1. M/s. Graphite India Limited, filed a revision1 petition before the Central Government (Joint Secretary, Ministry of Finance, Department of Revenue, New Delhi) assailing orders of the Excise Authorities whereby a product manufactured by them and described as "Graphite Head Blocks" was classified, for the purpose of excise duty, under Tariff Entry No.67 of Central Excise Tariff, as 'Graphite Electrodes'. This revision petition stands transferred to the Tribunal as an appeal by virtue of provisions of Section 351 of the Central Excises and Salt Act, 1944, and is being disposed of as such.
2. The appeal first came up for hearing on 5.1.1983 when Shri R.N.Bajoria, Senior Advocate accompanied by Shri K.K. Ganguly, Advocate appeared for the Revenue.
3. After the matter had been extensively argued by the learned Counsel for the appellant, an adjournment was necessitated because Shri Bajoria made an oral request to submit a certificate from the Steel Authority of India in support of the appellants' contention that the disputed product could not be characterised as "Graphite electrodes". Although the oral request was granted but in view of the fact that this constituted fresh evidence, it was considered appropriate that the Departmental Representative is given an opportunity also to file any certificate on behalf of the Department as a counter to the appellant's fresh evidence for which the time was allowed upto 31st January, 1983 and thereafter the appeal was directed to be taken up for further hearing some time in second or third week of February, 1983.
Accordingly, 9.2.1983 was fixed as actual date for hearing, and the Bench heard the matter when Shri R.N. Bajoria, Senior Advocate again appeared along with Shri K.K. Ganguly for the appellants and Shri K.D.Tayal for the Department.
4. Arguments were concluded by reference to the material already filed by the appellants, namely, (1) the Catalogue dealing with graphite products manufactured by the appellant company; (2) the opinion recorded by a team of Experts of Indian Institute of Science, Bangalore and (3) Certificate given by Steel Authority of India, Delhi Office, under signature of the Executive Director thereof. The Department had not filed any document/certificate in rebuttal but Shri K.D. Tayal, Departmental Representative produced at the time of hearing, an extract relating to the definition of "electrodes" as given in the Dictionary of Scientific and Technical Terms, 2nd Edition by McGraw-Hill.
5. The facts giving rise to the present controversy are to the effect that the appellant company is manufacturing various types of graphite products including, of course, graphite electrodes but dispute revolves around a product, which they described as "Graphite Head Blocks". The appellants contend that these graphite head blocks are being used internally in their factory in the graphitising furnaces as a connector between the aluminium bus bars and the resistor material, and that the furnaces are of 'resistance heating type': Head blocks being used merely for their quality for passing current, and of withstanding high temperature inside the furnace, and that these blocks do not get consumed in the process nor do they take part in any activity of the furnace, beyond merely acting as a medium for passing current, whereas the essential character of an electrode, according to the appellants was to produce an arc and get consumed. It is further urged that these could not also be categorised as 'anodes'--another item falling under Tariff Entry 67--for the reason that the anodes must get disintegrated in the process of electrolysis.
6. The inception of the dispute can be traced to a claim lodged by the appellants seeking benefit of exemption Notification No. 58/75 dated 1.3.1975 as amended by Notification No. 77/75 dated 6.3.1975 and Notification No. 118/75 dated 30.4.1975 for these products on the plea that these 'graphite head blocks' were used as connectors in their graphitising furnaces and that they could fall only under residuary entry of the Central Excise Tariff, namely. Tariff Entry 68 as "Goods not elsewhere specified", and that since they were not being sold to any outside customer, and they were being consumed within the factory, they had to be treated as intermediate products, for the process of manufacture of other finished products in the same factory and that they were entitled to exemption from excise duty, by virtue of the aforesaid Notification.
7. This representation having been rejected by Central Excise Office, Bangalore within whose jurisdiction the factory is situated, by letter dated 14.4.1976, the appellants reiterated their stand in representation which they further made to the same office as well as to the Central Board of Revenue and after considerable amount of correspondence, the matter was finally adjudicated by the Assistant Collector of Central Excise, Bangalore by means of his order recorded on 19.9.1977 whereby he held that the assessee's contention that graphite head blocks could not be treated as 'graphite electrodes' for the reason that they were not consumed in the process of being used and merely acted as conductors of electricity, was not sustainable. He further held that the essential character of an electrode being to act as a conductor of electricity and it being admitted by the party that these products which they described as graphite head blocks were also carrying electricity and it being further admitted that the chemical composition of these blocks and the electrodes was similar, and it having not been established before him that formation of an arc or consumption in the process, were necessary characteristics of an electrode, these graphite head blocks were liable to duty under Tariff Entry 67 which dealt with "all sorts" of 'graphite electrodes'.
