1. This is an appeal filed by the appellants against the order of the Collector of Central Excise (Appeals), Bombay.
2. Brief facts of the case are that the appellants manufactured goods described as 'composite containers' or fibre drums and these were assessed for sometime under T.I. 17(4) CET, but, later on, the same were held to be assessable under T.I. 68 and duty demand was also raised for the goods cleared during the period April, 1982 to June, 1982. The composite containers have" "been described by the appellants as comprising three portions - the top portion; the bottom portion; and the Central cylindrical portion. The main body is formed by continuous winding of a number of layers of paper/board around a sized adopted mandrel, and after further processing, the layers of paper are passed through a glue tank on to the mandrel and a tube is formed; the same is cut to the desired sizes. The open ends of the tubes are closed by sheets of plastic or hardboard or playwood, depending upon the customers' needs. Necessary arrangement in the tube for fixing these is provided. The container is supplied in one piece with the bottom and top ends closed in the manner described above. The classification list filed for the goods for assessment under Item 17(4) CET was approved by concerned Central Excise authorities. Later on, however, demand was raised for payment of differential duty holding the goods to be falling under Item 68, and the same was confirmed by the Assistant Collector.
Against this demand, the appellants filed an appeal before the Collector (Appeals). Their plea for assessment under 17(4) CET was, however, negatived.
3. Learned advocate for the appellants, Shri C.L. Beri, pleaded that after the classification list for assessment of the goods under Item 17(4) CET was approved, the authorities issued a Trade Notice in August indicating the goods to be assessable under Item 68 and a show cause notice was issued by the Superintendent demanding duty on 3-8-1982. He stated that the Tariff Item No. 17 had been restructured in the Finance Bill, 1982 and till the matter could be decided by the Assistant Collector, duty had been paid under protest under Item 68 and after the classification list holding the goods to be assessable under Item 17(4) was approved on 3-8-1982, the appellants goods were assessed under that item read with the relevant notification. He stated that all the clearances had been made by the appelants on the approval of the classification list. He stated that the Department had also issued a Trade Notice No. 49(MP)/ Paper(2)/82, holding tubular containers were covered under 17(4). In this connection, he drew our attention also to CCCN under Heading 48.16 and also Custom Tariff Item 48.18. He pleaded that no demand could be raised for the past period as clearances had been made based on approved classification list. He cited the following case law in support of his pleas :Steel Authority of India Ltd., Durgapur v. Collector of Central Excise, Calcutta.
(2) 1985 (20) ELT 202 in case of D.A. Desai and Amarendra Nath Sen, JJ, Collector of Customs and Central Excise and Ors..
He also pleaded that the same authority who approved the classification list, could not review his own order and till the classification list earlier approved could be reviewed by a superior authority under the law and the order of approval of the Assistant Collector was set aside by the competent authority, the clearances made in terms of that could not be called into question and no extra duty therefore could be demanded. He cited the following case law : (1) 1986 (23) ELT 318 (Delhi) in the case of Ajanta Iron and Steel Company Private Limited v. Union of India and Ors..
(2) 1980 ELT 752 (Guj.) in the case of Bhor Industries Limited v. Union of India.Inarco Limited, Bombay v. Collector of Central Excise, Bombay.
(4) 1981 ELT 328 (Del.) in the case of J.K. Synthetics Ltd. and Anr.
v. Union of India.
He stated that under Trade Notice No. 49(MP)/Paper(2)/82, it had been clarified by the Government that the containers of the type manufactured by them fell under scope of Tariff Item 17. He drew our attention to relevant portion and the same is reproduced below for convenience of reference : "Sub-item (3) covers carbon and other coping paper including duplicating stencils and transfer papers whether in rolls or in sheets or cut to size whether or not having a decorative value, bags, cones, packets, sacks, boxes, cartons, drums fitted with re-inforcing circular bands of other materials, tubular containers for posting documents grament bags, the like are also covered under this sub-item." He pleaded that once Tariff Advice had been issued, the same was binding on the authorities and any clarification issued subsequently would only have effect prospectively. He cited the following case law :Rayalaseema Cable Corporation, Cuddapah v. CCE, Hyderabad (Para (2) 1977 ELT (3 67) (Guj.) in case of Navgujarat Paper Industries v. Superintendent of Central Excise and Ors..
