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Radio Supply Stores (P) Ltd. Vs. Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtKolkata High Court
Decided On
Case NumberCivil Rule No. 15407 (W) of 1976
Judge
Reported in1984(3)ECC187,1985(20)ELT15(Cal)
ActsIndian Companies Act, 1912; ;Central Excise Act, 1944; ;Customs Tariff Act; ;Indian Tariff Acts, 1934; ;Indian Telegraph Act, 1885 - Section 4; ;Central Excise Rules - Rule 206(3)
AppellantRadio Supply Stores (P) Ltd.
RespondentUnion of India (Uoi) and ors.
Appellant AdvocateMaloy Kumar Basu and ;Bimal Jyotsna Chatterjee, Advs.
Respondent AdvocateSakti Nath Mukerjee and ;Uma Sanyal, Advs.
Cases ReferredCannanora Spinning and Weaving Mills Ltd. v. Collector of Customs
Excerpt:
tariff items - exemption--'fonokom' an intercom, whether telephones and exempted under tariff item 33d--words and phrases--'intercom', meaning of--central excises and salt act (1 of 1944), schedule i, tariff item 33d. - .....they fall under the category of office machines and apparatus under the indian customs and central excise tariff item no.33das mentioned above, would not be excisable. mr. basu, of course, stated that intercom-devices are excisable under the said tariff, whereunder all types of intercom-devices except telephones are excisable. it was the further case of the petitioner that since 'fonokom' was not chargeable to excise duty, since their production in 1975, the petitioner had no occasion to pay any excise duty for the same. it has been alleged by the petitioner that central excise inspectors verbally informed that 'fonokom' being an exempted item, would not be excisable under the said act or the said rules. such statements have been affirmed as submissions of the deponent charu prokash.....
Judgment:

Manash Nath Roy, J.

1. 'Fonokam'' is, .ads name of what the petitioner,, Radio (Supply Stones (p) Ltd has described as a telephone for internal' communication and has also stated to have manu factured the same since April, 1975. It was the case of petitioner that such product 'Fonokom' operates independent of the public telephone exchange and such product, is popularly know as intercom telephones. The petitioner has stated that because of the use and manner of operation such product 'Fonokom' would fall or come under the category of office machine and apparatus under the Indian Customs and Central Excise (Tariff) and more particularly under item No. 33D.

2. The petitioner is a limited company incorporated under the Indian Companies Act, 1912 as was established in 1927. The petitioner is stated to be carrying on business in electronic appliances and also deals with compo nent parts of such appliances and other electrical goods. It has also been claimed that the petitioner has been duly registered as small-scale manufacturing unit and the licence for manufacturing of office machines and apparatus, which include electronic calculator and intercom devices, under the Central Excises Act and Rules (hereinafter referred to as the said act and the said Rules) in or about'1974 and since then they are continuing with or carrying on the manufacture of the products 'Fonokom' It was the case of the petitioner that, they adverrtised the product 'Fonokom' and displayed such item for the use as mentioned above and have sold the same to various customers including the Government and other statuory bodies.

