Judgment:
1. The brief facts of the above appeal which arises out of the order passed by the Collector of Central Excise, Kanpur are that, on receipt of intelligence that M/s. Shiv Raj Tobacco Co., Shuklaganj, Unnao were using aluminium containers received by them in the guise of aluminium utensils declared as milk pots (manufactured by Mauji Lai Metal Works, Kanpur without licence and without payment of central excise duty) for packing and sale of pan masala of brand "Chaman Bahar" manufactured by them, the Central Excise Officers seized such goods from the premises of Shiv Raj Tobacco Co. The officers of the company deposed that under their scheme, 4 dozens and 8 dozens of tin dibbies 10 gms. packing size of branded pan masala were being sold after packing them inside the aluminium balties which were then repacked with polyethene cover and finally packed inside a wooden box before a despatch. The goods described as aluminium milk pot were also seized from the factory premises of M/s. Mauji Lai Metal Works. As it appeared that the so-called aluminium milk pots were aluminium containers which were sold only to M/s. Shiv Raj Tobacco Co. for the specific purpose of packing of pan masala and would hence fall for classification under Tariff Item 27(f) as aluminium containers, a show cause notice was issued to M/s.
Shiv Raj Tobacco Co. proposing levy of duty of Rs. 11,396.58 on the seized goods and confiscation and imposition of penalty, to M/s. Shukla Rajaram concern for imposition of penalty and to M/s. Mauji Lai Metal Works for confiscation of seized goods, imposition of penalty and levy of duty on the seized goods as well as on aluminium metal containers valued at Rs. 60 lakhs approximately, manufactured and cleared by them during the period 1979-80 to 1983-84. M/s. Shiv Raj Tobacco replied to the show cause notice denying that they were producers of aluminium balties which were actually manufactured by M/s. Mauji Lai Metal Works and designed for carrying milk or liquid and not for packing of goods for sale. They submitted that they had supplied these aluminium milk pots (aluminium balties) free of cost as gifts to their bulk customers of pan masala and they were not liable to pay any duty on goods not manufactured by them. The defence of M/s. Mauji Lai Metal Works was that they were manufacturing aluminium utensils including milk pots classifiable under Tariff Item 68 and covered by exemption Notification. M/s. Shukla Raja Ram concern replied that they were only doing job work on behalf of M/s. Shiv Raj Tobacco Co. Ltd. After adjudication, the Collector of Central Excise, Kanpur held that the main issue involved in this case was classification of aluminium balties which had been put to use by manufacturers of pan masala, as aluminium containers, and accepted the respondents' contention that the end use of certain goods would not determine their classification and that the predominant use was relevant. He held that the aluminium balties merited classification only under Tariff Item 68 and were eligible for exemption from payment of duty under Notification 234/82, dated 1-11-1982 as amended, since the goods were utensils made of aluminium. He dropped the proceedings against all the 3 respondents and hence these appeals by the Revenue.
2. When the matter came up for hearing, none was present on behalf of the respondents inspite of notice of hearing having been issued; hence, we proceeded to hear the learned DR, Shri Mohamed Ali and perused the records.
3. We find from the evidence on record that the first respondent had been purchasing these aluminium balties from M/s. Mauji Lai Metal Works for putting their pan masalas tin dabbies of 10 grams each duly packed and this use was amongst the general use of balties which the manufacturer was selling to other customers also, as aluminium balties i.e. aluminium utensils and not as aluminium containers. No duty was being paid on these aluminium balties because these were aluminium utensils falling under Tariff Item 68 and exempt from duty vide Notification No. 244/77 and No. 234/82. Before clearance, these aluminium balties had already been classified as aluminium utensils under Tariff Item 68 and not as aluminium containers under Tariff Item 27(f). No doubt, the embossing of the words "Chaman Bahar" was being done at the premises of the first respondent but mere embossing of the name of the product and the name of the manufacturer could not determine its classification as aluminium containers as rightly held by the Adjudicating authority.
4. The learned DR has not adduced any arguments to support the contention of the department that the goods in question were not aluminium utensils in the hands of the manufacturers namely M/s. Mauji Lai Metal Works. The Adjudicating authority has rightly concluded that the end use of these goods is not indicative of their classification and once it is accepted that the balties in question are aluminium utensils, the fact that they are used by the first respondent in this case to pack pan masalas will not alter their classification from aluminium utensils under Tariff Item 68 to aluminium containers under Tariff Item 27(f).
5. The Adjudicating authority has also accepted the contentions of the respondents that the aluminium balties were being supplied as a free gift to their bulk purchasers of Pan masala and there is nothing on record to dislodge this finding.
