Judgment:
1. These two appeals were heard together by consent of parties as they relate to the same issue. The question that falls for consideration in these two appeals is whether the disinfectant fluids manufactured by the appellants are entitled to exemption in terms of notification No.55/75-CE, dated 1-3-1975 as amended by notification No. 62/78, dated 1-3-1978. Under the notification as it was issued on 1st March, 1975, several items were wholly exempted from excise duty. Some more items were subsequently added under further notifications. Under notification No. 62 of 1978 item 18 was introduced which read : "Insecticides, pesticides, weedicides and fungicides. The appellants claim that the disinfectant fluids manufactured by them would be entitled to exemption in terms of the said notification as they would be either pesticides or fungicides." 2. Their claim had been rejected by the Assistant Collector concerned, but, on appeal, they had succeeded before the Collector (Appeals).
These appeals have thereupon been preferred by the department against the said orders.
3. We have heard Shri A.S. Sundar Rajan, JDR, for the appellant Collector, and Shri F.H.J, Taleyarkhan, Advocate, for the Bombay Chemicals. Shri N.S. Sawant, Consultant, appeared on behalf of M/s.
Standard Chemical and Pharmaceutical Company, and he adopted the arguments of Shri Taleyarkhan generally. We may note here itself that Shri Sawant referred to a contention that the order dated 11-12-1980 in their case was not competent on the ground that the classification having been once approved, ought not to be re-opened, but he himself later stated that this argument was not being.
4. Shri Sundar Rajan argues that even in their letter dated 2-3-1978 addressed to the Superintendent with reference to the exemption claimed by them, M/s. Bombay Chemicals have mentioned disinfectants as a separate (third) class distinguishable from the other two classes mentioned, of which the 2nd class referred to insecticides and, therefore, even the said letter would make the present claim doubtful.
But it will be seen that in the said letter the company had claimed exemption under notification No. 62 of 1978 under item 18 of the notification which read: "All drugs, medicines, Pharmaceuticals and drug intermediates not elsewhere specified".
Thereafter, to support the claim, they had referred to their registration with the Directorate General of Technical Development in connection with their manufacture of pesticides. It is in this connection that they had referred to the three classes mentioned by Shri Sundar Rajan. Therefore, the said reference to disinfectants separately from the other class of insecticides would not make the present claim of the company doubtful of acceptance.
5. Shri Sundar Rajan then contended that even the Directorate General of Technical Development had not considered disinfectants to be insecticides and this would also be against the case of the company.
The reference was to the certificate issued by the D.G.T.D. It may be seen that this certificate refers to the several chemicals mentioned in the said letter as are required for manufacture of insecticides, pesticides and fungicides, such chemicals not being produced in India.
One of the chemicals was Tar Acids. There is no dispute that the subject goods are manufactured from phenolic compounds. The letter of the Superintendent, Central Excise dated 17-9-1979 addressed to M/s.
Bombay Chemicals, containing the opinion of the Deputy Chief Chemist with reference to the chemical examination of the products manufactured by the company (including the disinfectant fluids now in question), shows that these products are formulations containing high boiling tar acids as their principal active ingredient. Therefore, while it is established that the tar acids imported by Bombay Chemicals are used for manufacture of disinfectants, the D.G.T.D. certificate shows that such import had been permitted for the manufacture of "insecticides, pesticides and fungicides".
6. Shri Sundar Rajan then relied upon several Text Books and Reference Books in support of the department's contention. He contended that while insecticides, pesticides, weedicides and fungicides are to be used on living organisms, disinfectant fluids are to be used on inanimate objects and, therefore, no disinfectant would fall in the category of insecticides, pesticides, weedicides and fungicides. In this connection he referred to pages 793 to 795 of Kirk Othmer's Encyclopaedia of Chemical Technology. He pointed out that at page 794, and again at page 795, it is mentioned that disinfectants are to be applied on inanimate objects. But it may be seen that at page 794 it is also mentioned that fungicides inhibit growth of or destroy fungi (including yeasts) pathogenic to man or other animals on inanimate surfaces. Therefore, fungicides would appear to be applied on inanimate surfaces in order to inhibit or destroy pathogenic fungi. In the circumstances, the inference sought to be drawn by Shri Sundar Rajan does not appear to be correct. He then referred to an extract at pages 50 and 51 of the Text Book- "Learning Chemistry-A modern way" by M.R.Mendiratta. He pointed out that the pesticides, insecticides and fungicides which have been referred to in these pages are to be used on living organisms, such as plants, etc. But as Shri Taleyarkhan pointed out, this section of the book dealt with chemicals in agriculture.