(i) The container by virtue of material used for forming the tube notwithstanding other material used to seal at the bottom and top should be considered as article made of paper, should be held to be assessable under 17(4) CET; (ii) Once the classification has been approved, no duty could be demanded unless the same was reviewed as required under the law; (iii) If any duty demand was due, it can be made only prospectively and not retrospectively.
4. The learned JDR for the Department pleaded that so far as the decision on merits was concerned, the same was covered by decision of the Tribunal in favour of Revenue in the case of Indian Textile Paper Tube Company, Madras v. Collector of Central Excise, Madurai 1985 (18) ELT 35 (Tribunal). She read out the relevant portion of the order of the Tribunal. She pleaded that in composite containers manufactured by the appellants the bottom and top portions forming top and bottom parts of the container are esential functional parts of the container and as held by the Tribunal in their decision, the same fell out of purview of the Tariff item 17(4) and correctly assessable under 68. She stated that for the article to be considered as container, made of paper an paper board, it should have all its essential parts made of these materials. She cited the judgment in the case of Geep Flashlight Industries Limited v. Union of India and Ors. 1985 (22) ELT 3 (S.C.).
She relied on the following observations of the Supreme Court : "Petitioner is admittedly manufacturing plastic torches. It is contended on his behalf that for the purpose of 'levy of excise duty plastic torch manufactured by the petitioner is governed by Tariff Item No. 15A(2) which reads as under : "Articles made of plastics, all sorts including tubes, rods, sheets, foils, sticks, other rectan gilar or profile shape whether laminated or not, and whether rigid or flexible including lay flat tubings and polyvinyl chlorides sheets..".
The learned Counsel Contended that the plastic torch manufactured by the petitioner is nothing else but plastic tube made of plastic in which certain other devices are inserted so as to make it a torch but it none-the-less retain the character of a plastic tube. A mere reference to Tariff Item No. 15A(2) would show that the articles therein described are plastic material, in different shape and form and not articles made from such plastic material. There is a noticeable difference between plastic material in different shape and form such as tubes, rods, sheets etc. and articles made from such plastic material such as plastic torch. It would be doing violence to language if one were to include plastic torch in articles under Tariff Item No. 15A(2) on the ground that a plastic tube is used for manufacturing plastic torch. Articles such as tubes, rods, sheets, foils, sticks etc. of plastic material merely describe plastic material in different shape and form and each word used therein takes its colour from the word just preceding and just succeeding and the adjectival clause "articles made of plastics".
Articles made of plastic meaning article made wholly of commodity commercially known as plastics, and not articles made from plastics along with other materials. By no canon of construction, a plastic torch can be read in conjunction with plastic tubes, rods, sheets, foils etc. made of plastics. Plastic torch is a distinct and different commodity commonly known in the market as torch.
Ordinarily, torch is not described by the name of the material used in the tube in which the device of torch is housed. The commodity known advertised, sold and offered in the market is torch. Prefix plastic merely describes the quality of torch as distinguished from other type of torches. It is not sold primarily as plastic tube." She pleaded that the Assistant Collector had limited power of review in terms of Section 11A after classification list had been approved by the said authority and cited the case of Duncan Agro Industries Ltd. v.Central Board of Excise and Customs - 1985 (22) ELT 770 (Cal.) and the case of Shyam Sunder v. Nichani v. Assistant Collector of Central Excise, Bangalore and Anr. - 1985 (22) ELT 751 (Karnataka). She drew our attention to the relevant observation of Hon'ble High Court as set out in the Head Notes which is as under :D.R. Kohli v. Atul Products Ltd. - 1985 (20) ELT 212 while considering the scope of erstwhile Rules 10 and 10A held that any error committed at the time of granting approval to the classification list can be corrected by invoking powers under Rule 10A. Since Rules 10 and 10A were omitted with effect from 17-11-1980 and Section 11A was inserted by Act, 25/1980 in substitution thereof, therefore, to withdraw the approval to the classification list and apply to Notification No. 80/80 to the facts of the case by the Assistant Collector was within the purview of Section 11A of the Central Excises Act. Therefore, the contention that Section 11A is only a recovery provision and it does not enable the original authority to re-open the classification list and reassessee under the Act is no longer open to question. Hence, the order of withdrawal of classification list under Section 11A of the Central Excises Act was not review of classification list and not without jurisdiction 1984 (16) ELT 389 (Trib.) disagreed - 1985 (20) ELT 212 (S.C.) followed." She also stated that the issuing of Trade Notice did not debar the raising of the demand and pleaded that Department was under no obligation to advise the appellants. She cited the case of D.R. Kohli and Ors. v. Atul Products Limited - 1985.(20) ELT 212 in support of this plea. She pleaded that a similar matter came up before the Tribunal and the Tribunal in the case of Indian Textile Paper Tube Company Ltd., Madras v. Collector of Central Excise, Madurai - 1984 (18) ELT 35 (Trib.) have held that the containers of the type manufactured by the appellants were correctly assessable under Item 68 CET. (i) whether the goods manufactured by the appellants are classifiable under Item 17(4) CET or 68 CET; (ii) whether the Assistant Collector is competent to re-open the issue of classification after having approved classification list; (iii) whether the demand could be raised for the period prior to the issue of the show cause notice or whether the revised classification would be applicable only from the prospective date.
