Skip to content


Collector of Central Excise Vs. Purewal and Associates Ltd. - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1987)(31)ELT457TriDel
AppellantCollector of Central Excise
RespondentPurewal and Associates Ltd.
Excerpt:
1. this is an appeal by the collector of central excise, chandigarh, against the order-in-appeal dated 25-2-1983 of the collector (appeals), central excise, new delhi, in which that authority had allowed the appeal of the respondents against the order-in-original dated 25-1-1982 of the assistant collector, customs and central excise division, chandigarh.2. he short point involved in this case is whether the four specified articles manufactured by the respondents and referred to as barrel axle screw, etc., are classifiable under item 52 of the central excise tariff schedule as "bolts, nuts and screws" as held by the assistant collector, or under item 68 ibid as "all other goods, not elsewhere specified" as held by the collector (appeals).3. appearing before us for the appellant collector,.....
Judgment:
1. This is an appeal by the Collector of Central Excise, Chandigarh, against the Order-in-Appeal dated 25-2-1983 of the Collector (Appeals), Central Excise, New Delhi, in which that authority had allowed the appeal of the respondents against the Order-in-Original dated 25-1-1982 of the Assistant Collector, Customs and Central Excise Division, Chandigarh.

2. he short point involved in this case is whether the four specified articles manufactured by the respondents and referred to as barrel axle screw, etc., are classifiable under Item 52 of the Central Excise Tariff Schedule as "bolts, nuts and screws" as held by the Assistant Collector, or under Item 68 ibid as "All other goods, not elsewhere specified" as held by the Collector (Appeals).

3. Appearing before us for the appellant Collector, Shri K.D. Tayal drew our attention to samples of the four articles under consideration, known as barrel axle screw, bridge screw, dial key screw and lid screw.

He pointed out that each of these articles was in the shape of screw, with a head and a shank with a thread. No doubt they were very small in size, since they had to be used in watches. However, this was not material, as Item 52 covered screws irrespective of their sizes.

4. Shri Tayal further argued that the articles were not only screws within the meaning of the Central Excise Tariff Item but were also known in the trade as screws. The respondents themselves called these articles as screws, as would be evident from para 3 above. In this connection he cited the decision of the Supreme Court in the case of Indo International Industries v. Commissioner of Sales Tax, UP, reported in 1981 E.L.T. 325. In that judgment reference had been made to the importance of popular and commercial parlance when interpreting a commodity schedule (in that case it was with reference to sales tax, but the same principle applied).

5. Shri Tayal also relied on two recent decisions of the Tribunal. One of these is that in the case of Sri Ramdas Motor Transport Ltd., reported in 1983 E.L.T. 2067. This related to "hub bolts and nuts" used in motor vehicles, and the question was whether they should be considered as bolts and nuts falling under Item 52 or goods not elsewhere specified falling under Item 68. It was held that the goods were classifiable under Item 52, although there was no doubt that they were being made specially for motor vehicles. Shri Tayal also referred to the Tribunal's Order No. 577/83D, dated 15-9-1983 in the case of Fit Tight Nuts and Bolts Ltd., Bombay. That case also related to various types of nuts and bolts for use in motor vehicles, and it was contended that they had special engineering features and were not merely used as fasteners. In that case also it was held that the goods were covered by Item 52.

6. Shri Tayal submitted that Item 68 of the Central Excise Tariff Schedule could be resorted to only when there was no other Item of the Tariff which specifically covered the goods. This had been clearly set out in the judgment of the Bombay High Court in the case of Garware Nylons Ltd., reported in 1980 E.L.T. 249. It had been observed by the Bombay High Court that as the goods in that case were covered by one of the specific items of the Central Excise Tariff Schedule, they could not be "consigned to the orphanage of the residuary Item 68". The High Court had in this connection relied on the judgment of the Supreme Court in Dunlop India Ltd., v. Union of India, AIR 1977 SC page 597, which contained observations to the same effect. Shri Tayal submitted that these observations fully applied to the present case, and the goods, being specifically covered by Item 52, could not be classified under the residuary Item 68.

