1. The appellants manufacture rockwool. They claimed its assessment at the lower rate applicable under sub-heading 6807.10 w.e.f. 28-2-97 on the ground that more than 25% by weight of blast furnace slag is used in it. Sub-heading 6807.10 reads as under : Goods in which more than 25% by weight of red mud, press mud or blast furnace slag or one or more of these materi-als have been used 2. Their claim regarding use of more than 25% blast furnace slag is not contested and they succeeded in the adjudication proceedings before the Dy. Commissioner. But that decision was overturned by Commissioner (Appeals) on an appeal filed by the Revenue. Commissioner (Appeals) held that the correct classification of rock wool would be under Chapter heading 6803 with the following observations : "The Rockwool, slagwool and product thereof manufactured would be classifiable under Chapter sub-heading No. 6803.00 of the Central Excise Tariff Act, 1985 as the description of the product Rockwool/Slagwool/ Mineral wool are specifically mentioned in the sub-heading No. 6803.00 despite the fact that they contain blast furnace slag more than 25% by weight. As per Rule 3(a) of the Rules of Interpretation of the Central Excise Tariff Act lays down that the heading which provide a more specific description shall be preferred to heading providing general description. The description of Chapter sub-heading No. 6803.00 provides more specific description of the product 'Rockwool and Slagwool' as compared to the description under chapter sub-heading 6807.10 and therefore, I hold that the Rockwool, Slagwool and its products are classifiable under 6803.00 liable to appropriate duty. The Board vide Circular No. 387/24/2001/CX., dated 17-9-2001 has also issued clarification on the same lines." 3. The present appeal is directed against the order of the Commissioner (Appeals). It is the submission of the appellants that goods in which more than 25% by weight of one or more of red mud, press mud or blast furnace slag is used have to be classified under tariff item 6807 as that subheading specifically mentions them and indicates the duty leviable on them. Their contention is that sub-heading 6807 is specific to goods in which more than 25% by weight of furnace slag have been used. With regard to subheading 6803 it is contented that that heading would cover all slagwool, rock-wool and similar wools provided, on account of composition, they don't fall under sub-heading 6807.10.
Thus, according to the appellants, both the headings are specific for the goods mentioned therein. Another contention on behalf of the appellants is that Rule (3)(c) of the same Interpretative Rules warrants classification of the goods under 6807. They also have submitted that an interpretation, which places all kinds of slag wool, rock wool, etc. under heading 6803, irrespective of composition, is to be avoided as that would render heading 6807 and in particular, sub-heading 6807.10 redundant. They have also pointed out that legislative history and budgetary circular of the Ministry of Finance would show that the intention was always to grant full exemption or impose a lower rate of duty on goods in which more than 25% by weight of red mud or press mud or blast furnace slag had been used. The appellants have also pointed out that Commissioner of Central Excise (Appeals), Pune had held [2001 (128) E.L.T. 314] that the goods in question should be classified under Tariff Item 6807.
4. As against the aforesaid submissions on behalf of the appellants, the contention of learned SDR is that classifications of goods are to be guided by the language of the heading and it is clear from the language of 6803 that it covers all varieties of slag wool, rock wool and similar mineral wool. He also drew our attention to the findings of the Commissioner that even if subheadings 6807 and 6803 are considered applicable to the goods in question, in view of Rule 3(a) of Rules of Interpretation of the Central Excise Tariff Act 1985, Classification under 6803 is to prevail as that sub-heading provides "the most specific description" when compared to the more general description contained in sub-heading 6807. The learned SDR drew our attention also to the Board's Circular No. 587/24/2001-C.E., dated 17-9-2001 stating that Board has accepted the recommendation of the conference of Chief Commissioners that goods known/marketed as slagwool, rockwool and similar mineral wool, even though containing more than 25% by weight of blast furnace slag, etc. will appropriately be classifiable under Heading 68,03." 5. The contending headings for classification of the appellant's products (6803 and 6807) occur in Chapter 68, which is for "articles of stone, plaster, cement, asbestos, mica or of similar materials." Headings 6803 and 6807 under this Chapter are reproduced below for ease of reference and discussion :- Goods, in which more than 25% by weight of red mud, press mud or blast furnace slag or one or more of these materials, have been used; all other articles of stone, plaster, cement, asbestos, mica or of similar materials, not elsewhere specified or included.