3. 'Telephony' means the transmission of speech in a distance by means of the electric current. The process involves the use of a transmitter into which the message is spoken, a battery, conductors to connect the two stations and a receiver in which, the message is heard. ''Telephone' according to Chamber's Dictionary, is an instrument for reproducing sound at a distance, by means of electricity and according to Webster's, an instru-ment for reproducing sound at a distance Which' sound is converted into electrical impulses for transmission by wire. According to Oxford Dictionary, 'Telephone' is an apparatus for transmitting speech or other sound to distant, hearer especially , by electricity, a system of comminication by its means and having the instrument connected with others. On the basis of the definitions and the manner of user, Mr. Basu pleaded the product 'Fonokom' being a telephone, though falling under the category of intercom-devices, is not excisable under Tariff Item No.33D and more particularly whereunder such item 'telephones' have been specifically exempted from excise duty, whereas other intercom-devices are excisable under the said tariff. Under the said tariff Item No.33D in fact all types of intercom-devices except telephones are excisable. thus, Mr. Basu categorically Claimed that the product 'Fonokom' which are 'master' telephones, that is to say, any station can call any other station and which is a self-operated transistorised and push button intercom telephone system and cannot be connected to the public exchange, should be exempted under the said tariff item It was also claimed that since 'Fonokom' operates independent of the public telephone exchange and they fall under the category of office machines and apparatus under the Indian Customs and Central Excise Tariff item No.33Das mentioned above, would not be excisable. Mr. Basu, of course, stated that intercom-devices are excisable under the said tariff, whereunder all types of intercom-devices except telephones are excisable. It was the further case of the petitioner that since 'Fonokom' was not chargeable to excise duty, since their production in 1975, the petitioner had no occasion to pay any excise duty for the same. It has been alleged by the petitioner that Central Excise Inspectors verbally informed that 'Fonokom' being an exempted item, would not be excisable under the said Act or the said Rules. Such statements have been affirmed as submissions of the deponent Charu Prokash Ghose, the Managing Director of the petitioner. In view of the manner of affirmation and also because of the fact that the deponent has not mentioned the name of the Central Excise Inspectors, who gave him such assurances and also because of the denial of such statements by Shri Jagadish Chandra Dey, the Assistant Collector of Central Excise, respondent No. 4, as made in the respondents' affidavit-in-opposition dated 14th Jan., 1981 no reliance can or should be placed on those statements. It has also been claimed by the petitioner that the Indian Telephone Industries, Bangalore, do not pay any excise duty on the similar type of telephone they manufacture for inter-communications, which again, as in this case, cannot be connected with the public exchange and the products of the said Industry as mentioned above are sold to the public and the said Industry, having more than the required number of employees or at least more than the petitioner, pays 1 per cent excise duty under the said Act and in terms of Tariff Item No. 68.

4. In this case, on or about 15th May, 1976, the officers of the Central Excise department visited the office of the petitioner and conducted a search, which has been claimed to be illegal and unauthorised. It has been stated that such search was conducted even in spite of the due protest. Such search was, of course, conducted on disclosure of a search authorisation order and ultimately, on such search, tewenty-two pieces of 'Fonokom' a.nd eight pieces of Bush branch calculating machines amongst other valuable records, were seized. Mr. Basu stated that the challenge in this proceeding would relate to the 'Fonokom' and not to the calculators, as they have already been released. It has further been stated that although the search authorisation letter was asked for, the respondents concerned did not disclose the same, even though under the said Act and the Rules framed thereunder, it was incumbent on the authorities to serve and disclose such authorisation.

5. It was also claimed that the officer issuing the search authorisation, had no reason to believe or to be satisfied that any goods liable to excise duty or confiscation therefor, were secreted and in fact, there was no material before the officer concerned, to form any such opinion or hold any such belief and really any such reasonable belief or opinion as required in law, was not formed. The issue of the order as involved was claimed to be without any authority, jurisdiction or competence. That apart, the order of authorisation has been claimed to be vague and devoid of material particulars. It was also the case of the petitioner that the officers, who conducted the search, informed the managing director, that they had information that the intercom-devices, which are excisable under Tariff Item No. 33D, were being manufactured by the petitioner without the necessary authority. It has been claimed that at the time of the search and seizure, the officers concerned were appraised of the fact that 'Fonokom' did not come within the purview of the Tariff Item No. 33D as they are telephones, which are specifically exempted from excise duty. It has further been claimed that according to Brussel's Tariff Nomenclature, 'Fonocom' are nothing but telephones and as such also, should be deemed to be exempted from duty under the tariff as indicated above. It was also claimed that the new Customs Tariff Act, which has made the Indian Customs Nomenclature more scientific and has replaced the existing Indian Tariff Acts, 1934 and that of 1949 was based on Brussel's Tariff Nomenclature and by such incorporation, an attempt has been made to maintain the rates of duty at existing levels.

