1. As common questions of law and fact are involved in both these appeals, they were taken up together. The appeals have been filed under the following circumstances: 2. The appellants are manufacturers of collapsible tubes falling under Item No. 27(e) of the First Schedule to the Central Excises and Salt Act, 1944. The appellants clear the plain tubes on payment of duty and thereafter subject the goods to the process of lacquering and/or printing. The appellants furnished price list showing therein the price of the plain tubes. In the remarks column, they have adverted to the printing, lacquering, etc. The Superintendent of Central Excise informed the appellants to score the remarks and hence they were scored. The appellants submit that they have not suppressed any fact and have intimated the Department the nature of the activities including that of printing and lacquering. The invoices have been checked by the Department and the relevant returns have been filed.
While so, a show cause notice was issued on 1-12-1978 alleging that aluminium containers were cleared by mis-describing them as collapsible tubes for further lacquering and printing which were carried on within the factory. The appellants were directed to show cause as to why duty amount of Rs.3,18,512.93 (basic duty) and Rs. 9,852.37 (Special Excise Duty) should not be recovered from them for the period from 1-9-1977 to 30-9-1978.
3. Another show cause -notice was received during April, 1979 to show cause as to why a sum of Rs. 2,44,730.11 should not be recovered as basic duty and Rs. 12,236.92 as special excise duty for the period from 1-10-1978 to 28-2-1979 in respect of similar products.
4. A third show cause notice dated 27-9-1979 was issued to show cause as to why a sum of Rs. 3,04,161.95 as basic duty and a sum of Rs. 15,208.10 as special excise duty should not be recovered for the period from 1-3-1979 to 31-9-1979.
5. The appellants sent their replies containing similar allegations urging that there was no mis-declaration. 'Container' is a general category whereas 'Collapsible tube' is a special category. The appellants have been rightly classifying their items under 27(e). The appellants have also set out, in detail, the process of manufacturing collapsible tubes.They emphasised that printing and lacquering did not form part of the process of manufacturing collapsible tubes. Printing and lacquering cannot be stated to be incidental or ancillary to the completion of the manufactured product. The tubes, not printed and not lacquered, were, by themselves marketable commodities requiring nothing else for completing their manufacture. They denied their liability to pay the duty, basic and special. They have also urged that the demand was barred by time as per Rule 10 of the Central Excise Rules.
6. The Assistant Collector passed a common order on 16-7-1979 holding that the appellants had cleared collapsible tubes after printing and lacquering and without filing the price list for the same. He held that there was evasion of payment of duty by mis-declaring aluminium containers as mere extruded tubes.
7. An appeal was preferred on the ground that there was no suppression or wilful mis-statement and the Department was aware of the process of manufacture. The demand has not been issued within a period of six months. Since the period relates prior to the amendment of 27(e) and 27(f) under the Finance Act of 1980 (effective from 18-6-1980), the artificial definition under the Finance Act of 1980 should not be applied to the present case. The process of printing and lacquering does not amount to a process of manufacture. The appeals were dismissed oh the ground that the product manufactured by the appellants were used for the purpose of packing tooth paste, medicines, cosmetics, shaving cream, etc. and this fact would certainly place the products within the ambit of sub-item(f) meant for containers made of aluminium ordinarily intended for packaging of goods for sale. It was also observed by the lower authorities that the appellants did not stop the manufacture process at this stage of tube but subjected the tubes to further processes such as, trimming, threading, printing, lacquering, etc. and the product would not remain within the realm of T.I. 27(e) but would attract duty under T.I. 27(f). Hence the present, appeals.
Incidentally, we may point out that there was a common revision application to the Government of India. The same was transferred to the Tribunal. For completion of records, the appellants have also filed a supplementary appeal.
Shri Soli J. Sorabjee, Senior Counsel appeared for the appellants. He urged that Entry 27(e) referred to 'Extruded shapes and sections including extruded pipes and tubes'. 27(f) referred to 'Containers, made of aluminium'. The entry at the relevant period also contained an explanation which is as follows:- 'Container means containers ordinarily intended for packaging of goods for sale, including casks, drums, cans, boxes, gas cylinders and pressure containers, whether in assembled or unassembled condition, and containers known commercially as flattended or folded containers'.
