1. The point of dispute involved in this appeal is whether tubular shaped arc chamber housings manufactured by the appellants from glass fabrics, which they purchase from outside, fall under Tariff Item 22F(4) or under Item 68 of the Central Excise Tariff. These two Tariff Items read as under :- "22. F. Mineral fibres and yarn and manufactures therefrom, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power, the following, namely : (3) any other mineral fibre or yarn, whether continuous or otherwise, such as, slag wool and rock wool; (4) Other manufactures in which mineral fibres or yarn or both predominate or predominates in weight.
Explanation.-This Item does not include asbestos cement products." "68. All other goods, not elsewhere specified, excluding- 2. Initially, the subject housings were classified by the Department under Item 68. On 5-12-80, the Assistant Collector issued a notice calling upon the appellants to show cause as to why the classification should not be changed to Item 22F(4). The ground given for the proposed change in the classification was that glass fibre predominated in the housing. This notice did not say specifically that any differential duty for the past period was also proposed to be recovered from the appellants. On 28-2-81, the Assistant Collector directed the appellants to assess the goods provisionally pending his decision on the re-classification. However, within a mouth, on 30-3-81 to be precise, the Assistant Collector was able to decide the matter. In his Order-in-Original he maintained the classification under Item 68 on the ground that the goods were not manufactured from mineral fibres or yarn but were the products manufactured from the manufactures of mineral fibre and yarn. The Collector was tentatively of the view that the order passed by the Assistant Collector was not proper, legal and correct. The Collector initiated proceedings to review the Assistant Collector's order by issuing a notice to the appellants, on 7/12-10-81 calling upon them to show cause why the order of the Assistant Collector should not be set aside or such other order as deemed fit passed. The grounds given for the proposed review were- (1) The goods were manufactured from glass fabrics which were in turn manufactured from glass fibre and yarn, and (2) Content of the glass fibre and yarn was more in weight than the plastic component in the goods.
In this show cause notice also no differential duty was demanded for the past period as such. After hearing the appellants, the Collector passed the impugned order in which he held that- (1) The words "manufactures therefrom" in the entry included not only first manufactures of mineral fibres and yarn but also subsequent manufactures wherein mineral fibre or yarn is used and accordingly the goods were correctly classifiable under Item 22 F(4); (2) Demand of duty should be restricted to six months prior to the date of issue of demand notice. The Collector made this order in respect of the period of demand in reply to the appellants' argument before him that his show cause notice for review was time-barred since it had been issued after six months of the Assistant Collector's order. Nevertheless, the Collector simultaneously held that the time-limit for issuing review show cause notice under the then Section 36(2) of the Central Excises and Salt Act, 1944, was one year and not six months.
Pursuant to the Collector's order, the Superintendent issued a letter to the appellants on 30-4-83 saying that the assessments had been provisional from June, 1979, that the appellants should pay the differential duty amounting to Rs. 10,41,524.27 for the period from September, 1980 to February, 1983 and that they should furnish particulars of clearances for the earlier period from June, 1979 to August, 1980 so that the demand for the said earlier period could be quantified. Thereupon, the appellants filed the present appeal before this Tribunal.
3. During the hearing before us on 6-3-84, the appellants pressed for the following four arguments :- (1) Though the entry 22F(4) relating to "other manufactures" was by itself wide enough to cover the subject goods, they stood excluded from the entry because of the words "manufactures therefrom" in the opening para of the main entry 22F. The appellants maintained that these words restricted the scope of the entry and consequently the entry covered only those products which had been made directly from mineral fibres and yarn. Since their goods were manufactured from glass fabrics as the starting material, they did not fall under Item 22F(4) but fell under the residuary Item 68.
(2) The appellants purchased glass fabrics from the market. These fabrics were themselves a manufacture of mineral fibres and yarn and had been assessed at 'nil' rate of duty under Item 22F(4) read with exemption Notification No. 87/76-C.E., dated 16-3-76. Since the fabrics themselves had already been taxed at the appropriate rate as a "manufacture" and were thereafter used for making another manufacture, that is, the subject housing, the latter product could not be taxed again under the same tariff sub-item. They relied on the order of this Tribunal passed in the appeal of M/s. Golden Paper Udyog [1983 E.L.T. 1123 (CEGAT)].
(3) It was an established proposition of law that there was no room for intendment in interpreting a provision relating to taxation and that if there was any doubt in the matter, the construction which was favourable to the assessee should be adopted.
(4) In terms of the Collector's order, the demand for differential duty should be restricted to six months prior to 30-4-83 (the date of issue of the demand). But the Superintendent had gone beyond the Collector's order in seeking to demand duty from June, 1979 onwards.
There had been no provisional assessment as contended by the Superintendent as classification lists submitted by the appellants from time to time had been duly approved and the appellants had never executed the requisite B-13 Bond for provisional assessments.
At any rate, the appellants argued, there could be no question of the assessments remaining provisional after the Assistant Collector's considered decision on classification on 30-3-81.
4. The Department's representative stated that there was no basis for the appellants' contention that only such manufactures as were made directly from fibres and yarn were taxable under Item 22F(4). He maintained that this entry was wide enough to cover the subject goods.
He relied on the Andhra Pradesh High Court judgment reported at 1983 E.L.T. 786 (A.P.) M/s. Standard Packagings v. Union of India and Anr.) to say that there was no bar to taxing commercially different products under the same Tariff Item or sub-item. Double taxation in such cases could be avoided by giving set-off or proforma credit for the duty already paid on the starting material as ordered by this Tribunal in the case of M/s. General Industrial Society (1983 E.L.T. 2497 CEGAT).
As there was no doubt on the basic issue of classification which was the subject matter of these proceedings, the question of giving any benefit of doubt to the appellants did not arise. He stated that the questions regarding time-limit for payment of the differential duty and quantification of the demand did not arise out of the present proceedings and these question could, therefore, be remanded to the lower authorities for examination in the first instance.
5. We have carefully considered the matter. There is no dispute that the subject housing is a manufactured product in which glass fibres/yarn predominate. The dispute is on the point whether Item 22F(4) covers only such products as are made directly from glass fibres/yarn or it covers also the products made from glass fabrics which in turn are made from glass fibres/yarn. In other words, glass fabrics are an intermediate stage between glass fibres/yarn and the subject housing. The material words in Item 22F read as "mineral fibres and yarn and manufactures therefrom". The words "manufactures therefrom" are capable of a simple and straightforward meaning, that the goods should be manufactured from mineral fibres and yarn. The word "directly" does not occur in the tariff item and the appellants are not entitled to read that word into the entry. If glass fibres/ yarn have first to be woven into fabrics before they can be used in the manufacture of the housing, the housing would not cease to be a manufacture of glass fibres/yarn. The point can be illustrated by simple examples which we come across in everyday life. Bread made from wheat flour, and not directly from wheat, still remains wheat bread. A shirt stitched from cotton cloth continues to be considered as a cotton shirt although it is well known that cotton fibre cannot be turned into a shirt directly and the fibre must first undergo the intervening processes of spinning into yarn and thereafter weaving into cloth.
Similarly, furniture made from wood is not directly manufactured from wooden log; the log must first be sawn and fashioned into planks, legs, arms etc. In the same way, manufactures from glass fibres/yarn do not cease to be so just because the act of manufacture involves the intervening process of weaving. Interpreting the entry in the manner the appellants want us to do would amounts to saying that a person manufacturing the same housing in an integrated process from glass fibres/yarn as the starting material (that is, having weaving equipment in the same factory) should pay the tax but the person starting from the intermediate stage of glass fabrics need not. We find no warrant for such an interpretation. The entry clearly covers all manufactures made from glass fibres/yarn irrespective of the fact that the raw material undergoes some intervening processes in the same or another factory before ending up in the final manufacture. We hold that the subject housings rightly fall under Item 22F(4) which is more specific for them than the residuary Item No. 68.
6. There is also no substance in the argument of double taxation put forth by the appellants. The fact that the housing is a totally different product from its base material, i.e., glass fibres/yarn/fabrics, is beyond doubt and even the appellants do not contest it. Their argument is that since their starting material (glass fabrics) as well as the final product (the housing) are both manufactures, manufactures from manufactures cannot be taxed again under the same entry. We find that there is no rule of thumb that different commercial products cannot be taxed twice over under the same entry. It all depends on how the entry is worded. We quote from the judgment of the Andhra Pradesh High Court in the case of M/s. Standard Packagings [1983 E.L.T. 786 (A.P.)] :- "There is nothing to prohibit in law or in any statute including the statute of Constitution under Article 265 prohibiting double taxation or in any fiscal enactments. There is no 'inherent' invalidity 'if the legislature should choose to levy tax twice' (see Avinde? Singh v. State of Punjab-(3) AIR 1979 S.C. 321)." 7. The High Court held further that there was no basis in our fiscal philosophy to countenance the proposition that the goods which had suffered duty once under a Tariff Item should fall under a different item before they could be taxed again. We observe that in the appellants' case, the entry 22F(4)-"other manufactures"-is a group entry. It is not restricted to one specific commercial product but covers all manufactures [of course, excluding those covered by the earlier entries 22F(1) to (3)] in which mineral fibres/ yarn predominate. The appellants have relied on our orders in the case of M/s. Golden Paper Udyog. The situation in that case was different inasmuch as the entry 17(2) relevant to that case was specific for paper and paper-board and by a further inclusive description the entry placed both treated and un-treated papers and paperboards on the same footing; in other words, both were to be regarded as paper and paperboard. On the other hand, the entry 22F(4) is worded on the pattern of Item 68 (All other goods, not elsewhere specified) both of which are residuary entries covering a number of diverse products. To take an example, components of a lathe machine fall under Item 68. The complete lathe machine also falls under Item 68 A manufacturer of the complete lathe machine cannot take the argument 'that the complete machine cannot be taxed because the components had already been assessed earlier under the same entry. The two being commercially different products, the complete machine has to be taxed again However m order to mitigate the effect of repeated taxation, the law separately nro-vides for proforma credit of the duty already paid being given to the manufacturer or for not charging duty on the components under Item 6s at all it they are manufactured in the same or another factory of the same manufacturer. The situation is similar in the case before us Since glass fabrics and the housing are different commercial products and since the entry 22F(4) is a group entry and is wide enough to cover both of them there is no illegality if the housing is taxed again under the same entrv' This is not a case of double taxation on the same product but a case of multi-stage taxation on two different products.