6. We observe that the issue has arisen with introduction of the new Tariff Item 17(4) CET and under this item certain specified articles of paper and paper board are covered. The containers manufactured by the appellants admittedly are not wholly made out of paper but comprise of a central tube which is sealed at both the ends to make it a container by discs or circles made of material other than paper and paper board.
The appellants have themselves described the goods as composite containers. Unlike in the case of Customs Tariff, there are no interpretative rules or Chapter Notes incorporated in the Central Excise Tariff- for determining as to under which Tariff Heading goods would fall in case the goods are made out of two different raw materials when a tariff entry is worded as in the case of Item 17 CET.The Tariff Entry as it stood at the relevant time is as under : "17. Paper and Paper Board, all sorts (including pasteboard, mill board, straw board, card board and corrugated board) and articles thereof specified below in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power :- (4) Boxes, cartons, bags and other packing containers (including flattened or folded boxes and flattened or folded cartons), whether or not printed and whether in assembled or unassembled condition." It is seen that the tariff entry covers paper and paper board of all sorts and articles thereof as are specified in the tariff entry. The question that arises therefore for consideration is whether the containers manufactured by the appellants are articles of paper and paper board. As stated, in the absence of any criterion laid down as to the use of the other materials by the appellants for the manufacture of specified articles necessary resort has to be had to the trade understanding of the goods. It is pertinent to note that the appellants themselves have not described the goods as containers made of paper or paper board, but market them as composite containers. No evidence also has been placed before us to show that the goods are known in the trade as paper or paper board containers by those who deal with the same. It has not also been shown before us that the containers had been ordered for as paper or paper board containers. The question of assessment of similar containers had come up for consideration as pointed out by Revenue before this Tribunal in the case of Indian Textile Paper Tube Company, Madras v. CCE, Madura 1984 (18) ELT 35 (Tribunal) and after going into the various aspects, the Tribunal has held the said article to be assessable under Item 17(4) CET in preference to the assessment under 68 CET. The Tribunal in this case has held as under : "In this case before us, the paper tubes are prepared first and then other material components like lids, and bottoms which are made of tin plates and black plates and printed aluminium foils, these articles, i.e., Vim Containers and Defence Containers cannot come into existence and therefore, paper/board is only one of the raw materials and the other material components like lid and bottoms and printed aluminium foils are the other important materials and, under these circumstances, it cannot be said that the paper/paper board gives the essential character of the product in question. Besides this, the principle of essential character of an article for classifying the same under Customs Tariff has no application in Excise Tariff classification. In the Excise Tariff classification, the words mentioned in the tariff itself must be given their natural and popular meaning. Tariff Item 17(4) speaks of articles made of paper and paper board. This evidently suggest articles made of paper with all essential parts of the same material. Thus, there are boxes, cartons etc. for shoes, cigarettes, sweet-metas and a host of other goods made of paper/board in all essential parts. At most, they may have metal staples to hold the corners i.e., for reinforcement, but these articles i.e. Vim Containers and Defence Containers cannot be said to be the articles of paper or paper board. These are composite containers made of paper, paper board and other metal components. The metal components perform roles as essential as the paper tube viz. that of containment. Their correct classification is under Tariff Item 68 CET and not under Item 17(4) CET. The authorities below have rightly classified these articles under Item 68 CET." We do not find any material before us nor any basis had been laid by the appellants as to how their case can be distinguished from the case dealt with in the case cited supra. We find no reason to depart from the decision of the Tribunal. In the circumstances, we hold that the containers are not assessable under Item 17(4) CET but under Tariff Item 68 CET.7. The appellants next plea is that the Assistant Collector could not have reviewed classification earlier approved by the same very authority. The appellants have cited the case of Ajanta Iron and Steel Company Private Limited v. Union of India and Ors. - 1986 (23) ELT 318 (Del.). The Hon'ble High Court, it has been pointed out, has held as under : "It was contended by the learned counsel for the respondent and also stated in the affidavit in reply that the approval was given provisionally by the Assistant