1. The appellants are aggrieved by the rejection of their claim for re-assessment of synthetic industrial diamonds imported by them under heading 71.02(3) of the Customs Tariff Act, 1975. The lower authorities have confirmed the assessment already made under heading 71.04 of the C.T.A. on the ground that the goods were of very small size-less than 500 microns (30 mesh) and, therefore, they answered the description of dust and powder of natural or synthetic precious or semi-precious stones. The lower authorities also observed that the goods have been used for manufacture of industrial abrasives, a use to which dust and powder of precious or semi-precious stones were put to. The appellants are in appeal against this order.
2. For ready reference, we reproduce below the relevant headings of the Tariff: "71.02. Precious and semi-precious stones, unworked, cut or otherwise worked, but not mounted, set or strung (except ungraded stones temporarily strung for convenience of transport): (2) Diamonds, unworked or uncut, including sawn diamonds which require further cutting or faceting, but excluding industrial diamonds.
(4) Precious and semi-precious stones not elsewhere specified, unworked.
"71.03. Synthetic or reconstructed precious or semi-precious stones, unworked, cut or otherwise worked, but not mounted, set or strung (except ungraded stones temporarily strung for convenience of transport)." "71.04. Dust and powder of natural or synthetic precious or semi-precious stones." 3. The appellants invited our attention to the wording of heading 71.04 "Dust and powder of...stones". They argued that this meant that the goods first have to be stones which may then be crushed into powder or dust. The Explanatory Notes to the CCCN, on which the Customs Tariff was largely based, corroborated this interpretation when they stated that dust and powder of the heading 71.04 should be obtained normally (1) by crushing coarse boarts or (2) from the polishing or grinding of the stones. The appellants stated that as against that requirement of the entry 71.04, the diamonds imported by them were produced as such synthetically and they did not undergo any process of cutting or crushing. The entry 71.04, therefore, did not apply to their goods and the entry 71.02(3) was specific for the industrial diamonds imported by them. They added that the intention of the Legislature in charging a lower rate of customs duty on industrial diamonds was evident from the fact that such diamonds enjoyed a concessional rate of duty prior to 2-8-76 as well as after 24-5-77. The only gap, when the concession was not available, was during the period from 2-8-76 to 24-5-77 and this happened because of the switch over to the CCCN-based Tariff. The concession was restored under an exemption notification issued on 25-5-77. Finally, they pleaded that if there was any doubt in the matter, the benefit thereof should be given to the appellants.
4. The Department's representative stated that the exemption notification issued on 25-5-77 was effective only from that date and could not apply to the importations made earlier, as in the present cases under appeal. The fact that the need to issue an exemption notification with reference to the entry 71.04 was felt, confirmed the view that the goods were otherwise subject to a higher rate of duty under that entry. He added that the entry 71.04 was specific for dust and powder and that the words "Dust and powder" did not occur in the entry 71.02.
5. On reading the relevant entries, it appeared to the Bench that the entry 71.02 could not apply to the present goods since this entry related to natural precious and semi-precious stones while the goods imported in the present cases were synthetically produced. For that reason, the Bench felt that the entry 71.03 was more appropriate for the goods in case they did not fall in the entry 71.04. The Bench put this point to both sides. The appellants agreed that synthetic diamonds (which their goods were) would fall under entry 71.03. They mentioned that "industrial diamonds" were specified under entry 71.02 as sub-heading (3). However, on our pointing out that this sub-heading should be taken as referring to those falling within the main description, viz., naturally formed industrial diamonds, they did not press the point. The Department's representative, however, maintained that entry 71.04 was specific for dust and powder and as such this entry alone applied.
6. We have carefully considered the matter. We agree with the appellants that the wording of the entry 71.04 requires that dust and powder covered thereunder should come out of natural or synthetic precious or semiprecious stones. The Explanatory Notes to the CCCN also lent support to this conclusion. Since, in the present cases, it has been the consistent stand of the appellants that their industrial diamonds were synthetically produced as such in the size imported and they did not originate through crushing, cutting, grinding or polishing of natural or synthetic precious or semi-precious stones and since the Department has not controverted this contention of the appellants, we hold that the heading 71.04 did not cover the goods imported. Further, for the reason already discussed and put to both sides, we hold that the heading 71.02 also did not apply to the goods. Consequently, the goods are held to be covered by the heading 71.03 which is the only relevant entry left for consideration and which is wide enough to cover the goods. Accordingly, we set aside the impugned order and direct that the goods should be reassessed under the heading 71.03 read with any exemption notification in force during the relevant period. We direct that if upon such re-assessment the appellants are found entitled to any relief, such relief should be granted to them.