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inarco Limited Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1987)(31)ELT469TriDel
Appellantinarco Limited
RespondentCollector of Central Excise
1. the point falling for determination in this appeal is scope of the benefit of exemption notification no. 197/67 dated 29-8-1967, as amended from time to time; particularly with reference to sub-item (3) of the table annexed thereto, vis-a-vis the goods manufactured by the appellants, bearing the trade name : "aprons' and 'cots'.2. we consider it expedient to reproduce the said notification, as well as the relevant tariff entry, so as to facilitate appreciation of area of controvercy. "notification no. 197/67-c.e. dated 29-8-1967 as amended by notification no. 1/68-c.e. dated 6-1-1968; no. 161/70-c.e., dated 29-8-1970; no. 17/73-c.e. dated 3-2-1973 and no. 72/74-c.e. dated 13-4-1974. exemption to piping and tubing of unhardened vulcanised rubber:-in exercise of the powers conferred by.....
1. The point falling for Determination in this appeal is scope of the benefit of Exemption Notification No. 197/67 dated 29-8-1967, as amended from time to time; particularly with reference to Sub-item (3) of the Table annexed thereto, vis-a-vis the goods manufactured by the appellants, bearing the trade name : "Aprons' and 'Cots'.

2. We consider it expedient to reproduce the said notification, as well as the relevant Tariff Entry, so as to facilitate appreciation of area of controvercy.

"Notification No. 197/67-C.E. dated 29-8-1967 as amended by Notification No. 1/68-C.E. dated 6-1-1968; No. 161/70-C.E., dated 29-8-1970; No. 17/73-C.E. dated 3-2-1973 and No. 72/74-C.E. dated 13-4-1974.

EXEMPTION to piping and tubing of unhardened vulcanised rubber:-In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Govt. hereby exempts piping and tubing of unhardened vulcanised rubber, falling under Sub-item (3) of Item No. 16A and specified in column (2) of the Table below from the whole of the duty of excise leviable thereon :- TABLE------------------------------------------------------------------------------Serial Specification------------------------------------------------------------------------------(1) (2)1. Piping and tubing designed for use as component part of medical or surgical instruments or of sports goods.2. Piping and tubing designed for use in laboratories provided each piece of such piping and tubing is manufactured in length not exceeding three metres and has a bore of a diameter not exceeding 1.27 centimetres.3. Piping and tubing designed to be, or converted in the factory of its production into component parts of machinery articles (including typewriters) provided such component parts do not perform the function of conveying air, gas or liquid (emphasis ours).b) as hydraulic or air brake hose in motor vehicles,c) as bicycle pump or motor pump connection but having inner diameter not exceeding 5mm and outer diameter not exceeding 12mm and bicycle valve, andd) in the manufacture of bushes, washers and rings." "TARIFF ITEM No. 16A - RUBBER PRODUCTS:------------------------------------------------------------------------------Item No. Tariff Description Rate of duty------------------------------------------------------------------------------(1) (2) (3)------------------------------------------------------------------------------16A. RUBBER PRODUCTS, the following namely :- 1) Latex foam sponge Fifty-five per cent Explanation ; This Sub-item includes articles made of ad valorem latex foam sponge.

2) Plates, sheets and strips unhardened Thirty-five whether vulcanised or not, and whether per cent combined with any textile materials ad valorem otherwise.

3. The aforesaid tariff item was inducted in the Central Excise Tariff (GET for short) in 1967. Case of the appellants as set out in the grounds of appeal is :- that they are manufacturers of tubings made out of synthetic rubber; two of such products bearing, the popular name 'Cots' and 'Aprons' which are said to be used as components of textile machinery. Synthetic rubber, which is taken as a raw material, is subjected to a series of processes, including extrusion and vulcanisation. At one stage, unhardened tubes emerge as a result of the manufacturing activity, which tubings, according to the appellants, are finally cut to specific lengths, according to the requirement conveyed by the customers in their orders. The appellants plead that these 'Cots' and 'Aprons' are designed according to technical patent processes and conform to ISI specifications for Synthetic Rubber Cots and Aprons (I.S. 7175-1974 and J.S. 4892-1968).

4. The genesis, as narrated in the appeal, is traced to the introduction of Tariff Item 16A in the GET in the year 1967, and the appellants allege that as a result of this entry, the pipings and tubings made by them, being of unhardened vulcanised rubber, were taken to be covered by Sub-Item (3) of T.I. 16A of the CET and they started paying central excise duty accordingly. But on an exemption Notification being issued with effect from 29-8-67; namely, Notification No. 197/67, exemption was claimed with reference thereto, which position was conceded by the Department.

5. The appellants allege 'that this stand; namely, the goods being covered by T.I. 16A (3) and then held entitled to benefit of Exemption Notification No. 197/67 was confimed by the Collector in his order dated 10-6-1968 whereby although the refund claim filed by them was dismissed on the view that the notification could not operate retrospectively but it was clearly held that with effect from the date of said notification, the products would be exempt from excise duty, and that before that there was endorsement of this position by the Collector of Central Excise also, vide his letter dated 21-10-1967.

6. The appellants further plead that this position continued, and clearances effected after due declaration on the classification lists to the effect that excisable goods were being manufactured, but cleared without payment of duty by virtue of the aforesaid notification, and even after the introduction of T.I. 68 in the GET, the Superintendent of Central Excise vide his letter dated 7-3-1975 confirmed that these goods known as 'Accotex Synthetic Rubber Cots and Aprons' were not falling under T.I. 68, and that their factory did not come to be covered under Central Excise control.

7. The appellants further contend that the decision to classify Cots and Aprons under T.I. 16A(3), and then accord benefit of exemption Notification No. 197/67, was a well-considered decision of the Excise authorities, reiterated from time to time, so much so that even Trade Notices were issued by the West Bengal Collectorate to the same effect.