6. 'Telephone apparatus', according to Brussel's Tariff Nomenclature to which Mr. Basu referred to, includes,

(a) Telephone sets.

These comprise a transmitter (microphone), one or more receivers, a switching device and bell. In addition, depending on the type of telephone, there may be a signalling device for local battery working or a dial selector for automatic working.

(1) The transmitter is a microphone, which under the impact of soundwaves causes variations in current.

(2) The receiver reconverts the modulated current into sound-waves. It usually consists of a diaphragm placed in the field of an electromagnet. Receivers are usually incorporated in a case specially designed for fitting to the ear, frequently the transmitter and the receiver are incorporated in a single moulding known as a hand-set. In some systems the receiver may be a loudspeaker; such systems are used particularly for intercommunication between offices, etc. and permit conversation to be carried on at a distance with an ordinary speaking voice.

(3) The bell or buzzer gives warning of a call. These may be built-in with the telephone or be mounted separately.

(4) The switching device puts the bell out of circuit when the transmitter and receiver are connected to the line and vice versa. The switch is usually operated by a hook on which the ear-piece is hung, by a cradle for the hand-set or, in the loudspeaker system, by a push button or key.

(5) The signalling device enables the subscriber to call the exchange. This is required only in local primary battery telephones and is usually in the form of a hand driven magneto. In central battery working, the call flaps or lights at the exchange or operated when the receiver is taken off its cradle.

(6) The dial (drum, etc.) selector, for automatic working enables the caller to obtain his connection automatically by the production of impulses which operate selector at the exchange. Other devices, occasionally fitted to subscribers' telephone sets include : device for holding a connection on line while communicating with a person on another extension and devices for listening into or breaking into other lines.

Telephones may be mounted in several ways. Generally speaking, they are either designed for wall mounting or are of the portable type for placing on tables, etc. However, there are special types (e.g. the military field-telephone 'parlophone' for building, of which part may be of built-in design for fixing into walls; coin-operated telephones for public booths; sealed telephones for use in mains; equipment with special thromicrophone and permanently fixed earphones (used for example in aviation). The present heading covers telephones of all types, including those with special devices or mechanisms so far transmitting recorded messages or recording message in the absence of the subscriber.

(b) Non-automatic switch boards and exchange.

Ranging from small switching panels to large exchanges these consists of a frame on which are mounted that various manual switching devices, etc. The principal components are :

(i) Call or 'clear' indicator (flaps, bells, lamps etc.) for signalling to the operator that a call is being made or that a connection is no longer required.'

7. I think at this stage, Tariff Item No. 33D, on the basis whereof arugments were advanced at the Bar, must be reproduced. The said item is to the following effect :

'33D. Office machines and apparatus, including typewriters, calculating machines, cash registers, cheque writing machines, accounting machines, statistical machines, computers (including central processing units and peripheral devices), intercom-devices (but excluding telephones), teleprinters and auxiliary machines for use with such machines, whether in assembled or unassembled condition.

Explanation : -The term 'office machines and apparatus' shall be construed so as to include all machines and apparatus used in offices, shops, factories, workshops, educational institutions, railway stations, hotels and restaurants for doing office work, for data processing and for transmission and reception of messages.'