7. Shri Tayal pointed out that the respondents had sought to place reliance on an Order of the Appellate Collector of Central Excise, Delhi, in the case of Western Coalfields Ltd., reported in 1979 CENCUS 131D. That case related to a number of "screws" and "bolts and nuts" used as parts of mining machinery. It had been held in that case, after a detailed examination of each of the articles under consideration, that they were integral parts of the concerned machines and that they did not act as fasteners but along with other parts and components had distinctly clear functions required for the operation of the entire machine. It was also observed that the articles were not commercially available in the market and were not known in the trade as bolts, nuts and screws. Shri Tayal submitted that the decision of the Appellate Collector in that case had been taken on the basis of the end-use of the articles in question. Shri Tayal relied on the judgment of the Supreme Court in the case of Dunlop India Ltd., (supra), wherein it had been observed that where a Tariff entry does not contain a reference to the use or adaptation of the article, the end-use of the article is not relevant. In the present case, the goods were clearly screws and the fact that their end-use was in watches would not affect their classification. In any event, the two decisions of the Tribunal which he had referred to were more recent and should be followed.

8. Asked by the Bench whether the articles in question had any function other than that of fastening, Shri Tayal replied that this was a technical question on which he could not speak as an expert. However, he drew our attention to ground No. (iii) of the memorandum of appeal, in which the appellant Collector had stated that "the function of these four screws was to fasten and to keep the different assemblies of the watch machine at their respective places". It was, therefore, clear that the function of the screws was basically one of fastening.

9. Shri Tayal fairly pointed out that in case Item 52 was held as applicable, the respondents might claim the benefit of the exemption from duty for small-scale units under Notification No. 71/78-CE, dated 1-3-1978. He submitted that in case the Bench held that the goods were classifiable under Item 52, the Collector could if necessary be asked to consider the question of applying the aforesaid exemption.

10. Replying for the respondents, Shri S.N. Mathur submitted that merely because the respondents themselves referred to the articles as "screws", it did not mean that they were screws within the meaning of Item 52. The relevant question was how they were known in the trade. No evidence had been produced by the Department to show that they were known in the trade as screws.

11. Shri Mathur filed photocopies of Indian Standards Specification No.15:9783-1981, on "Nomenclature of Parts for Wrist Watches". Item 2.6.11 of this Standard referred to "Screws for train wheel bridge, etc.".

Shri Mathur submitted that the goods in question were of the same nature as the goods referred to in Item 2.6.11. Accordingly, they should be considered as "parts for wrist watches". In this connection Shri Mathur cited a decision of the Madras High Court in the case of Messrs. Parry Confectionery Limited, reported in 1980 E.L.T. 468. In that case, which dealt with the question whether lozenges would be classifiable as "candy", the assessees had relied on an Indian Standard Specification. The High Court observed that the views of the I.S.I.deserved acceptance by the Court except where there were other strong considerations to the contrary.

12. It was pointed out to Shri Mathur by the Bench that the "Explanatory Note" at the end of the above Standard stated that "The nomenclature given in the Standard is based on ISO 3831-1979...excepting some modifications which have been made so as to retain some of the terms as are commonly used and understood by the watch manufacturers in this country". It was put to him that the Standard could be considered as representing the usage of the trade in watches. Shri Mathur asserted that they were nevertheless to be considered as "parts for wrist watches".

13. Shri Mathur thereafter referred to a trade notice No. 117/79. dated 28-12-1979 of the Chandigarh Central Excise, Collectorate which, according to him, stated that watch parts would fall under Item 68. He did not file a copy of this trade notice. In any case the Bench pointed out to him that the notice would not greatly help his case. In the first instance, any such explanation by the executive authorities cannot have statutory value. Secondly, the trade notice does not refer to screws which are watch parts but only watch parts in general. Watch parts which are not more specifically covered by another Item of the Tariff would obviously fall under the residuary Item No. 68.

14. Shri Mathur also filed a copy of a trade notice No. 127/71, dated 5-7-1971, which reads as under :- "Mere existence of threads would not render an article as a bolt, nut or screw if it is recognisable as component part of an instrument, apparatus, appliance, or machine. The Tariff definition of Item 52 is intended to cover only those which are known as bolt, nuts and screws in the market".

