   to   loose   anything,   on   the   other



hand, the Municipal Corporation has assured that they will be



provided   alternate   accommodation   till   the   completion   of   the



fresh   construction   and   after   new   construction,   they   will   be



provided convenient shops in the ground floor itself with more



facility for parking, accordingly, they prayed for dismissal of all



the above appeals as devoid of any merits.




                                                                               8


7)    We   have   carefully   considered   the   rival   submissions,



impugned   order   of   the   High   Court   including   various   orders



passed, statutory provisions and all other relevant materials.



8)    In order to consider the issues raised above, it is relevant



to note the ultimate directions issued by the High Court.  It is



useful   to   mention   that   the   High   Court   has   considered   the



issue not only in the PIL filed by an advocate of the local Bar



but   also   heard   and   decided   three   writ   petitions   filed   by   252



shopkeepers having their business in the market in question.



9)    The following directions in paragraph 8 of the impugned



order are relevant.  They are as follows:



      "8.     As   we   have   directed   through   interim   orders   and   the

      Town and Country Planning vide order dated 5.12.2007 has

      granted   permission   for   construction   of   new   shopping

      complex of seven storeys, with three underground storeys of

      parking   area,   in   the   interest   of   all,   this   petition   and

      connected petitions are disposed of finally with the following

      directions:



      1.    That   now   the   respondent   No.2   Municipal   Corporation

            shall construct new Gandhi Market Building as per the

            permission  granted  by the  Town and Country  Planning

            Department,   Gwalior   as   well   as   by   the   State

            Government.



      2.    That   the   aforesaid   construction   shall   be   supervised   by

            the   Committee   constituted   by   this   Court   vide   interim

            order dated 20.4.2007.  Committee and Corporation will

            ensure   the   construction   of   the   new   building   for   the

            commercial   market   and   will   see   that   the   tenders   are

            invited   timely   and   agency   is   fixed   for   the   purpose   of




                                                                                        9


             construction.     Whenever   agency   shall   be   fixed   by   the

             Corporation   for   the   purpose   of   construction,   then   after

             entering   into   agreement   with   the   agency   but   before

             issuing the work order, the Committee will give notice to

             the   shopkeepers   for   vacating   the   shops   and   within   a

             period   of   two   months,   shopkeepers   shall   vacate   the

             shops.   The shopkeepers will not raise any objection on

             any   alternative   site   granted   by   the   Municipal

             Corporation for running the business and will not delay

             in vacating the shops.  After taking over the possession,

             the   agency   will   start   the   work   and   see   that   the

             construction upto ground floor level is completed within

             a period of one year and thereafter shops are allotted to

             the   old   shopkeepers   positively   within   a   period   of   18

             months on the outer limit.



       3.    That   the   ground   floor   shops   shall   be   allotted   to   the

             shopkeepers, those who will deposit the balance amount

             of   three   instalments   and   shall   also   enter   into   an

             agreement with the Corporation.



       4.    That  the  Corporation  shall   be  free  to  allot  the shops  of

             first,   second   and   third   floor   on   fair   and   auction   basis

             under   the   supervision   of   the   Committee.     Other   terms

             and   conditions   of   the   allotment   shall   be   settled   by   the

             Corporation   and   the   Committee.     So   far   as   the

             participation   of   the   representatives   of   the   shopkeepers

             in   the   Committee,   that   shall   be   limited   only   for   the

             ground floor shop.



       5.    Municipal   Corporation   shall   be   free   to   fix   the   fresh

             rent/licence   fee   of   the   new   shops,   which   shall   be

             allotted to the existing shopkeepers.  The Commissioner,

             Municipal   Corporation   and   Committee   shall   submit

             quarterly progress report in the Court."



10)    The whole controversy involved in these appeals is about



the   order   dated   18.01.2008   passed   by   the   High   Court   in   the



said   writ   petitions.   The   question   for   consideration   before   this



Court is whether the High Court overstepped in its legitimate





                                                                                           10


and   legal   jurisdiction   while   continuing   to   pass   order   after



order   constituting   a   Committee   to   supervise   the   construction



of the shopping complex and any such directions can at all be



issued   by   the   High   Court   while   exercising   its   powers   under



Article 226 of the Constitution of India.



