1. The matter in dispute in this case relates to liability of the imported item which is described as "pulp stones" for purposes of countervailing duty.
2. According to records, the import took place on 7/8-2-1980 and the goods were classified under heading 68.01/16(2) of the Customs Tariff for basic Customs Duty whereas for the purposes of countervailing duty it was held to be falling under Item 51 of the Central Excise Tariff.
The party was made to pay an amount of Rs. 94,625.77 on account of countervailing duty in addition to customs and other duties.
Subsequently an application for refund was made on the contention that the imported goods were not liable to any countervailing duty, and that Tariff heading 51 had been wrongly applied.
3. This prayer for refund made by M/s. Lee & Muirhead (I) Pvt. Ltd., Bombay on behalf of importers, namely, M/s. National Newsprint & Paper Mills Ltd., was rejected by the Assistant Collector of Customs, Bombay by his order dated 12-6-1980 holding that goods imported were "Norton" grinder pulp stones. He further observed that these stones had got the function of grinding and were in the nature of tools and, therefore, correctly classified under Tariff Entry 51 of CET. He accordingly upheld charging of [email protected]% ad valorem, which was the rate contemplated by Tariff Entry 51.
4. The party went in appeal before the Appellate Collector on the same plea, namely, that the consignment was not liable to be charged to countervailing duty with reference to Tariff Entry 51. The Collector of Customs (Appeals), Bombay by his order, passed on 15-11-1980, rejected the contentions of the party, and dismissed the appeal by holding that imported items were pulp stones and definitely answered the description of grinding stones made of abrasives. He, no doubt, observed that the description of the goods adopted by the Assistant Collector was erroneous inasmuch as they could not be treated to be in the nature of tools and to that extent, the order of the Assistant Collector was not sustainable as it unduly created an impression that the customs authorities had not understood the nature of goods but feeling that the goods squarely fitted in the description of Tariff Item 51 of the CET, he thought it a fit case to uphold the assessment, though disagreeing with the reasoning given by the Assistant Collector.
5. The party instructed their agents to approach Government of India with a revision petition against the dismissal of the appeal on the ground that no countervailing duty was chargeable on these type of pulp stones and that these stones were used in the grinders of their ground wood machinery and were heavy grinding stones of a special type, not indigenously manufactured.
6. This revision petition has been received by the Tribunal, on being transferred by virtue of provisions of section 131 B(2) of the Customs Act, 1962, and is being disposed of as if it were an appeal filed before the Tribunal.
7. At the time of hearing, Shri D.N. Kohli, Consultant appeared for the appellant and argued that the imported goods were merely grinding stones not covered by Tariff Entry 51 and were in the nature of pulp stones employed in their wood grinding machines for the purpose of making pulp out of wood, required for the purpose of manufacture of newsprint paper. He vehemently contended that this item did not at all fall within the description of the articles described under Tariff Entry 51 of the CET. He further urged that this heading was confined so far as this species of goods are concerned only to grinding wheels, and the expression "the like" would have reference only to similar articles, and would, in no case, stretch to these grinding pulp stones.
He thus reiterated the plea raised in the appeal that no countervailing duty was chargeable and the same was liable to be refunded.
8. Shri M. Chatterjee appearing for the Department countered the arguments of the learned Consultant by urging that the Tariff Entry 51(2) would encompass within its scope these items described as grinding stones because, according to him, the term "the like" used after grinding wheels was of wide amplitude. He further contended by reference to the Explanatory Notes to the Customs Cooperation Council Nomenclature that Chapter 68 thereof, particularly part .04, clearly indicated that this heading, which included "grinding stones and grinding wheels and the like," would cover - "mill stones and grinding stones often of considerable size for crushing, grinding... pulping wood...and paper makers and paint mixers, grinding stones, etc." He thus argued that Clause (1) appended to Chapter 68.04 of the aforesaid notes made it pointedly clear that grinding stones used for pulping wood would also be covered under this description and that consequently the stand taken by the Department was unassailable.
9. He also referred to a book entitled "Grinding Wheels and Machines" by P.S. Houghton in which there was a specific heading at page 309 as "wood" of the following description ; The abrasive wheel is used to grind logs of spruce, fir, or pine into pulp for paper making. The logs are first cut to length and barked, then pressed against the abrasive roll roughly 4 ft. in diameter and 5 ft. long." 10. We have taken into careful consideration the respective contentions canvassed on both sides and have gone through the impugned order-in-appeal as well as the adjudication order. We observe from these two orders that the goods have been positively treated as "grinding stones". The description of these goods in the invoice is "Norton" grinder pulp stones and the statement of the function of the grinder pulp stone submitted by the party, with the appeal, and also in their letter on the basis of which the appeal is filed, categorically states that these were grinding stones of a special type. In the Bill of Entry also these have been described as pulp stones. The Appellate Collector pointedly refers to them as "grinding stones of rather giant size" and it was on this description that he felt that they were squarely covered by the description given in Item 51 of the CET, for the purposes of countervailing duty.