Therefore, no general inference in the manner required by Shri Sundar Rajan could be drawn on the basis thereof.
7. Shri Sundar Rajan then referred to the Insecticides Act of 1968 and pointed out that under Section 3(e) of the Act, "insecticide" would mean any substance specified in the Schedule to the Act, or such other substances (including fungicides and weedicides) as the Central Government may subsequently include in the Schedule or any preparation containing any one or more of such substances. He pointed out that disinfectant fluids, etc., are not to be found in the Schedule. But in this connection Shri Taleyarkhan points out that tar acids is found mentioned in the Schedule to the Act and, therefore, the product now in question (which has been manufactured with high boiling tar acid as its active ingredient) would be an insecticide. This submission is not without substance 8. The case for the respondents is that the products in question could be classified either as pesticides or fungicides and would, on either account, qualify for exemption under the notification in question.
Their submission is that these disinfectant fluids are capable of, and are normally being used for the purpose of, destroying fungi of medical importance and, would, therefore, be fungicides. It is also contended that they are capable of, and are normally being used for the purpose of, destroying bacteria and would, therefore, be bactericides, and such bactericides would be pesticides.
9. It has already been seen that in Kirk Othmer's book at page 794 it has been mentioned that "disinfectants destroy or irreversibly inactivate infectious or other undesirable bacteria, pathogenic fungi, or viruses on surfaces or inanimate objects". This definition would support the contention of the respondents that these disinfectant fluids would be fungicides as well as bactericides since they are normally used for the purpose of destruction of bacteria and fungus of medical importance, as will be seen from the next paragraph.
10. The Bombay Chemicals Co., have produced letters from various public hospitals in support of this contention. These are letters of Haff kine Institute, Parel, Bombay-12 (17-1-1969); King Edward Memorial Hospital, Parel, Bombay (21-1-1969); Chief Medical Officer, Central Railway, Bombay (1-2-1969); and J.J. Group of Hospitals, Bombay (1-2-1969).
These letters appear to have been written in response to letters sent by the Bombay Chemicals to the said hospitals, asking for replies from them with reference to the use to which the disinfectant fluids (manufactured by Bombay Chemicals) was being put to in these hospitals.
On a direction from the Bench the Bombay Chemicals have sent us copies of their letters to these hospital authorities. They appear to have asked for the replies from the hospitals for the purpose of using the same in approaching the D.G.T.D. for issue of the certificate, w/without which import of the required raw materials would not have been permissible. It is seen that in all these letters the hospital authorities have mentioned that the disinfectant fluids manufactured from phenolic compounds are being used as both bactericide and fungicide, for the destruction of bacteria as well as fungi of medical and public health importance. While it is true that these replies have been sent in response to letters from the company suggesting that disinfectant fluids are being used in the hospitals for destruction of pathogenic bacteria as well as fungi of public health importance and a reply to that effect would be useful, it is not necessary that one should ignore these replies only for the reason that they were in response to such a request. These replies were by responsible Heads of the respective public hospitals and the contents of such replies need not be ignored merely for the reason that they were in response to specific letters.
11. The respondents further wished to rely upon several letters from merchants and dealers. These letters are relied upon to establish that in common trade parlance also these disinfectant fluids are dealt with as insecticides or pesticides or fungicides. Shri Sundar Rajan comments that the eight letters produced are all stereotyped letters sent in pursuance of solicitation therefor from the manufacturers and they should not be relied upon. Shri Taleyarkhan concedes that for the present purposes the letters at pages 53,57 and 59 of the paper book are not relevant as they are with reference to disinfectant powder, and not disinfectant fluids. With reference to the other letters, he submits that when such opinion is to be produced before the adjudicating officer they will be necessarily in the form of letters given in response to a request from the assessee and, therefore, it may not be proper to ignore them on that ground. He further submits that in view of this circumstance the fact that the letters are stereotyped would also not be a circumstance to compel their rejection. But on a perusal of the letters we are not inclined to attach much importance to them. All of them read in part "to the best of my knowledge disinfectant fluids are generally known, used and regarded in the market and trade by traders and consumers as insecticide/ pesticide/fungicide". To say the least, such an assertion is entirely vague. The remaining parts of the letters are also in the same strain.
