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Talbros Automotive Components Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1984)(15)ELT193TriDel
AppellantTalbros Automotive Components
RespondentCollector of Customs
Excerpt:
.....tariff schedule, at 100% basic duty plus 20% auxiliary duty; and also charged to countervailing duty under item 22f of the central excise tariff schedule at 15%. the appellants have contended that the basic customs duty should have been levied at 60% and 15% auxiliary, namely the rates corresponding to item 87 of the indian customs tariff which was in force prior to the coming into force of the customs tariff act, 1975. they have not specified any particular item of the new tariff under which they claim classification for the levy of basic duty and the rates of 60% + 15%.3. so far as countervailing duty is concerned, it is the contention of the appellants that their goods did not conform to the description of item 22f of the central excise tariff schedule as in force at the relevant.....
Judgment:
1. These are nine appeals arising out of the combined Order-in Appeal No. S/49-1523/ 77R dated 10-1-1978 passed by the Appellate Collector of Customs, Bombay, on 10 appeals (one being a duplicate appeal) filed to him. The appellants had originally filed a single revision application to the Central Government which under Section 131B of the Customs Act, 1962, stands transferred to this Tribunal to be disposed of as if it was an appeal presented before the Tribunal. They have subsequently filed eight supplementary appeals having regard to the practice of the Tribunal to require separate appeals to it in respect of each of the appeals covered by a combined Order-in-Appeal.

2. The issue in all these appeals is the same, that is, regarding the classification of several consignments of goods imported by the appellants and described in the Order-in-Appeal as "Beater addition asbestos jointing". These were classified by the Customs authorities under Heading No. 68.01/16 of the Customs Tariff Schedule, at 100% basic duty plus 20% auxiliary duty; and also charged to countervailing duty under Item 22F of the Central Excise Tariff Schedule at 15%. The appellants have contended that the basic Customs duty should have been levied at 60% and 15% auxiliary, namely the rates corresponding to Item 87 of the Indian Customs Tariff which was in force prior to the coming into force of the Customs Tariff Act, 1975. They have not specified any particular item of the new tariff under which they claim classification for the levy of basic duty and the rates of 60% + 15%.

3. So far as countervailing duty is concerned, it is the contention of the appellants that their goods did not conform to the description of Item 22F of the Central Excise Tariff Schedule as in force at the relevant time and therefore should not have been charged to any countervailing duty. (In the course of the hearing it was observed that the imports had been effected after the introduction of residuary Item 68 of the Central Excise Tariff Schedule. The appellants did not contest that if their goods were not covered by Item 22F, they would have been covered by Item 68. This would not, however, have affected their claim for refund, since at the relevant time imported goods were exempt from the levy of countervailing duty with reference to Item 68 CET).

4. In the application titled Exhibit 'A' appended to their appeals, the appellants have stated that in view of Rule 3 of the Rules for Interpretation of the Schedule to the Customs Tariff Act, 1975, and because the test reports obtained at the time of clearance did not indicate the percentage of all the ingredients in the product imported and the goods cannot be retested at this stage, they were not pursuing the matter regarding the classification under the Customs Tariff. Shri D.N Gaur, the Consultant who appeared for the appellants at the personal hearing, with Shri S.C. Chopra, their General Manager, also confirmed that the ground regarding classification for the purpose of basic Customs duty in these appeals was not being agitated.

Accordingly, the appeals are confined to the question of classification and levy of countervailing (additional) duty with reference to Item 22F of the Central Excise Tariff Schedule.

5. The description in the abovementioned Item 22F as it stood at the relevant time is reproduced below :- '22F. 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.

Explanation.-"Mineral fibres and yarn, and manufactures therefrom" shall be deemed to include :- (iii) any other mineral fibre or yarn, whether continuous or otherwise such as slag wool and rock wool ; and (iv) manufactures containing mineral fibre and yarn, other than asbestos cement products.' The contention of the appellants in brief is that, from the reports of chemical tests made when the goods were cleared, it is found that in every case the percentage of asbestos in the goods was below 50%, being in the range of 28 to 39%. According to them, unless the percentage of asbestos was over 50%, the goods could not be called a manufacture of asbestos fibre or of mineral fibre.