11)    The   Municipal   Corporation,   Gwalior   before   the   High



Court   as   well   as   in   this   Court   furnished   necessary   details



about   their   stand.     It   is   seen   that   a   Writ   Petition   No.   310   of



1999 filed by Advocate G.S. Tomar was pending consideration



in   which   the   encroachment   caused   on   the   public   way



belonging   to   the   M.P.   Housing   Board   in   Najar   Bagh   market



situated   at   Maharaj   Bada   where   the   Municipal   Corporation



raised  certain wooden stall pucca structure and was going to



auction   the   same   but   subsequently   under   the   orders   of   the



Court   in   miscellaneous   petitions,   the   petitioner   confined   the



issue only to the question relating to encroachment in Gandhi



Market,   Gwalior.     It   was   stated   in   the   writ   petition   that   the



shopkeepers   of   Gandhi   Market   have   encroached   upon   the



verandah which was constructed in front of the shops for the



use   of   public   and   the   prayer   was   made   that   the   aforesaid




                                                                                    11


verandah   which   has   been   encroached   upon   by   the



shopkeepers   may   be   removed.     While   so,   in   the   other   writ



petitions,   all   the   shopkeepers   have   stated   that   they   have   not



made   any   encroachment   of   the   verandah.     When,   on   earlier



occasion,   this   Court   was   approached   by   the   parties   with



regard   to   certain   interim   directions,   this   Court   requested   the



High   Court   to   dispose   of   the   main   writ   petitions   at   an   early



date.   Pursuant to the same, all the writ petitions were heard



on several occasions and before passing a final order, several



interim orders/directions were issued.





12)    At the foremost, Mr. Gupta submitted that they were not



parties in the writ petition filed as PIL, hence without affording



opportunity,   various   directions   have   been   issued.     Inasmuch



as   almost   all   the   shop   keepers  have   filed  three  writ   petitions



conveying   their   stand   and   admittedly   all   those   writ   petitions



were heard along PIL (Writ Petition No. 310 of 1999), the said



objection is liable to be rejected.





                                                                               12


Consent by the shop keepers:


13)    Though   Mr.   Gupta,   learned   senior   counsel   for   the



appellants   vehemently   contended   that   the   High   Court   has



exceeded   its   jurisdiction   while   considering   the   writ   petitions



filed   under   Article   226,   Mr.   K.K.   Venugopal   and   Dr.   Rajiv



Dhavan, learned senior counsel for the Municipal Corporation



while   refuting   the   above   contention   pointed   out   that   several



orders   were   passed   by   the   High   Court   on   the   basis   of   the



consent   given   by   the  shopkeepers.     On  09.01.2005,   the   High



Court passed the following order:



       "During   course   of   arguments,   counsel   for   the   petitioners

       suggested   that   each   shop   keeper   will   deposit   Rs.   One   Lac

       with   the   Municipal   Corporation,   Gwalior   in   four   monthly

       installments, First Installment shall be paid next month and

       thereafter   other   installments   shall   be   paid   every   month   in

       the Municipal Corporation.



       Counsel for the Municipal Corporation submits that they will

       prepare   a   map   for   development   of   Gandhi   Market   and   will

       prepare   a   good   shopping   complex   having   first   and   second

       floor.     Plan   shall   also   include   parking   area.     It   is   also

       suggested   by   the   Municipal   Corporation   that   the   shopping

       complex   shall   be   prepared   in   such   a   manner   that   existing

       shop   keepers   will   not   be   dispossessed   till   first   floor   is

       completed.    However,   exact  plan  will  be  submitted  by  them

       within one month.



       Petitioners  have  also  agreed  that  they  will  not  keep  of  their

       goods   on   the   footpath   and   the   footpath   will   be   kept   clear.

       They   have   further   agreed   that   there   shall   be   no

       encroachment   on   the   footpath   including   hangings   on   the





                                                                                          13


       footpath.     Respondents   shall   ensure   that   no   vehicles   are

       parked on the footpath.



       Counsel   for   the   petitioners   also   submitted   that   they   will

       move   an   application   before   the   Apex   Court   for   extension   of

       time for decision of the petition.



       It is, therefore, directed that the amount so deposited by the

       shopkeepers   shall   be   kept   in   a   separate   fund   by   the

       Municipal Corporation and its use shall be considered at the

       time of final hearing."



14)    Again   on   19.01.2005,   the   High   Court   passed   the



following order:



       "Shopkeepers   of   Gandhi   Market   have   discussed   the   matter

       amongst   themselves   and   have   decided   to   deposit   Rs.   One

       Lac   each   with   Municipal   Corporation   which   shall   be

       deposited   by   them   in   four   equal   monthly   installments.

