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Collector of Central Excise Vs. Industrial Marketing - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1985)(5)LC2507Tri(Delhi)
AppellantCollector of Central Excise
Respondentindustrial Marketing
Excerpt:
.....before the lower adjudicating authorities, the fibre content was less than 50% in the varnished glass fabrics whereas item 22f(4) required predominance of the mineral fibres or yarn for classification under that item. shri ohrt further contends that the fibre-glass fabric would be a textile fabric and the coating thereof was, according to the chemical examiner's report mentioned in the orders of the lower authorities, by a synthetic resin. he contends that such synthetic resins are artificial plastic materials. he therefore contends that the classification by the assistant collector under tariff item 22b was proper and has to be restored.10. reference is now to be made to the decision of the gujarat high court in dynamo dc electrics v. union of india and ors. (special civil.....
Judgment:
1. The respondents, M/s Industrial Marketing Corporation manufacture Varnished Fibre Glass Cloth, Varnished Sleevings and Varnished Fibre Glass Tapes. Under his order dated 25-7-1981 the Assistant Collector of Central Excise, Bombay Division C-II classified the first two products under Tariff Item 22B-CET and the last one under Tariff Item 68-CET.The respondents preferred an appeal in respect of the classification of the first two items. Under his order dated 23-10-1981, the Appellate Collector of Central Excise, Bombay, set aside the order of the Assistant Collector in the said matter and held that the said two products were also classifiable under Tariff Item No. 68-CET. Under notice dated 21-9-1982 the Central Government, in exercise of its powers under Section 36(2) of the Central Excises and Salt Act, as it then stood, indicated to the respondents that it proposed to revise the order of the Appellate Collector and restore the classification to Tariff Item 22B-CET. Under the said notice the respondents were called upon to show cause why the said variation should not be ordered. The respondents sent their reply reiterating their contentions raised before the Appellate Collector. It is the said proceedings initiated under the abovesaid Show Cause Notice that, on transfer, are being dealt with as an appeal before this Tribunal.

2. We have heard Shri Vineet Ohri, Senior Departmental Representative, for the appellant Collector and Shri S.L. Rajgarhia, Partner of the respondents, on behalf of the respondents.

3. An objection had been taken in the reply to the Show Cause Notice that the show cause Notice is barred by limitation as it had been issued after the expiry of the period of six months from the date of the order-in-appeal. In respect of this preliminary contention, Shri Ohri submitted that the order of the Assistant Collector was on a classification list filed by the respondents and dealt with the question of classification and that the order of the Appellate Collector also, therefore, dealt with the question of classification only and, in the circumstances, the period of limitation for the issue of the Review Show Cause Notice under Section 36(2) of the Act, as it then stood, was a period of one year and not six months only. Section 36(2) read as follows : "Section 36(2).-The Central Government may, of its own motion or otherwise, call for and examine the record of any proceeding in which any decision or order has been passed under Section 35 or Section 35A of this Act for the purpose of satisfying itself as to the correctness, legality or propriety of such decision or order and may pass such order thereon as it thinks fit : Provided that no decision or order shall be varied so as to prejudicially affect any person unless such person is given a reasonable opportunity of making a representation and, if he so desires, of being heard in his defence : Provided further that no proceedings shall be commenced under this Sub-section in respect of any decision or order (whether such decision or order has been passed before or after the coming into force of this subsection) after the expiration of a period of one year from the date of such decision or order : Provided also that where the Central Government is of opinion that any duty of excise has not been levied or has been short-levied or erroneously refunded, no order levying or enhancing the duty, or no order requiring payment of the duty so refunded, shall be made under this Section unless the person affected by the proposed order is given notice to show cause against it within the time limit specified in Section 11 A." 4. It is seen therefrom that the period of limitation of six months as mentioned by the respondents would apply if the proceedings were such as are mentioned in the third proviso, dealing with demands for payment of duty. But as Shri Ohri points out, the dispute in the present case related to classification, being under an order by the Assistant Collector on the classification list, and would, therefore, be covered by the second proviso and not the third proviso. It is, therefore, clear that the period of limitation for the issue of the Review Show Cause Notice by the Central Government was the period of one year mentioned in the second proviso and not the period of six months mentioned in the third proviso. We may also note that, evidently accepting this conclusion, S hri Rajgarhia did not submit any arguments on this question. We therefore hold that the Review Show Cause Notice was not barred by limitation.