He submitted that in the present case the screws were recognisable as component parts of watches and in terms of the trade notice they would not be covered by Item 52.

15. Shri Mathur then, with the help of Shri Harpreet Singh, an Engineer employed by the respondents, gave a detailed description of the functions of each of the four articles under consideration, with the object of showing that they did not perform the basic function of fastening, but functioned in different ways.

16. The lid screw, as explained by Shri Harpreet Singh and as seen from the sample watch, passes through the lid of the watch into the main plate and prevents the lid from getting separated from the main plate.

To the naked eye it appears that it holds together the lid and the main plate, as its head rests over the lid and its stem passes through the lid and is tightened into the main plate. Shri Harpreet Singh, however, contended that the stem of the lid screw did not actually touch the lid, but there was a small separation between the stem and the lid and that it was fixed only on to the main plate.

17. The barrel axle screw is screwed on to the lid, adjacent to the axle, which passes through both the lid and the main plate. According to Shri Harpreet Singh, it prevents the axle from coming out. He emphasized that normally the head of the screw did not touch the axle, but if the axle started working its way up through the lid, then the head of the barrel axle screw would come in contact with it and prevent it coming out. His stress was that normally the barrel axle screw was in contact only with the lid and not with the axle.

18. The bridge screw also serves to hold the lid and the main plate together. The stem of the screw is screwed into a small tube which passes through both the lid and the main plate and helps to keep them together. The pinion passes through both the main plate and the lid, but while it is fixed to the main plate, it is not fixed to the lid which is subsequently fitted on to it. The function of the screw which is screwed through the top of the tube is to act as a stopper and prevent the lid coming away from the main plate. From the diagram shown to us by Shri Harpreet Singh, it appeared that the stem of the bridge screw fits into the tube, which is fixed to the main plate, while the head of the screw rests on the surface of the lid, thus holding the lid fast between the head of the screw and the bottom plate. Although this is what the diagram showed, Shri Harpreet Singh stated that in practice there was a separation of a few microns (a micron being equal to a thousandth of a millimetre) between the head of the screw and the surface of the lid. According to him, the head of the screw would not normally touch the lid, but if the lid started to work itself loose it would come in contact with the head of the screw and be held back.

19. The dial key screw serves to keep the dial in position. It also has the shape of a screw, except that the head, instead of being a perfect circle, has one segment sliced off, so that its shape is something like a "D". It is screwed into the dial. When in position, the flat side of the head of the screw presses against a "lug" like a pin, which passes through the dial from below. The pressure of the head of the screw on the lug prevents the dial from coming loose.

20. Based on these detailed explanations, Shri Mathur submitted that none of the screws was a fastener, as none of them was in contact with two other things which it was holding together. Further, as for example in the case of the dial key screw, the important function was done not by the stem of the screw but by the head. According to him, therefore, they could not be considered as fasteners and therefore not as screws.

21. In paras 4.1 to 4.4 of the Assistant Collector's order, reference has been made to certain other functions said to be performed by these screws. These functions were not referred to or explained by S/Shri Mathur and Harpreet Singh in the-demonstration before us.

22. Shri Mathur thereafter referred to the decision of the Supreme Court in the case of Indo International Industries, which had been relied upon by Shri Tayal. He argued that although the manufacturers might have referred to the articles as screws, that term should be understood in its popular sense. The articles in question could be used only for the manufacture or repair of watches made by the respondents, and they could not be considered as screws in the popular sense.

23. Replying to Shri Tayal's argument based on the judgment of the Supreme Court in the case of Messrs. Dunlop India Ltd., Shri Mathur contended that the respondents had not relied on the end-use of the screws but on their function. With reference to the two orders of the Tribunal cited by Shri Tayal, Shri Mathur submitted that in those cases the goods were found to perform the function of fastening, which in the present case they did not.