       Similarly,   shop   keepers   of   Victoria   Market   and   the   market

       nearby   the   Town   Hall   have   agreed   to   deposit   Rs.   50,000/-

       each   in   two   installments   with   Municipal   Corporation,

       Gwalior.



       It   is   directed   that   the   amount   so   deposited   by   the   shop

       keepers   shall   be   kept   in   a   separate   fund   by   the   Municipal

       Corporation   and   its   use   shall   be   considered   at   the   time   of

       final hearing.



       Respondent- Municipal Corporation has submitted that they

       will   prepare   a   plan   for   development   of   these   markets   as   a

       shopping  complex with  the  assistance of Town Planner and

       ensure   that   there   is   no   traffic   congestion   in   the   area   and

       shall   also   prepare   parking   place   so   that   citizens   have   no

       inconvenience on the public streets.



       Shop   keepers   have   assured   that   there   will   be   no

       encroachment on the footpath and the respondents will be at

       liberty to remove the encroachment, if found on the footpath.

       They shall also ensure that footpath is not obstructed by any

       vehicle.





                                                                                          14


       Counsel   for   the   petitioners   before   the   Apex   Court   submit

       they   will   be   moving   an   application   in   the   Apex   Court   for

       extension of time for disposal of the petition.



       As   prayed,   list   this   petition   for   further   orders   next   month

       alongwith other connected petitions."




15)    Thereafter,   the   High   Court,   on   11.03.2005,   passed   the



following order:



       "Shri Bhardwaj stated that as per undertaking given by the

       shop   keepers   of   Gandhi   Market   an   amount   of   Rs.

       62,27,000/-   has   been   deposited   with   the   Municipal

       Corporation, Gwalior.  Counsel for the shop keepers submits

       that   efforts   are   being   made   to   pay   future   installments.     He

       further   submits   that   if   the   map   prepared   by   the   Municipal

       Corporation   for   development   and   beautification   of   the

       market,   as   ordered   earlier   by   this   Court,   is   produced   and

       after   going   through   the   map,   shop   keepers   will   be   in   a

       position   to   raise   further   funds   and   deposit   other

       installments   as   undertaken   by   them   earlier.     Shri   Bidua,

       counsel for the Municipal Corporation, Gwalior has informed

       that the finalization of map is at the final stage and is likely

       to   be   finalized   by   the   end   of   next   week.     He   submits   that

       plan for development will be ready within a week or ten days.



       Since   there   is   likelihood   of   amicable   settlement   in   the

       matter,   we   post   this   case   after   two   weeks.     On   that   date,

       map approved by the Municipal Corporation for development

       of Gandhi Market shall be produced in the Court for perusal.



       Shri   Bhardwaj   has   mentioned   that   in   view   of   further

       development   in   the   case   they   have   already   approached   the

       Apex Court for extension of time for deciding the petitions as

       the   dispute   is   being   settled   between   the   Municipal

       Corporation and the shop keepers.   He has also stated that

       there is every possibility that the application for extension of

       time will be heard in the next week."





                                                                                            15


16)    From the above orders, it is clear that with the consent of



the   parties,   the   order   of   construction   of   new   market   was



passed and maps were prepared.



17)    Again,   by   order   dated   06.05.2005,   the   High   Court   has



specifically   mentioned   "the   scheme   for   development   of   the



market   shall   also   be   finalized   in   consultation   with   the



shopkeepers".  The same reads as under:-



       "Today   counsel   for   Municipal   Corporation   intimated   that

       maps   for   Gandhi   Market   have   been   prepared   by   the

       Architect and accepted by Municipal Corporation.



       Said maps be shown to the shop keepers or representatives

       of shop keepers.  The scheme for development of the market

       shall also be finalized in consultation with the shop keepers.



       Counsel  for  the   parties  state  that   they  will  sit   together  and

       negotiate the matter."  



18)    Thereafter,   on   08.07.2005,   the   High   Court   passed   the



following order:



       "As agreed by the shopkeepers on 19.01.2005, that they will

       deposit Rs. One lac with the Municipal Corporation, Gwalior

       in four equal monthly instalments, they have deposited only

       one instalment and remaining  three instalments at the rate

       of   Rs.25,000/-   per   month   have   not   been   deposited.     Maps

       have   been   prepared   by   the   Municipal   Corporation   which

       have been shown to the representatives of the shopkeepers.