5. The goods in question are Varnished Fibre Class Cloth and Varnished Sleevings. Paragraph 3 of the Review Show Cause Notice read, in part, as follows : "3. On examination of the records of the case the Central Government are tentatively of the view that the impugned order in appeal is not proper, legal and correct. The samples of the goods were tested by the Chemical Examiner who in his reports BMS/68-164/6459/80 dated 22-5-1980 and BMS/68-163/6456/80 dated 22-5-1980 opined that the goods were impregnated with preparation containing synthetic resin.

Subsequent to the passing of the impugned order in appeal the goods were again tested by the Dy. Chief Chemist who in his report stated that the sample was composed of glass fibre and synthetic resin (alkyd type). Both the aforesaid reports appear to indicate that the varnish in which the base material was dipped contained synthetic resin." It therefore appeared that in issuing the Review Show Cause Notice the Government had referred not merely to the materials that were available in the file as it stood on the date the Appellate Collector passed his order but also made reference to a te st carried out subsequently and the report of the Deputy Chief Chemist on such further examination. An objection had been taken by the respondents that reference to such additional material was improper and the Show Cause Notice was on that ground itself invalid and is liable to be discharged. Section 36(2), as it then stood, has been extracted supra. It is seen therefrom that the Central Government may call for and examine the record of the proceedings in which any decision or order had been passed under Section 35 or 35A of the Act, for the purpose of satisfying itself etc... Therefore, it is clear that for initiating the proceedings by issue of a Show Cause Notice under Section 36 the Central Government was to look into the records as they stood on the date the order sought to be reviewed was passed and not take into consideration any additional or extraneous matter. It may, no doubt, be open to the Government in pursuing the proceedings following the issue of Show Cause Notice to seek for additional materials and take them also into consideration during the course of the adjudication on the Review Show Cause Notice. But in initiating the proceedings under Section 36(2), the Central Government was entitled to take into consideration the materials as they stood in the record on the date the impugned order was passed and not additional materials. In the present instance it further transpires that no copy of the subsequent report of the Deputy Chief Chemist had been made available to the respondents. We may note that even now the report of the Deputy Chief Chemist (date not mentioned in the Review Show Cause Notice) has not been filed even before us and the reference thereto is only in the extract of the report contained in the Show Cause Notice itself.

6. But Shri Ohri contended that the Review Show Cause Notice could be supported and disposed of without reference to the additional report of the Deputy Chief Chemist and with reference to the materials that are available in the file, as they stood on the date the order of the Appellate Collector was passed. It is on the said basis that we heard further submissions on this matter.

"Textile fabrics impregnated, coated or laminated with preparations of Cellulose derivatives or of other artificial plastic materials, not elsewhere specified." Therefore, to fall in this item the goods must be firstly textile fabrics ; secondly, they must be impregnated, coated or laminated; thirdly, such process must be with preparations of Cellulose derivatives or of other artificial plastic materials ; and fourthly, they must not be elsewhere specified. In the said view, it appears to us that as far as the Varnished Sleevings are concerned, they would certainly fall outside item 22B. A fabric would be a piece of woven cloth of any length or width but sleevings are tubular in shape and, we are informed, are manufactured directly from yarn by braiding on a braiding machine. In view of this shape (tubular), it is clear that sleevings would not be fabrics. Tariff Item 22B would refer to fabrics only. Therefore, for this reason itself we are satisfied that so far as the Varnished Sleevings are concerned, they would not fall within Tariff Item 22B. In the absence of ar other specific item for such sleevings, we hold that same would fall under Tariff Item 68-Central Excise Tariff.