But on 24-9-1980, the appellants were issued a notice to. Show Cause by the Assistant Collector, Central Excise, thane Division, Bombay, conveying to them that the Department was of the view that 'Aprons' and 'Cots' manufactured by them were excisable under T.I. 68 on the ground that they were component parts of textile machinery and were distinctly known, and marketed as such, and having not been specified under T.I.16A, these finished products, which were a separate commercial commodity than the rubber tubing and piping, were appropriately classifiable under T.I. 68 of the CET. The appellants were thus called upon to show cause as to why duty be not charged with reference to the said Tariff Item and why excise duty at the appropriate rate be not recovered from them on the past clearances under Rule 10 read with Rule 1733 of the Central Excise Rules, 1944, (Briefly referred to as the Rules).

8. Appellants, of course, contested this position placing reliance on the previous practice, as confirmed by orders passed by the Excise authorities from time to time, and pleading that no change of position had taken place, justifying any change of stand, proposed to be taken by the Revenue, and that in view of the fact that even after the induction of Tariff Item 68, the Superintendent of Central Excise, had conveyed to them that these products would not fall under the said item, and the appellants having proceeded on that assumption, and having effected clearances without passing on the burden of excise duty to the consumers; the notice to show cause was liable to be withdrawn.

They reiterated that these goods were validly classifiable under T.I.16A, and benefit of Exemption Notification No. 197/67 was fully available.

9. The Assistant Collector, after affording opportunity of hearing, upheld contentions of the appellants, by his order dated 20-11-1981.

Consequently, the notice to Show Cause dated 24-9-1980 was withdrawn.

However the Collector of Central Excise, Bombay-II opined that Assistant Collector's order, was liable to be reviewed. He accordingly, in exercise of the power vested in him, under Section 35A(2) of the Central Excises and Salt Act, 1944, as it then existed, issued a Review Notice to the appellants on 18-1-1982, intimating them that on examination of the case records, he was tentatively of the view that the order passed by the Assistant Collector was not legal and correct, and that he considered the Synthetic Rubber 'Aprons' and 'Cots' to be essentially textile machinery components, and were distinctly known, and marketed as such, and that these finished products were not covered by any of the Sub-items under T.I. 16A of the CET nor were classifiable under any other Tariff Entry 1 to 67, and as such would appropriately be classifiable under the residuary entry, namely Tariff Entry 68 and so he was prima facie of the view that the Assistant Collector had erred in holding the products in question as falling under T.L 16A{3) of the CET and entitled to benefit of Exemption Notification No.197/67. The appellants were thus called upon to show cause as to why the said order of the Assistant Collector be not reviewed, and set aside.

10. The appellants controverted the view as conveyed by the Collector's Review Notice by their reply dated 17-3-1982 reiterating that their products were nothing but rubber tubing and piping and thus covered by T.I. 16A(3) and entitled to the benefit of Exemption Notification No.197/67. They consequently defended the order of the Assistant Collector, contending that there was no justification in the proposed action of reviewing the said order.

11. The Collector, however, by his order dated 20-4-1983, declined to accept the plea of the appellants to the effect that these products (known as 'Cots' and 'Aprons') were excisable under T.I. 16A(3) and thus entitled to exemption under the notification relied upon by the party and held them classifiable, under T.I. 68, observing that the tubing and piping which appropriately fall under T.I. 16A(3), and emerge as an intermediate stage, for the manufacture of the finished products could get benefit of this exemption notification by these products, traded as "Aprons' and 'Cots', could not be so held, as they are distinctly different in character, quality, size, weight and shape.

12. It is this order of the Collector, which is being assailed in the present appeal by, reiteration of the contention that the 'Aprons' and 'Cots' are nothing but tubing of unhardened vulcanised rubber designed to be component parts of machinery articles and fully covered by the scope of Tariff Item 16A(3) read with Exemption Notification No. 197/67 and that the Collector has erred in setting aside the order of the Asstt. Collector and by holding them as classifiable under T.I. 68.

Although they do not dispute that the commodity that emerges after vulcanisation, is tubing of unhardened rubber, but the contention is that these products known as 'Aprons' and 'Cots' continue to be tubing and piping of different sizes and specifically designed to be converted into component parts of textile machinery and that the Collector has gone wrong in ignoring the evidence furnished by the appellants as to trade understanding of these products, which they had furnished by means of the affidavits of trade and industry community to the effect that these 'Cots' and 'Aprons' were known as rubber tubing and piping.

13. The appellants further contend that what the Collector has described as patent product is only an intermediate product which by itself was neither capable of being bought and sold nor known to the market and it were only the cut pieces of such tubing that were being traded as 'Aprons' and 'Cots', and that the product before cutting, as well as after, remains the same; the difference being that before the said operation, the product was not marketable and it becomes so, only after cutting into different sizes. Pleading that cutting did not amount to 'manufacture' inasmuch as it did not alter the character or quality of the article nor did it bring into existence any new substance, nor involve any chemical changes, and even all other dimensions remain the same barring the length, they contend that the Collector has erred in holding that the products before cutting, and after, are two separate entities. The appellants place reliance in support of this contention on the Supreme Court Judgments in the case of DCM V. Union of India (AIR 1963 SC 791) and South Bihar Sugar Mills V. Union of India AIR 1968 SC 922, elucidating as to what the expression 'Manufacture' implied.

14. They also contend that the Collector ought to have taken into consideration the fact that Excise authorities, from time to time, right from 1967 when T.I. 16A was for the first time introduced, had been holding these products to be classifiable under this Tariff Entry by means of regular orders passed at the level of Appellate Collector and Collector and even after T.I. 68 came into existence, the view was reiterated by the Superintendent, Central Excise, which view was confirmed by the Assistant Collector by withdrawing the notice and that the Collector had gone wrong in departing from the views, consistently held and conveyed to the appellants, in the absence of any change in the Tariff Entries or process of manufacture or any other contingency, such as withdrawal of the Exemption Notification and that there was no justification on the part of the Collector in not accepting the finding of fact recorded by the Assistant Collector, which he had done after going into the evidence and after personally inspecting the factory and seeing the manufacturing process and which he had narrated in detail in his order, stating clearly that the final operation was only cutting of rubber tubing and piping into smaller tubes of specific lengths to obtain 'Cots' and 'Aprons'.

15. The appellants thus plead that 'Cots' and 'Aprons' do not cease to be tubings, merely because they have been cut into smaller tubes. They lay particular emphasis on the fact that whereas Sub-item (2) of the Exemption Notification, restricts the length of tubing to a specified size, it was not so in the case of Sub-item (3), whereunder they were claiming benefit, and that inasmuch as "Cots' and 'Aprons' manufactured by them are in length as long as one foot or even more depending upon the requirement of the customers, they retain the inherent characteristics of tubing and pipings, and could not be treated as different products. They thus assail the view of the Collector that the resultant products known as 'Cots' and 'Aprons', were different from piping and tubings from which they have been cut, and which only could be entitled to benefit of Exemption Notification, accessing to them, they fulfil all the conditions of the said notification. Attributing lack of appreciation on the part of the Collector of the real issues involved, the appellants assert that their products are nothing else but tubing and piping of vulcanised unhardened rubber classifiable under T.I. 16A(3), and inasmuch as they are designed to be, and are converted into parts of textile machinery, they come within the ambit of Sub-item (3) of the notification and that Collector's order, holding them to be classifiable under T.I. 68, was not sustainable.

16. Shri D.B. Engineer arguing for the appellants canvassed the same arguments as set out in the grounds of appeal, and reproduced above. He highlighted the wording of exemption notification on which the appellants are placing reliance, and all different Sub-items thereof, to draw out the distinction that whereas Sub-item (3) on which the appellants rely, did not contain any reference to minimum or maximum length, the preceding Sub-item specifically saying so, by laying down maximum length in meters, as well as the diameter of the bore, in terms of specified centimeters, and further that the 'Aprons' and 'Cots' did not involve any process other than simple cutting to shorter given lengths from the tubings which the Collector has held entitled to this benefit of exemption notification. He emphatically argued that inasmuch as these tubings and pipings did not undergo any chemical process nor transformation other than reduction in lengths by simple cutting operation, and that they continued to retain the character of tubings and pipings and since they are "designed to be", and "converted" in appellants' own factory, into parts which serve as components of textile machinery, they come fully within the ambit of Sub-item (3) of notification under reference and the fact that they carry a trade name : as 'Aprons' and 'Cots' would make the least difference.

17. While clarifying that it was not disputed that the basic raw material for these Aprons and Cots was synthetic rubber and that it passes through highly sophisticated processes, including threading, to satisfy the technical specifications, he emphasised that right from the beginning these rubber tubings and pipings are designed as such with the end-product; namely, Aprons and Cots in view, and went back to his arguments that the 'Aprons' and 'Cots' would still remain tubings, because the only process intervening before they emerge as final products is that of cutting which was not a manufacturing process and that since the notification permitted conversion, these products cannot be deemed anything other than tubing and piping.

18. The learned Counsel relied on the meaning attached to the term conversion or 'converted', in the Random House Dictionary, and produced an extract thereof arguing that it meant complete transformation or metamorphis, and that even if, as a result of cutting operation, it could be said that a new product had come into existence, even so benefit of exemption notification would be available since the wording of this notification permitted "conversion". He also relied on Webster's 3rd International Dictionary in support of his argument that by tubing, one understands any material for tubes, and that in this view of the matter also whatever the length of the finished products, they very well came within ambit of the expression 'tubing'.

19. Shri Engineer formulated his arguments in four propositions, urging that his first endeavour would be to show, as already argued, that on plain interpretation of the terms of the notification and the background thereof, 'conversion' having been permitted, and the 'converted' thing having been covered by the notification, even after cutting into smaller pieces, the tubings would be exempt particularly when no length has been specified to earn this exemption. He placed reliance in support of this argument on a Bench decision of the Tribunal: 1983 ELT 2020 (CEGAT) -Arvind Mills Ltd., Ahmedabad v.Collector of Central Excise, Baroda, and further referred to a Tariff Advice issued by the Central Board of Excise & Customs in 1980, being Tariff Advice No. 59/80, dated 27-9-1980, to the effect that woollen blankets made from fabrics in running length after cutting into required sizes, hemmed and stitched with satin borders, would continue to be classifiable under T.I. 21 of the GET, and urged that when stitched handkerchiefs as in the Arvind Mills case (supra), or bordered and hemmed blankets cut from woollen fabrics of running length, as contemplated by Tariff Advice of the Board, could be treated as falling within T.I. 19 of 21, respectively, why could the tubing and piping irrespective of their length, not continue to be treated as tubing and piping, as contemplated by the exemption notification.

20. He then went on to his second contention, namely: there having been no change in circumstances; there was no justification for change of view on the part of the departmental authorities, adding that introduction of Tariff Item 68, was not such a change as would justify reversal of the previous view taken by the authorities over the years.

Shri Engineer recapitulated history of the case, as already brought into focus when, from time to time, Excise authorities have been confirming to the appellants that the subject products were entitled to benefit of Exemption Notification No. 197/67, as rubber tubings and pipings. The learned Counsel referred to a series of court judgments as well as of the Tribunal and of Government of India to support his contentions on different aspects of the controversy which rulings, we propose to refer to, and discuss in their proper context.

21. Finally, Shri Engineer criticised the order passed in review contending that it was absolutely uncalled for and that there was mis-appreciation of evidence on the part of the Collector as also violation of the established principles of natural justice inasmuch as although the appellants had placed before the Collector in reply to Review Notice, a number of affidavits certifying as to the true nature of these products and how they are known in commercial parlance, and argued that not only the Collector had betrayed lack of appreciation of this evidence as to trade understanding, but he had further erred in ignoring the same although the Department had not placed on record an iota of material to rebut this evidence furnished by the appellants. He laid great emphasis on this aspect by highlighting the fact that personal hearing had taken place on 22-7-1982 by which time these affidavits had been placed on record and although the orders were passed on 26-4-1983, i.e., practically after nine months, no attempt was made to procure any material to controvert the plea of the appellants, placed before him in the shape of affidavits. He concluded his arguments by again stressing that even though 'Aprons' and "Cots' may be treated as distinct items but since conversion was permitted by the notification which he characterised to be peculiar, and of its own type, this made all the difference to appellants' case.

22. However, before Shri K.D. Tayal, SDR, commenced reply arguments, on the resumed hearing, Shri D.B. Engineer wanted to present an application for amendment of certain portions of the appeal, stating that in paragraphs 1 and 2 of "Statement of Facts", the word 'manufacture' has crept in by inadvertance and that the appellants sought permission to delete the' same as it was their contention that mere cutting was involved which was not a process of manufacture.

23. The learned SDR opposed this prayer by asserting that this was not a case of inadvertance inasmuch as, right from the beginning, that is, from the date of reply to Show Cause Notice (vide para 3-Ex./C) they had used this expression and it was not now open to them to turn round and say that no manufacture was involved. It was, however, made clear to both the sides that, the decision in the case would depend upon the substance, and not on the words used or employed in the pleadings.

Appreciating this position, Shri Engineer did not press his application, though reiterated that the stage of conversion of tubing and piping into Aprons and Cots did not involve any manufacturing process. He also placed on record certain papers in accordance with the requisition made by the Bench during hearing; one of those being, Appellants' letter to the Superintendent, Central Excise, written on 6-3-1975 in reply whereto Superintendent's letter dated 7-3-1975, on which the appellants placed reliance, was addressed. He also furnished a copy of Department's letter dated 1-3-1975 and also certain copies (four) of the Classification Lists for the period 1975, 1977-1979. ' 24. Shri Tayal, at the outset, controverted the contention that no manufacture was involved for bringing into existence this last product.

He cited a number of authorities of High Courts as well as CEGAT where processes, such as drilling of holes, packing of matches in match boxes, powdering of rocks or mixing of coffee with chikori, or process of cutting of paper or bagasse coming out as a result of crushing of sugarcane, or saw dust emerging on sawing of wood, are all held to be amounting to manufacture.

25. He also distinguished the Case Law cited by the learned Counsel for the appellants in this regard, starting from the Government of India decision reported in 1981 ELT 502 in Re. Bralco Metal Industries Pvt.

Ltd. stating that this case was in direct conflict with the judgment of the Division Bench of Bombay High Court in Kores (India) Ltd. v. Union of India and Ors. reported as 1982 ELT 253 and submitted that the view of the High Court has to take precedence over that of revisionary authority, particularly when the Bombay High Court's judgment is of much later date and highly reasoned one, citing all relevant Case Laws as against extremely short order recorded by the Revisional authority.

He further contended that the CEGAT decision in the Arvind Mills case (supra) was also distinguishable because that case, as well as the Tariff Advice relating to blankets, pertained to T.I. 19 or 21 which envisage stitched and embroidered products. Similarly, according to him, in the case reported as 1980 ELT 249 (Garware Nylons Ltd. v. Union of India) decided by Bombay High Court as well as the case decided by Delhi High Court and reported as 1981 ELT 667 (Trilochan Singh v. Union of India and Ors.), the products remain the same, namely; whereas in the former nylon twine was held to be same as nylon yarn, in the latter, the only process was that of sizing of yarn, which was adopted only as an aid in weaving, and no distinct commodity comes into being as a result thereof.

26. He vehemently contended that the end-products in this case; namely, 'Aprons' and 'Cots' could not be considered same as piping and tubing because these products carry a distinct use and trade name and that whereas piping and tubing signify some material in running length, these Aprons and Cots were specific things of given sizes. He further referred to the technical data prepared in the form of a booklet by the appellants, copies whereof were supplied during hearing, in reply to a query by the Bench, which indicated positively, according to Shri Tayal, that apart from the fact that they were prepared in accordance with specific technical requirements; otherwise also, these involved processes, further than cutting, inasmuch as bevelling of edges was also involved, and that the very fact that there are separate 151 specifications for both the products, establishes that these products had a recognised trade nomenclature and was not just a name given by the appellants or their principals, as was the suggestion during hearing. He also placed reliance on Case Law in support of this contention that ISI specifications indicate true trade meaning.

27. He defended the order of the Collector by reiterating that the scope of notification would extend only to the initial items, which are admittedly tubings, but could, in no case, cover these, finished products, which were definitely products having a distinct trade name, use as well as character. He further highlighted the fact that whereas sub-item (1) of T.I. 16A carried an Explanation to include articles made of "Latex foam sponge" which was the subject matter of sub-item (1); sub-item (3) did not carry any such explanation or extended meaning, with the result that this sub-item would cover only tubing and piping, and not articles made thereof or therefrom.

28. He also countered the plea that the Department was stopped from changing the stand contending that there was no estoppel against the Revenue and that decisions of the Collector or the Appellate Collector were all before the introduction of T.I. 68, and all that we have, after the coming into existence of T.I. 68, is a letter of Superintendent of Central Excise, which could not be considered to be an order in the nature of an adjudication. He further relied on the case of Bawa Potteries v. Union of India and Anr. decided by the Delhi High Court reported in 1981 ELT 114 holding that power to review earlier decision, was inherent in the wording of Rule 10. He went to the extent of saying that there was no inequity involved by seeking to raise the demand by invoking Rule 10, dating back six months from the Show Cause Notice issued on 24-9-1980 as, according to him, burden could be passed retrospectively subject to time limit and for cogent reasons. He further contended' that when it was clear that these products, namely, Aprons and Cots were not covered by specific entry of T.I. 16A, then they have to be taken to be falling under T.I. 68 and that the Explanation, now appended to T.I. 68 would not make any difference, as a Tariff Item could not be modified by notification.