Collector, Central Excise, MOD-IV. We think that this position is not tenable. The approval had already been given by the Assistant Collector, MOD-II and it was not stated therein that this was provisional. It may be mentioned here also that a provisional assessment is done under Rule 9B which is a different procedure from an approval under Rule 173B. According to Rule 173B, the assessee has to file for approval before the proper officer, a list contained in a particular form in accordance with the rule, and that officer may make enquiry and then approve the list. All this has been done earlier by one Assistant Collector and for an earlier period the Assistant had approved only two Of the items in the list, but on appeal the Appellate Collector had accepted the assessee's view point. It, therefore, appears to us that the show cause notice cannot be issued in the present case : (a) because the notice was issued in April, 1984 with regard to a period which commenced in April, 1982, and included periods also commencing in April, 1983. the withdrawal of approval cannot be postponed to years after the event; and (b) once the approval then the classification list becomes an approved list and cannot now be disapproved by another Assistant Collector. We are, therefore, of the view that the notice is not valid." The Revenue has- however cited the case of the Karnataka High Court in the case of Shyam Sunder U. Nichani v. Assistant Collector of Central Excise, Bangalore and Anr. in which the Hon'ble High Court has held that under Section 11 A, the Assistant Collector has the authority for reviewing the approval already granted. It is seen that the Hon'ble High Court of Karnataka took note of the observations of the Hon'ble Supreme Court in the case of D.R. Kohli and Ors. v. Atul Products -1985 (20) ELT 212 when the question of the scope of Rules 10 and 10A (the predecessor provisions to Section 11 A) was considered. The Hon'ble Supreme Court held that any error committed at the time of granting of classification can be corrected under Rule 10A. The Karnataka High Court held that the issue of the classification can be re-opened and demand raised as a consequence thereof under Section 11 A. We observe that in the case of Ajanata Iron and Steel Company referred to supra by the appellants, the question of raising of demand under Section 11A was not considered by the Hon'ble High Court and the position in terms of this Rule was not examined. In fact, the High Court in para 8 has observed as under : "We think we should make it clear that if the classified list is one which had not previously been approved by the Assistant Collector MOD-II then only can the question of denying approval be raised.
Once the list has been approved by one of the Assistant Collectors it becomes an approved list and accordingly the Excise authorities can only take recourse to some other provisions of the Act. So the show cause notice has to be held to be invalid. Furthermore, we think we should not deny the petitioner's relief at this stage when the notice is clearly invalid. The notice states that list should be approved under Item 68 in respect of the Railway Track Material i.e.
Tie Bars, Cottors and Two Way Keys etc. This position is untenable as all the four items have been approved under Item 26AA not only in the same period but also for the previous period." It is seen that the Hon'ble High Court left the issue of upsetting the approval granted earlier under other provisions of Central Excises and Salt Act, 1944, open. The Karnataka High Court has clearly held that a demand under Section 11A could be raised notwithstanding the fact that the classification earlier approved was sought to be reviewed by the same authority. This decision of the Karnataka High Court as stated earlier, is based on the observations of the Supreme Court in the case of D.R. Kohli as mentioned earlier. We, therefore, hold that there is no legal bar to the raising of the demand in this case by the Assistant Collector notwithstanding the fact that the said authority had earlier approved the classification list.
Coming to the next leg of the appellants argument that any demand of duty should be prospective in nature from the date of the issue of the show cause notice and not restrospective. We observe that the Tribunal in the case of Inarco Limited, Bombay v. Collector of Central Excise, Bombay "In view of this position and finding that order of the Appellate Collector as well as Collector's letter in this case, were both prior to the introduction of Tariff Item 68, and what came subsequently thereto was only a letter of the Superintendent of Central Excise, issued on 7-3-1975 issued in reply to a communication addressed by the appellants a day before, namely on 6-3-1975. Thus there was no bar in the way of the higher authorities in undertaking examination of the correct position, which was done by issuing a show cause notice and affording full opportunity to the appellate and the authorities acted in a manifestly fair manner, as evidenced by the fact that at one stage even the show cause notice was withdrawn. It is thus a case where Collector's Review Order is certainly for cogent reasons, and within the ambit recognised by the judicial authorities.
