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Gwalior Rayon Silk Mfg. (Wvg.) Co. Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1983)(14)ELT1880TriDel
AppellantGwalior Rayon Silk Mfg. (Wvg.) Co.
RespondentCollector of Customs
Excerpt:
.....the gwalior rayon silk mfg.(wvg) co. ltd., imported a consignment of what was described as "pan-glass spinnerettes" vide bill of entry 11639 dated 1-11-1977.these were assessed to basic customs duty with reference to tariff item 70.21, and as a corollary-the goods having been treated to be glass products, countervailing duty was charged by reference to tariff entry 23a(4) of the c.e.t., which entry covers generally all such articles of "glass and glassware", not specified elsewhere.2. after the goods were released on payment of the duty as assessed, the appellants filed a refund claim on the contention that the appropriate heading for these goods was tariff heading 84.38 of the customs tariff act, 1975 and that the department had taken a mistaken view in treating them as articles of.....
Judgment:
1. The point in controvesy in this Revision Petition [Now being disposed of as an appeal having been received by transfer to the Tribunal under Section 131B(2) of the Customs Act, 1962] falls within a very short compass. Appellants, namely, the Gwalior Rayon Silk Mfg.

(Wvg) Co. Ltd., imported a consignment of what was described as "Pan-Glass Spinnerettes" vide Bill of Entry 11639 dated 1-11-1977.

These were assessed to basic customs duty with reference to Tariff Item 70.21, and as a corollary-the goods having been treated to be glass products, countervailing duty was charged by reference to Tariff Entry 23A(4) of the C.E.T., which entry covers generally all such articles of "glass and glassware", not specified elsewhere.

2. After the goods were released on payment of the duty as assessed, the appellants filed a refund claim on the contention that the appropriate heading for these goods was Tariff Heading 84.38 of the Customs Tariff Act, 1975 and that the Department had taken a mistaken view in treating them as articles of glass by classifying them under Tariff Entry 70.21. Correspondingly, the classification for purposes of countervailing duty with reference to Item 23A(4) of the Customs Excise Tariff was also assailed, on the same contention, namely, that the goods were not glass or glassware of any type but essential parts of machine for producing viscose staple fibre, etc.

3. The Assistant Collector dealing with the refund claim did not accept this contention of the party, as a scrutiny of the documents revealed that the goods were described in the invoices as "Pan-Glass spinnerettes", and since Chapter Note l(c) to Tariff Heading 84, which deals with machinery and appliances or parts thereof, excluded from the purview of the said Chapter, those made of glass; he held that these have been rightly classified for purposes of basic customs duty under Tariff Heading 70.21, which specifically covered those parts of machinery which were made of glass. Support was also taken from the Explanatory Notes to the B.T.N. vide page 1301, Volume III whereunder 'spinnerettes made of glass are not to be classifiable under Item 84.38. As a result, the levy of countervailing duty, treating them as glassware, as covered by Item 23A(4) of the C.E.T. was also maintained.

4. The party took the matter in appeal before the Appellate Collector of Customs, but by order dated 4-9-1979, the Appellate Collector, Bombay, dismissed the appeal confirming the classification as originally made, and maintained by the Assistant Collector. The Appellate Collector also went by the description of the articles as given in the documents pertaining to their import and held that under the Customs Tariff of 1975, in view of Notes appended to Chapter 84, glass spinnerettes could not fall under this Chapter, dealing generally with machinery and appliances and parts thereof, and that, they had been rightly classified under Chapter 70.21 of the C.E.T. In view of this, description of the goods as "glass spinnerettes", the classification for purposes of countervailing duty under Tariff Item 23A(4) of the C.E.T. was also upheld. The appeal was accordingly dismissed in its entirety.

5. It is against this order that the party went up in Revision Petition to the Central Government which has since been received by transfer to the Tribunal, and is being disposed of as an appeal. Same contentions as set forth before the appellate authorities were reiterated, namely, that goods were essentially parts of machinery, and that prior to the enactment of the Customs Tariff Act, 1975, these type of goods used to be assessed as parts of textile machinery under Tariff Heading 72(3) of the old Tariff, and that this item carried basic customs duty at the rate of 40 per cent ad valorem. It was contended that while introducing the Customs Bill, 1974, which subsequently became the Customs Tariff Act, 1975, it was specifically stated in the Statement of Objects and Reasons that whereas the description of the articles was broadly based on the Brussels Tariff Nomenclature (BTN in short), the previous duty structure and rates thereof would be preserved, and in specifying the rates of duty in the Schedules, every effort had been made to see that there was no change in the rates of duty on particular commodities.