24. Shri Mathur was asked by the Bench whether "fastening" implied holding together two things other than the screw itself, or the term could apply if the screw itself was held fast to a single object. In this connection it was pointed out to him that a very common use of ordinary screws is to hang pictures, etc., on a wall. In such cases the screw would be driven into the wall (if of wood) or into a plug embedded in the wall (if of concrete or brick) and the picture hung on the screw. In such a case there was normally no question of the screw fastening two other things together. Nevertheless, this was a very common use of a screw. Shri Mathur replied by citing the definition of a fastener as contained in the Chambers Dictionary of Science and Technology, which ran as follows :- "An article designed to fasten together two or more other articles, usually in the form of a shaft passing through the articles to be fastened, eg., Nails, Screws, Rivets, Pins".

25. In conclusion, Shri Mathur submitted that the goods in question, were not classifiable as screws and that the appeal should be rejected.

26. Replying to Shri Mathur, Shri Tayal submitted that the detailed descriptions given of the "functions" of the various screws were all related to their end-use, which as held by the Supreme Court was not relevant when the Tariff entry did not specify end-use. Referring to the emphasis placed by the respondents that the screws must be "fasteners" or must perform a fastening function, Shri Tayal submitted that the Tariff entry did not refer to fasteners, but specified bolts, nuts and screws. It would not, therefore, be correct to equate screws with fasteners and go by the meaning given to the latter term.

27. Shri Tayal further submitted that even if the fastening function was important, the parts in question did perform that function. Two of them, namely the dial key screw and the lid screw, were obviously used for holding two parts together, and were in contact with both the parts. The other two screws might not actually touch two parts, but there was no doubt that they were also necessary for holding two or more parts together. Shri Tayal stressed that it was not necessary that the function of holding different parts together should be performed only with the help of the shank and the thread, but it could also be done by the shank and the head together or even by the head alone. He pointed. out that if any of these screws was left loose or was absent, the parts would come apart and the watch would not function. They, therefore, clearly performed a fastening function.

28. As regards the trade notices cited by Shri Mathur, Shri Tayal submitted that they had no force in law. In this connection he cited the judgment of the Bombay High Court in the case of Associated Film Industries Private Ltd., reported in 1980 E.L.T. 107. Even the ISI Specifications could not form the criterion for assessment, though they could be useful indications of trade nomenclature and understanding. In the present case, while the I.S.I. Specification showed that the goods were used in wrist watches, it was also clear that they were referred to in the trade as "screws". For these reasons he submitted that the appeal should be allowed.

29. We have given our very careful consideration to the arguments advanced on behalf of both parties. As already observed, the basic issue is whether the articles in question, which are known as screws (although according to the respondents this is a loose usage), are classifiable as screws under Item 52. In deciding this issue, we have first to note that the choice in this case is between a specific Item, namely Item 52, and the residuary item, namely Item 68. It is well-established that where any goods are covered by a specific item of the Tariff, they cannot be relegated to the "orphanage" of the residuary item. Shri Mathur's arguments proceed as if we had to decide whether the goods can more appropriately be described as "screws" or as "parts of watches". However, the description "parts of watches" is nowhere in the Tariff. Parts of watches, if not covered by any other item, have to come under the residuary item, and the description is "All other goods, not elsewhere specified". Therefore, the mere fact that an article can be described as a part of a watch does not give it a claim to be classified under Item 68 in preference to Item 52.

30. Heavy reliance has been placed by the respondents on the exact function of each of the screws. This aspect has also been gone into both by the Assistant Collector in his Order-in-Original and by the Collector (Appeals) in his Order-in-Appeal. They nave, however, come to contrary conclusions. Shri Mathur urged that the Collector (Appeals) had applied his mind to these functions and had been satisfied that the screws did not perform any fastening function, and he invited us to take the same view. We accordingly went into the functions of each of these screws with the help of diagrams and samples produced by Shri Harpreet Singh and explanations given by him. Our observations are given below.

31. We have attempted in paras 16 to 21 supra to give as clear a description as is possible without diagrams or photographs of the four articles under consideration, in the context of Shri Mathur's arguments that they are not used for lastening and are therefore not screws. We shall now examine this argument in the light of the description of the articles as well as the points made by both sides.

32. We have already pointed out that if the goods can be said to be covered by the description of Item 52, they cannot be relegated to Item 68. The relevant term in Item 52 is "screws". The Explanation to that item amplifies this by including such articles as screw studs, screw hooks, etc., but these inclusions do not directly apply to the articles before us. The question is simply whether these can be classified as screws.