In the circumstances, we are not inclined to attach any weight to these letters.
12. For the respondents, reliance was placed on the fact that in the Indian Standards Specification for disinfectant fluids, black and white (IS : 1061-1975) it is mentioned in para 0.2 that the said Specification had been prepared within the purview of the Pest Control Sectional Committee in line with international thinking. The argument is that this would also support the contention for the respondents that such disinfectant fluids would be pesticides as the standards therefor were being dealt with by the Pest Control Sectional Committee. Such a reasoning appears to us to be a little far fetched.
13. In this connection the respondents further relied upon an article in Pesticide Information by Dr. R.S. Rajagopalan under the title "ISI Certification of Pesticides and their Formulations". It was pointed out that here also reference had been made to IS Specification 1061-1975 in Appendix A dealing with the list of pesticides. But, for the reason mentioned above, we are not inclined to attach importance to this reference in connection with the dispute before us. A similar argument was raised with reference to an Article "Standardisation in the field of pesticides" by Shri Lajinder Singh, Assistant Director (Agri. and Food), Indian Standards Institution. It is pointed out that here also he has referred to IS Specification 1061-1975. Here also Appendix A refers to IS Specification 1061-1975, but, for the reason mentioned earlier, this also does not appear to us to be of any significance for the resolution of the dispute before us.
14. It is, therefore, seen on the basis of the discussion earlier that disinfectant fluids manufactured by the respondents, based on high boiling tar acids are meant for use, and are actually and normally being used, for destruction of bacteria as well as fungi of medical importance. They would, therefore, be bactericides as well as fungicides. Therefore, even apart from the question whether bactericides would be pesticides or not, these disinfectant fluids, so long as they are fungicides, for the reasons discussed earlier, would qualify for exemption under notification No. 55 of 1975 as amended by notification No. 62 of 1974. In the circumstances, we are satisfied that there are no grounds to disturb the orders of the Collector (Appeals) in both instances.
15. It was further contended by Shri Taleyarkhan that in any event, the demand for duty could not have exceeded the normal period of limitation of six months. He pointed out that immediately after the issue of the notification No. 62/78, M/s. Bombay Chemicals intimated the Superintendent concerned of their entitlement to the exemption and asked for cancellation of the licence already taken, and that the Superintendent under his letter dated 24-7-1978 ordered cancellation of the licences consequent upon the total exemption under the notification. Shri Taleyarkhan, therefore, points out that the department was fully aware of the manufacture of the disinfectant fluids by Bombay Chemicals and was also aware of their intention to cease payment of duty consequent upon the issue of the notification No.62 of 1978, and thus, there was no case whatsoever made out for invocation of the provisions which would justify the demand being made beyond the normal period of limitation. This contention appears to us to be justified. But it is unnecessary to go into this matter, since we have held on the main merits that no duty was payable during the period covered by the demand.
17. I have very carefully read the order proposed by my learned Brother. 1, however, regretfully find myself unable to agree with his main conclusion that disinfectants would qualify for the exemption admissible to "Insecticides, Pesticides, Weedicides and Fungicides".
18. As observed by my learned Brother, the case was mainly argued for the respondents by the learned advocate for Messrs. Bombay Chemicals and his arguments were adopted by the learned consultant for Messrs.
Standard Chemical & Pharmaceutical Co. There was one point in the case of Messrs. Bombay Chemicals which did not arise in the case of Messrs.
Standard Chemical, namely, that the extended time-limit under Rule 9(2) was not applicable. I shall come to this argument at its proper place.
Otherwise, I shall deal with the case of Bombay Chemicals, it being understood that the arguments and conclusions would equally apply to the case of Messrs Standard Chemical.
19. The question basically is whether "disinfectants" can be deemed to be included within the heading "Insecticides, pesticides, weedicides and fungicides" occurring in exemption notification No. 55/75-CE dated 1-3-1975, issued under Item 68, CET. To begin with, I would set out a few facts which are not in doubt or dispute :- (i) There is no doubt that the disinfectants, were excisable goods or that they were classifiable under T.I. 68.