6. It was contended that the intention was thus made clear while enacting the new Tariff that rates of duty would not be disturbed, and that this intention had even been translated into action by subsequently promulgating a Notification, being Notification No.9-Cus/79, dated 13-1-1979, laying down specifically that the rate of duty for all types of spinnerettes including glass and ceramic ones, would be 40%. It is urged that it was manifest that at no stage, the Government had intended to levy duty higher than already existing and from that angle also, the classification ought to have been done under Tariff Heading 84.38 which prescribed uniform rate of basic customs duty, viz., 40% for such parts and accessories, suitable for use solely or principally with the machines, covered by Chapter 84, such as spindle flyers, card clothing, combs, extruding nipples, shuttles". It is pleaded that the spindle flyers in the nature of "extruding nipples" were used to be assessed as parts of textile machinery, and that the lower authorities have erred in treating them, as made of glass, and by taking them to Tariff Entry 70.21.

7. The contention repeatedly was that these were composite articles of glass and ceramics and as such could be treated neither exclusively of 'glass' nor of 'ceramics', so as to fall under Chapter Heading 69 or 70, which dealt exclusively and specifically with ceramics or glass products, and that these type of articles which was another name for extruding nipples, would retain their general character and description, so as to be assessable to duty under Tariff Heading 84.38.

The classification for purposes of countervailing duty under Tariff Heading 23A(4) was also challenged on the same plea; namely, that the articles were not at all of glass, and that countervailing duty had been erroneously recovered.

8. The hearing of the appeal was first fixed for 2-2-1983 but since no one had appeared nor was there any intimation, the appeal was dismissed in default of appearance under Rule 20 of the CEGAT(Procedure) Rules, 1982 but on a subsequent application having been made, the appeal was restored and thereafter taken up for hearing on merits on 2-8-1983.

9. Shri J. R. Gagrat, Advocate of Gagrat & Co., Bombay appeared on this date of hearing accompanied by Shri R. C. Pandey, Advocate. A Paper Book described as compilation of all the relevant Tariff Entries, C.C.C.N. Notes, Notifications and other data, such as invoices, etc., was filed for the purpose of ready reference.

10. Shri Gagrat formulated his arguments in the same sequence, as the pleas set out in the grounds of appeal. He first of all invited attention to the fact that before the coming into force of the present Tariff with effect from 2-8-1976, such type of goods were being assessed at the uniform rate of 40% ad valorem by reference to Item 72 (3) of the Indian Tariff as then prevailing and that this entry generally dealt with all parts of textile machinery without any distinction as to composition of such parts. He pleaded that the Statement of Objects and Reasons, the extracts whereof were reproduced in the Grounds of Appeal, made it manifest that although the tariff was re-structured but an assurance was given in the Clauses of Bill, as well as Statement of Objects and Reasons that the pattern of rate of duty would continue unaltered. He argued that Central Government, in fact, stood by this assurance so much so that specific notification was issued on 13-1-979, being Notification No. 9-Cus of 1979 reducing the rate of customs duty for spinnerettes even made of glass or ceramics to 40% ad valorem, which was the rate for general parts of machinery of this nature under Tariff Heading 84.38. He explained that controversy in this case has arisen because the import relates to a period falling in between the issue of this Notification and introduction of the new Tariff but the intention having been made explicit, not to burden the assessees with additional levy; principle of harmoneous construction required that such an interpretation of the Tariff Entry be considered which was in consonance with the declared intention of the Government.

11. He further built up his arguments by contending that the goods which were the subject matter of dispute, were not solely either of glass or of ceramics, but were admixture of the two materials along with some bonding agent used in the ring frame of the holder plate. He emphatically urged therefore that these could not have been treated to be an article of glass Or as if made of glass alone for the purpose of taking it out of the general Tariff Entry 84.38, dealing with all types of spinnerettes, and for the same reasons it could not be treated as "glassware" for the purpose of countervailing duty. He made pointed reference to some judicial authorities in this regard, holding that goods, such as 'wind screens' or 'clinical syringes' or 'fuse links' made of porcelain-had to be classified for purposes of duty, not with reference to the material of which they were composed, but having regard to the functions they were to perform. Thus, in the case reported as 1981 ELT 325 (SC), Indo-Interational Industries v.Commissioner of Sales Tax, U.P., it was ruled that clinical syringes though made of glass could not be considered as glassware. Similarly, wind screens were held to be part of motor vehicles, and not assessable to duty as glassware, in the case of Maharashtra Safety Glass Works Pvt. Ltd., Poona v. Union of India and Ors. 1982 ELT 237 (Bom) and for identical reasons, H.R.C. Cartridge fuse links were held to be not porcelain ware in the case of English Electric Co. of India Ltd. v. the Superintendent, Central Excise and Ors. as reported in AIR 1975 Madras 393. He thus vehemently argued that these spinnerettes which were having mixed composition had to be treated as plain parts of machinery, as contemplated under Tariff Heading 84.38.