33. An attempt has been made by Shri Mathur to equate screws with "fasteners". No specific authority was quoted by him for such an equation. We observe that there can be some difference in significance between the two terms. The term "screw" is basically a description of the article without reference to any special function. On the other hand, the term "fasteners" is in the nature of a functional description, which is not confined to screws, bolts and the like (a common example of another type of fastener is the zip-fastener). We find substance in Shri Tayal's argument that by attaching undue importance to the question whether a screw is also a fastener, we would be entering into the question of end-use which, as ruled by the Supreme Court in the case of Dunlop India Ltd., may not be correct in view of the fact that Item 52 does not specify any end-use.

34. We would not go so far as to say that the use of the article is entirely irrelevant. There could be extreme cases where an article looks like a screw or has a thread like a screw but which it would be far-fetched to regard as a screw. There are many articles which are in the nature of component parts or accessories which are attahced to the main article by a shank with a thread. A spark plug in an engine, the gear lever in a motor car and the pedal of a bicycle, are some examples. Merely because they are screwed into position by means of a thread, it would be far-fetched to treat them as screws. There could be less extreme examples where also the article possesses thread but still cannot be regarded as a screw. It is in this context that it can be said that the mere existence of threads would not render an article as a bolt, nut or screw, as has been stated in the Bombay trade notice dated 5-7-1971, and we can agree with the statement in that trade notice upto this point. There is also force in the latter part of this trade notice which indicates that Item 52 should be applied only to those articles which are known as bolts, nuts and screws in the market.

But we think this trade notice goes wrong in implying that an article which is recognisable as a component part of an instrument, apparatus, etc., would not be a bolt, screw, etc. Such a proposition would involve ignoring the obvious fact that a bolt or screw in the ordinary-sense can well be used as a component part of an instrument, apparatus, etc.

Thus Shri Mathur "s argument that merely because the screws in question are shown to be used as component parts of watches they are taken out of the purview of Item 52 is, in our opinion, misconceived.

35. This does not mean that we disagree with the finding in the Order dated 8-5-1978 of the Appellate Collector of Central Excise, Delhi, cited by Shri Mathur, in which he had held 9 specific articles as not falling within the scope of Item 52. We would merely observe that the Appellate Collector had in the case of each of those articles gone into its description as well as its function and held that they were not bolts and screws within the meaning of Item 52. Many of them were massive articles, weighing from 21 to 56 kgs. each, and one could say even at first sight that such articles would hardly be known in the market as bolts or screws. That case illustrates the type of extreme case where an article, although loosely described as a bolt or screw, cannot in fact be regarded as a bolt or screw as commonly understood.

That, however, is not the case here because not only do the articles have the shape of screws (noting that the dial key screw has a head which is not a complete circle but a circle with a small segment cut off), but they are described by the respondents as screws, and even the I.S. Specification on which they have relied clearly refers to them as screws. They could, therefore, be excluded from the definition of screws only if it can be shown that by virtue of their use they are quite incapable of being considered as screws.

36. The two main points made against considering these articles as screws are that (a) they do not actually touch and hold together two other things; and (b) in some case's, it is the head rather than the shank of the screw, or along with the shank of the screw, which performs the function of holding something else in position.

37. As already observed, Shri Mathur had quoted the definition in the Chambers Dictionary of Science and Technology to the effect that a fastener is designed to fasten together two or more other articles. We have already observed that it would not be proper to equate the term "screw" with the term "fastener". We have also given an example (vide para 24 above) where a screw can be put to a quite common use without fastening together two or more other articles. It is not, however, necessary to dwell on this aspect further, because we find that all the four articles in question do have the function of holding together at least two other articles.

38. We thus come to the other argument of Shri Mathur, on which great reliance has been placed, namely that each of the screws comes into contact with only one other part. According to our visual observation and even according to the diagrams produced by the respondents, this does not appear to be correct in the case of two of the screws, namely the bridge screw and the lid screw. In the case of the bridge screw the diagram clearly shows that the head of it touches the lid of the mechanism while the stem grips the tube which passes through both the lid and the main plate and is attached to the main plate. We were then told by Shri Harpreet Singh that although the diagram showed that the head of the screw was in contact with the lid there was in actual fact a separation between them of a few thousandths of a millimetre.