29. He also countered the proposition that in every case of two views being possible, the one propounded by the assessee and favourable to him should be adopted, urging that in such an event, legal view has to be preferred and in support of this contention, he cited AIR 1973 SC 194 (V.V. Iyer of Bombay v. Jasjit Singh, Collector of Customs and Another) and 1981 ELT 642 decided by Delhi High Court in case Hindustan Aluminium Corporation Ltd. v. Supdt. of Central Excise, Mirzapur and Another adding that even the industrial licence of the appellants (page 30) indicates that these Rubber Cots and Rubber Aprons were introduced as a result of expansion programme and the description of the goods was "other rubber goods" which meant that they were supposed to be rubber goods, other than covered by T.I. 16A.30. Shri D.B. Engineer in a short rejoinder stressed that every word of the notification under reference was material and has to count and that this being couched in a language which suggested that even "converted" tubings were exempt, and that consequently even though these may be carrying distinct names, they would still remain tubings and pipings.

He further argued that concept of manufacture could not be mixed up in this situation, when it has been factually established that no more than cutting, which he described to be the simplest process, was involved and that it should be seen in the light of the overall picture as to whether, cutting here, amounted to manufacture or not and in any case, this, according to him, was permitted by the notification itself (conversion).

31. He further made reference to ISI specification No. I.S. 4892-1968 pertaining to Aprons, saying that these specifications clearly indicate that the products were made up of tubes, and that size of the end-products was not material and that rubber was a general parent product for all types of tubings and pipings, of all sizes and so ISI specifications were no answer to his contention and further that there was no reply to his argument that the Department did not take any step to furnish a single counter-affidavit though they had all the means to do so to rebut the evidence of the appellants, supplied by means of trade affidavits. He also explained with the help of the General Manager (Operations) of the Company that what has been described by the learned SDR as catalogue, was only technical data meant for the information and guidance of the consumers, indicating as to what type of requisitions they were expected to convey, so that the products were free from any complaints or defects subsequently, and that this technical data was no evidence of the commercial meaning attached to these products.

32. He concluded by asserting that there was no cogent reason for change of view except for the Tariff Advice issued in 1980 by the Central Board of Excise & Customs (hereinafter referred to as the Board), and that the show cause notice came round about the same time, and that there was every reason to believe that proceedings had been initiated in the background of this Tariff Advice in reply to which Shri K.D. Tayal, intervening, shortly, asserted that there was judgment of Delhi High Court holding that there was nothing wrong in Tariff Advices being issued by the Central Administrating authority by way of guidance for all, and that in this case there was intrinsic evidence that the decision is not based on this Tariff Advice inasmuch as, apart from the fact that the show cause notice is of a date prior to the date of the Tariff Advice, otherwise also, the very fact that the Asstt.

Collector had, in the first instance, withdrawn the show cause notice, shows that the Excise authorities acting quasi-judicially, have taken an independent view, and were not guided by the Tariff Advice, issued by the Board.

33. Shri Engineer summed up his arguments with an alternative prayer making it clear that although he was not conceding that the end-products were excisable under T.I. 68 but in case these were held to be so; in view of the background of the case, and the orders passed by the Excise authorities and the communication sent by them from time to time, there would be no justification, in any event, for recovery being made retrospectively, and that at best it could be prospectively, i.e., from the date of the order of the Collector.

34. We have given our earnest consideration to the contentions, canvassed by the learned Counsel and we consider it expedient to deal with the points made by him at seriatim.

35. Since the main thrust of his arguments was the terms of the notification which the appellants are pressing into aid, to claim complete exemption for their products, we consider it expedient to take up this issue first. Even after keeping in full focus the stress laid by the learned Counsel on the expressions, used in the relevant sub-item (No. 3 of the Table of the notification, which he termed to be peculiar), we cannot persuade ourselves to concede the argument, adopted by the learned Counsel to the effect that exemption of duty would be attracted at two stages; namely, firstly to the pipings and tubings and then to the finished products, which are marketed as: "Aprons' and 'Cots'.

36. It can be nobody's case that the pipings and tubings, which the appellants admit to be involving a highly sophisticated and specialised process, would not have been excisable, even as intermediary products, but for this exemption notification. The appellants can have no grievance on this count because the Collector, has already conceded this benefit. It is thus manifest that in spite of the high degree of technical specialisation involved in the manufacture of these tubings and pipings, and which would have been otherwise exigible to excise duty, even when captively consumed, by virtue of this notification, they are allowed free of excise duty.

37. We are constrained to record that the appellants are stretching their point beyond any degree of plausibility when they contend that even the finished products, though having a specific trade name and connotation, would, nevertheless, be treated as tubings and pipings, so as to again earn exe'mption, under the same notification. We say so because the Preamble to the notification makes it abundantly clear that the exemption is meant to operate only in respect to what is known as 'pipings' and 'tubings' of unhardened vulcanised rubber. We have already noticed that this description applies to running lengths of pipings and tubings, from which other products may be prepared. These 'Aprons' and 'Cots' brought into existence by means of cutting operations, and some further processes which we will detail a little later, are thus some of those products. The plain meaning of sub-item (3), as we see it, is that these tubings and pipings which would have been otherwise liable to excise duty under T.I. 16A(3) would be exempt from excise duty if following conditions are satisfied, namely, (a) they are "designed to be" or are "converted" in the factory of their production; (b) into component parts of machinery articles. No intention can be spelt out from the wording of this sub-item that even such resultant component parts Would also be exempt.