6. In support of this ground, Shri Gaur advanced the following arguments :- (i) Item 58(1) of the First Schedule to the Indian Tariff Act, 1934, covered "asbestos manufactures, not otherwise specified". They were importing the same goods when this Schedule was in force. Their goods were tested at that time also. It was found on each occasion that the percentage of asbestos in the goods was below 50%.

Accordingly, their goods were not classified under Item 58(1) but under the residuary Item 87, covering "All other articles, not otherwise specified". On the same analogy, the goods could not be considered as "asbestos manufactures" for the purpose of countervailing duty ; (ii) Item 22F of the Central Excise Tariff Schedule was subsequently amended, by the Finance (No. 2) Act, 1980. The effect of the amendment was that the words "manufactures containing mineral fibres and yarn" appearing in clause (iv) of the Explanation were replaced by "other manufactures in which mineral fibres or yarn or both predominate or predominates in weight". In a note explaining the provision of the Bill, it was mentioned that this amendment was "of a clarificatory nature". It should, therefore, be considered that the condition as contained in the amended provision was effective even before the amendment ; (iii) If the condition that asbestos should predominate in weight was not read into the explanation, it could lead to absurd results, such as that an article containing even 1 % of asbestos fibre would have to be treated as a manufacture of asbestos or of mineral fibre; (iv) In case of doubt arising about the wording of a provision, the intention of the Legislature as available from other sources should be taken into account. In this case that intention could be gathered from the subsequent amendment made in 1980; and (v) In regard to other items in the Central Excise Tariff Schedule such as Item 19 relating to cotton fabrics or Item 21 relating to woollen fabrics, certain minimum percentages of the weight of cotton or wool are generally laid down, to bring a fabric within the scope of those items. Similarly, it was necessary that there should be a minimum percentage of asbestos or mineral fibre to bring an article within the scope of Item 22F.For these reasons, Shri Gaur submitted that the goods would not be covered by Item 22F for the levy of countervailing duty.

7. For the Department, Shri A.S. Sundararajan, JDR, submitted that the only question for consideration was whether countervailing duty had been properly levied. He submitted that the wording of the entry was very clear, when read along with the Explanation thereto. The entry included all manufactures containing mineral fibres and yarn (other than asbestos cement products, which are not relevant to the present case). Since no percentage of mineral fibres or yarn had been specified, the entry would cover a manufacture containing any mineral fibre or yarn, however small the percentage. The subsequent amendment had the effect of narrowing down the scope of this entry, by introducing the condition that the mineral fibres or yarn should predominate in weight. This was a specific change made subsequently and could not be taken to affect the entry as it existed prior to the amendment.

8. We have carefully considered the submissions made by Shri Gaur and Shri Sundararajan. In order to be clear regarding the nature and composition of the goods, we asked Shri Gaur to show us some of the invoices relating to the goods imported, which he did. We found that in these invoices the goods had been described as "Beater addition asbestos jointings" or "Beater addition process asbestos". We also enquired whether the reports on the tests carried out by the Customs authorities at the time of importation were available. Shri Gaur replied that the detailed reports were not made available to them.

However, the results of the tests had been endorsed on the relative Bills of Entry and were therefore known to them. They had also taken down copies of some of these endorsements. We were shown copies. In one case the endorsement read as follows : - "Sample is in the form of sheet. It is composed of asbestos, rubbery matter and oxides of iron and magnesium. The percentage of asbestos is less than 50% by weight.

"Sample is in the form of a sheet. It is mainly composed of asbestos, wood pulp, colouring matter, inorganic filler and rubbery matter.

The basic argument of Shri Gaur was that unless the content of asbestos was over 50%, the goods could not be deemed to be a manufacture of asbestos or manufacture of mineral fibre. This contention would have some force if we were interpreting the expression "manufactures of mineral fibres and yarn" or "articles of mineral fibres and yarn", or "articles made of mineral fibres and yarn". In all these expressions, there would be some justification to contend that the asbestos or mineral fibres and yarn should predominate by weight. However, the wording of the Explanation at the relevant time was significantly different, as it referred to "manufactures containing mineral fibres and yarn". On a literal construction, this expression would cover a manufacture which contained mineral fibres or yam, irrespective of the percentage of the mineral fibres or yarn, and all such manufactures would be brought within the scope of Item 22F. There in no doubt that the goods in question did contain asbestos, which is a mineral fibre, in a percentage ranging from 28.3 to 39%. The effect of the Explanation is to include such articles within the scope of the main item. So long as it is admitted that the goods did contain asbestos to the extent of 28.3% or above, it is not possible to agree that they would fall outside the scope of the expression "manufactures containing mineral fibres and yarn".