However, we find justification in the plea made alternatively that, in any case, in view of the previous stand consistently conveyed to the party, the demand for recovery of duty restrospectively could be sustained. We, therefore, considering peculiar circumstances of this case, consider it to be a fit case to hold that the demand of duty for the period preceding the date of the show cause notice was in no case justified. Although learned counsel for the appellants urged that the demand should be enforceable with effect from the date of the Review Order of the Collector, but we feel that the party was put on notice, that the Department was likely to undertake a review of the position as soon as the show cause notice was issued on 24-9-1980. We were also given to understand during hearing that in fact duty was paid from that date under protest, and passed on to the consumers. We, therefore, think that it will be both justified in law, as well as in equity, if he demand for excise duty by reference to Tariff Item 68 for these products is held enforceable with effect from the date of the show cause notice, i.e., 24-9-1980."Steel Authority of India Limited, Durgapur v.Collector of Central Excise, Calcutta - 1985 (22) ELT 487, it has held as under : "There can be, thus, no disputing the contention of appellants that there was no justification in applying the period of five years from the date of issue of show cause notice. What requires consideration is the further contention of appellants that the Excise authorities could not go back even six months from the date of show cause notice assuming that departments' stand on classification was correct, because of there being no existence of any fresh reason, for changing the stand as established by the long standing practice, approved by the Department right from the inception of the manufacture of goods in 1962, for 17/18 long years, upto 1979-80, when the last classification was approved, and till the first show cause notice was given. We find substance in this plea. The Tribunal has held in the case of Inarco Ltd., Bombay v. Collector of Central Excise, Bombay - 1984 ECR 2164 (CEGAT), that in such a situation the demand for additional duty by reference to Tariff Item 68 is enforceable only with effect from the date of issue of show cause notice. That was also a case of a longstanding practice having been allowed to continue by. the Department by means of orders issued and approvals recorded both from the period prior to introduction of Tariff Item 68 as well as subsequent dates; till the issuance of show cause notice in 1980. We feel inclined to adopt a similar view on the peculiar facts of this case, and hold that the demand for additional duty in this case under Tariff Item 68 can be held enforceable only with effect from the date of issue of the first show cause notice, i.e. 28-4-1980." In both these cases there had been long-standing practice and in the interest of fair play and equity, the Tribunal held that demand should be applicable prospectively. In the present case, we observe, there is no long-standing practice for assessment of goods under a particular heading. In fact, after the introduction of Tariff Item 17(4) in the beginning the assessment of the goods was kept provisional and later the goods were first held to be assessable under Tariff Item 17(4) and after about two months the matter was taken up for examination. There was a Trade Notice also issued after the introduction of the item and according to that bags, cones, packets, sacks, boxes, cartons, drums fitted with reinforcing circular bands of other materials, tubular containers for posting documents, garments bags and the like are stated to be covered under new item. There was, however, no mention of the composite containers in this Trade Notice and in a general way tubular containers for posting documents were shown to be covered under this.
It is not the appellants case that the containers manufactured by them answer to that decriptiori. Further, the drums covered under this item, as indicated in the Trade Notice, are those as are fitted with re-inforcing circular bands. It is not again the appellants' case that the containers' manufactured by them have merely bands of other materials for re-inforcement fixed therein. In fact, the bottom and top ends are the essential components for the purpose of formation of the containers manufactured by the appellants. In this view of the matter and in the background of these facts, we find no reason to accept this plea of the appellants. We, in view of the above, find no merits in the appeal and reject the same.
8. I would only like to add that while Delhi High Court decision and other decisions relied on by the appellants referred to in para 3 of Brother Gulati's order dealt with Rule 10 of Central Excise Rules and general power of review," the Karnataka High Court decision in Shyam Sunder U. Nichani case deals specifically with Section 11A of Central Excises and Salt Act, 1944 and is based on an earlier Supreme Court decision D.R. Kohli and Ors. v. Atul Products Ltd. The Karnataka High Court held that the same authority could review classification earlier approved. In view of the features as aforesaid Karnataka High Court decision directly in point could be preferred to Delhi High Court decision which is not directly on the point. As pointed out by Brother Gulati there is no long standing practice involved in the present appeals and demand therefore could be within the time limit set out in Section 11 A.With the above observations, I would agree with the order proposed by Brother Gulati.
9. I agree with the order writien by Brother Shri Gulati and the observations recorded by Vice-President (J), as above.