8. It has been claimed by the petitioner that the Joint Managing Director of the same, on 15th May, 1976 made a representation to the Superintendent, Central Excise, respondent No. 3, disclosing all the relevant facts as mentioned above and demanded release of the 'Fonokoms' and such representation having failed, further representation was made on 19th May, 1976, to the Assistant Collector of Central Excise, respondent No. 4. It was specifically disclosed in those representations, that the search and seizure was unwarranted, unauthorised and bad in law. The petitioner has also stated that because of the seizure of 'Fonokoms' they have suffered much and is also suffering, as during the continuance of the seizure, the petitioner would not be permitted to effect supplies to other customers from whom orders were already accepted. Thereafter, on 26th May, 1976, the petitioner has stated to have been made a further representation, for return of seized 'Fonokoms', to the Assistant Collector of Central Excise. The representations as aforesaid, were replied by the Assistant Collector concerned stating that the goods in question could not be returned as they were seized on reasonable belief that they were excisable under Tariff Item No. 33D of the said Act. The petitioner was, of course, informed that they would be at liberty to apply for provisional release of the seized goods in terms of Rule 206(3) of the said Rules, which postulates that anything seized by a Central Excise Officer may pending the orders of the adjudicating Central Excise Officer be released to the owner on taking a bond from him in the proper form, with such security as the Collector may require. Such letter of department was replied to by the petitioner on 28th June, 1976, and therein, prayer was made for provisional release of the goods.

9. Even on the face of the above records and backgrounds, on or about 30th June, 1976, the petitioner was served with a show cause notice dated 30th June, 1976, from the Assistant Collector concerned, asking them thereby to show cause, why the 'Fonokoms' as seized, should not be confiscated under the provisions of the said Rules. The 'Fonokom' machines as seized were valued at Rs. 7,259.00 and the calculating machines, which are not in issue in this proceeding, were valued at Rs. 2,400.00. The petitioner was also informed that they could examine the records and documents as seized or take copies or extracts from them, on prior engagement with the authorities concerned. The petitioner by the letter at annexure K to the petition after denying and refuting the charges, asked for certain dates as well as the relevant search warrant and asked for some time to give a full and complete answer. Thereafter, on or about 8th July, 1976, the petitioner was informed that the goods in question could be released provisionally on furnishing of a bond for Rs. 9,659.00 and with a security of Rs. 4,347.00 and on that day, by another letter, the petitioner demanded for a copy of the search authorisation letter. Then on 12th July, 1976, a further representation was made by the petitioner, for a copy of the search authorisation and thereafter, on 29th July, 1976, the petitioner was asked to send a representative to have inspection of the search authorisation and in fact on 3rd August, 1976, after obtaining such copy, the petitioner submitted the necessary reply to the concerned show cause notice. The petitioner has alleged that on 5th August, 1976, a representation was sent for early disposal of the matter, but no expeditious steps were taken. In fact, the petitioner has stated that for such disposal of matter, they have suffered and the petitioner, in spite of the bona fide intention to have the goods as seized released, could not succeed because of the attitude and steps taken by the authorities concerned.

10. The petitioner has stated that after repeated representations the authorities could be persuaded to hear the matter on 27th August, 1976, and on the next date, but thereafter, the respondents, for reasons best known to them, did not pass any order, whereupon on 3rd November, 1976, the petitioner had to give a reminder to the Deputy Collector of Central Excise concerned. Such act or action in not passing the necessary order, was also claimed by the petitioner to be harassing and mala fide too.