(ii) There is no doubt that these were being referred to and marketed as "disinfectants" (this will be seen from the Assistant Collector's order original dated 29-11-1980, which refers to certain pamphlets describing the goods, and also from the letters dated 1-3-1978 and 2-3-1978 addressed by Messrs, Bombay Chemicals to the Superintendent of Central Excise and reproduced at pages 19-20 of their Compilation); and (iii) It can also be taken as established that the preparations in question were capable of killing various bacteria and fungi.
20. Shri Taleyarkhan's argument was basically that, even though the goods were disinfectants, they qualified for exemption. His argument was that a disinfectant kills bacteria and fungi. This it does not just incidentally but in its role as a disinfectant. A disinfectant would, therefore, fall within the class of bactericides and fungicides. A bactericide in its turn falls within the class pesticides. Therefore, a disinfectant qualifies for exemption both as a fungicide and as a pesticide.
21. In support of the above argument, the respondents have referred to various works of reference, journals, etc. In this connection, we may observe that one of the arguments of the respondents is that the classification of goods for purpose of excise duty cannot be founded on technical or scientific meanings. However, some of the references on which they have relied clearly come within the description of scientific or technical literature. While noting this aspect of the argument, we have paid due attention to the various authorities brought to our notice.
22. On his side, Shri Sundar Rajan made a conscious effort to adduce material which could be described as representing the common understanding. Thus, he furnished an extract from a text book prescribed for VIII Class students, namely "Learning Chemistry-A Modern Way" by M.R. Mendiratta. He also relied on the Explanatory Notes to the C.C.C. Nomenclature, which can be taken to represent the understanding of importers, exporters and Customs administrations. However, Shri Sundar Rajan also relied on scientific or technical works such as the "Glossary of Chemical Terms" and the "Encyclopaedia of Chemical Technology" and also the Insecticides Act, 1968.
23. Thus, both sides, between them, placed before us a large number of definitions or explanations of the various terms in question. We may now see what conclusions these would lead to. It will be convenient to deal with these from the point of view of the respondents.
24. Going by the literal and "broad-based" approach of the respondents, it would appear that the various terms are interchangeable or overlapping. This may be illustrated by the reference given by Messrs Bombay Chemicals. According to the draft ISO Recommendation on "Common names for pesticides" (pages 41-42 of the Compilation attached to their Memorandum of Cross-Objections and referred to in this Order as the "Compilation"), the term "pesticides" would include among others bactericides, fungicides, herbicides, insecticides, rodenticides and avicides. However, disinfectants are not shown as one of the classes of pesticides. A very similar classification under "pesticides" is given in a book titled "Chemistry of Pesticides" by a Russian author (pages 63-64 of the Compilation). However, since this has been translated from the Russian, and the English versions of the terms have to be attributed to the translator, this reference is of doubtful value.
25. Again, the "Tropical Pest Management Pesticide Index-1981 Edition" (page 69 of the Compilation) contains an "index of chemical, common and trade names of pesticides". It contains a "Classification of pesticide uses", which is more or less the same as in the draft ISO Recommendation (para 24 above).
26. A technical paper by Dr. R.S. Rajagopalan of the ISI (page 44 of the Compilation) refers to "ISI Certification of Pesticides and their Formulations". One of the ISI publications listed in the article is No.1061-1975 covering "Disinfectant fluids, black and white". This implies that disinfectant fluids are covered by the term "pesticides".
Similarly, an article on "Standardisation in the field of Pesticides" by Lajinder Singh, also of the ISI (page 45-46 of the Compilation) refers to more or less the same list of Indian Standards, which includes the Standard relating to disinfectant fluids.
27. A paper on "Commercial and Experimental Organic Insecticides" by two American authors (pages 60-64 of the Compilation) gives a list of Insecticide" groups. These include "bacterials" (but not fungicides herbicides, etc.). This was quoted to show that the term "insecticides" includes bactencides. However, in the light of the other entries in the list as well as the use of the term "bacterials" instead of "bactericides", it appears to me that the reference here is to an insecticide which works through the use of bacteria.
28. Reliance was also placed on Webster's Third New International Dictionary, page 922 (page 62 of the Compilation) wherein the word "fungus" is given a lengthy definition which states that it includes among many other things bacteria. This was relied upon to show that a fungicide would also be a bactericide. However, reliance was also placed on an article in a medical journal of 1933 (page 67 of the Compilation) which stated "a close relationship between fungicidal and bactericidal power has been observed throughout this study of phenol derivatives". This article assumes that fungi and bacteria are distinct categories.