There was an amendment to these entries under the Finance Act of 1980 (effective from 18-6-1980). Shri Soli Sorabjee stated that collapsible tubes have also been included in the explanation to Finance Act of 1980. The printing and lacquering have also been mentioned in Tariff Entry No. 27(f). He argued that as the issue relates prior to the amendment of the Finance Act, the extended explanation cannot be applied to the present facts. Shri Sorabjee argued that printing and lacquering could not be considered as incidental or ancillary to the manufacture of collapsible tubes. The printing and lacquering do not involve any manufacturing activity resulting in the emergence of a new product. In other words, the 'tube' continued to be a 'tube' under T.I.No. 27(e) and would not hop into 'container' merely because certain printing and lacquering have been done to the product. The tube remain to be a tube and the assessment could only be as a tube. He placed reliance on the decision reported in 1979 E.L.T. 380 (Extrusion Process Private Limited v. N.R. Jadhav, Superintendent of Central Excise). The question before the Gujarat High Court was whether the petitioner therein purchased plain tubes and plain containers from the market and engaging themselves in printing and lacquering. They would be eligible to duty. The Court held that 'printing and lacquering of plain extruded tubes, no doubt, mean some change in the form of that article but they do not bring into existence a new article or substance altogether'. The tube remained a tube and whether printed or lacquered or not, it was used for the purpose for which a plain extruded tube was used. Shri Sorabjee, therefore, urged that the lower authorities have erred in holding that the article would fail under T.I. No. 27(f) as 'container'. He also urged that, in any event, the demand cannot be for a period beyond six months as there was no mis-declaration or mis-description and the Department was made aware of the nature of the products.
9. Smt. V. Zutshi, SDR argued that the explanation to 'Container' referred to 'Containers ordinarily intended for packaging of goods for sale and hence the product has to be examined in the light of the explanation appended to it'. The inclusive nature of the explanation indicates that it is of a wide connotation. The goods manufactured by the appellants were ordinarily intended for packing of medicines, cosmetics, tooth paste, shaving cream, etc. She stated that there is a difference between 'tube' and 'container'. A tube should be hollow at both the ends. Though ordinary extruded tubes could be marketed and they could also be marketed after lacquering and printing, in this case, as the appellants cleared the goods after printing and lacquering them according to the customers' specifications and designs, the product ceased to be 'tubes' and would attract duty as 'Containers'.
The appellants manufactured tubes under Tariff Item No. 27(e) but they do not stop with that activity; they also effect trimming and threading wherein nine stages of operation are involved. She referred to the reply to the show cause notice and the appellants have stated therein that the sequence of operation is feeding, threading, neak trimming, cutting, shaving, straighting, releasing mechanical air and after all these stages of operation, remained tubes marketed as collapsible tubes saleable in the market without further processing. She distinguished the judgement of the Gujarat High Court on the ground that the products were not the same and the question whether the product is 'container' never came up for scrutiny.
10. Shri Sorabjee, in his reply, drew our attention to Lexicon Webster's Dictionary p. 1062 (Vol. 2) where 'Collapsible tube' has also been described as 'tube'. He contended that if there are two entries wherein one is beneficial to increase the incidence of taxation, then the former one should be preferred. He relied on the decision in A.I.R.1952 (Madras) 227. According to him, tubes would be a more specific entry rather than a container. The points for determination in these appeals are (i) Whether the product in question would attract duty under T.I. 27(f) and (ii) Whether the demands are in time? 11. For the purpose of clear understanding the Tariff Item as it stood during the relevant period is extracted below:- "27(e) Extruded shapes and sections including extruded pipes and tubes.
Explanation -"Container" means containers ordinarily intended for packaging of goods for sale, including casks, drums, cans, boxes, gas cylinders and pressure containers, whether in assembled or unassembled condition, and containers known commercially as flattened or folded containers".
The appellants contend that the products are "tubes" attracting duty under Tariff Item No. 27(e) and would not be "containers". If the products cease to be tubes, then duty would be attracted under Tariff Item No. 27(f). It must be mentioned that the appellants manufacture these products as per the specifications of the customers and they are actually used for the purpose of packing of tooth-pastes, medicines, cosmetics, shaving creams, etc. In other words, it is manifest that they are ordinarily intended for packaging of goods for sale. The explanation to Item 27(f) indicates that containers mean containers ordinarily intended for packaging of goods for sale. It is an inclusive definition and certain items have been specifically enumerated. We have to consider whether the products manufactured by the appellants continue to be tubes or would become containers. At the risk of the petitioners we must say that the products manufactured by the appellants are actually ready for being used for the purpose of packing goods for sale. They cease to be tubes and have become containers. The Collector (Appeals) has rightly emphasised on this aspect in the impugned order and has held that the products would attract duty under Tariff Item No. 27(f).
12. The appellants urged that the products would be tubes and would continue to be tubes despite the printing and lacquering. The printing and lacquering are done as per the design, specification and the colour as required by the customer. This is yet another indication that the purchasers have only to pack the intended goods in them for sale and no other manufacturing activity was left to be performed before they could be converted from tubes to containers. This fact concludes that the products no longer remained as tubes but have become containers.