6. In the light of the above discussion, we see no reason to interfere with the finding that the aluminium balties in question fall for classification under Tariff Item 68 of the Schedule to the erstwhile Central Excise Tariff and are eligible for exemption from payment of duty under Notification No. 244/77 and No. 234/82, dated 1-11-1982 during the relevant period. Accordingly, we uphold the impugned order and reject the appeal.
7. With due respects to Hon'ble Member (Judicial), my views and orders in the matter are as follows.
8. I observe that learned Departmental Representative has stated that the Collector's order is wrong both on facts and the law. It is not based on true and proper appreciation of factual position and legal provisions.
9. It was his submission that as is seen from the advertisement put up by M/s. Shiv Raj Tobacco Co., the containers have been described as aluminium balties packing for 10 gms. tin dibbies and showing the value per baity. Not only M/s. Shiv Raj Tobacco Co. described these goods as balties but the purchasers of the goods from M/s. Shiv Raj Tobacco Co.
have also described the goods as aluminium balti packing. This shows that the seized goods were specifically manufactured and also used for packing purposes. Such packing materials are to be treated as containers and not utensils. M/s. Shiv Raj Tobacco Co. in their statement dated 1-3-1984 had confessed that aluminium metal containers were supplied to them by M/s. Mauji Lai Metal Works as per their orders and specifications. The following literature was superscribed by the manufacturers "Chaman Bahar Rose Powder - Shiv Raj Tobacco Co. (P) Ltd., Unnao" and embossing was done with the help of press machine and these have been purchased by one single party M/s. Shiv Raj Tobacco Co.
10. It was also his submission that the embossing of the manufacturer's name and the name of product packed in such containers was done on these containers by manufacturer/supplier looking to these aspects as also to the fact that such containers were, in fact, being used in this case as 'secondary containers'. The product in question therefore, merits classification as aluminium containers rather than as aluminium utensils. The fact of putting dibbies in such containers had nowhere been disputed.
11. It was his submission that M/s. Shiv Raj Tobacco Co.'s & M/s. Mauji Lai Metal Works' contention that end-use of certain goods do not determine its classification in general but predominant use was relevant and significant where classification was related to the functions of the goods. In this case, there is no doubt about the fact that the goods had been specifically manufactured and also embossed with M/s. Shiv Raj Tobacco Co. "Chaman Bahar Pan Masala" and also put to specific use. These would determine the classification of the product as a container under Tariff Item 27.
12. It was also his contention that the so-called milk pots with the name of Pan Masala manufacturers and the trade name of pan masala embossed thereon are used for packing and sale of 'Pan Masala'. As such, these so-called milk pots satisfied the function of containers as given in Explanation 1 below Tariff Item 27 with a view to evading payment of duty and availing of exemption, the manufacturers had been selling them in guise of milk pots.
13. It is also a fact that during the last five years, the so-called milk pots or the balties under consideration had never been sold to any other utensils seller.
14. It was his submission that such milk pots merit classification as containers under Tariff Item 27 as these are not sold for use as domestic utensils. These were embossed, marketed and were solely put to use by one single purchaser i.e. M/s. Shiv Raj Tobacco Co. Even the question of end-use would not arise in this case as the goods were specifically manufactured for a specific purpose. The manufacturers of the said goods themselves had embossed the particulars on such containers. This is more than sufficient evidence to prove the ultimate use of the product.
15. It was also his submission that simply because the product is termed as milk pots (utensils) by a manufacturer will not entitle it to fall under Tariff Item 68 when the same is manufactured with specifications, designs, purpose and even the use and embossing. When a product has been manufactured for a specific purpose, it rules out the general purposes and in this case, the specific purpose is for packing of Pan Masala and as such, these can be considered as 'Containers'.
16. It was his contention that M/s. Mauji Lai Metal Works suppressed the fact of production of Aluminium Containers and unilaterally availed of exemption as aluminium utensils. They had carried on manufacture without a licence and cleared goods without payment of duty. Even the so-called aluminium milk cans of 20 Its. and 40 Its. capacity, which are used for carrying milk are classifiable under Tariff Item 68 and are not eligible for exemption as aluminium utensils as per Madras Collectorate Trade Notice No. 85/82, dated 22-4-1982.
17. It was also his submission that the Collector of Central Excise should have confirmed the demands by invoking the extended period of five years and should have imposed deterent penalties on all the three above mentioned parties.
18. I have considered the above submissions. Since the respondents have not appeared before us, we have also taken into consideration the submissions made by them before the lower authorities referred to by the Collector.