       Now the shopkeepers state that all the shopkeepers want to

       see   the   maps   and   CD   prepared   for   construction   of   the

       market.   Municipal Corporation has no objection in showing

       the   entire   plan   to   them.     However,   the   shopkeepers   are

       directed to deposit the second instalment within fifteen days

       and   thereafter   remaining   instalments   be   paid   in   equal




                                                                                      16


       instalments   every   fifteen   days   and   after   deposit   of   second

       instalment   those   shop   keepers   who   have   deposited   the

       second instalment will be entitled to see the maps CDs and,

       the Municipal Corporation will be at liberty to remove those

       shop   keepers   who   are   not   willing   to   deposit   their

       instalments.   However, before passing any order of removal,

       Municipal   Corporation   shall   examine   their   encroachments

       and other factors and submit report before this Court."




19)    The same order has been reiterated on 24.03.2006 which



is as follows:-



       "Shopkeepers are not ready to honour their offer given before

       this  Court  and they  are  not  prepared  to  pay  the  amount  of

       premium   as   agreed   by   them   on   19.01.2005.     They   have

       deposited only one installment of Rs. 25,000/- and they have

       not   deposited   the   remaining   three   installments.     Though,

       vide order dated 08.07.2005, the shopkeepers were directed

       to deposit the second installment, but they have not done so,

       which   shows   that   the   shopkeepers   are   not   willing   to

       cooperate and now they have applied for exemption.



       In the circumstances, petition is required to be heard finally.



       In   the   meantime,   the   Municipal   Corporation   shall   auction

       the shops, which shall not be finalized, so that the court will

       be in a position to know the actual rental value of each shop.

       The   auction   shall   be   for   the   area   of   shop   only   and   the

       encroached verandah shall not be auctioned which shall be

       clarified in the auction notice and the Corporation will be at

       liberty to remove the encroached area.



       List the petition finally before appropriate Bench, as prayed

       for   by   the   counsel   for   the   petitioners,   in   the   week

       commencing   1st  May,   2006.     It   is   directed   that   before   the

       date   of   hearing,   Municipal   Corporation   shall   submit   the

       price   offered   for   each   shop   and   the   State   shall   also   submit

       the valuation report of each shop."





                                                                                           17


20)    On 09.02.2007, the Court recorded that:



        "Shri Bidua (counsel for Respondent No.2) prays for time to

       submit   verification   report   of   the   photographs   filed   by   Shri

       V.K.   Bharadwaj   counsel   for   intervenors   and   shopkeepers

       and to submit report about closing of verandah  against  the

       shops."



21)    Again,   on   02.03.2007,   the   High   Court   passed   a   brief



order which is as follows:



       "With   the   consent   of   the   parties,   it   is   directed   that   Shri

       Sharma, Commissioner, Municipal Corporation will complete

       the   inviting   process   of   tenders   for   the   construction   of   new

       market   building   at   the   place   of   old   Gandhi   Market   on   or

       before 09.03.2007."



22)    The order dated 20.04.2007 is very relevant which reads



as under:-



       "For the construction of new market building at the place of

       old   Gandhi   Market,   the   shop   keepers   have   consented."

       "Today,   the   Municipal   Corporation   has   filed   a   compliance

       report".    With a view to complete the project and to remove

       the   day   to   day   hurdles   with   the   consent   of   the   parties,   we

       constitute a Committee comprising of ....."




23)    The following noting in the order dated 04.05.2007 by the



High Court is also relevant which reads as under:-



       "Shri   Raja   Sharma,   learned   counsel  appearing   for  the  shop

       keepers   submitted   that   the   shop  keepers   will   not   raise   any

       objection before the Committee regarding the construction of

       the market."





                                                                                            18


24)    It is abundantly clear that from time to time, on different



occasions with the consent of the parties, the construction of



new   Gandhi   Market   was   discussed   and   a   Committee   was



constituted after the order dated 20.04.2007.



25)    The   High   Court,   on   different   occasions,   took   into



consideration   the   objections   and   suggestions   of   the   Director,



Town   and   Country   Planning   Department,   the   Commissioner,



Municipal   Corporation,   Principal   Secretary,   Housing



Development and passed an order on 18.05.2007 which is as



follows:-



       "Today progress report along with minutes of the meeting of

       the   Committee   dated   14.05.2007   has   been   filed,   which   is

       taken on record and Corporation has also produced copy of

       letter dated 15.05.2007 written by Joint Director, Town and

       Country   Planning   Department   to   the   Director   for   seeking

       permission from the State.  It is submitted that the Architect

       has   already   submitted   map   as   per   advice   of   the   Joint

       Director,   Town   and   Country   Planning   Department   and   the

       matter has been referred to the Government for permission.