13. The process of manufacture indicated by the appellants in their reply to the show cause notice also prove that the subject goods are only containers. The raw material aluminium sheet is taken and made into slugs by using suitable dies. These slugs are annealed in furnace by 4 to 5 hours to make it soft. They are then charged into the tumbling barrel and mixed with zinc stearate powder and tumbled for about 10 minutes. This process makes it ready to feed into the extrusion press. These slugs are fed into the hopper whereby it is passed by a conveyor chute and automatically fed into the die. The punch hits the slug and a tube us forrned in the punch and in the reverse operation it is being stripped off and made to fall on the conveyor which is carried into the trimming machine. At this stage the tube is formed without other operations. The appellants have specified that thereafter trimming and threading take place. It undergoes nine stages of operations before the collapsible tube is ready for sale in the market. The process of manufacture set out by the appellants indicate that they do not stop with the manufacture of tube by extrusion but continue further operations of trimming, threading, etc.
and the container is manufactured. Lacquering and printing are carried on subsequently on the collapsible tubes. The definition of tube in Webster's Dictionary, no doubt, includes collapsible tube. But, it is a general definition and the same cannot be urged to construe the tariff entry. It is pertinent to point out that an explanation has been given and the entry has to be determined in the light of the explanation. In the technical texts, tube is defined (in Mc. Graw-Hill Dictionary of Scientific and Technical Terms, Second Edition) as 'a long cylindrical body with a hollow center used especially to convey fluid'; Tube is produced by cold extrusion process. The dictionary defines "cold extrusion" as shaping cold metal by striking a slug in a closed cavity with a punch so that the rnetal is forced up around the punch; also known as cold forging; cold pressing; extrusion pressing; impact extrusion. It is, therefore, manifest that according to technical understanding, the tube is manufactured by cold extrusion process and the manufacture of tube is complete when the punch hit the slug. The further operations cannot, therefore, be considered as process for manufacture of a tube. They are basically processes for the manufacture of a container which could readily be used for packing of goods.
14. The definition of tube in the Harmonized Code is as follows:-'A hollow product of uniform cross-section having a continuous periphery produced by drawing, casting, extrusion or welding process'. The emphasis is, therefore, on a uniform cross-section having a continuous periphery. From the details of the manufacture furnished by the appellants, it is manifest that there is no continuous periphery and the product indicates trimming and threading. These operations will distinguish them from the operations required for the manufacture of pipes and tubes.
15. Shri Soli J. Sorabjee, learned counsel mainly placed reliance on the decision of the Gujarat High Court reported in (supra). But that decision concerns with the process of lacquering and printing. From the facts of the case, it is seen that the petitioners therein were asked to take L-4 licence and that printing and lacquering was incidental to the process of manufacturing extruded shapes and sections or extruded tubes and pipes of aluminium. The petitioners therein purchased plain tubes and plain containers and were merely engaged in printing and lacquering them. It must be stated that the Department's main contention therein was that printing and lacquering of extruded collapsible tubes were covered by some item (e) of Entry 27. The Revenue did not place any reliance upon any other sub-item of Item 27.
The Court was not called upon to decide on competing items. On the facts of the case, the Court held that printing and lacquering could not be said to be incidental or ancillary to the completion of the manufacture of the product, because they had no relation to the completion of manufacture of tubes. The printed and lacquered tubes were by themselves marketable commodities. The issue in this case is, whether the containers were manufactured by the appellants. There was no such plea by the Department in the earlier case. It must be said that printing and lacquering per se would not amount to manufacture.
But the authorities below have considered the issue not only on the question of printing and lacquering but on the basis that further processes had definitely converted the extruded tubes into the containers. The Appellate Authority has also stated that the further processes such as, trimming, threading, printing and lacquering, etc.
would not retain the item under 27(f) but would take it to item 27(e).
This is not a case where there is ambiguity and the benefit should be given to the assessee. This is a clear case where the product is a container and the duty has to be charged as a container. Hence the assessment under 27(f) is confirmed.
First Show cause notice dated 1-12-1978; Period involved -1-9-1977 to 30-9-1978.
Second show cause notice dated April, 1979; Period involved -1-10-1978 to 28-2-1979.
Third show cause notice dated 27-9-1979; Period involved 1-3-1979 to 31-8-1979.
The Department contend that there is mis-declaration and hence the longer period of limitation would apply. But, as rightly pointed out by Shri Sorabjee, the appellants have indicated in the classification list effective from 28-3-1977 that the printing and lacquering and transportation would be charged extra. Of course, it has been scored out as suggested by the Superintendent. The appellants have, thus, brought to the notice of the Department the nature of the activity carried on by them. We also notice that in the classification list dated 16-2-1979, the appellants have mentioned the item as follows: "Aluminium extruded shapes cross-section including extruded tubes and tubes (aluminium collapsible tubes plain)".
They have referred to containers made of aluminium also. The reference to collapsible tubes is very important and supports the case of the appellants. When the Department was made aware of the product and the processes involved therein, i+ cannot be said that the appellants had mis-described the product and were clearing it with an intent to evade payment of duty. The invoices issued by the appellants have also been verified by the Central Excise Officers from time to time. "1 here was no suppression or any wilful mis-statement on their part to invoke a longer period of limitation. Under these circumstances, we agree with Shri Sorabjee that the demand ought to be restricted to a period of six months of the show cause notice. (In the result, the appeal is partly allowed. The classification of the product under T.I. 27(f) is confirmed. The demand would be restricted to 6 months prior to the dates of the respective show cause notices. The lower authorities will re-work the demand on the above basis. The appeal is disposed of accordingly).