10. Shri Gaur had contended that such an interpretation could lead to absurd results, in case where the percentage of asbestos was very small, and had also relied on the subsequent amendment to this item. It is quite possible that the amendment was made in order to avoid the anomaly of articles containing a very small percentage of asbestos or other mineral fibre being brought within the scope of the item. This amendment was made in 1980, whereas Item 22F was introduced in 1976.

The amendment was not made retrospective, nor was there any indication that it was meant to be retrospective. A statement in an explanatory note (not in the Bill itself or the Notes on Clauses thereto) that the amendment was of a clarificatory nature, could not have the effect of making it retrospective. The entry as it stood before amendment was quite clear and did not admit of any doubt. (It might have had the effect of leading to hardship in some extreme casses of which this was not one -but that is not the same as saying that it was not clear). It has been held by the Supreme Court in the case of Dunlop India Ltd., and Madras Rubber Factory Ltd. v. Union of India & Ors. (reported in 1983 ELT 1566) that "once an article is classified and put under a distinct entry, the basis of the classification is not open to question". That principle applies fully in the present case.

11. Shri Gaur had referred to the hardship which might be caused in extreme cases where the percentage of asbestos or mineral fibre was very low, say 1%- It cannot be said that the present is one such extreme case, for a number of reasons.

12. Firstly, the percentage of asbestos in these cases ranges from 28.3% to 39%. This is certainly a substantial percentage, and there is no analogy to a case where the percentage of asbestos is negligible.

13. Secondly, it is seen, as stated by the appellants themselves in their appeal (and as confirmed by the test reports) that the goods are composed of a mixture of asbestos, rubber, inorganic materials, chemicals and fillers. The percentage of each of these ingredients, particularly the fillers, is not available. The term "filler" is normally used for a material used to increase the bulk of an article without having any active role of its own. When evaluating the importance of a constituent in the product, the filler would have to be ignored. In the present case, if the percentage of asbestos is taken with reference to the essential components of the product, with the exclusion of the filler, it would obviously be higher than the range of 28.3 to 39%, shown in the test reports, and could be over 50%.

14. Thirdly, what is most important, we have seen that the articles have been described both by the appellants and by their suppliers, in the relative invoices, as "Beater addition process asbestos" or "Beater addition asbestos jointings". Thus, as between the seller and the buyer of these articles, they were referred to as "asbestos" or "asbestos jointings". This would make it clear that it is the asbestos which gave them their essential characteristics and that they were in fast regarded as articles of asbestos. Thus, even the terminology used by the manufacturer and buyer of these articles supports the view that they could be regarded as manufactures of asbestos or manufactures of mineral fibres.

15. Having regard to these reasons, and the clear wording of the Explanation to Item 22F(iv) as it stood before amendment, we do not think there can be any doubt that these goods were covered by the description of that item and were liable to countervailing duty with reference to that item.

16. Shri Gaur had referred to the fact that prior to the coming into force of the Customs Tariff Act, 1975, these goods were classified for the levy of basic Customs duty under Item 87 of the old Customs Tariff and not under Item 58(1) ibid as "asbestos manufactures, not otherwise specified". We need only observe that the wording of Item 22F of the Central Excise Tariff Schedule is different from, and far more comprehensive than, the wording of Item 58(1) of the old Customs Tariff Schedule. The fact that the goods were not considered as falling under Item 58 (1) would not stand in the way of their being classified for the purpose of countervailing duty under Item 22F of the Central Excise Tariff Schedule, which as pointed out above, is clearly comprehensive enough to cover them.

17. For the reasons given above, we find that the orders of the Appellate Collector were correct. We accordingly confirm those orders and reject these appeals.


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