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Poonam Trading Co. Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1983)LC1362DTri(Delhi)
AppellantPoonam Trading Co.
RespondentCollector of Central Excise
Excerpt:
.....for the purpose of welding and that the "use" could not be a criterion for assessment so far as tariff item 50 was concerned. they added that copper coating of the steel wire was only for the purpose of preventing rusting of the wire and was on the same footing as galvanising of wire.4. the department's representative stated during the first hearing on 20-1-83 that the plea of the appellants that electric current did not pass through their wires during the welding process was a new point put forth for the first time. the appellants maintained that this plea had been taken before the appellate collector as well but that he had not recorded any finding thereon. we felt that this plea being a question of fact required verification. we, therefore, issued a direction to the respondent.....
Judgment:
1. These two appeals involve a common point at issue and relate to the same appellants and they were, therefore, taken up for consideration together.

2. The short point involved in these appeals is whether sub-merged arc welding wires and CO2 wires are classifiable under item 50 of the Central Excise Tariff which covers "welding electrodes, all sorts". The lower authorities held that item 50 covered these wires and since the appellants were found manufacturing and clearing these wires without taking out a Central Excise licence, and without payment of duty, they were subjected to penalty and confiscation of their goods. Duty on the goods cleared by them was also demanded from the appellants.

3. The appellants' plea is that in trade parlance their wires, which are nothing but copper coated steel wires, are not known as electrodes, that their wires could not be called electrodes since no electric current passes through them, that their wires were only a welding media and not electrodes, that the lower authorities had based their findings on the use of their, wires for the purpose of welding and that the "use" could not be a criterion for assessment so far as tariff item 50 was concerned. They added that copper coating of the steel wire was only for the purpose of preventing rusting of the wire and was on the same footing as galvanising of wire.

4. The Department's representative stated during the first hearing on 20-1-83 that the plea of the appellants that electric current did not pass through their wires during the welding process was a new point put forth for the first time. The appellants maintained that this plea had been taken before the Appellate Collector as well but that he had not recorded any finding thereon. We felt that this plea being a question of fact required verification. We, therefore, issued a direction to the respondent Collector to verify the facts and send a report. The Collector's report since received does not controvert the appellants' contention. The Department's representative, however, maintained that the fact that the wires manufactured by the appellants were used for welding purposes only, i.e., the same purpose for which welding electrodes were used, was very relevant and since the tariff item covered welding electrodes "all sorts", the subject wires fell in item 50. He added that tariff advice No. 2/73 which stated that copper coated steel wires were classifiable under item 50 had been issued on the advice of the Directorate General of Technical Development who were the technical authority to advise the Government.

5. The question also came up before us in the resumed hearing on 16-8-83 as to whether the subject wires would be covered by the residuary item 68 in case item 50 was found to be inappropriate for them. Both sides stated that the question of alternative tariff entry had not been gone into by the lower authorities and this question, if at all, could be remanded for consideration by the lower authorities in the first instance.

6. We have carefully considered the matter. We notice that the question of tariff classification of copper coated steel wires came up before the Bombay High Court in the case of Mis. Advani Oerlikon Ltd. v. Union of India [1981 E.L.T. 432 (Bom.)] in that case, the wires involved were meant for gas welding. In the two .cases before us, the wires are meant for electric welding. However, certain observations made by the Honourable Bombay High Court are relevant to the cases before us also.

The High Court held that item 50 of the Central Excise tariff makes no reference to the end use in contradistinction, to items 51 and 54 wherein the end use is specifically mentioned and, therefore, to classify the copper coated steel wires under item 50 on the basis of end use is irrelevant. The burden of proof lies on the Department to show that the goods are welding electrodes as commercially understood.

No such evidence is forthcoming. On the contrary, the contention of the appellants that electric current does not pass through their wires during the course of welding has not been controverted by the Department. The Department's case almost entirely rests on the plea that the subject wires are also used for welding, like electrodes.

Although, use of an article could be a relevant factor in understanding the commercial nature of that article, in the absence of any stipulation as to use in the tariff entry, it could not form the sole basis for classification. We, therefore, hold that the Department has failed to prove that the subject wires are welding electrodes. The words "all sorts" referred to in item 50 must be read in-conjunction with the preceding words, namely, "welding electrodes". Since the subject wires have not been shown to be welding electrodes, the words "all sorts" do not help the Department's case. As regards the question of an appropriate alternative tariff entry, whether item 68 or item 26AA (ia), we agree with both sides that since the question involves verification of new facts, in fairness to both parties it should be left to the lower authorities to consider it.

7. Accordingly, without prejudice to the Department's right to consider alternative classification for the subject wires, we allow these two appeals on the short point that the subject wires do not fall under item 50 of the Central Excise Tariff. In the consequences, the duties demanded from the appellants, the penalties imposed on them and the order of confiscation of the goods seized from them are all set aside.


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