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Collector of Central Excise Vs. Searsole Chemicals Ltd. - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1985)(21)ELT343TriDel
AppellantCollector of Central Excise
RespondentSearsole Chemicals Ltd.
.....upheld the contention of m/s. searsole chemicals ltd. (hereinafter called the respondents) that coated precipitated chalk was eligible for exemption from payment of central excise duty under notification no. 23/55, dated 29-4-1955.the assistant collector had denied the benefit of this exemption and the appellate collector set aside the assistant collector's order and extended the benefit of the exemption.2. we have heard shri s.n khanna, departmental representative for the appellant and shri t.m. ansari, advocate for the respondents.3. notification no. 23/55 issued by the central government under central excise rule 8(1) exempts several specified products from the whole of the duty leviable thereon under section 3 of the central excises and salt act, 1944. the entry relevant for our.....
1. The present appeal is directed against Order No. 251-CE/MRT/83, dated 19-11-1983 passed by the Collector of Central Excise (Appeals), New Delhi. By this order, the Collector (Appeals) upheld the contention of M/s. Searsole Chemicals Ltd. (hereinafter called the Respondents) that coated precipitated chalk was eligible for exemption from payment of Central Excise duty under Notification No. 23/55, dated 29-4-1955.

The Assistant Collector had denied the benefit of this exemption and the Appellate Collector set aside the Assistant Collector's order and extended the benefit of the exemption.

2. We have heard Shri S.N Khanna, Departmental Representative for the Appellant and Shri T.M. Ansari, Advocate for the Respondents.

3. Notification No. 23/55 issued by the Central Government under Central Excise Rule 8(1) exempts several specified products from the whole of the duty leviable thereon under Section 3 of the Central Excises and Salt Act, 1944. The entry relevant for our present purpose reads as follows : "Minerals, employed either as extenders, suspending agents or fillers or as diluents, namely : - Barytes, Bauxite, Bentonite, China Clay, Celestite, Limestone and Chalk (including Precipitated Chalk), Fuller's earth, Cypsum, Mica, Silica, Asbestine, Talc and Slate." 4. We are concerned with the goods specified as "Chalk (including Precipitated Chalk)". It is the appellant's contention that coated precipitated chalk is not covered by the entry whereas the Respondents' contention is that it is.

5. The Respondents filed a classification list on 4-3-1982 seeking classification of the two products in dispute, namely, "SEACAL - S2 (COATED) and SEACALITE (COATED)" under Item No. 14 of the First Schedule of the Central Excises and Salt Act (hereinafter referred to as the C.E.T., for brevity's sake) and exemption from duty leviable thereon under the said item in terms of Notification No. 23/55. The Assistant Collector of Central Excise disallowed the claim and ordered the classification of the goods under Item No. 68 C.E.T. It needs to be noted here that the Assistant Collector did not give any reasons whatsoever why he rejected the claim of the Respondents and classified the products under Item No. 68-C.E.T. The order was passed by merely modifying the classification indicated by the Respondents in the classification list.

6. The Collector (Appeals) based his impugned order on another order dated 29-4-1983 passed by him on another appeal involving the same product. He observed that coated precipitated chalk was also precipitated chalk and was covered by the entry in the notification.

Consequently, he allowed the appeal.

7. Before us, Shri Khanna, learned Departmental Representative, contended that precipitated chalk manufactured by the Respondents was coated with stearic acid. The coating had the effect of making the substance mix more effectively and making it a better filler because of its better flow. He contended that, in trade and technical parlance, coated precipitated chalk was different from and not the same thing as uncoated precipitated chalk. He relied upon passages from the Encyclopaedia of Chemical Technology by Kirk-Othmer. He also referred to Tariff Advice No. 140, dated 30th December, 1981 issued by the Central Board of Excise and Customs to the effect that coated precipitated chalk was classifiable under Item No. 68C.-E.T. Shri Khanna laid emphasis on two aspects. Firstly, he urged that the word "namely" restricted the scope of the notification to what was specifically enumerated therein. In support of this stand and the meaning and effect of the word "namely" he cited two decisions, one of the Delhi High Court in Modi Rubber Ltd. v. Union of India and Ors.