38. 'Appellants' contention is thus liable to be utterly defeated on the plain interpretation of the term of the notification, but since the matter was pressed in great detail, we feel incumbent upon us to consider all aspects of the controversy raised in this behalf.

39. The foremost argument of the learned counsel in this regard was that irrespective of carrying a specific name; no manufacturing process intervenes between the stage of 'tubings' and 'pipings' and their conversion into these "Aprons' and 'Cots', which are components of textile machinery, except for bare cutting in shorter lengths. It was urged that to amount to manufacture, there ought to have been involved a complete change in the substance, what was described as transformation, but in this case, the argument ran, what was tubings and pipings remain so, except for reduction in length, even after cutting.

40. We have examined this contention with great care in view of reliance placed by the appellants on the authorities of the Hon'ble Supreme Court; namely, in the case of Union of India and Another v.Delhi Cloth & General Mills Co. Ltd. and Ors., AIRSouth Bihar Sugar Mills v. Union of India (AIR 1968 SC 922) and that of Dunlop India Ltd. v. Union of India and Ors. (AIR 1977 SC 597) and that of Delhi Cloth & General Mills Co. Ltd. v. State of Rajasthan. and Ors.

1980 ELT 383 (SC) laying emphasis on the dicta that every process did not amount to manufacture, and that words or expressions must be construed in the sense in which they are understood in the trade, and commercial community, that is, by dealers and consumers, and that understanding would constitute index of the legislative intention of statute or Tariff Entry, and that trade parlance test has to be preferred to dictionary meanings, or other technical references.

41. We are afraid, no part of discussion in the above quoted authorities lends any sustenance to the contentions put forward on behalf of the appellants inasmuch as the first principle laid down in the basic authority reported as Union of India v. Delhi Cloth & General Mills Co. Ltd. was that although ever process may not tantamount to manufacture, but the test laid was that whenever any distinct object, having a specific character, use and trade name emerges, then manufacture has to be assumed to have been inherently involved. Their Lordships also stressed that the test was how the trading community understands or uses a given product and as rightly pointed out by the learned SDR with reference to the same authority that the Indian Standards Specifications (I.S.I. for short) furnish most clinching evidence of trade meaning attached to a product, which proposition he further fortified by citing a Bombay High Court authority in case Devidayal Rolling & Refineries Pvt. Ltd. v. A.V. Barkar, Supdt. Central Excise and Ors., reported as 1983 ELT 338, laying down that "definitions of terms given in ISI should be preferred to British Standard Institutions and Ors.".

42. Given these guidelines, when one proceeds to examine the subject goods, it is apparent that they have a very special type of use for the textile industry and the very fact that there have to be Indian Standards Specifications for them, since as far back as 1968 and 1974, is suggestive of the fact, beyond any iota of doubt, that these products have a distinct trade meaning and nomenclature than what goes by the generic name of tubings and pipings.

43. We would like to reproduce a paragraph from the ISI specification pertaining to 'Aprons' - IS: 4892-1968 and it will be noticed from para 0.2 set out below that these 'Aprons' which work in conjunction with 'Cots' have a very specialised function to perform in the textile machinery :- "0.2 Rubber aprons for drafting systems are tubular bands of rubber used in conjunction with the drafting rollers of apron drafting systems for the purpose of exercising control on the movement of fibres in drafting zones by virtue of their resilience. Such aprons provide a sort of semi-positive grip on the fibres, thus preventing them from being carried forward out of turn in bunches to cause drafting irregularity. Such aprons are also made of leather to serve the same purpose." 44. The specifications further provide that these aprons should be smooth, uniform in texture and pliable so that they are liable to bend themselves to the shape of the sharp angle nose bars, and the products themselves, as would be indicative from para 3 onwards, are a result of a manufacturing process, which is a highly intricate one. Same observations apply to the twin product; namely, 'Cots' which are described in IS: 7175-1974 to be meant, "for top rollers used in textile spinning machinery". It is further noticed from Appendix-A to these specifications that specialised type of buffings is needed before the Cots can be pressed into service.

45. This explains the contents of page 13 of the technical data, printed by the appellants themselves, for the guidance, of their consumers. It is apparent that bevelling of edges is one of the essential requirements for the 'Cots' which the General Manager (Operations) explained, was needed for smooth operation. It thus becomes obvious that this bevelling or chamferring or buffing is essential operation before the 'Cots' are* put into use in the machinery, and this is carried out after cutting into specified lengths. We, therefore, do not find it possible to sustain the contention that 'Aprons' and 'Cots' are nothing but tubings and pipings converted into shorter lengths as we find on reference to the IS specifications and even technical data of the appellants and the facts set out-in the appeal that they are objects having a different trade name, character and usage, and thus even on the principles laid down by the Hon'ble Supreme Court in the authorities cited on behalf of the appellants, these have to be treated as manufactured products.

46. We may observe in passing that even according to the meaning given to the term: 'Tubing' in Webster's Dictionary the subject products cannot be treated as tubing because they no longer remain 'material' for tubes but become finished goods, with an entirely different connotation.

47. We find endorsement for our view from a series of judgments of various High Courts as well as CEGAT enunciating principles, where very simple processes have been held to be tantamount to manufacture in view of the definition of the term 'manufacture' as it now exists in Section 2(f) of the Central Excises and Salt Act, 1944, so as to include any process 'incidental' or 'ancillary' to the completion of a manufactured product. We have already noted that tubings and pipings by themselves cannot function as components of textile machinery, but because they have been, from the very beginning, so designed as to be fit to be converted into 'Aprons' and 'Cots' which have technical specifications, the process which the appellants described simply as cutting is one of the essential processes, and may be penultimate one but nevertheless part of the integrated technology; - in any case, a process, which is 'incidental' or 'ancillary' to the completion of these products, known as 'Aprons' and 'Cots', and which are definitely 'manufactured products'.