19. I consider that the main question which is required to be considered in the first instance is as to whether the respondents were manufacturer of aluminium containers classifiable under the old Tariff Item 27(f) which reads as follows :- (f) containers, plain, lacquered, or printed, or lacquered and printed." It is noticed in this connection that this tariff had, at that time, had an explanation which reads as follows :- "Explanation I - "Container" means containers ordinarily intended for packaging of goods for sale, including collapsible tubes, casks, drums, cans, boxes, gas cylinders and pressure containers whether in assembled or unassembled condition, and containers known commercially as flattened or folded containers." We are required to decide whether the aluminium balties could be classifiable as such under Item 27(f) instead of Item 68 with benefit of exemption Notification No. 244/77 which covered utensils made of aluminium falling under Item 68 and the subsequent Notification No.234/82 which also exempted utensils made of aluminium (vide Entry 38 in the Schedule appended'thereto).
20. In this connection, I consider that since pan masala was a tobacco product, Section 2f(i) as it stood during the relevant period was also relevant. This provision reads as follows :- "(i) in relation to tobacco includes the preparation of cigarettes, cigars, cheroots, biris, cigarette or pipe or hookah tobacco, chewing tobacco or snuff; (ia) in relation to manufactured tobacco, includes the labelling or re-labelling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer;" 21. I consider that since in the present case, the admitted fact is that pan masala was packed in dibbies which were in turn packed in aluminium balties, therefore, the question as to whether aluminium balties could be considered as secondary containers is also involved. I consider that in terms of Section 2f(i) & (ia), the product became marketable as soon as it was packed in dibbies and therefore, became excisable and dutiable at that very stage. The aluminium balties in which these dibbies were packed could be considered secondary containers only if they satisfied the definition of 'container' as given in Section 27(f) and as elaborately explained in the judgment of Hon'ble Supreme Court in the case of G. Claridge & Company Ltd. v.Collector of Central Excise 22. It is also required to be kept in view that the two notifications referred to above refer to utensils made of aluminium but the explanation to Section 27(f) refers to containers but does not specifically mentions utensils.
23. The word 'Utensil' has been defined in "The New International Webster's Comprehensive Dictionary of the English Language - Encyclopedic Edition' as "a vessel, tool, implement, etc., serving a useful purpose, especially for domestic or farming use". It is apparent that 'container' is a broader term than 'utensil'. That means, whereas the utensils are a type of containers, all containers are not utensils.
It is also required to be kept in view that the word 'container' has been used in the Explanation to Tariff Item 27 (old) i.e. in the context of containers made of aluminium. The meaning of the word 'container' has been elaborately explained in the aforesaid judgment of Hon'ble Supreme Court in the following words :- "Container - One that contains; a receptacle or flexible covering for shipment of goods." "Container - that which contains that in which goods are enclosed for transport." "Containers - Any receptacle which holds, restrains or encloses any article or commodity or articles or commodities to be stored or transported." "Container. (1) In general, any receptacle or enclosure used in packaging and shipping. (2) Relatively large, reusable enclosures to be filled with small packages and discrete objects, to consolidate shipments and allow transport on railway flat cars, flatbed trailers, aircraft, in ships' holds or as deckloads, etc. (See Cargo Transporter: Containerization). (3) Any receptacle for holding a product." "Container. A large box for intermodal transport, containing many smaller boxes of different shapes and sizes as well as individual articles." (Abstract from Glossary of Packaging Terms (Australia))." 24. In the old Tariff Item 27, the emphasis in the Explanation is on the use of the word 'container' in the sense it is known commercially as containers ordinarily intended for packaging of goods for sale.
25. It is well known that aluminium balties are considered as vessels in common parlance and are not considered as containers ordinarily intended for packaging of goods for sale and are not normally used for packaging but for carrying and transportation of other material (of various types including water, milk etc.) and were used for carrying milk itself or referred to as a milk pot as well in a loose sense.
26. In the present case, admittedly, the pan masala was packed in dibbies and dibbies were transported in the aluminium balties which were wrapped in polythene and were supplied as free gifts. Therefore, it did not satisfy the definition of 'container' as given in Explanation to Tariff Item 27(f) and they could not be considered as secondary packaging from this angle as well. In view of the above position, I hold that learned Collector was right in hold that Balties were classifiable as utensils under Tariff Item 68 and eligible for exemption Notification [234/82] (as amended) and consequently justified in dropping the Department's case against all the respondents. The Department's appeal is, therefore, dismissed as already announced in the open Court.