Goods, in which more than 25% by weight of red mud, press mud or blast furnace slag or one or more of these materials, have been used.
6. The background to the present dispute is that it was Government policy to encourage the use of waste and polluting materials in the use of manufacture of articles of stone cement etc. Full exemption was given to goods manufactured with the use of more than 25% by weight red mud, press mud or blast furnace slag. Notification No. 36/93, dated 28-2-93 exempted "all goods, falling under Chapter Heading 68" (emphasis added) in which more than 25% by weight of red mud, press mud or blast furnace slag was present, from the whole of the duty of excise leviable on them. Similar treatment was given to same goods under Notification No. 8/96, dated 23-7-96. However, with the re-casting of Chapter 68 in the budget of 1997, Heading 6807 was enacted specifically for goods in which more than 25% by weight of red mud, press mud or blast furnace slag was present and some other goods. A separate sub-heading was also created as 6807.10 for goods in which red mud, press mud or blast furnace slag were used in excess of 25% by weight.
Full exemption thus far granted under notifications was replaced with a lower rate of duty at 8% for goods falling under sub-heading 6807.10.
Budget 1997 Explanatory Notes while explaining Chapter-wise changes in excise duty stated the following with regard to Chapter 68 : "Budget 1997 - Explanatory Notes explaining chapter-wise changes in excise duties.
50.1 Tariff rate of this chapter reduced from 20% to 18%. (Relevant bill entry in Part I refers).
50.2 The existing entries of S. Nos. 68.3 and 68.4 of Notification No. 8/96-C.E., relating to intermediates and components of pre-fabricated buildings and goods of red mud, press mud or blast furnace slag are being withdrawn. These are being incorporated in the tariff at subheading Nos. 6807.30 and 6807.10 respectively. The tariff and effective rate of 8% shall henceforth be applicable to these items. (Relevant bill entries in Part II refer).
50.3 Full exemption on goods in which not less than 25% by weight of fly ash or phospho gypsum or both have been used, withdrawn. Duty on Cement bonded particle board, jute particles board, rice husk board etc. reduced from 10% to 8%. These goods shall now attract 8% duty.
(S. Nos. 154 and 156 of Notification No. 4/97-C.E., dated 1-3-97 refer)". [RLT-1997 (Vol. 19) M 84].
7. Sl. No. 68.4 of Notification No. 8/96 referred to under 50.2 in the Explanatory Note above related to "Goods, in which more than 25% by weight of one or more of the following materials have been used :- (i) Red mud, (ii) Press mud, or (iii) Blast furnace slag". Budgetary (1977) policy is, thus, clear. Full exemption for goods of blast furnace slag etc. is replaced by lower tariff rate at 8%.
8. Full or partial exemption from Central Excise duty to goods produced from non-conventional raw materials or waste/polluting materials is part of taxation policy. Notification No. 38/93, dated 28-2-93 gave full exemption to goods falling under Chapter 68 of the Schedule to Central Excise Tariff Act, 1985 in which not less than 25% by weight of fly-ash or phospho-gypsum or both have been used. This scheme is to be noticed in the case of partial exemption under Notification 36/93, dated 28-2-93 in respect of Rice Husk Board, Glass-fibre Reinforced Gypsum Board (GRG) etc. and paper, paper board made out of non-conventional raw materials 50.3. Exemption for goods of blast furnace slags etc. is part of this policy.
9. While the above was the background and purpose to the recasting of Chapter Heading 68, and creation of Heading 68.07 and subheading 6807.10 for the assessment of goods in which more than 25% by weight blast furnace slag was used, pursuant to a discussion in Tariff-cum-General Conference of Chief Commissioner of Central Excise held at Mumbai on 29-8-2000. Central Board of Customs and Excise issued its Circular No. 587/24/2001-C.E., dated 17-9-2001 clarifying that "goods known in the market as slag wool, rock wool and similar mineral wool even though containing more than 25% by weight of blast furnace slag etc. will properly be classified under Heading 6803". The duty demand and change in classification are the result of this Circular.