Since here too the proforma credit facility is available, provided the manufacturer can prove the fact of tax payment earlier by documentary evidence, the net effect that remains is a single-stage tax under Item 22F on the final product. We therefore reject the appellants' argument of double taxation.
8. We have no doubt in our mind in coming to the above conclusion nor is our finding based on any supposed intention of the Government This is not, therefore, a case in which any benefit of doubt can leeitimatelv be claimed to accrue to the appellants.
9. Coming now to the last argument of the appellants regarding limita tion, we find no material placed before us by the Department to controvert the appellants' contention that there had in fact been no provisional assessment of their goods. The Department is, therefore not entitled to finalise the assessments on that basis. The classification was revised by the Collector as a result of proceedings which were initiated through a show cause notice dated the 7th/12th October, 1981 issued specifically in exercise of his powers under Section 35A(2), Central Excises and Salt Act, 1944, as it then stood (The notice is hereafter referred to as "the review show cause notice"). The review show cause notice clearly indicated the Collector's tentative view that the classification of the goods should be under Item 22F(4) CET and not under Item 68. as held by the Assistant Collector. The appellants were required to show cause why the Assistant Collector's order should not be set aside and why other appropriate order should not be passed. The review show cause notice did not specifically refer to the duty having been short levied during the period prior to its issue, nor did it call upon the appellants to show cause why the differential duty should not be demanded from them In the Collector's final order, there was a reference to the appellants' objection that the show cause notice was time-barred, having been issued more than 6 months after the date of the Assistant Collector's order The Collector observed that the period for review of the Assistant Collector's order was one year and not six months and therefore the question of show cause notice being time-barred did not arise. He went on to say that the party's objection would be only valid so far as the demand of duty was concerned, which would be restricted to six months prior to the date of "demand notice".
It is apparent from the context that what the Collector had in mind was the review show cause notice which had already been issued and not a demand notice which was yet to be issued; the error can probably be attributed to the use of the word 'demand' used earlier in the same sentence. In other words, the effect of the Collector's order was that differential duty would be payable by the appellants only for the period of 6 months prior to the issue of the review show cause notice, 10. We find substance in the appellants' contention that the demand for duty for the period from June 1979 is hit by limitation. The matter will be clear if the position is examined in the light of the provisions of Section 35A at the material time and the relevant dates, which are given below :-5-12-80 Assistant Collector's show cause notice.30-3-81 Assistant Collector's decision classifying goods under Item 68.7/12-10-81 Collector's review show cause notice (no reference to demand for past period).20-2-83 Collector's order reclassifying the goods under Item 22F(4).30-4-83 Superintendent's letter intimating that appellants should pay differential duty with effect from June 11. Now, Section 35A of the said Act as then in force contained two time-limits. The applicability of these can be clearly seen from the judgment of the Delhi High Court in the case of Associated Cement Company Ltd. v. Union of India (1981 E.L.T. 421) on the corresponding provisions of Section 36(2). There is the special case of a short-levy or non-levy of duty, for which there is a time-limit of 6 months under Sub-section (3)(b) of this Section : and there is the general case-comprising all other cases-for which the time-limit is 1 year. As will be seen from the above list of dates, the review show cause notice in this case was issued more than 6 months but less than one year after the date of the Assistant Collector's order. It proposed to set aside the Assistant Collector's classification but, perhaps with the time-limit under Sub-section (3)(b) in mind, did not propose to demand duty for the period prior to the date of the review show cause notice.
In so far as it proposed to revise the classification decided by the Assistant Collector without reference to the period prior to the date of the review show cause notice, that is prospectively, it was within the relevant time-limit of one year. The Collector's final order reclassifying the goods could, therefore, be held as valid prospectively, that is, on and after the date of the review show cause notice. But where the Collector's final order sought to demand duty for an earlier period, prior to the date of the review show cause notice, it is not sustainable. Firstly, and most important, the show cause notice did not specifically call upon the appellants to show cause against such a demand, as required under Sub-section (3) (b) (a sweeping reference to "such order as may be deemed fit" or "appropriate order" is clearly not a sufficient compliance with this provision).
Secondly, even if the show cause notice had proposed to demand duty for the earlier period, it would have been hit by the time-limit in Sub-section (3) (b).
12. We accordingly hold that in the facts and circumstances of this case, the differential duty is payable by the appellants only from 12-10-81 onwards which was the date when the Collector's show cause notice was issued for changing the classification. The demand issued by the Superintendent on 30-4-83 was only a consequential action pursuant to the Collector's order and the date of the said demand by itself can, therefore, have no significance.
13. Accordingly, we uphold classification of the subject goods under Item 22F(4) but direct that the demand for differential duty payable by the appellants should be restricted to the period from. 12-10-81 onwards only. The appeal is disposed of accordingly.