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J.B. Manufacturing Company Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1986)(6)LC594Tri(Delhi)
AppellantJ.B. Manufacturing Company
RespondentCollector of Central Excise
Excerpt:
.....lighters which work on the piezo-electric principle and are of the kind generally referred to as "electronic lighters" were classifiable under item 39 of the central excise tariff as it stood at the relevant time. the description of the tariff item at that time was as follows : 'mechanical lighters' means any mechanical or chemical contrivance for causing ignition, which is portable and which operates by producing a spark or flame, whether by itself or when brought into contact with gas, and includes a mechanical lighter issued from a factory in an incomplete state or requiring for its completion the addition of a flint." 2. for completeness it may be added that the description of the above item was amended through the finance act, 1982, to read as follows : 'lighters' means any.....
Judgment:
1. The question raised in this appeal is whether the goods manufactured by the appellants, namely, gas lighters which work on the Piezo-electric principle and are of the kind generally referred to as "Electronic Lighters" were classifiable under Item 39 of the Central Excise Tariff as it stood at the relevant time. The description of the tariff item at that time was as follows : 'Mechanical Lighters' means any mechanical or chemical contrivance for causing ignition, which is portable and which operates by producing a spark or flame, whether by itself or when brought into contact with gas, and includes a mechanical lighter issued from a factory in an incomplete state or requiring for its completion the addition of a flint." 2. For completeness it may be added that the description of the above item was amended through the Finance Act, 1982, to read as follows : 'Lighters' means any mechanical, chemical, electrical or electronic (containing piezo-electric materials) contrivance for causing ignition, which is portable and which operates by producing a spark or flame whether by itself or when brought into contact with gas, and includes a lighter issued from a factory in an incomplete state or requiring for its completion the addition of a flint." 3. The facts in brief are that the appellants started manufacturing gas lighters under the brand name "Electrolite" (referred to for convenience as "the said goods") in 1978. On 5-6-1978, before they had started manufacture, they wrote a letter to the concerned Assistant Collector, in which they explained the features of their product. They stressed that it was an electronic gas lighter and expressed the belief that it would not attract excise duty under T.I. 39. They admitted that it might fall within the scope of the residuary item T.I. 68. They, however, submitted that their capital investment on machinery and equipment was below Rs. 10 lakhs and they had not cleared any excisable goods during the preceding year and that they would therefore, be eligible for exemption in terms of Notification No. 176/77-C.E., dated 18-6-1977. They expressed the belief that they were not required to obtain the excise licence or to comply with other Central Excise formalities.

4. It appears that on 3-7-1978 the appellants as directed by the Excise officers filed a classification list, declaring the said goods under T.I. 39, but in the covering letter they stated that they were submitting the classification list under protest, with a view to obtaining clearance until the question of excis-ability was finally determined. The Assistant Collector on 6-7-1978 sent a brief reply to the appellants' letter dated 5-6-1978. He stated that having regard to the facts and circumstances stated by the appellants he had come to the conclusion that the product was a mechanical lighter falling under T.I.39. He therefore, requested the appellants to file classification list for the same and follow the excise formalities. (No reference was made to the classification list said to have been filed by the appellants on 3-7-1978 under protest).

5. On 17-7-1978 the appellants replied to the Assistant Collector requesting him to pass a speaking and appealable order after following the principles of natural justice. To this the Assistant Collector sent a reply dated 26-7-1978 to the effect that the appellants should file a classification list for "electrical gas lighter" and that the decision of classification by the Department could be appealed against. It appears that the appellants again addressed the Assistant Collector on 28-7-1978, requesting him to pass a speaking order, and also sent a reminder on 1-9-1978, but no such order was passed by the Assistant Collector. They accordingly on 30-9-1978 filed an appeal to the Appellate Collector of Central Excise, Bombay, advancing various arguments against the classification of the said goods under T.I. 39.

6. It also appears that on 14-6-1978, that is, a few days after the appellants' letter dated 5-6-1978 to the Assistant Collector, Excise officers visited their factory. Subsequently, on 29-6-1978 the Excise officers served a detention order in respect of 60 lighters found in their factory on that date and on 1-7-1978 these lighters were seized under a Panchnama. Separate proceedings with a show-cause notice dated 28-12-1978 were started by the Excise authorities, leading to an adjudication order dated 20-12-1979 of the Assistant Collector, in which the 60 lighters were confiscated subject to a fine of Rs. l,000/-and payment of appropriate duty, and a penalty of Rs. 500/- was imposed on the appellants. That order was however not covered in the Order-in-Appeal dated 19-12-1979 passed by the Collector (Appeals), which was concerned only with the question of classification of the said goods as contained in the order dated 26-7-1978 of the Assistant Collector (read with his previous letter dated 6-7-1978).