29. It may be added that in the Encyclopaedia Britannica on which also Shri Taleyarkhan placed reliance, there is a definition of disinfectant which states inter alia "the ideal disinfectant would rapidly destroy bacteria, fungi..--", indicating that bacteria and fungi are different categories of micro -organisms.
30. From his side, Shri Sundar Rajan had drawn our attention to the Insecticides Act, 1968 and the list of "insecticides" in the Schedule to that Act. He submitted that disinfectants were not included in the Schedule. Shri Taleyarkhan, however, brought it to our notice that the Schedule includes "tar acid", which enters into the formulations of the respondents. Thus, both sides sought to derive support from the Insecticides Act. It is seen that in this Act, the term "insecticide" has been given a very wide meaning, covering (i) any substance specified in the Schedule and (ii) such other substances (including fungicides and weedicides") as the Central Government might include in the Schedule from time to time.
31. For completeness, we may refer to the I.S. Specification No. 1061- 1975, namely "Specification for disinfectant fluids, black and white (Second Revision)". This does not contain any definition of disinfectants. It however, shows that they should have a germicidal property. In other words, they should be "germicides" if we may add another term to the many which are already before us.
32. The conclusion that would emerge from the above discussion is that various authors used the various terms in different senses. In one context, a term may be given a very wide meaning. In another, it may be given a restricted one. Appellations such as fungicide, herbicide, etc., are given with reference to the purpose for which they are to be used, as will be seen from the "Tropical Pest Management Pesticide Index" (para 25 above). Therefore, some authors may consider bactericides, fungicides and insecticides as special classes of ''pesticides". As against this, the Insecticides Act would appear to consider "insecticides" as a larger class which would include fungicides, weedicides, etc. (It is rather remarkable that none of the scientific publications relied upon by the respondents mentions disinfectants, though a disinfectant is an article in common use and marketed as such). From these definitions it would not be possible to draw any conclusion as to the exact demarcation between the various terms, and to say that something is a pesticide but not an insecticide, or a bactericide but not a fungicide, and so on. The one conclusion which clearly emerges is that if one assumes that (for example) a substance which kills fungi would deserve to be called a fungicide merely on the basis of that property, without reference to its normal use, there would remain hardly any distinction between the various terms used in the exemption notification.
33. On the other hand, if one goes by the indication of normal use as apparent from the various terms and assumes that an insecticide is a substance which is normally used for exterminating insects; a weedicide is normally used for exterminating weeds, and so on, the different terms used in the notification would be seen to have sense and purpose.
34. Of the two approaches, that is, one which gives the terms wide and overlapping meanings and would render some of them redundant, and the other which gives them limited meanings which would by and large avoid overlapping, and ensures that no part of the notification is found to be redundant, 1 think the latter approach is clearly to be preferred.
Some reasons for this follow.
35. When a particular substance could possibly be described by more than one name, it is not correct to seize upon one of those names, irrespective of whether that is the most appropriate name. In the case of South Bihar Sugar Mills Ltd., and Ors. v. R.N. Desai and Ors. (AIR 1968 SO 922) the Hon'ble Supreme Court dealt with the classification of "kiln gas" which contained 30 to 35% carbon dioxide and about 53 % nitrogen. While rejecting the claim of the Excise authorities that the kiln gas was "carbon dioxide", the Hon'ble Supreme Court observed that it was equally possible to call it nitrogen.
36. If the argument of the respondents were accepted, the term "pesticides" should be taken as covering insecticides, weedicides and fungicides The use of those terms in the notification will then have to be regarded as mere surplusage. It is well-established that an interpretation which leads to such a result should be avoided. The legislature is deemed not to waste its words or to say anything in vain and a construction which attributes redundancy to the legislature will not be accepted except for compelling reasons: a meaning should, if possible, be given to every word in the statute and it should be taken that, unless there is good reason to the contrary, the words add something which would not be there if the words were left out.
(Seepages 56-57 of "Principles of Statutory Interpretation", Second Edition, by G.P. Singh).