12. He further contended that in any case, these goods could not be treated to be glassware for the purpose of countervailing duty, because though he did not accept the position, but contended that even if it were held but that by virtue of exclusion note under Chapter Heading 84, these had to be taken as spinnerettes made of glass, and thus assessable to basic customs duty with reference to Tariff Heading 70.21; nevertheless the general character would not change and in support of this view, he made reference to a Bench decision in the case of Indo-Swiss Synthetic Gem Manufacturing Co. LTD. v. Collector of Customs, Madras (1983 ELT 388-CEGAT) wherein it was held that silica fused quartz could be assessed to customs duty under Chapter 70 of the Customs Tariff but that was only because of the extended meaning given to the term 'glass' in the notes to the Chapter Heading, but since except for this deeming provision, 'silica' ordinarily could not be treated to be 'glass', and since C.E.T. did not contain any such corresponding extension of the meaning, these articles for the purpose of countervailing duty could not be deemed to be 'glassware' but would go under the residuary Item 68 and in view of the existence of exemption Notification relating to all articles falling under Tariff Heading 68 at the relevant time being Notification No. 362-Cus of 1976., dated 2-8-1976 no countervailing duty in any case could be charged.

13. Shri Gagrat also pointed out that before importing this bulk supply, two spinnerttes had been imported by way of samples, and he referred to the Bill of Entry pertaining to that import which revealed that at that time, the classification as given by the appellants, namely, under Tariff Entry 84.38 had been accepted by the Department.

He thus urged that the stand could not be changed in the manner as had been done by the Department.

14. Shri Gagrat succinctly summed up his arguments by reiterating that these spinnerettes were not wholly made of glass, so as to be taken out of tariff heading 84, and that in any case for purposes of countervailing duty, they certainly could not be treated as 'glassware'.

15. The Departmental Representative addressed reply arguments on 4-8-1983 because of paucity of time on the previous date on account of lengthy arguments by the appellants' counsel. On the later date, Shri R.C. Pandey remained present for the appellants. Shri Kunhikrishnan, D.R., very systematically referred to the documents as compiled in the Paper Book attached with the appeal which revealed that these spinnerettes had throughout been described as of 'glass' and he thus urged that they had been rightly treated to be-glass spinnerettes and that Note 1 (c) under Chapter 84 very specifically excluded "machinery and appliances and parts thereof made of glass" falling under Heading 70.20 and 70.21. He also placed reliance on the Explanatory Notes to the CCCN at page 1163 of Chapter 84 which also showed that machinery parts made of glass or ceramics were to be excluded from the general heading and further contended that the description as given in the Invoices, Bill of Entry and Manufacturers' letters, put the position beyond all doubt. He also made pointed reference to Rules of Interpretation particularly Rule 3(b), which laid certain guidelines and provides that regard has to be had to the essential functions of such type of articles. He pointed out that the details, given in the supplier's letter, revealed that the extrusion part, which perform an essential function in these spinnerettes, is exclusively made of glass, and that this composition would lend character to the whole of the article, and that thus construed, they have rightly treated to be as "spinnerettes of glass", so as to be specifically covered by Tariff Heading 70.21, and thus get automatically excluded from the general heading 84.38.