(1983 E.L.T. 24) and the other of this Tribunal in Delta Spokes Manufacturing Co. v. Collector of Central Excise, Bombay (1983 E.L.T.547). Secondly, he urged that coated precipitated chalk was not a mineral and only mineral substances were covered by the relevant entry.

For all these reasons, Shri Khanna concluded, the Respondents' claim was untenable.

8. Shri Ansari, learned Council for the Respondents, opened his arguments by saying that the fact that precipitated chalk was mentioned under the head "Minerals" showed that what was contemplated in the entry was not minerals in their natural form alone but also processed minerals. He referred to passages from Kirk-Othmer and the "Hand-book of Fillers and Reinforcements for Plastics" published by Van Nostrand and Reinhold Company and submitted that these authorities recognised that coated precipitated chalk was a grade of precipitated chalk.

Further, precipitated chalk is discussed in the Chapter "Mineral Fillers" in the second cited authority. Since there is no dispute about the end-use of the product as a filler and the product was known in the trade as precipitated chalk, reliance being placed for this purpose on the affidavits on record from dealers, Shri Ansari contended that the product fulfilled all the requirements for exemption. In support of the stand that a particular grade of a product is not to be taken as something different from that product, he cited the decision of the Kings Bench on the famous Saccharin case-McNicol and Anr. v.Finch-decided by the King's Bench and the Bombay High Court decision in Sandoz India Ltd. v. Union of India and Ors. (1980 E.L.T. 696) and the Andhra Pradesh High Court in State of Andhra Pradesh v. Shri Durga Hardware Store and Anr.-STC (32) 322.

9. We have carefully considered the submissions before us. The notification in question exempts the specified minerals employed as extenders, suspending agents or fillers or as diluents. Chalk including precipitated chalk is listed as a mineral. Now, precipitated chalk is not a naturally occurring mineral. In the common process of its manufacture, namely, Carbonation process which the Respondents are stated to be following- "Limestone is calcined in a kiln to obtain carbon dioxide and quicklime. Generally, these products are purified separately before recombining. The quicklime is mixed with water to produce either a milk-of-lime or dry hydrated lime ; both are essentially all calcium hydroxide. When dry hydrate is used in a process, water is added to produce a milk-of-lime slurry.

In the carbonation process, the cooled and purified carbon dioxide- bearing kiln gas is bubbled through the milk-of-lime in a reactor known as a carbonator. Gasing continues until all the calcium hydroxide has been converted to the carbonate. The end point can be monitored by pH or by chemical measurements.

Reaction conditions determine the type of crystal, the size of particles, and the size distribution produced. The process variables include starting temperature, temperature during carbonation, rate of mixing, pH, concentration of reactants, and the presence or absence of chemical additives.

Following carbonation, the product can be further purified by screening as the impurities in the milk-of-lime remain as coarse particles in comparision to the micrometer-sized, precipitated calcium carbonate.

This screening, also used to control the maximum size of the product, is followed by dewatering. Rotary vacuum filters, pressure filters, or centrifuge are used in the mechanical removal of water. Washing of the filter cake is unnecessary as water is the only by-product of carbonation.

The filter cake solids are generally 25-60%, CaCO3, depending, to a large degree, on the particle size of the precipitated carbonate. Final drying is accomplished in either a rotary, tunnel, spray, or flash dryer (see Drying). This dryer product is usually disintegrated in a micropul-verizer. The milled material is conveyed to large storage bins for bulk loading or packing in bags." (Extracted from Pp. 428-429 of Vol. 4 of Kirk-Othmer's Encyclopaedia of Chemical Technology -3rd edition).

10. It is clear from the process of manufacture, which has been set out above in detail, that precipitated chalk is a prepared product and, at the most, can be said to be a processed or prepared mineral. If precipitated chalk can be classed as a mineral for the purpose of the notification, we do not see why coated precipitated chalk cannot be.