7. In the appeal to the Appellate Collector, the appellants submitted that their lighter did not contain any of the mechanism provided in a mechanical lighter, such as stone, flint, file or spring, nor was any gas or petrol used in it for the purpose of ignition as in the case of a mechanical lighter. As it had no mechanical or chemical contrivance for causing ignition, it did not conform to the description of mechanical lighters in T.I. 39.

8. The Collector (Appeals) in his order stated that a sample of the lighters was produced at the time of personal hearing and its function was explained. He further described the working of the lighter as under : "It was seen from this lighter that two piezoelectric crystals were used and a mechanical pressure is applied to the crystals and this creates an electrical charge. This electrical charge is transmitted by the plastic wire through the steel nozzle, and when these sparks come in contact with the gas burner, it ignites the same." 9. The Collector (Appeals) observed that the crystals used in the gas lighter produced what was known as piezo electrical effect. To explain this phenomenon he reproduced the following extract from "Electronics Made Simple" by Henry Jacobowitz : "Piezoelectric Effect.-The control of frequency by means of crystals is based upon the piezoelectric effect. When some crystals are compressed or stretched in certain directions, electric charges appear on the surface of the crystal that are perpendicular to the axis of mechanical strain. Conversely, when such crystals are placed between two metallic surfaces between which a difference of potential exists, the crystals expand or contract.

Thus if a slice of crystal is compressed along its width, or stretched along its length, so that it bulges inward, as in Fig. 87 (a) opposite electrical charges will appear across its faces, and a difference of potential is generated. If the crystal is squeezed or compressed lengthwise, so that it bulges outward, as in (b) of Fig.

87, the charges across its faces reverse. If alternatively stretched and squeezed, a crystal slice becomes a source of alternating voltage." 10. The Collector (Appeals) observed that the said goods satisfied the various requirements in T.I. 39, the only dispute being whether it was a mechanical contrivance for causing ignition. He then observed as follows : "There is no doubt that the Electrolite lighter causes ignition, as the purpose for which it is designed is to cause ignition or to set fire to a gas burner. It is seen from the above, that the piezoelectric effect is produced when the crystals are compressed along its width and subjected to mechanical strain. A difference of potential is generated, which becomes a source of alternate voltage.

The sample produced at the time of hearing clearly showed that when a trigger is pressed, mechanical strain is brought on the crystals along its width, by means of a small projection attached to the steel plate. In other words, this functions as a mechanical contrivance to cause ignition. The mechanical contrivance in this case, however, produces electronic charges.

8. In the light of the above, I have to conclude that Electrolite, which is an electronic gas lighter, is a mechanical gas lighter falling within the meaning of Item 39 of the Central Excise Tariff." He accordingly rejected the appeal. It is against this order that the present appeal is directed.

11. Appearing before us for the appellants, Shri Gopal Prasad submitted that the reasoning of the Appellate Collector was erroneous. Merely because a trigger was pressed and mechanical strain was brought on the piezoelectric crystals, the lighter did not become a mechanical contrivance. That description could apply only to an article in which the proximate cause of ignition was mechanical. It would not include a case where mechanical energy which was initially applied was transformed to electrical energy and that electrical energy resulted in a spark, which was the means of lighting the gas.

12. Shri Gopal Prasad submitted that this position had been accepted by the Central Board of Excise and Customs in its Tariff Advice No. 71/81 dated 29-7-1981 (reproduced in 1981 ECR Volume I, Part I, Page 274B).

The Board had indicated that electrical and electronic gas lighters were not classifiable under T.I. 39 but under T.I. 68. Subsequently, that is, by the Finance Act of 1982, Tariff Item 39 was amended so as to specifically include electrical or electronic (obtaining piezoelectric materials) contrivances. This would also show that before the amendment electrical and electronic lighters were not covered by Item 39.

13. Shri Gopal Prasad submitted that in a subsequent Order-in-Appeal dated 4-11-1980 in the case of M/s. Amar Enterprises, relating to the similar goods, the then Appellate Collector accepted the contention that ignition was caused by the voltage difference produced by the piezoelectric effect exhibited by the crystals, and held that the gas lighters in question were not excisable under T.I. 39. Again in an Order-in-Review dated June 1980, in the case of M/s. Lara Enterprises, where also the goods were electronic lighters working on the piezoelectric principle, the Collector of Central Excise, Bombay-I had held that ignition was caused by an electric current, and he had accepted the contention that the electronic lighters in question were not covered under T.I. 39 and had discharged the show cause notice.

14. Shri Gopal Prasad submitted that in the light of the various facts and circumstances stated above the orders of the lower authorities in this case holding the said goods to be classifiable under T.I. 39 were erroneous and should be set aside.

15. In reply to a question from the Bench, Shri Gopal Prasad readily agreed that the goods were classifiable under T.I. 68. He, however, submitted that, as requested by the appellants in their letter dated 5-6-1978, their eligibility for exemption from duty in terms of Notification No. 176/77 should be considered.

16. In reply to a further question, Shri Gopal Prasad agreed that the present appeal was concerned solely with the question of classification of the said goods, and that relief if any in regard to the seizure of 60 lighters, demand for duty etc., which were the subject of other proceedings, would have to be agitated with reference to these proceedings.