       So   far   as   the   question   of   permission   upto   the   height   of   24

       meter is concerned, that shall be obtained by the Municipal

       Corporation and not by the Contractor.   The Committee has

       fixed   the   next   date   of   meeting   of   5th  June,   2007.     List   this

       case   on   6th  July,   2007.     In   the   meantime,   the   State

       Government shall take a decision on the permission and the

       Committee shall also finalize the map and issue the tenders

       for   fixing   the   agency   etc.     During   this   period   every   effort

       should   be   made   to   complete   the   formalities   and   process   of

       inviting   tenders   should   also   be   started   so   that   the

       construction   plan   may   be   prepared.     Next   progress   report

       shall be submitted on 6th July, 2007.





                                                                                              19


The   same   order   has   been   reiterated   in   the   subsequent   order



dated 20.07.2007.  On 27.07.2007, the High Court passed the



following which reads thus:-



       "It is directed that Shri Batham will continue to co-ordinate

       between the authorities and will see that the inspection and

       report   is   submitted   by   the   School   of   Planning   and

       Architecture, New Delhi as early as possible and the consent

       is   obtained   from   the   Department   of   Town   and   Country

       Planning   as   well   as   the   State   Government.     He   will   also

       submit the reply of the queries and fulfill  all the conditions

       which   are   necessary   for   the   approval   of   the   project.     The

       Corporation is directed to submit the further progress report

       on 10.08.2007.



26)    If   we   analyze   the   above-mentioned   and   various   other



orders,   it   would   not   be   possible   to   conclude   that   the   High



Court over stepped its limit while giving directions in para 8 of



the impugned order.  As rightly observed by the High Court, it



is the duty and responsibility of the Public Department of the



State   Government,   Municipal   Corporation   to   take   all



endeavour   to   save   the   town   of   Gwalior   from   encroachments



and   also   easing   the   public   utility   system.     The   materials



placed by the Municipal Corporation clearly show that Gandhi



Market which is primarily a cloth market is established in the



year   1952   is   now   in   a   very   haphazard   condition   causing



difficulty in the movement of public as well as of vehicles.   It




                                                                                        20


was highlighted that in the day time as well as in the evening



busy time, it takes hours together for the vehicles to pass from



that   area.     Photographs   were   also   shown   to   us.     It   is



impossible for the public to even walk on the street.  The shop



keepers  are  dumping their  products  upon the street  which is



not permissible.   The public are prevented from using the foot



path/pavement   meant   for   them.     In   such   circumstances,   a



decision   was   taken   to   construct   a   multi-level   parking-cum-



commercial   complex.     In   this   process   of   construction,   it   was



planned to shift temporarily the present shop keepers to some



other nearby places.



27)    It is further seen that the present commercial area of the



appellants/shop   keepers   is   60   sq.   ft.   which   has   been



converted by encroaching the area of verandah and converted



the same into 90 sq. ft area.  The new shop of 60 sq. ft. size is



to be given to 252 present incumbents of Gandhi Market.  It is



highlighted that to construct the building to the height of 12.5



metres   having   3   layers   of   basement   for   parking,   the   ground



floor   shall   have   252   shops   which   shall   be   allotted   to   the





                                                                           21


present   incumbents   of   Gandhi   Market   and   other   floors   shall



be at the disposal of Municipal Corporation, Gwalior.



28)    In view of the various orders passed by the High Court on



the  basis  of consensus  of  the  parties,  more   particularly,   with



the consent  of the shop keepers,  a  Committee  was appointed



and a direction was issued for providing alternate place to the



shop   keepers   till   new   construction   being   completed   in   the



existing place and all of them were assured of accommodation



in the ground floor of the new market complex, we are of the



view   that   the   ultimate   directions   issued   in   the   final   order



dated 18.01.2008 by the High Court cannot be faulted with.



29)    The next submission of Mr. Gupta relates to applications



filed by the appellants before the High Court for recalling the



order   dated   24.03.2006   and   also   seeking   clarification   on   the



same   order   as   well   as   another   application   for   refund   of   the



amount   deposited.     Admittedly,   one   application   was   rejected



on   05.05.2006   and   it   is   not   clear   how   the   other   applications



are   kept   pending   even   after   disposal   of   main   writ   petitions.