48. Such a view has been propounded in a catena of authorities. The one most pertinently relevant to the point in controversy, is the case of Kores (India) Ltd. v. Union of India and Ors. 1982 ELT 253 (Bom.) (cited by the learned SDR), where a Division Bench held that "even the process of cutting large rolls of paper into specific sizes and dimensions, and to roll them into teleprinter rolls with the aid of power driven machines amounts to manufacture under Section 2(f) of the Central Excises & Salt Act, 1944". We also endorse the contention of the learned SDR that to the extent that there is a Division Bench decision of Bombay High Court specifically on this point, the Government of India's decision relied upon by the appellants, namely, 1981 ELT 502 in Re. Bralco Metal Industries Pvt. Ltd., stands superseded.

49. Besides, there is umpteen number of reported cases, as cited by the SDR, where much simpler processes have been held to be amounting to manufacture in the context of the use of the particular products involved in the respective cases. For instance, in case Metro Readywear Co. v. Collector of Customs reported as 1978(2) ELT (3 520), the High Court of Kerala held the process of ironing applied to readymade garments before they could be packed for marketing, as process of manufacture, so as to make them liable to excise duty.

50. Similarly, the High Court of Andhra Pradesh, (again a Division Bench), held in case Brook Bond India Ltd. v. Union of India and Ors.

(1983 ELT 32) which was a case of simple mixture of coffee and chicory, that whenever a separate commercial commodity emerges or comes out by the mixture or combination of more than one goods by whatever process, the new commercial goods become separately taxable under the Act, and that even if the mixture takes place by mere mechanical process, that will constitute process of manufacture as this brings into existence a new and different article, commercially known as 'French Coffee'. This thus defeats the argument of the appellants, that to amount to manufacture, some chemical process resulting in complete transformation must be involved. Even processes, such as packing of 'match' in a match-box, has been held to be manufacture, within the meaning of Section 2(f) of the Act, by High Court of Madras in case: Asstt.

Collector of Central Excise v. Subramania Chettiar, (1980 ELT 609).

51. We, in the Tribunal, have held in a chain of cases that processes such as crushing of sugarcane, resulting in a product commercially known as bagasse (1983 ELT 1186-CEGAT) in case Carew & Co. Ltd. v.Collector of Central Excise, Allahabad; powdering of rocks to produce the product: known as pyrites phosphates, (a variety of a chemical fertilizer) (1983 ELT 1192-CEGAT) in case Pyrites Phosphates & Chemicals Ltd. v. Collector of Central Excise, which in turn was based on Delhi High Court judgment in case: Hyderabad Asbestos Cement Products Ltd. and Anr. v. Union of India and Ors. (1980 ELT 735); conversion of copper chromium rods into copper inserts, by process of chamferring, i.e., cutting to required sizes or grinding off bevel-wise (1983 ECR 703-D in case M/s. Sundaram-Clayton Ltd. v. Collector of Central Excise, Madras); doubling of yarns (1983 ELT 1853, in case: Aditya Mills Ltd. v. Collector of Central Excise, Jaipur); all amount to manufacture.

52. In face of this preponderance of the authorities, and in view of the clearly established proposition that whenever a product separately known to commercial community comes into existence, as a result of whatever process, manufacture is involved so as to make the end-product liable to duty, the argument cannot be countenanced that cutting, which, in this case happens only to be one of the steps for bringing into existence these 'Aprons' and 'Cots', would not amount to manufacture, so as to attract excise duty.

53. We consider it expedient here to distinguish the cases cited by the learned Counsel; the first being that of Arvind Mills Ltd. v. Collector of Central Excise (1983 ELT 2020 - CEGAT) where handkerchiefs, though stitched and hemmed, have been held to be cotton fabrics within T.I. 19 as compared to T.I. 68. This case is clearly distinguishable, as description of the term 'cotton fabrics', as enshrined in T.I. 19 of the GET, contemplates products which have undergone stitching etc.

Bench decision was thus in recognition of this definition, inherent in the Tariff Entry itself. The same principle would explain the trade notice relating to woollen blankets, relied upon by the appellants, issued in 1980 because T.I. 21, similarly covers, even embroidered articles made of wool.

54. Similarly, in the case relating to sizing of yarn cited as 1981 ELT 867 (Bom) (Shreeniwas Cotton Mills Ltd. v. Union of India), it has been stated in the judgment itself that sizing of the yarn was not an essential process for the manufacture of yarn and that in fact yarn has already come into existence, and that this is applied only to facilitate weaving and in fact fabric has again to be 'de-sized'. It was obvious in this context that it was held that process of sizing did not make the yarn a different commodity, because no manufacturing process to change the commodity, so as to result in the emergence of a new substance, was involved. As against that, in the case in hand, definitely distinct products, with specified uses, and carrying special trade understanding in commercial parlance, with intricate specifications, to meet specified technical requirements of a high degree, come into existence, and are products so well-known commercially, and are having a recognised trade nomenclature, to the extent that there had to be separate I.S.I. specifications, in respect thereto, No better evidence of their being, 'manufactured products', having a definite trade and commercial meaning was thus required.

55. We would also like to dispose of in passing the contention put forward very vehemently that the appellants had furnished evidence of trade- meaning, which remains uncontroverted, and that to that extent the Collector erred in ignoring the same. We find that, in the first place, what were described as affidavits are in fact only letters from dealers (Annexure-IV collectively) and some confirmatory letters from the consumers of the appellants (Annexure-V collectively). They are apparently procured, on requisition, and so worded as if to meet the points in controversy. They are having a pronounced partisen tinge, and cannot be considered to be such material, as could be having any backing of technical authority, or from any Institute which could not be suspected of lack of objectivity, or betraying interest in the appellants. Apart from the fact thus that these letters do not contain such material as deserves controversion or which was intrinsically worthy of credence; otherwise also, the Collector while reviewing his subordinate's order, on the basis of material on record, was not expected to go about collecting evidence, and the proceedings before him were not in the nature of adversary proceedings. So there was no occasion for any rebuttal evidence. The letters by themselves do not convey much, because, they also describe 'Cots' and 'Aprons' as component parts of spinning and textile machinery. The portion, that the products were nothing, but "rubber tubings", strikes as mere superfluity, given on requisition of the appellants, and thus rightly ignored by the Collector.