11. In their affidavit-in-opposition dated 14th January, 1981, the answering respondents, through Shri Jagadish Chandra Dey, the Assistant Collector of Central Excise respondent No. 4, have stated that the petitioner is a licensed manufacturer of office machine and apparatus falling under Tariff Item No. 33D, and they have been manufacturing calculating machines since 1974. It has been stated that the petitioner has only disclosed the office machines as excisable in form No. 1 and has not included the apparatus manufactured in the name and style of 'Fonokom'. It has been stated that the internal communication system, which are known as intercom-devices, are not treated and considered as telephones in the popular sense of the terms and they are treated by the trade as intercom-devices and not as telephones. The deponent has also stated that men in trade and commerce, conversant with the subject, generally understand the system of devices as something which are not strictly speaking telephones. Such intercom-devices, in whatever brand name they are called, are excisable under the concerned Tariff Item No. 33D of the said Act. It has been categorically denied that the 'Fonokom' brand or product of the petitioner, would not be taxable under the item as referred to hereinbefore, which only excludes telephones and not the intercom system, which again, by any stretch of imagination could (not) be regarded or termed as telephones. In fact, it has been stated that the very term 'intercom telephone system', itself indicates the character, which is not certainly a telephone. The deponent has also stated that the literature of the petitioner, on a reference, would prove the above fact, more particularly when the petitioner's product 'Fonokom', on their own statements, help to increase effective working hours by providing internal communication facilities with no telephone operators to overhear confidential talks. It has further been stated that no person can establish, maintain or work on telephones in contravention of the provisions of Section 4 of the Indian Telegraph Act or otherwise than is permitted by the Rules as framed thereunder. It was alleged, that the petitioner could not adduce any evidence, authorising them to produce and manufacture telephones. The distinguishing features of a telephone and an intercom, it has been stated that the former is connected with the public exchange while the latter is not so, and that apart, intercom machines do not contain selection switches, which the telephones have. In view of the admitted characteristics and distinguishing features, the deponent has claimed that 'Fonokom' is not a telephone, falling under Tariff Item No. 33D and as such, the same cannot claim exception. It has also been stated that the petitioner has not paid excise duty on such product 'Fonokom'.

12. The validity, bona fide and correctness of the correspondence with the authorities other than the petitioner by the Indian Telephone Industries, have been denied and it has further been stated that if the Indian Telephone Industries Ltd. are not paying excise duty for their intercom-devices as alleged, treating such products as exempted items, they are doing so illegally, irregularly and on wrong interpretation of Tariff Item No. 33D and such non-payment, would not absolve the petitioners from paying the appropriate duty on their product 'Fonokom' which is an intercom device.

13. The deponent has denied the search and seizure as conducted to be illegal, unwarranted, irregular and unauthorised as alleged and the deponent has also claimed, such search and seizure to be due, bona fide, legal and authorised. The 'Fonokom' machines have also been claimed to be office machines attracting Central Excise Duty under Item No. 33D. It has further been stated that the opinion towards the excisability of the 'Fonokom' machines was formed duly bona fide and with authority. It has further been alleged that the petitioner was carrying on the manufacturing of intercom-devices, known as 'Fonokom', without the due declaration and the provisional release of the seized goods were appropriately imposed under Rule 206(3) of the said Rules. It has also been claimed that from the action as taken, the petitioner had other remedies in the statute and the Rules, i.e. appeals and revisions, and those remedies not having been availed of, interference by this Court, would not be possible and permissible. The petitioner has not filed any rejoinder to the affidavit-in-opposition as filed by the respondents.

14. On the basis of the pleadings as above-mentioned and the records as produced, so also on the basis of the user of the product 'Fonokom'. Mr. Basu claimed that the same should be deemed to be and that too on the basis of the dictionary meaning of the word 'telephone', as a telephone and not as intercom and as such, such product 'Fonokom' should be exempted from duty under or in terms of Tariff Item No. 33D. Mr. Basu of course argued and as he had no other alternative that 'Fonokoms' cannot be connected with public exchange and through them, no call outside the premises where such machines are installed, would be possible. The whole question to be answered in this case and that too on the available pleadings and documents, is, whether 'Fonokom' is a telephone or is just an intercom. The dictionary meaning of the word 'telephony' and 'telephone', have been indicated hereinbefore and Mr. Basu claimed that if, no proper or appropriate description or definition is available, ordinary dictionary meaning should be adopted. In support of such submissions, Mr. Basu, firstly, referred to the observations in the case of Union of India v. Gujarat Woollen Felt Mills- : 1977(1)ELT24(SC) . In that case, a point arose whether non-woven felt manufactured from woollen fibres by machine pressing and used for filtration in heavy industries, are or are not woollen fabrics within the meaning of entry 21 of the First Schedule to the said Act and it has been held, on the facts of that case, that non-woven felts, manufactured from woollen fibres by machine pressing of raw wool-waste, which were neither sheets nor fabrics and utilised for the purpose of filtration in heavy industries are not 'woollen fabrics' within the meaning of entry 21 in the First Schedule to the Act, read as a whole. The word 'fabrics' in entry 21 has been used to mean woven material in which sense it is popularly understood, and blankets, rugs and shawls, etc. have been specifically included in the entry out of abundant caution to indicate that 'woollen fabrics' in entry 21 means not only woollen garments but also woollen materials used as covering or for similar other purposes and the well-known rule in interpreting items in statutes like the Central Excises and Salt Act, 1944, is that 'resort should be had not to the scientific or the technical meaning of such terms but to their popular meaning or the meaning attached to them by those dealing in them, that is to say, to their commercial sense.' Mr. Basu, secondly, referred to the determinations in the case of Cannanora Spinning and Weaving Mills Ltd. v. Collector of Customs- : 1978(2)ELT375(SC) for the proposition that no technical meaning should be given to a word or term, unless such meaning is provided for in the statute and in such a case, the dictionary meaning should be adopted. It was claimed by Mr. Basu, thirdly, that no addition or enlargement of a term than what is provided for in the dictionary, if the said term is not defined in the concerned statute, would be possible or should be allowed.

15. After placing the pleadings of the respondents and more particularly those contained in paragraph 9 of the affidavit-in-opposition and the particulars whereof have been indicated hereinbefore and so also the provisions of the Indian Telegraph Act, 1885, Mr. Mukherjee specifically contended that none else than the Central Government or authorities under them, would be entitled to deal with telegraph and telephone or to produce telephones. He contended that the product 'Fonokoms', even it has the other characteristics of telephone, but as they look in many material particulars other than a telephone, in respect of the component parts and the manner of use, they cannot be termed, called or considered as telephones. For example, Mr. Mukherjee claimed that through a telephone, connections outside the place were the same is, is possible through different exchanges, but in the case of 'Fonokoms' such connection is not possible. He, in support of such statements relied on the admission made by Mr. Basu that a 'Fonokom' cannot be connected with other exchanges. Mr. Mukherji also claimed that the Indian Telephone Industries also produce or supply or make provisions for intercom systems and those intercom instruments are not regarded or considered as 'telephones'. In respect of those intercoms Mr. Mukherjee claimed that connections to or through other exchanges like 'Fonokoms' would not be possible. It was claimed by Mr. Mukherjee that such an interpretation or meaning to 'Fonokom' which is really an intercom, should not be given whereby the real character of 'Fonokom' which is an intercom, would be lost or frustrated and he said, that such meaning and interpretation to 'Fonokom' should be given, which would be accepted without any repugnancy and violence to the actual meaning, and that too on the basis of the actual user in the trade world. 'Intercom' means internal communication, viz, communication between persons of the same premises or room through an apparatus like 'Fonokom' or any apparatus of that kind. So, even though 'Fonokom' satisfies some of the tests and ingredients like telephone according to its dictionary meaning the same cannot be claimed or called a telephone, in view of the circumstances and events in the matter of the user as mentioned hereinbefore. The meaning of 'intercom' which is the abbreviation of intercommunication, would be to enjoy a right of common mutuality with the inhabitants or occupants, here in this case of contiguous rooms in the same premises or even in the same room. 'Intercom' according to Webster's means intercommunication system, which term according to Chamber's means, telephone system within an aeroplane, talk etc. In view of the above, it can also be deduced that 'Fonokom' which is admittedly an intercom, would further mean intercommunication system or a telephone system within a concerned premises. In such view of the matter, I hold that 'Fonokoms' are intercoms and not telephones and as such, they would not come under the exemptions in Tariff Item 33D of the said Act.

16. The rule is thus discharged. There will be no order for costs.


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