8. So far as the Varnished fabrics are concerned, the respondents have contended for classification under Tariff Item 22F(4)-Central Excise Tariff. Tariff Item 22F read as follows : "Mineral fibres and yarn, and manufactures therefrom in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power, the following, namely :- (3) Any other mineral fibre or yarn, whether continuous or otherwise, such as slag wool and rock wool; (4) Other manufactures in which mineral fibres or yarn or both predominate or predominates in weight." The contention for the respondents is that as the commodity in question is Varnished Fibre glass cloth, it would fall in this Tariff Item 22F which deals with Mineral Fibres and Yarn and manufactures therefrom.

They, therefore, contend that there is no question of invoking Tariff Item 22B.9. Shri Ohri, on the other hand, contends that Tariff Item 22F(4) would not be attracted since according to test reports that were available before the lower adjudicating authorities, the fibre content was less than 50% in the Varnished Glass Fabrics whereas item 22F(4) required predominance of the Mineral Fibres or Yarn for classification under that item. Shri Ohrt further contends that the fibre-glass fabric would be a textile fabric and the coating thereof was, according to the Chemical Examiner's report mentioned in the orders of the lower authorities, by a synthetic resin. He contends that such synthetic resins are artificial plastic materials. He therefore contends that the classification by the Assistant Collector under Tariff Item 22B was proper and has to be restored.

10. Reference is now to be made to the decision of the Gujarat High Court in Dynamo DC Electrics v. Union of India and Ors. (Special Civil Application No. 1242 of 1983), a copy of the judgment (though uncertified) has been made available by the respondents. It dealt with Glass Fabrics (Epoxy D stage), Varnished Fabric Glass Sleevings and Un-Varnished Glass sleevings as also scrap of the last two items. The Gujarat High Court observed in paragraph 7 of its judgment : "The moment Mineral Fibres come into play, entry 22F alone is to be resorted to. If that entry 22F either applies or does not apply, but the other entry dealing with a different type of case known as Textile Fabrics cannot be pressed into service." They had also observed in para 8 that "these products, viz. Glass Fabrics (Epoxy D stage) and Varnished and Un-varnished Fabric Glass sleeves and their scraps are even popularly not known as Textile Fabrics". Applying the above tests they held in the said case that the Glass Fabrics (Epoxy D stage) and Varnished Fabric Glass sleeves with their scrap are covered under Tariff Item 22F. That was on the basis that in the case of the goods that were under dispute in that case there was predominance of mineral fibres or yarn.

11. Shri Rajgarhia heavily relied on the abovesaid decision. Fibre lass would certainly be a mineral fibre. The Fibre Glass fabric would be a uianufacture therefrom. The Gujarat High Court has laid down that once Mineral Fibres come into play, entry 22F alone is to be resorted to but not other entries dealing with textile fabrics. The decisions cited by Shri Ohri were all with reference to whether synthetic resins would be plastic materials or not. None of them dealt with this position as to whether when mineral fibres or manufactures therefrom are to be considered, they should be primarily dealt with under Tariff Item 22F and not any other Tariff Item. Therefore, in the absence of any decision contrary to the decision of the Gujarat High Court, we respectfully follow the observations therein.

12. In that event, the Varnished Textile Fabrics manufactured by the respondents would not be considered under Tariff Item 22F and if they do not fall witnin that item, they should be held to fall within the residuary item T.I. 68 only. They could not be held to fall within Tariff Item 22B in the light of the observations of the Gujarat High Court.

13. So far as item 22F is concerned, it is to be noted that the report of the Chemical Examiner is that the fibre content in the Varnished Textile Fibre-glass Fabrics was less than 50%. It is, therefore, clear that the same would not fall within 22F(4)-Central Excise Tariff. In the absence of any other specific item, it has only to be held, following the Gujarat High Court judgment, that the goods fall under Tariff Item 68-Central Excise Tariff as held by the Appellate Collector. We hold accordingly.

14. In the result, the order of the Appellate Collector is upheld and the Review Show Cause Notice is discharged.


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