17. Replying for the Department, Shri Sachar referred to the sequence of events. He argued that the appellants had failed to comply with the direction of the Assistant Collector in his letter dated 26-7-1978 that the appellants should file a classification list. (The position stated at para 4 above, namely that the appellants had apparently filed a classification list already under protest, was not mentioned or noticed when this submission was made). The point of the submission was not clear to the Bench. It was pointed out to Shri Sachar that the same Assistant Collector had in his earlier letter dated 6-7-1978 clearly indicated that he had come to the conclusion that the said goods were mechanical lighters falling under T.I. 39. The appellants were obviously entitled to appeal against this decision, without going through the motion of filing a classification list. Further, since the Appellate Collector had entertained the appeal and passed an order on it, it is too late in the day to argue that the appellants should not have appealed to the Appellate Collector, or that we should not entertain the further appeal.

18. As regards the merits of the classification, Shri Sachar submitted that the lighters in question were operated by the impact of the "trigger" on the piezoelectric crystals. Accordingly, the lower authorities were justified in regarding them as a mechanical contrivance falling within T.I. 39. Shri Sachar submitted that he stood by the grounds set out by the Appellate Collector in his order.

19. We have carefully considered the arguments advanced on both sides.

It is undisputed that the lighters in question operate by the piezoelectric effect, which has been described in the quotation in para 9 above. It is also undisputed that the goods fall within the description "electronic gas lighters", as seen from the order of the Collector (vide para. 10 above). The question is whether the Collector was right in holding that they fall within the scope of T.I. 39, for the reasons given by him.

20. It is clear from the Collector's order that in this case the mechanical strain resulting from pressing the "trigger" results in opposite electrical charges appearing on the opposite faces or the crystals. The charge is led away by means of wires to the nozzle, where there is a small gap. It is a well-known fact of physics that when there is a potential difference between two points, and the gap between them is sufficiently small, electric current flows between them in the form of an arc or spark. Therefore, in the operation of these lighters the actual spark which ignites the gas is an electrical phenomenon. The Collector has gone by the fact that this electrical phenomenon has been induced by a mechanical action and he has therefore taken the view that the lighter is a mechanical contrivance. With all respect to the learned Collector, we find that this reasoning is fallacious. A mechanical contrivance would be one where the mechanical action, such as that of striking a flint against metal, directly results in the spark, which leads to ignition. But in this case, as pointed out by the learned consultant, the energy imparted by the mechanical action of pressing the "trigger" is first converted to electrical energy in the form of an electric current, and it is that electrical energy which is in turn converted to heat energy accompanying the spark, which ignites the gas. Such a lighter clearly cannot be termed a mechanical contrivance. If it were so, that is, if we were to go to the source of the electrical current which produces the actual spark, many strange conclusions would result. For instance, electrical energy as supplied to houses, factories etc., can be in different forms. One is hydro-electricity, obtained from rivers etc., which is nothing but mechanical energy converted to electrical energy. If a machine is operated by electrical energy whose source is hydro-electricity, would we be justified in calling such a machine as a mechanical contrivance Or, to take an even more extreme example, an electrical appliance may be operated by turning a switch, which means by applying mechanical energy. Would this turn that appliance into a mechanical contrivance We need not multiply examples, since it is clear that electronic gas lighters of the nature of the said goods have to be regarded as electrical or electronic and certainly not mechanical.

21. As pointed out by the learned consultant, it would be seen that the above view has been generally accepted, even by the Central Board of Excise and Customs, as seen from its Tariff Advice No. 71/81. The amendment made to Tariff Item 39 in 1982 is also an indication that the earlier description (that is, the description as it stood at the time of the present case) was not found wide enough to cover electronic gas lighters. This would also be clear from the "Memorandum explaining the provisions in the Finance Bill, 1982" which was circulated along with the 1982 budget documents. With reference; to the, amendment of Item 39, the memorandum stated as under ; "The existing Tariff description 'mechanical lighters' is proposed to be amended to include electrical and electronic lighters under the purview of this item. There is no change in duty rates." 22. The order dated 4-11-1980 of the other Collector (Appeals) and the Order-in-Review dated June 1980 of the Collector of Central Excise, Bombay-I, show that these officers also were of the same view. All these factors go to lend support to the view we have taken, namely that the goods in question were not classifiable under T.I. 39 as it stood at the relevant time. They were however, classifiable under T.I. 68, as pointed out by the appellants in their letter dated 5-6-1978, and as accepted by Shri Gopal Prasad before us. Whether or not the appellants were liable to pay duty under T.I. 68, or whether they were exempt by virtue of Notification No. 176/77-C.E., dated 18-6-1977 are questions which we are not required to go into, for the reasons given in para 16 above. In this appeal the only question before us is as regards the correct classification of the goods. Our decision is that they were classifiable under Item 68.


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