About   the   amount   deposited   by   the   shop   keepers,   both   the



senior   counsel   appearing   for   the   Municipal   Corporation




                                                                             22


submitted   that the  said  amount was  not  towards  adjustment



of   construction   charges   but   the   same   would   be   adjusted



towards future licence fees.   In the light of the same, there is



no substance in the contention relating to filing of applications



about   various   orders   passed   by   the   High   Court.     As   rightly



pointed   out   by   Dr.   Rajiv   Dhavan,   learned   senior   counsel   for



the   Municipal   Corporation   even   after   the   so-called



applications, the consent to the process of a new market place



continued   and   this   is   evident   from   the   orders   of   the   High



Court   dated   02.03.2007,   20.04.2007   and   04.05.2007.     It   is



also   brought   to   our   notice   that   some   applications   that   were



made in June/July to recall the order dated 04.05.2007 were



not pressed.  In view of the same, we are unable to accept the



claim of the learned senior counsel for the appellants.



30)    In view of our factual conclusion based on the materials



placed by both the parties as well as various orders of the High



Court,   we   feel   that   there   is   no   need   to   advert   to   various



decisions   relied   on   by   the   learned   senior   counsel   for   the



appellants.





                                                                            23


31)    In the light of the above discussion, we are satisfied that



various directions in para 8 of the impugned order of the High



Court cannot be faulted with and according to us it safeguards



not   only   the   interest   of   the   Municipal   Corporation,   general



public but also all the 252 shop keepers who are running their



business in the Gandhi Market.   Further, it was not disputed



before   the   High   Court   that   Gandhi   Market   became   quite   old



and   market   is   fully   congested   and   there   is   no   space   for



parking.     That   was   the   reason   the   High   Court   specifically



recorded a finding in para 7 that:



       ".....   under   changed   circumstances   that   all   the   parties

       including   the   shop   keepers   have   agreed   for   construction   of

       new   Gandhi   Market   building   in   the   place   of   old   Gandhi

       Market building.  This Court has already in the interest of all

       the parties and the citizens of Gwalior City, directed through

       interim orders for construction of a new market building and

       has   also   constituted   a   Committee   to   see   that   new   Gandhi

       Market   building   is   constructed   and   after   construction,   the

       existing shop keepers were also settled therein. ....   ...."





We   fully   endorse   the   above   view.     Though   an   argument   was



advanced that the permission granted by Joint Director, Town



and   Country   Planning,   Gwalior   in   his   proceeding   dated



05.12.2007   to   the   Commissioner,   Municipal   Corporation,



Gwalior   regarding   reconstruction   of   Gandhi   Market,   Gwalior




                                                                                      24


was   objected   to   by   the   Director   and   further   approval   of   the



State Government is required, inasmuch as the Joint Director



is   the   officer   competent,   we   hope   and   trust   that   no   fresh



construction would be carried out without the authority of the



person   concerned   and   contrary   to   the   statutory



provisions/regulations,   accordingly,   we   reject   the   said



contention also.



32)    Under these circumstances, we are unable to agree with



any   one   of   the   submissions   made   by   the   appellants,   on   the



other hand,  we  are  in entire  agreement  with the stand  of the



respondents and reasonings and conclusion arrived at by the



High   Court.     We   direct   the   respondents,   particularly,   the



Municipal   Corporation,   Gwalior   and   the   officers   concerned   to



implement   the   directions   of   the   High   Court   within   the



parameters of the statutory provisions considering the interest



of   the   general   public   as   well   all   the   shop   keepers   of   the



existing   market.     In   view   of   the   disposal   of   the   civil   appeals,



Municipal Corporation is free to proceed with the construction



as directed in the impugned order of the High Court and in the



light   of   the   above   observations,   as   early   as   possible,   and   we




                                                                                 25


also   direct   that   all   the   directions   of   the   High   Court   shall   be



adhered to.  It is further directed that as soon as construction



up   to   ground   floor   level  is   completed   along   with   the   required



parking   facilities  at  the  basement  level   those  shops   are   to  be



allotted to the old shop keepers in the Gandhi Market within a



period   of   six   months   after   completion   of   such   construction,



unless   an   individual   shop   keeper   becomes   ineligible   for   the



known reason.  



33)    Consequently,   all   the   appeals   fail   and   are   accordingly



dismissed.    In view of  the   same,  interim  stay  granted  by   this



Court on 17.10.2008 shall stand vacated. No order as to costs.

                       




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

                                             (P. SATHASIVAM)




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

                                            (DR. B.S. CHAUHAN)



NEW DELHI;

AUGUST 30, 2011.            





                                                                                 26

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).


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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.


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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


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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


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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.


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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.


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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


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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.


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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.


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 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


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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.