The present Circular itself is reproduced below for convenience of discussion : "Slagwool/Rockwool and similar mineral wool - classification of [Heading 68.031 Subject :- Classification/Excisability of slagwool, rochvool and similar Mineral wool - Regarding A doubt has been raised whether rockwool/slagwool in which more than 25% blast furnace slag was used is classifiable under Heading 68.03 as slag wool, rock wool and similar mineral wool being specific entry for the said goods or under Heading 68.07 as goods, in which more than 25% by weight of blast furnace slag has been used.
2. The matter was discussed in Tariff-cum-General Conference of Chief Commissioners of Central Excise held at Mumbai on 29-8-2000.
The Conference took note of the manufacturing process of the goods in question. It was explained that the slagwool was produced basically from blast furnace slag. It was also noted that the goods were marketed as slagwool/rockwool only in bulk or sheets. It was felt that slag wool may get covered both under Heading 68.03 and as also under Heading 68.07, but it will more appropriately be classifiable under Heading 68.03 that being more specific for the product in question and therefore the products known/marketed as slag wool would merit classification under Heading 68.03 only.
3. The Board has accepted the above recommendations of the Conference and it is hereby clarified that the goods known/marketed as slagwool, rock-wool and similar mineral wool even though containing more than 25% by weight of blast furnace slag, etc. will appropriately be classifiable under Heading 68.03.
10. The foregoing circular of the Board has been followed by the Commissioner while passing the impugned order. Therefore, the issue raised in the present appeal is the correctness of the circular. As would be seen from Para 2 of the Circular, what prevailed with the Conference in reaching the view that Heading 68.03 is the proper heading for classification is that "goods were marketed as slag wool, rock wool in bulk of sheets", even as the Conference noted that "the goods may get covered under Heading 6803 and as also under Heading 6807". Classification under Heading 6803 was preferred, for the further reason that that heading was "more specific" for the product in question. Thus, it is clear that the conference was going by Rule 3(a) of Rules for interpretation of Central Excise Tariff Act.
11. It may be noted here that as against the Revenue's contention that Rule 3(a) warranted classification of the product under 6803 because that heading describes the products more specifically as rock wool and slag wool etc. than Chapter Heading 6807.10, the assessee has submitted that the product is to be classified under sub-heading 6807.10, following Rule 3(c) of the same Interpretative Rules inasmuch as that heading occurs last in the numerical order among those which equally apply to the classification.
12. Classification of the goods under Heading 6803 is being canvassed by the Revenue on the ground that the goods are classifiable under two headings, namely, 6803 and 6807 and that, by application of Rule 3(a), 6803 is to be preferred because that heading provides "the most specific description" and the other Heading 6807 provides "a more general description". Revenue considers Heading 6803 more specific because it mentions by name slag wool, rock wool etc., the Commercial names and identity of the goods in question. Rule 1 of Interpretative Rules states that for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or notes do not otherwise require, according to the provisions herein after contained".
Rules 2 to 5 of Rules for the Interpretation of the Central Excise Schedule follow Rule 1. What Rule 1 makes clear is that, classifications shall be determined according to the terms of the headings and that subsequent Rules of Interpretation are to be resorted to only if "headings or notes do not otherwise require". Therefore, before bringing Rules 2 to 5 into operation, it has to be seen whether Chapter Headings or Chapter Notes cover the classification and whether they "do not otherwise require". Thus, the basic issue is whether the classification of the goods in question can be determined according to the terms of the two headings and the relative section or Chapter Notes and if both headings are attracted, how the two entries are to be construed. There are no Section or Chapter Notes throwing any light on the classification of rock wool, slag wool in which more than 25% of blast furnace slag are present. Therefore, the issue is to be considered in terms of the two contending headings. Chapter 68 is not aligned to HSN. So notes under that code are also not to be resorted to.
13. The appellant submits that the goods could be classified according to the terms of Heading 6807 itself. That heading covers "goods" in which more than 25% by weight of red mud, press mud or blast furnace slag or one or more of this material have been used. This is heading based entirely on material used, or composition of the goods. And the only specification is the percentage presence of red mud, press mud or blast furnace slag. There is no contention, and there could be none, that composition of the goods is unknown or cannot be ascertained and, therefore, classification cannot be determined in accordance with the heading. It cannot also be argued that the heading is not specific because stipulating composition is no way of specifying goods.