16. The learned Departmental Representative also repudiated the plea as to need for uniformity of rates, to which the learned counsel for the appellants had alluded by reference to the Statement of Objects and Reasons and the Clauses of Bill and the subsequent Notification, and contended that the general intention stood displaced by virtue of the specific exclusion in the Chapter Notes and the subsequent Notification would only indicate that the interpretation as given by the authorities in excluding glass or ceramic objects from general heading was correct, and relief was given only by way of a Notification, but during the period this Notification was not there, there was no escape for the party but to abide by the Tariff. He also distinguished the authorities cited by the learned counsel by contending that so far as the case of wind screen was concerned, there the goods were shown to be of "integrated manufacture" whereas according to the supplier's letter in this case, the spinnerettes are plainly made of glass and that so far as the case of clinical syringes was concerned that was with reference to a notification of the Sales Tax authorities and unless we have the wording of it before us, there could not be proper appreciation of the matter and that similarly, in the case of fuselinks, porcelain was found to be only used as a base, and the fuselinks comprised of other materials, and for that reason it was held that composition of porcelain could not be the determining factor to assess the nature of the articles. He even asserted that the subject goods have to be treated as 'glassware' for the purpose of countervailing duty because the case which was before the Bench in the Indo-Swiss Synthetic Gem Mfg. Co. was that of a deeming definition having been given in the Customs Tariff, which was not in the C.E.T. whereas in the present case, the description is basically that of glass and simply because they are being used as parts of machinery, would not take them out of the general description of glassware, so as not to be covered by Item 23A of the C.E.T.17. He also contended that there could not be any estoppel against the Department, and simply because the description given in the sample consignment with reference to Item 84.38 had been accepted, the authorities could not be debarred from determining classification which, according to them, was correct on subsequent consideration of facts, nor could the assessment under the previous Tariff when there was no such specific exclusion as now exists in the Tariff itself, could be of any relevance.

18. Shri R.C. Pandey made a short reply, by pointing out that he too was relying on the documents for the purpose of description of the goods, and it was clear that they were neither of glass nor of ceramics, but an admixture and he also reiterated the plea that the intention of the Government was very relevant and so was the previous clearance which he referred to, not for the purpose of pleading any estoppel, but for showing as to how the authorities had interpreted the intention of the Government, and that interpretation had to prevail till the notification came. He also reiterated that the previous Bench ruling (1983 ELT 388-CEGAT) had laid down unambiguously (hat so far as countervailing duty was concerned, the classification for the purpose of Customs Tariff by virtue of any exclusion or extended meaning could not govern the classification for the purpose of C.E.T. and such like items, which do not conform to any specific item of the C.E.T., had to go under Tariff Item 68 and so far as goods falling under Item 68 were concerned, no countervailing duty could be levied.

19. We have given our earnest consideration to all the contentions set out in the Grounds of Appeal, and reiterated during that arguments.

Although Shri J.R. Gagrat addressed arguments in an impressively lucid manner, we are constrained to reject his pleas, so far as the question of classification for the purpose of basic custom duty is concerned, because we find that not only in the Invoice and the Bill of Entry, these have been described clearly as "Pan-glass spinnerettes", but lot of other documents which find place in the Paper Book, annexed with the appeal, the whole emphasis is that the extrusion nipples or nozzles which are 7 in number, were made of glass. These are letters of the suppliers, giving details of the articles. For instance by means of letter dated 31-1-1977, they give categorically the description of the spinnerettes as of glass, and the whole stress is on the glass nozzle portions, 7 in number, each containing 2,000 holes, making the total number of holes to be 14,000. It is obviously these holes which perform the function of extrusion and thus it is glass nozzles which lend the character of spinnerettes, to the whole article; the ceramic portion being only of the holder plates for these nozzle plates. It is pertinent to note that the learned counsel himself explained that 'spinnerettes" was another name for "extrusion nipples".

20. The subsequent communication as given at page 5 of the Paper Book also lays emphasis on the fact that the spinnerettes were that of glass and the same position is indicated in other letters which are at pages 12 and 15 of the Paper Book. These details given and supplied by the manufacturers as well as the description given in the invoice thus take the matter beyond all possible doubt and unmistakably indicate that what actually are called spinnerettes in this consignment were made of glass.

21. Apart from this plain description, the rule of interpretation as per copy supplied by the appellants themselves, as now prevailing (Page 2 of the Compilation) clearly provides guidelines for such type of articles in Sub-clause (b) of Rule 3 to the effect that goods which are mixture or composite goods which consist of different materials are to be classified with reference to that material or component which "gives the goods their essential character". In view of what has been discussed above, namely, there being clear indication from the suppliers' communications that the extrusion nozzles plates, are of glass which, in fact, are the spinnerettes and because of the nature of the material of this essential part, the manufacturers describe them as "glass spinnerettes", they have to be treated as "spinnerettes of glass", and it is not possible to accept, the contention of the appellants that they were of a mixed material so as to be treated neither as glass nor ceramic, and that as a consequence, they ought to be held to be spinnerettes of the general kind, falling under heading 84.38.