Similarly, in the case of the lid screw, which, to all appearances fastens the lid on to the main plate, we were told that there was a small gap between the shank and the hole in the lid.

39. In the case of the dial key screw, there is no doubt that it touches both the dial as well as the lug which is attahced to the bottom plate, but it is contended that because the dial is in contact with the stem of the screw, while the lug is in contact with its head, it cannot be said to fasten two things. Finally, in the case of the barrel axle screw, it is contended that while the stem of the screw is in contact with the lid, the head does not normally touch the axle, but only when the axle tends to become loose or works its way up - when no doubt it will come in contact with the head of the screw and be held back.

40. It is clear from what we have seen and what has been explained to us that all these screws have the function of holding together two or more pans of the watch assembly. In some cases there is said to be a very minute gap between the screw and one of the two parts. In other cases, it is argued that the function is performed not only by the stem but also by the head of the screw. We consider that it would be unrealistic to go by such minute differentiations when it is clear that the basic function of all the articles (assuming that they should have a fastening function) is of holding together two or more parts of the watch assembly. If the barrel axle screw were not there, there is every likelihood that the axle would in course of time work its way upwards and out of the main plate or lid or both. It makes little difference whether the function of ensuring that the barrel axle remains in place is performed by the head of the screw being in contact with the axle continuously or intermittently. In the case of the bridge screw, even the diagram furnished by the respondents does not show the minute separation of a few thousandths of a millimetre, on the basis of which they claim that it does not hold together two other parts and is, therefore, not a screw. So long as the function of the articles is clear, its classification should not have to be determined by the fact whether in the process of its use there is or there is not a gap of a few thousandths of a millimetre between its head and the lid on which it appears to rest. Were we to attach such importance to very small measurements (small even in comparison with the small size of the screws themselves), and that too not in the article itself but in the circumstances of its use, we would not only be introducing an unwarranted refinement into the Tariff Schedule, but would also be making it almost impossible to operate. In this connection we consider! it relevant to quote the observation made many years ago by the Privy Council in its famous judgment, delivered on 19-11-1937, in the case of Ford Motor Co. of India Ltd., v. Secretary of State 1978 (2) ELT (3 265) P.C., namely, "That the Legislature intended to exclude post-importation expenses need not be doubted, but it had to do this in a practicable manner without undue refinement, and it must be taken to have regarded the phrases which it employed as sufficient for the purpose if taken in a reasonable sense". Similarly, classification under the Tariff has also to be done in a practicable manner and without undue refinement. If, where an article has the appearance of a screw and is described as a screw both by the manufacturers and by the I.S.I., the assessing officer were required to go into diagrams showing its intended use, and give significance to a separation of a few thousandth of a millimetre, it would certainly be a case of undue refinement which would be far from practicable, and we think it would not be reasonable to interpret the Tariff in such a manner.

(d) they are described both by the manufacturers and by the Indian Standards Institution as screws; and (e) they do perform in different ways the function of holding in place two or more parts of the watch assembly, we consider that the Assistant Collector was right in holding that they were classifiable under Item 52, and that the learned Collector (Appeals) fell into error in holding otherwise.

42. As mentioned in para 9 above, Shri Tayal had fairly pointed out that in case we hold the goods as covered by Item 52, the question whether the respondents were entitled to the benefit of the exemption in Notification No. 71/78, dated 1-3-1978 or No. 80/80, dated 19-6-1980 might have to be determined by the lower authorities. We find, however, that the Assistant Collector, in paras 5.4 and 5.5 of his Order dated 25-1-1982, has gone into this question in depth, and has given findings as to why the respondents could not benefit from these notifications.

The respondents did not advance any reasons for differing from the Assistant Collector's orders. We, therefore, do not find any need to remand the matter for a fresh decision on this point.

43. In the result, we allow the appeal, set aside the order of the Collector (Appeals) and confirm the order dated 25-1-1982 of the Assistant Collector.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //