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Shree Hubli Chemical Works Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1984)(16)ELT365TriDel
AppellantShree Hubli Chemical Works
RespondentCollector of Central Excise
.....4780.33 from the factory on certain clearances or goods which the department held were colloidal sodium silicate. at first the assistant collector said that the notification 154/70 under which the factory asked for concessional assessment would not cover colloidal sodium silicate. he passed an order in march '81 demanding duty of rs. 26,495.22. this order was set aside by the appellate collector who remanded the case to the assistant collector to re-examine it after taking into consideration notifications 71/78-c e. and 80/80-c.e. in the subsequent order of 30-7-82, the assistant collector demanded only rs. 4780.27 after hearing the case and after taking into account notifications 71/78-c.e. and 80/80-c.e. as directed by the collector (appeals), and taking only clearances "made out of.....
1. This appeal HCW/Col-SS/Demand/82 dated 10-1-83 has been filed by Shree Hubli Chemical Works against the order of the Collector of Central Excise (Appeals), Madras A. No. 199/82(B)/ C. No. V/14BB/6/82 dated 4-12-82 which arose from an order of the Assistant Collector, Central Excise, Hubli C. No. V/14BB/2/16/82 B. 5/28654 dated 30-7-82.

By this order the Assistant Collector ordered recovery of Rs. 4780.33 from the factory on certain clearances or goods which the department held were colloidal sodium silicate. At first the Assistant Collector said that the notification 154/70 under which the factory asked for concessional assessment would not cover colloidal sodium silicate. He passed an order in March '81 demanding duty of Rs. 26,495.22. This order was set aside by the Appellate Collector who remanded the case to the Assistant Collector to re-examine it after taking into consideration notifications 71/78-C E. and 80/80-C.E. In the subsequent order of 30-7-82, the Assistant Collector demanded only Rs. 4780.27 after hearing the case and after taking into account notifications 71/78-C.E. and 80/80-C.E. as directed by the Collector (Appeals), and taking only clearances "made out of production relating to sample drawn on 25-7-80 and upto the date of next drawal". It is this demand that we have to adjudicate about.

2. At the hearing on 16-11-83, the representative of Shree Hubli Chemical Works argued that they did not manufacture colloidal sodium silicate. They had been clearirg their sodium silicate under duty concession provided by notification 154/70-C.E., when suddenly the Central Excise drew sample in July 1980 and after the test, informed them that they were not entitled to exemption under notification 154/70-C.E. and issued demands on them as they said their goods were found on test to be colloidal sodium silicate. The counsel criticized the test procedure because, the requisitioning officer asked the chemist to test whether the sample was a variety of colloidal sodium silicate. The chemist naturally appended a "rote" to the test report which he ended by saying the sample under reference was colloidal silicate. This was a mis-direction by the Central Excise officer- he should have merely asked for the sample to be tested and left everything to the testing chemist. The appellants' counsel further read the note that appears under notification 148/81-C.E. dated 1-8-81. This note says : "this notification has been issued in supersession of Notification No. 154/70-C.E. dated 1-8-1970 so as to clarify that the partial exemption applies to all varieties of Sodium Silicate used in industries other than soap industry subject to Chapter X procedure." This note maintains the counsel, merely clarifies that the partial exemption applied to all varieties of sodium silicate except those used in soap industries. He argues that the note clarified the position both under notification 148/81-C.E. and Notification No. 154/70-C.E. and that this meaning would become clear from a reading of the note.

3. The learned counsel for the department denied that the note under notification 148/81-C.E. can have any such meaning as was read into it by the appellant's representative. It can only clarify notification 148/81-C.E. under which it appears and can have no retrospective effect to cover the goods under dispute as these were all cleared before the note. He also said that the goods were found to be colloidal sodium silicate-not refined liquid sodium silicate, sodium sesqui silicate or sodium silicate powder which varieties of sodium silicate are eligible to exemption under notification 154/7C-C.E. Colloidal sodium silicate was none of these things and, therefore, the exemption cannot be extended to these goods. The appeal deserved to be rejected.

4. We should begin our examination by reading the test report. The Superintendent of Central Excise sent a memorandum dated 25-7-80 tothe Chemical Examiner, Central Excise, Custom House, Madras, asking him to test a sample described in the memo as "Refined liquid sodium silicate". The memo recorded the identification marks, number of container, weight of the sample etc. But it began by saying that "A sample of Refined Liquid Sodium Silicate has been sent with RR No. 1 Registered post parcel No. 4430 dated 29-7-80 for test". Thus, in two places, the test requisition by the Superintendent, Central Excise speaks of the sample being refined liquid sodium silicate, once in the beginning of the communication and again in the column "Description of sample". The Superintendent wanted the chemist to test the sample to ascertain whether it was a variety of colloidal sodium silicate or not.

He did not ask him to test the fineness or purity. This is significant.

5. The department maintains that colloidal sodium silicate is not refined sodium silicate. There is nothing to support this. A colloid is a reference to the dimension of the particle of the substance and is not a factor of its state of purity or the nature of the material. The behaviour of a colloid is more a physical manifestation than a chemical phenomenon. Generally appealing, when a substance is a colloid or is in a colloidal form, it is an emulsion when the state is aqueous. The particles are so fine that they do not settle out of the emulsion. The sample was found to be an aqueous solution of colloidal silicate and had a sodium oxide (Na2O), Silica (SiCV ratio of 1:2.01. But the test report did not say it was not unrefined sodium silicate. We have seen that the requisitioning superintendent described the sample twice as refined liquid sodium silicate. The chemist would know, therefore, that fineness was a determinant-he said nothing to correct the description; if he found it incorrect, he would, without a doubt, have corrected the mis-apprehension. He did say, however, that the sample was a colloidal silicate, obviously because the superintendent wanted to know. It appears to us, furthermore, that what the superintendent wanted to know was whether the sample described by him as refined liquid sodium silicate was in colloidal form or not, and not whether it was refined sodium silicate. Why he wanted the knowledge we do not know : it could be he did not know the meaning or how it might affect the assessment, but he may have heard that it was a colloid silicate. However that may be, we do not have any test that found the sodium silicate was not refined.

6. To be a colloid does not mean the sodium silicate cannot be refined.

To refine means to remove by separation undesirable elements and this can be done by several processes, the chief ones being distillation, evaporation, chemical reaction, physico chemical change; the process can also be served by simple mechanical means like sieving, filtering, pressing. Whatever the method, the aim is the same : to achieve a product free from impurities and other undesirable components, in a concentrated and or purified form. The concentration/purification may be high or low and depends on the efficiency of the process employed or the duration of the process; it may be dependent on what degree of purity /concentration the processor/manufacturer desires; it depends on various things. What may bs a refined product for one purpose may be not sufficiently pure for another and so on and so forth. One could go on expatiating on this endlessly but our only object is to clarify that the physical state of a colloid will not be an indicator of the parity of a substance. The factory had been clearing its sodium silicate in the past without hindrance from Central Excise; the same goods were suddenly found to be not entitled to the selfsame exemption they were enjoying. And there is no satisfying ground for holding that the exemption was undeserved. We do not agree that the colloidal sodium silicate is not eligible to exemption under notification 154/70-C.E. If the Central Excise found proof that the sodium silicate was unrefined it should have detailed its findings, told the factory about them, considering that the same goods were being cleared under the concession suddenly sought to be denied. This was no longer a case of the assessee proving its title to exemption, but of the tax collector demonstrating that the bounty already given and enjoyed should be taken away. This has not been done; the ground advanced do not convince us that the concession should be terminated.

7. For all the above reasons, we set aside the Collector (Appeal)'s order and the demand as untenable.

8. The factory's representative put forward some other arguments during the hearing but it is not necessary now to deal with them.

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