17. We find support for the view, we are taking from the Explanatory Notes to the CCCN also, where Chapter Heading 84 at the outset describes that articles, known as "extrusion nipples" of glass or ceramic, have to be specifically excluded. It is clearly explained in the said notes that by virtue of exclusion of machinery and appliances or parts thereof which were made of glass or ceramic, it follows that even if a machine or mechanical appliance is covered, because of its description or nature, by a heading of this Chapter it is not to be classified therein if it has the character of an article of ceramic material or of glass, even if such appliances or apparatus incorporates some other components of minor importance of other materials. These guidelines furnished by the CCCN as at page 1163, Volume III in Chapter 84 thus fortify the view that in view of the crucial portion of the spinnerettes being of glass, the fact that the holder plates for the glass were of ceramic or there was some other bonding material, used in the ring frame, was of no consequence.

18. The cases cited by the learned counsel for the appellants, as rightly pointed out by the learned Departmental Representative, are entirely distinguishable because in the case of wind screen it was established that the manufacture was not of plain glass but of some integrated mixture, and so was the case of fuselinks; where porcelain did not lend its essential character to the commodity and it was in that context that it was held that these could not be treated to be "porcelainware". In the instant case, on the other hand, the glass has gone into the making of those portions which lends its essential character to the article so as to make them spinnerettes exclusively of glass, and thus they have to be treated nothing but "glass spinnerettes". They have been so described by the manufacturers themselves. We, therefore, feel satisfied that the lower authorities did not go wrong in treating them as "glass spinnerettes", and we are also of she view that the previous acceptance by them at the time of import of two sample spinnerettes, of the description as given by the party would not be any bar in reviewing the classification, in coming to a correct decision, which both the lower authorities have done after full application of mind, with reference to the description and details given in the documents, and after full consideration of the Tariff Entries, read cumulatively, coupled with the elucidation furnished by the Explanatory Notes to the CCCN. We do not, therefore, find any ground to come to a different finding and we feel satisfied that the lower authorities have correctly classified the goods as falling under Tariff Heading 70.21 for the purpose of basic customs duty.

19. However, so far as countervailing duty is concerned, we do find justification in the plea made on behalf of the appellants that if goods at all were to be taken out of the general description of Tariff Heading 84.38, that would be because of the specific exclusion in the Chapter Notes, and but for that they would have been treated as machinery parts, of mixed composition, as was being done when the old Tariff was prevailing by virtue of a single heading being provided, namely 72(3), and it is only because of splitting up of this previous entry, into three para, in the new Tariff, namely General (84.38), Ceramic (69) and Glass (70.21) and by virtue of the exclusion note under the general Chapter that they are being taken under specific heading 70.21. However, they could not be treated as plain glassware for the purpose of the Central Excise Tariff, which does not contain any such indication in the whole of the Tariff, that glass or glassware of the general description given in 23A(4) would cover even machinery parts. We, therefore, feel inclined to go by our previous view as held in the case of Indo-Swiss Synthetic Gem Manufacturing Co. Ltd. v.Collector of Customs, Madras (1983 ELT 388-CEGAT) that where the classification for purposes of the customs duty, is taken out of special Tariff Item, by virtue of )me exclusion note or extended meaning which is not correspondingly given in the Central Excise Tariff, then the goods would remain if not covered by any specific heading of the Central Excise Tariff and would go under the general residuary heading 68. There is no dispute about the existence of Exemption Notification for the purpose of countervailing duty for the goods falling under Tariff Heading 68 being Notification No.364-Cus/76, dated 2-8-1976. We, therefore, hold that whereas classification for the purpose of basic customs duty has been rightly determined under Heading 70.21 during the period under reference, namely, when the notification No. 9/79 had not come into existence, for the purpose of countervailing duty, these cannot be treated as "glassware" so as to be covered by Item 23A of the Central Excise Tariff but will have to be treated as goods not specifically covered by any Tariff Entry of the Central Excise Tariff and taken to be as residuary entry of 68. They are, therefore, exempt from countervailing duty and the appeal is accordingly allowed partly, to this effect, whereas it is dismissed in regard to the basic custom duty, the same is allowed so far as countervailing duty is concerned, with consequential relief by way of proportionate refund.


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