8. On an appeal being taken to the Appellate Collector of Central Excise, Madras, same contention was reiterated; namely, that the graphite head blocks had a special application distinct from graphite electrodes and anodes, and end use should be the basis for classification, and not the chemical composition; (2) that electrodes and anodes had specific machining, threading, shapes, etc., for making them useable in arc furnace and electrolytic cells, whereas head blocks have distinct shape and size, and have no applicability or adaptability as electrodes and anodes; and (3) that by internationally accepted technical conventions, definitions and usage, graphite electrodes signify graphitised products made for the express purposes of producing steel of various grades in electric arc furnaces through generation of an arc between the electrodes and the charge and that this was very significant, whereas the graphite head blocks were being used in their plant in graphitising furnaces as a medium/connector between the aluminium bus bars and the resistor material, and that they were being so employed on account of their quality for passing current and withstanding high temperature and that they did not get consumed in the process and acted simply as a medium for passing current.
9. The learned Appellate Collector, however, by his order dated 10.12.1979, after considering all the contentions set out before him, confirmed the view held by the Assistant Collector, observing that simply because the appellants were laying. emphasis only on one type of graphite electrodes, namely those which are specially designed for use in arc furnaces for melting and producing steel of various grades, it did not mean that the other graphite electrodes were outside the purview of Tariff Entry 67, particularly when this entry covered graphite electrodes and anodes of "all sorts" the latter expression being intended to cover all other electrodes, besides those used for the purpose of manufacture of steel and for the reason that since these graphite head blocks admittedly acted as conductors of electricity, which was an essential character of an electrode, these are also classifiable under Entry 67 of Central Excise Tariff. The appeal was consequently rejected.
10. Feeling aggrieved by this order, the appellants had gone up in revision before the Central Government wherein they again urged that graphite head blocks in dispute did not conform to the function and use which were conventionally attributed to electrodes and that the lower Excise authorities had erred in treating them as graphite electrodes simply because they acted as conductors of electricity. They also pleaded that the end use should be the basis of classification and not chemical composition as established by the Hon'ble Supreme Court in the case of South Bihar Sugar Mills v. Union of India ECR C 257 SC : 1973 Cen-Cus ix(SC) as also in another case quoted as Ramavtar Budhai Prasad v. Assistant Sales Tax Officer, Akola , that while considering applicability of taxing statutes to certain goods in, the absence of any definition of the article in the particular enactment itself, recourse should not be had to the formal meaning as to how they were defined in technical literature or dictionaries, but as to how the particular goods were treated or understood in common trade parlance.
11. It was further contended that the expert opinion given by the Indian Institute of Science, Bangalore placed on record, had not been properly appreciated, and he erred in ignoring the same, and by merely referring to it in part to hold that since these graphite head blocks were composed of graphite and 'acted as conductors', they had to be treated as graphite electrodes. The Appellate Collector's order was assailed on the ground that he did not record any reason for not accepting the opinion given by such an expert body as Indian Institute of Science, Bangalore and he erred in ignoring the fundamental and basic use of graphite head blocks as commonly known in the market and meaning attached to them in commercial and trade practice. The appellants also contended that the Appellate Collector committed an error in understanding the import of words "all sorts" which expression, according to the appellants, only indicated that the article must be first 'graphite electrodes and anodes' and only then the term "all sorts" could be applied which meant graphite electrodes and anodes of all types of respective uses, and including all shapes and sizes and that applicability of this entry could not be extended to these graphite head blocks and that it was an established proposition which according to the appellant, did not satisfy the essential condition of being an electrode, namely, consumption during use and arc formation.
12. We have given very careful thought to the arguments canvassed by the learned Counsel during hearing and the material relied upon by him.
We find that the finding of the lower excise authorities to the effect that the chemical composition and properties of graphite head blocks and graphite electrodes is similar, is not being questioned nor the fact that these graphite head blocks act as conductors of electricity.
The distinction sought to be raised by the appellant is solely to the effect that to acquire character of an electrode, the article must be used in arc formation furnaces and should get consumed in the process.
13. They have, in support of this contention, besides demonstrating orally with reference to the picture of the furnace, which they described as graphitising furnace, as given in the catalogue of their products, also placed reliance on the opinion of the Indian Institute of Science, Bangalore already on the file and also the certificate given by the Steel Authority of India and produced at the time of first hearing of the appeal.
14. The learned Counsel stressed that the essential character of electrodes was formation of arc in the process of use in the furnace, and they get consumed whereas the report given by the experts of Indian Institute of Science, Bangalore which they made after visiting the factory, indicated that the graphite head blocks remained tact after use in the furnace, and that the specific function which they performed in their plant in the graphitising furnace was such that there was no arc formation. The learned Counsel also reiterated the proposition as enunciated by judicial authorities that words should be given the same meaning as accorded to them by common trade or according to the uses to which they are put and that when an article had a recognised meaning in trade practice or commercial parlance, then the meaning given in the technical dictionaries could not be adopted for the purpose of interpreting a taxing statute.
15. As against that, Shri K.D. Tayal, SDR defended the orders passed by the lower authorities by contending that the record reveals that the chemical composition of these blocks is the same as that of graphite electrodes and that since they admittedly perform the function of carrier or conductor of electricity, which is the fundamental characteristic of electrodes, they have rightly been held to be falling under Tariff Entry 67. He also placed reliance on the meaning given to the term "electrode" in Dictionary of Scientific and Technical Terms--2nd Edition, by McGraw-Hill and urged by reference to the same (an extract of which was placed on the file) that arc formation or consumption in the process of use are not the only characteristic of an electrode and that the expression was of wide amplitude to cover, within their sweep, these graphite head blocks, which satisfy the essential ingredient of an electrode, namely, carrier of electricity.