37. Another rule which leads to the same conclusion is that when in relation to the same subject matter, different words are used in the same statute, there is a presumption that they are not used in the same sense (ibid page 250). The respondents are seeking that a wide rather than a restricted meaning should be given to the terms in the notification. It is true that sometimes the context may require a wide meaning to be given, and sometimes a narrow one. In the present case, when four words are juxtaposed it should be assumed that they are not meant to be considered as synonyms or as substantially overlapping with one another. To illustrate this, one may take the word "men". In certain contexts this would have to be taken as referring to the species of mankind and as including women and children. When the poet makes the Brook say "Men may come and men may go, but I go on for ever", we are safe in assuming that the reference to ''men" is not intended to exclude the female of the species. However, if one is in search of a rest room and finds the words "Men" and "Women" close together but on two different doors, the context and Juxta-Position clearly require that the word "Men" should be interpreted in a narrow sense. In the present case the juxtaposition of four terms which indicate distinct uses or applications should be taken as referring to substances which are recognised as respectively suited to those applications. It would be wrong to go strict by a selected meaning, or to apply a process of extension of meaning from one word to another, as the respondents have sought to do.
38. It was argued that the burden is on the Revenue to bring an item within the scope of a Tariff entry. However, in the present case, it is not the Revenue which is seeking to bring the goods within a Tariff entry, but the respondents who are seeking to bring them within the scope of an exemption notification. It is well-established that exemption notifications are to be construed strictly, and that the burden is on the person claiming the exemption to make out his claim.
The principles of strict construction of exemption notifications would militate against the wide meaning which the respondents wish to be given to the terms.
39. It therefore appears to me that the notification was intended to cover various formulations which have specific applications.
"Disinfectant" is a household word and it is difficult to think that it was omitted by oversight. The use of a disinfectant is a matter of common knowledge. My learned Brother has rightly observed that much weight cannot be attached to the letters given by various dealers. Even if one were to take them into account, they would not help the respondents, because it clearly comes out from these letters that the use of disinfectant fluids is in bathrooms, lavatories, gutters and drains or for cleaning the floor. These uses, which have been faithfully repeated by the various dealers, demarcate disinfectants from insecticides, pesticides, etc.
40. In this connection, it would be relevant to note that some of these disinfectants are referred to as "deodorant fluid". Others actually contain perfumery materials--e.g., Bioflor Lavender Type and Bioflor Jasmine Type. Substances used for killing insects, pests, etc., are by their nature of noxious, and one is used to their having an unpleasant or irritating smell. On the other hand, it is quite usual for disinfectants either to neutralise existing unpleasant smells or even to add a pleasant smell (such as lavender or jasmine in the present case). This too would show that disinfectants are differentiated from pesticides, etc.
41. A word may be said about the certificates given by the Haffkine Institute, etc. Certainly, these cannot be shrugged aside, but what is their effect? The letters from the Haffkine Institute and the J.J.Group of Hospitals are in general terms and not with reference to any particular formulations. The letters from the K.E.M. Hospital is no doubt with reference to the formulations supplied by Messrs Bombay Chemicals and would show that the disinfectant fluid would destroy bacteria as well as fungi. The letter from the Central Railway shows that the disinfectant fluid which was used by them (no reference being made to the specific products of the respondents) was used "for purpose of general disinfection on this Railway". In other words, though the letter is from the Chief Medical Officer, it does not convey that the disinfectants are used only for medical purposes. What all these letters add up to is that disinfectant fluids and in particular those manufactured from phenolic compounds (tar acids) would destroy bacteria and fungi of medical importance. This is part of their function as disinfectant fluids. It does not show that they thereby become fungicides, pesticides, etc.
42. For the reasons which have been elaborately set out above, I do not think a formulation which kills fungi ipso facto becomes a fungicide.
Mendiratta's text book shows that kerosene can be used to kill weeds, but if an appellation has to be given to the kerosene it would certainly not be as a "pesticide" or "weedicide" but as an illuminant or a mineral fuel.
43. Messrs Bombay Chemicals have also contended that the technical opinion of the Directorate General of Technical Development is in their favour. In this connection Shri Taleyarkhan cited the order of the Tribunal in the case of R.I.S. Engineering Co., Bombay (1985(19) E.L.T.254). According to him, this order would show that the opinion of the D.G.T.D. was sufficient evidence of trade understanding.