11. It is thus manifest that both the lower authorities have positively described the goods as grinding stones, and there is no indication that they had the shape or formation of grinding wheels. We find, on reference to the Explanatory Notes to the CCCN, on which the learned departmental representative also placed reliance that amongst other things, "grinding wheels" have been described separately side by side grinding stones and other numerous articles. This unmistakably indicates that "what are known as grinding wheels," have an entity separate than what are called "grinding stones".
12. Clause (1) under Chapter 68.04 of the notes has reference only to mill stones and grinding stones which, as already observed, are an entity separate from grinding wheels, as the detailed description given in the main heading 68.04 would reveal. It is pertinent to note that whereas in the Customs Tariff both these articles are mentioned in the relevant Tariff Entry, namely, 68.01/16 and it is obviously for this reason that the party has not disputed assessment to customs duty because they admit that these goods were in the nature of grinding stones, which are also covered by Tariff Entry 68.01/16, under which they were charged to customs duty, at the time of appraisal.
13. What they are contending right from the beginning is that so far as Central Excise is concerned, the entry under reference, namely, 51 which has been invoked for the purpose of countervailing duty has no reference to "grinding stones" and that it ends only with "grinding wheels and the like." 14. We have examined this contention of the party and we find it full of substance because keeping in view the entry of the Customs Tariff apparently based on the CCCN notes, 'grinding wheels' are an entity separate from 'grinding stones'. Whereas the Customs Tariff kept both these items in the relevant entry, the Central Excise Tariff omitted 'grinding stones,' and retained only 'grinding wheels'.
15. There is no dispute in the proposition that countervailing duty is chargeable under section 3 of the Customs Tariff Act, 1975 on the basis equal to the excise duty leviable for the time being on a like article, if produced or manufactured in India. A plain reading of Central Excise Tariff reveals that there is neither reference to grinding stones under item 51 with reference to which the lower Excise Authorities have charged countervailing duty nor under any other Tariff Entry. There was thus no basis for assessing the goods, pleaded as well as accepted to be grinding stones, and charge countervailing duty with reference to item 51 of the CET.16. There is another reason for holding that these imported goods, admittedly grinding stones, as the two orders of the authorities below reveal, are not covered by Tariff Entry 51 of CET, because we have carefully analysed the wording of the Explanation, appended to this Tariff Entry, though it was not argued before us, but we find that there are certain pre-requisites, which an item described as "grinding wheels and the like," has to meet before it becomes liable to duty under Item 51 of the CET. It is significant that this explanation chooses to expressly define the term 'grinding wheels and the like" used in Item 51 and before it can be so treated under this Entry, it should perform one of the specified functions, such as "grinding, sharpening, polishing, trueing and cutting of metals, stones, glass, plastics, ceramics, rubber, leather, mother of pearl, ivory and the like".
17. It thus becomes apparent that this Explanation has given a definite meaning to this term "grinding wheels and the like" and their meaning has been restricted both functionally as well as with reference to the material in relation to which they are used.
18. On a careful study of the nature of the grinding stones, imported by the party, which have been described to be gaint size pieces of stones, and although neither of the two authorities dealing with the goods having even hinted or suggested that they were in the nature of grinding wheels, we are of our considered view that even if they were so, they were neither performing the function as contemplated by the Explanation which should be either sharpening or trueing or polishing or grinding nor are they used in relation to any of the materials enumerated in this Explanation, because it is an admitted case that the purpose for which these pulp stones are used is the pulping of wood.
This function of merely pulping the material namely, wood, do not find mention in the Explanation, which has very expressly defined the term "grinding wheels and the like".
19. We are thus of the careful view that because of this express wording of the Explanation which chooses to define these items known as "grinding wheels and the like," neither the note appended by means of Clause (1) to CCCN (Chapter 68.04), which definitely includes grinding stones which term is not included in Tariff Item 51 of the CET has any relevance nor description of the functioning, given in the technical book referred by.the learned departmental representative.
20. We, therefore, find justification in the plea that these goods have been wrongly assessed to countervailing duty with reference to Item 51 of the CET. On the other hand, howover, we do not find it possible to agree with the appellant's contention that no countervaj ing duty was chargeable at all because even if these goods known as grinding pulp stones are not specifically provided in Tariff Entry 51 but still the description as given in the invoice and the notes appended by the party which are at. page 8 of the file indicate that they are manufactured items. They would thus certainly go to Tariff Heading 68 for the purpose of assessment of excise duty, if manufactured in India, and by virtue of section 3 of the Customs Tariff Act, countervailing duty will also be chargeable accordingly as if these were goods, falling under, Tariff Heading 68. We accordingly allow the appeal partly, and direct consequential relief to be given to the party on the basis of finding that the goods were assessable under Tariff Heading 68 of the CET for the purpose of countervailing duty.