56. We have thus not an iota of doubt in our mind that these products, known as 'Aprons' and 'Cots' are finished manufactured products, wholly distinct from tubings and pipings, from which they are made, and thus appellants' claim for benefit of exemption for these products is not at all tenable, with reference to Notification No. 197/67-CE. In the result, we do not feel called upon to examine the plea convassed by the learned Counsel that in the event of doubt in the matter of interpretation of fiscal statutes, benefit should go to the assessee.

57. Even the Supreme Court has held that where two alternative interpretations are possible of the scope and applicability of a certain provision, and when the Customs authorities are found to have adopted a reasonable view, though favourable to the Revenue, then the finding cannot be assailed merely because another view as against the one adopted was possible (AIR 1973 SC 194 in case of V.V. Iyer of Bombay V. Jasjit Singh, Collector of Central Excise and Ors.).

58. We also find that the impugned order of the Collector is based on his own reasoning arrived at after complete consideration of the issues before him, and we do not find it to be a case where the Collector can be said to have been persuaded to undertake the review by virtue of the existence of the Tariff Advice, issued by the Board, nor is any such indication discernible, on a reading ot the order. Apart from the fact, as held by the Delhi High Court, in order passed in Writ Petition No.3980/82 in M/s. Orient Ceramics Industries Ltd. y. Union of India and Ors. (copy whereof was filed by the SDR) that there was nothing inherently objectionable in issuance of Tariff Advices, which the Board, as a Centrally administering authority, may feel expedient to ensure uniformity in approach by the assessing authorities; otherwise also, the present one happens to be a case where the adjudicating authorities have not gone by the Tariff Advice which inference is unmistakably clear from the fact that the Asstt. Collector had even withdrawn the Show Cause Notice, besides the fact, that notice itself was issued on a date prior to that of the Tariff Advice. Having endorsed the finding of the Collector on merits, we do not think that the order can be considered to be suffering from any infirmity, simply because there had been a Tariff Advice of the Board issued around the time when proceedings were initially taken up.

59. Having come to this conclusion, and having held that these products are excisable under T.I. 68, the only contention remaining to be examined is as to whether in view of the past history, the Customs authorities were justified in undertaking revision of their stand and if so as to with effect from which date that could be taken up. We have examined this point with great care and although we do not find it possible to subscribe wholly to the contention put forward by the appellants, based on certain authorities, such as, Deepak and Co. v.Central Excise, Division X, Dadar, Bombay and Ors. 1980 ELT 3 (Bom), Camlin Private Ltd. v. Union of India and Anr. 1981 ELT 1 (Bom), Tata Iron & Steel Co. Ltd. v. Collector of Customs, Calcutta 1983 ELT 1113 (CEGAT) that having once taken a view, excise authorities are debarred from revising or reviewing the same for all time to come because all those cases involved modification of stand by subordinate authorities or same authority without any change in position. We, on the other hand, consider that a balance has to be struck on the guidelines laid down by High Court of Delhi in two cases reported as 1981 ELT 114 (Bawa Potteries, Mehrauli v. Union of India and Anr.) and 1981 ELT 328 'O.K.Synthetics Ltd. and Anr. v. Union of India and Ors.) where certain situations have been recognised, such as subsequent judgment of higher authority or change in Tariff Entry or withdrawal of previous notification or issuance of fresh notification or some other similar cogent reasons; the former case going to the extent of holding that power of review was inherent in the wording of Rule 10. The synthesis of the view, enunciated in the aforesaid two authorities, has been worked out in a Bench decision of the Tribunal reported as Nuchem Plastics Ltd. v. Collector of Central Excise, Delhi, 1983 ECR 1888-D (CEGAT).

60. In view of this position and finding that order of the Appellate Collector as well as Collector's letter in this case, were both prior to the introduction of Tariff Item 68, and what came subsequently thereto was only a letter of the Superintendent of Central Excise, issued on 7-3-1975, issued in reply to a communication addressed by the appellants a day before; namely, on 6-3-1975. Thus there was no bar in the way of the higher authorities in undertaking examination of the correct position, which was done by issuing a Show Cause Notice and affording full opportunity to the appellants and the authorities acted in a manifestly fair manner, as evidenced by the fact that at one stage even the Show Cause Notice was withdrawn. It is thus a case where Collector's Review Order is certainly for cogent reasons, and within the ambit recognised by the judicial authorities.

61. However, we find justification in the plea made alternatively that in any case in view of the previous stand consistently conveyed to the party, the demand for recovery of duty retrospectively could not be sustained. We, therefore, considering peculiar circumstances of this case, consider it to be a fit case to hold that the demand of duty for the period preceding the date of the Show Cause Notice, was in no case justified. Although learned Counsel for the appellants urged that the demand should be enforceable with effect from the date of the Review Order of the Collector, but we feel that the party was put on notice, that the Department was likely to undertake a review of the position as soon as the Show Cause Notice was issued on 24-9-1980. We were also given to understand during hearing that in fact duty was paid from that date under protest, and passed on to the consumers. We, therefore, think that it will be both justified in law, as well as in equity, if the demand for excise duty by reference to T.I. 68 for these products is held enforceable with effect from the date of the Show Cause Notice, i.e. 24-9-1980.

62. As a result of the foregoing discussion, whereas the appeal is dismissed on merits, the period of demand is modified, as aforesaid; i.e., with effect from 24-9-1980.

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