44. At page 35 of the Compilation, there is a letter addressed by the Development Officer D.G.T.D., to Messrs Bombay Chemicals in which it was certified that various chemicals, including tar acids were required for the manufacture of insecticides, pesticides and fungicides. This by itself is not of much help since it does not refer to the specific products to be made from the various chemicals. However, at page 36 of the Compilation there is a copy of a statement made out by Bombay Chemicals. This refers to a quantity of 232 drums ot imported coal tar oil (high boiling tar acids). It also shows that various quantities of different disinfectant fluids and a disinfectant powder were manufactured out of the imported chemical. The statement also shows the disposal of the products manufactured. This statement bears an endorsement dated 17-6-1969 by the Development Officer, D.G.T.D. that "the above particulars are verified and certified to be correct as verified from the Chartered Accountant's certificate". The respondents would like us to consider this as an expression of opinion by the D.G.T.D. that the disinfectant fluids referred to were insecticides/pesticides/fungicides. It is apparent that the certification by the D.G.T.D. was given with reference to Customs exemption notification No. 26/68 dated 1-3-1968, exempting chemicals imported for the manufacture of insecticides, pesticides and fungicides. The statement before us has been prepared by Messrs. Bombay Chemicals, who had imported the said coal tar oil, and its utilization was certified by the Office of D.G.T.D., on the basis of a Chartered Accountant's certificate. I do not wish to imply that the D.G.T.D.certificate was given in a casual manner. At the same time I am not able to regard this certificate, which was basically with reference to consumption and utilization of the imported goods, as a clear expression of opinion by the D.G.T.D. that the disinfectant fluids in question were insecticides, etc. Such a view might have been acceptable if we had no other evidence before us, but it cannot be so considered when we have a considerable volume of other evidence, whose effect I have already analysed.
45. As regards the Tribunal's order in the case of R.I.S. Engineering Co., it would be useful to reproduce the relevant paragraph of that order, which reads as follows :- "While dictionary meaning of a term used in fiscal legislation may not be relevant, it is well to remember that appellant himself filed before us a copy of Instruction No. 7 issued by Central Excise Collectorate, Bombay, which contains an opinion expressed by Directorate General of Technical, Development. According to this opinion Ammonia Printing and Developing Machine would be appropriately classifiable as a photo copy machine under the notification. This we think is sufficient evidence of how the appellants' product is understood in common parlance by those who have to deal with the machine. We believe that Directorate General of Technical Development keep abreast of all relevant information like common parlance and trade understanding on the subject. In any case when the appellant has himself filed this document, he cannot escape from so much of it as goes against him".
46. It will be seen that in that case there was a considered opinion expressed by the D.G.T.D., which was incorporated in an Instruction Issued by the Bombay Collectorate. No doubt the Bench gave weight to the opinion of the D.G.T.D., but followed this up with the significant observation that the appellant (the assessee in that case) had himself filed the document, and could not escape from so much of it as went against him. The circumstances in that case were therefore different from those in the present case, where there is neither a specific opinion of the D.G.T.D., nor a case of a party filing a document which goes against him and then seeking to avoid such a conclusion.
47. I, therefore, do not find that the two "certificates" of the D.G.T.D. in this case can help much in taking a decision on the question at issue.
48. For the above reasons, I am of the view that the terms "insecticides", etc., in the exemption notification were meant to cover particular formulations with well-defined uses and specifically for killing insects, etc. They cannot be equated or interpreted to include disinfectants, which are preparations for general disinfection purposes and which are used in bathrooms, gutters, floor cleaning, etc.
Therefore, in the two cases before us, the view taken by the respective Assistant Collectors in holding that the disinfectants in question were not entitled to the benefit of the exemption notification was correct and the orders of the two Collectors (Appeals) against which the present appeals have been filed were in error.
49. I now come to the question of limitation raised by Messrs Bombay Chemicals. They have contended that the show-cause notice issued to them was dated 29-8-1979 and that in the absence of any fraud, suppression, etc., there was no justification for invoking the extended time-limit beyond six months. The Assistant Collector rejected this plea on two grounds. One is that "the goods have now been assessed during the material period". The other is that there was a specific undertaking given by the respondents in their letter dated 1-3-1978, to pay the duty if their contention was found incorrect by the Department.
I do not think the Assistant Collector's conclusions can be supported.