Therefore, we are in agreement with the appellant that there is no basis for holding that Heading 6807 is not specific and no classification is possible under that heading. A tariff heading based on composition of goods is not any less specific than a heading based on commercial nomenclature. True, normally classification follows the commercial identity of the goods. However, this is valid only when the tariff adopts terms from commerce as the basis of classification. And not otherwise. In the present case, legislature has chosen a different basis, i.e. composition of the goods in question. A classification and rate of duty have been enacted based on the materials used.
Classification has to be carried out according to that criteria.
Suggestion to the contrary would be to put limitation on the legislative power in regard to classification of goods to excise duty and rates of duty. A clearly untenable proposition.
14. According to the conference of Chief Commissioners, the difficulty is caused by the fact that Heading 6803 also covers the goods in question and since the goods are covered under two headings Rule 3(a) is to be taken resort to. We find that this aspect of construction of the entries had been considered by the Commissioner of Central Excise (Appeals), Pune in his order in appeal in the case of Commissioner (Appeals), Central Excise & Customs, Pune v. Lloyd Rock Fibres Ltd. [2001 (128) E.L.T. 314 (Commr. Appl.)]. The Commissioner noted that both the entries have to be read together and that Heading 6807 does not contain any words of exclusion like "other goods" i.e. goods not covered by the earlier Headings like 6803 under Chapter 68. Therefore, the Commissioner interpreted the two entries in such a way as to give room for both the Headings, 6807 covering any goods including rock wool in which 25% or more of the specified materials are present and 6803 covering other varieties of rock wool. We are in full agreement with the construction placed on the two entries by the learned Commissioner.
This approach of the Commissioner is in conformity with the well-settled rule of statutory construction, that different legal provisions are not to be interpreted in such a way that some of the provisions are left superfluous or redundant, because in legislation there is no superfluity and provisions are not surplus. Various provisions have to be harmoniously interpreted so that each provision has its own place.
15. We consider it necessary to uphold the classification based on composition of the goods in question for other well-recognized rules of construction also. As already pointed out it has been part of the fiscal policy to give incentives for the use of non-conventional materials or waste/polluting materials as raw materials. That applied to goods of the present kind produced with considerable percentage of red mud, blast furnace slag etc. This intention is clear from Notification No. 36/93 and Notification No. 8/96. All that happened with the recasting of Chapter heading 68 in the Budget of 97 was to incorporate a heading for the goods which hither to enjoyed exemption under various exemption Notifications. This is specifically stated in the Explanatory Notes to the Budget of 1997, which has been reproduced earlier in this order. It bears repetition that an interpretation, which goes against the stated legislative policy is to be avoided.
Since the interpretation contained in Circular No. 587/24/2001-CX, dated 17-9-2001 of the Board runs contrary to the legislated policy, the same has to be held as bad.
16. This brings us to the question of the binding nature of Circulars.
It is now well settled that circulars issued by the Central Board of Excise and Customs are binding on the Revenue Authorities. However, assessees are at liberty to challenge the Circulars as has been done in the present case. In fact, the present is a case where a Circular of the CBEC is contrary to the Explanatory Notes to the budget of 1997.
Can such a Circular be upheld The recasting of Chapter heading 68 is a Legislative action of the Parliament. Through the re-numbering of the headings under that Chapter and specifically incorporating a heading for goods in which not less than 25% by weight of one or more of the specified materials was present and fixing a lower rate of duty on such goods, the Parliament had fixed a rate of duty on the goods covered y Heading 6807. The circular of the Board denies the benefit of lower rate of duly so fixed by the Parliament on goods with the stipulated composition and allows imposition of duty at a higher rate as applicable under Heading 6803. This certainly is over stepping and is contrary to the scheme of issuing clarificatory administrative circulars. It is the duty of administrative bodies to ensure that duty at the rates enacted by parliament are levied by field formations and not to agree with the field formations that duties may be levied at rates different from legislated by the Parliament be the rates lower or higher. An administrative circular cannot override legislated entries and Explanatory Notes to Budget.
17. For the reasons stated above, we hold that the correct classification of the goods in which 25% or more by weight of blast furnace slag is present is under Heading 6807 and not under 6303. The appeal is allowed after setting aside the impugned order with consequential relief, if any, to the appellants.