16. For facility of reference, we would like to reproduce the said extract, which reads as under: 1. An electric conductor through which an electric current enters or leaves a medium, whether it be an electrolytic solution, solid, molten mass, gas or vacuum.
2. One of the terminals used in dielectric heating or diatherming for applying the high frequency electric field to the material being heated.
This definition thus makes it manifest that the characteristics of an electrode, as stressed by the learned Counsel for the appellants, need not necessarily be there and that basic requirement is that it acts as an 'electric conductor'.
17. Although the learned Counsel for the appellants has relied on a number of authorities of the Supreme Court to buttress his arguments that while interpreting taxing statutes the words used therein should be interpreted with reference to their meaning as understood commonly by the general public as well as the trade dealing with them, and not according to their technical meaning, but a reference to the authorities cited by him makes it clear that their lordships in respective cases were dealing with items which were commonly found in the market, and were in circulation. For instance, the case cited as Delhi Cloth and General Mills Ltd. v. State of Rajasthan and Ors. 1980 ELT 383 SC : ECR C 520 SC was with reference to an item known as "tyre cord fabric". Similarly, the goods which were the subject matter of cases reported as Union of India v. Gujarat Woollen Felt Mills ECR CDunlop India Ltd. v. Union of India ECRC476 SC : 1980 Cen-Cus 560D and 1981 ELDT 325 (SC) Indo-International Industries v. Commissioner of Sale Tax U.P. ECRC 580 SC were respectivley woollen fabrics, raw rubber known as V.P. Latex and clinical syringes.
18. It was in the context of the nature of goods that the Hon'ble Supreme Court in the cases quoted above, held that in the absence of any definition given to a term or expression in the concerned statute, the meaning us understood in common or commercial parlance, must be preferred to the one given in technical literature meant only for technical people.
19. It is pertinent to note that these graphite head blocks are being manufactured by the appellant-company for their own captive consumption and are internally used in their plant. It was further made clear in reply to a query by us that this type of item is not commonly traded or circulated in the market nor any one on behalf of the appellant-company could say that not only they but any other manufacturer was sending them into the trading market. These are thus the goods which on the appellants' own showing are specific type of goods, put to a specified use, and are not of such general nature which would have consumers outside the factory. These goods have thus no use or meaning attached to them except the one given to them by the appellants.
20. In this situation, the argument that the meaning as understood in general and common parlance has to be attributed to the goods, and not that of technical literature, does not seem to be available to the appellants because the subject goods do not go out in the general market nor any material has been placed before us to indicate that any general use was being made of such type of products or that there were people other than the appellants who were manufacturing, much less using these products or trading in them.
21. The opinion given by the experts of Indian Institute of Science, Bangalore also does not lend much weight to the case of appellants because any expert opinion in order to merit consideration must be backed by reference to known authorities on the subject, so that on face of it, the report could indicate that it was not based on subjective assessment of the experts who visited the factory on the requisition of the appellants but had weightage of known authorities on the subject. In the circumstances, we do not find ourselves impressed with the opinion so as to place unflinching reliance on this report. We are also constrained to ignore the certificate furnished by Steel Authority of India because, apart from the fact that it is not signed by any technical man but only by the Executive Director, there is no indication that the Steel Authority of India is either the user of this product or manufacturer thereof, and seemingly the Executive Director has recorded opinion in the abstract.
22. The appellants have also not shown that any other manufacturer in India is producing such type of goods so as to enable us to have a comparable data as to the nature of the product. Even the catalogue of the appellants (which is on record) does not contain any reference to these "graphite head blocks" as a separate entity, whereas they show the graphite electrodes as one of their main products.
23. We have thus to fall back in this case on the meaning of the term "electrodes" as can be understood from reference books as we find, in the peculiar circumstances of this case, that the goods with which we are concerned, are unique in nature and not commonly found in market.
We therefore, have to accept the dictionary meaning as relied upon by the Departmental Representative, because the said dictionary meaning has at least the merit of being impersonal and objective, and is certainly to be preferred to the expert opinion given on request of the appellants, but without support of any authority on the subject.
24. We also do not find much force in the argument as advanced by the learned Counsel for the appellants that end-use of the goods ought to be the only criterion because had it been so, the intention must have been made clear in the entry itself because we do not have some other entries in the Central Excise Tariff where there is reference to end-use such us entries jailing under Item 51 to 54. In contradistinction to that, Tariff Item 67 speaks in general terms without absolutely any reference to the end-use, or adaptation of the article.
25. Interpreting thus the Tariff Entry, as it stands, and reading it to relate simply to graphite electrodes and anodes of "all sorts", which term is of wide amplitude, and there being no dispute that subject goods are made of graphite, and have the same chemical composition and properties as electrodes, and it also being established that they perform the basic function of an electrode, namely, as conductor of electricity, we find no fault in the classification determined by the lower Excise Authorities. The appeal is accordingly rejected.