The respondents had placed the facts squarely before the Department and their licence was cancelled by the Excise authorities with their eyes open. There is no question of any fraud, suppression, etc. The observation that "the goods have not been assessed during the material period" is not clear and does not help the Department. As regards the "undertaking in the letter dated 1-3-1978, it has not been correctly quoted in the Assistant Collector's order. What the respondents said was "We undertake to pay the duty later on in case any discrepancy is observed". The ordinary meaning of this would be that they agreed to pay the duty in case any facts stated by them were found to be incorrect. It certainly would not cover a situation where the Department knowingly accepted that certain specified goods were exempt from duty, and later on adopted a different interpretation. I would, therefore, consider that the duty demanded in this case should be limited to the period of six months prior to the date of service of the show-cause notice. In this view the penalty of Rs. 1,000/- has also to be set aside.
50. Messrs Bombay Chemicals had filed what was purported to be a "Cross Objection". This in fact consisted of arguments why the order of the Collector (Appeals) should be sustained, and was not really a Cross Objection. This would stand automatically disposed of when we pass orders on the Collector's appeal.
51. So far as the case of Standard Chemical and Pharmaceutical Co. is concerned, I would hold against them on the question of classification.
Their case does not involve any specific demand or any question of limitation and therefore, no decision on such aspects is called for.
Nor have they filed any Cross Objection.
52. In the result, I consider that the disposal of these appeals should be as follows :-Collector of Central Excise, Bombay I v. Messrs Bombay Chemicals Pvt. Ltd.-Appeal No. E. 1302/83-C with Cross Objection No. E/Cross/285-C/85.
The order dated 8-3-1983 of the Collector (Appeals) should be set aside and the order dated 29-11-1980 of the Assistant Collector should be restored, with the modifications that the duty demand should be limited to the period of six months prior to the service of the show-cause notice dated 29-8-1979, and that the penalty of Rs. 1,000/- for the respondents should be set aside. The Cross Objection would stand automatically disposed of.
Collector of Central Excise, Bombay I v. Messrs Standard Chemical and Pharmaceutical Co.-Appeal No. E/2079/85-C. The order dated 12-7-1985 of the Collector (Appeals) should be set aside and the order dated 11-12-1980 of the Assistant Collector should be restored.
It should be noted that while we would restore the operative parts of the orders of the two Assistant Collectors (subject to the modifications indicated in regard to the case of Bombay Chemicals), we are not to be taken as subscribing to all the reasoning adopted by them. Our own reasoning would be as seen from this order.
53. In paragraph 34, the learned President has, in just one sentence, put the case as I see it.
54. Everybody knows, reads about and even uses disinfectants, bactericides, pesticides, insecticides and fungicides some time or other, the last named, it is true, only rarely, though by no means unknown to the general community. Now, it is true that a disinfectant can destroy bacteria, germs, many pests and vermin, and sometimes even fungus. But is it not a fact, that these words are associated in people's mind with well defined products No housewife who wants something to rid her kitchen of cockroaches, will accept in purchase a can of disinfectant-she will insist on a can of insect killer, insecticide, of which there are several brands in New Delhi, Bombay, Calcutta. No commerce in insecticide can be made with disinfectant.
This is true of all the other products.
55. Boiling water can disinfect and can achieve asepsis. It can also kill fungus, vermin, weeds, spores, insects. It can kill rats, if one can get a rat to stand still long enough for a kettle to be emptied over it-but is not rated as a rodenticide. Strong sodium soap can inactivate, and, if the concentration is high enough, kill body-and-head lice-but it is not an insecticide.
56. It will not do to say an insecticide is a germicide because it has the ability to kill germs, any more than it will do to call a disinfectant, a well known commodity, a bactericide just because it can kill bacteria. The names bactericide, pesticide, fungicide, insecticide are each understood to designate a well-known product or compound even if it also acts in ways that the other products act, Their manufacturers produce and market them as such products, and, even more important, the consuming public always buy and accept these products as they are called, and not by any versatility they might have in doing duty as other products. Disinfectants have a similar acceptance from their production and sale to their consumption by the user. That a disinfectant can be used or that it is used as a bactericide, will not bring it into the category of a bactericide for the purpose of conferring a tax benefit given to the latter.
The appeals and the Cross Objection are disposed of (in terms of the majority opinion) in the manner mentioned in para 52 above.