11. Some "Coated grades" (again, to refer to Kirk-Othmer) are available for special applications. The precipitated calcium carbonate is coated to improve flow properties, processing and the physical properties of the final product. Fatty acids, resins, and wetting agents used as coating materials are applied before or after drying. According to the book, while uncoated grades have found wide applications in latex and alkyd flat wall paints and ultra-fine precipitated calcium carbonate is used in rubber to provide reinforcement of white and light coloured products, coated grades are used to improve the dispersability in mixing and to lower the modulus of the rubber.

12. it is an admitted and common position that precipitated calcium carbonate is a filler but so is coated precipitated calcium carbonate.

Shri Khanna's contention that the coated grade is not a mineral lacks substance in so far as these notifications are concerned. If, as we have seen, precipitated chalk is a mineral (and Kirk-Othmer calls it one of the most versatile mineral fillers), coated precipitated chalk also is, Apart from this, the word "Chalk" has been assigned in the notification itself an expanded, inclusive meaning. The inclusion clause, taking as it does Precipitated Chalk, can, in our opinion, take in coated precipitated chalk also. It is also to be noted that the "Handbook of Fillers and Reinforcements for Plastics", relied upon by Shri Ansari, shows precipitated calcium carbonate and Surface-Coated Carbonate under the head "Mineral Fillers".

13. Shri Khanna said that having regard to the restricted scope of the entry in the notification-the word "namely" occurs first before the enumeration of the specific entries in the notification and, again, in entry (1) (the relevant one, here)-the expressions used therein should be strictly and narrowly construed. In other words, only chalk and precipitated chalk are covered, not coated precipitated chalk. This argument does not appeal to us. If "Chalk" includes, as it does in the notification, "Precipitated Chalk", we are of the view that "Coated Precipitated Chalk" is covered by the expression "Precipitated Chalk" because both are recognised in literature as mineral fillers.

14. In (supra) cited by Shri Khanna, the Delhi High Court held that exemption notifications have to be judged by the words employed therein. The Court cannot, by adding to or by amending or by construction, aid the authority, to make up the deficiencies in the language used in notifications. It goes without saying that there can be no question of any quarrel with this proposition, But, what we are faced within the present case is whether having regard to the words employed in the notification, a particular substance falls within its scope or not. It is a question of construction or interpretation of the notification- not of expanding its scope or filling in of any deficiency.

The other decision cited is of this Tribunal in (supra). In that case, Tariff Item 35-C.E.T. was being construed. The entry specifically and unambiguously restricted its scope to the specified parts of cycles, namely, free-wheels and rims. The question was whether cycle spokes, nipples and washers were covered by that item. The Tribunal said 'no'.

The relevance of this decision to the present case is not clear. No one can seriously contend that spokes, washers and nipples are either free-wheels or rims. Here the question is whether the term "precipitated chalk" will take in the coated grade. We think that the cited decision is of no relevance.

15. Shri Ansari cited the Bombay High Court decision in (supra). That case revolved round the question whether a mere change in physical form of a substance without any change in the chemical composition could be equated with "manufacture" bringing into existence a new product. The question before us is not whether a new product has emerged. Indeed, having regard to the process involved- coating of precipitated chalk with stearic acid with a view to improving its flow characteristics-we would be inclined to say a new product has emerged. But the question before us is whether the coated stuff falls within the purview of the notification. And, we have answered the question in the affirmative.

For the same reason, we do not think that the King's Bench decision in the Saccharin case (supra) is not of direct relevance here.

The Andhra Pradesh High Court decision in STC (Vol. 32) 322 holding that by the process of galvanisation, iron and steel do not lose their essential character as iron and steel goes to support Shri Ansari's stand.

16. The two technical authorities relied upon by Shri Ansari, as we have seen, state that precipitated calcium carbonate is coated to improve its flow properties. It is, thus, clear that the coated grade is an improved filler compared to the uncoated grade. It, thus, qualifies on all counts for the benefit of the notification in that it is a mineral, it is used as a filler and it is comprehended within the inclusive definition of "Chalk".

17. We uphold the impugned order of the Collector (Appeals) and reject the appeal.

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