Collector of Central Excise Vs. West Glass Works - Court Judgment

Excerpt:
1. two questions that arise for consideration in this appeal by the revenue under section 35b (2) of the central excises and salt act, 1944 (hereinafter referred to as the act) are, if :- (a) headlight covers made of glass fall within item 23-a (4) of the first schedule to the act or are more appropriately classifiable under item 68 of the said schedule; (b) the proceedings initiated by the notice to show cause dated 15-5-81 read with corrigendum dated 22-2-82 demanding duty, under : (i) rule 10 of the central excise rules, 1944 for the periods between 1-12-79 and 16-11-80; and (ii) section 11a of the said rules for the periods between 17-11-80 and 30th april, 1981 were barred by limitation.2. in a connected appeal no. 921/83, between the same parties identical issues arise, although in.....

Judgment:
1. Two questions that arise for consideration in this Appeal by the Revenue under Section 35B (2) of the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act) are, if :- (a) headlight covers made of glass fall within Item 23-A (4) of the First Schedule to the Act or are more appropriately classifiable under Item 68 of the said schedule; (b) the proceedings initiated by the notice to show cause dated 15-5-81 read with corrigendum dated 22-2-82 demanding duty, under : (i) Rule 10 of the Central Excise Rules, 1944 for the periods between 1-12-79 and 16-11-80; and (ii) Section 11A of the said Rules for the periods between 17-11-80 and 30th April, 1981 were barred by limitation.

2. In a connected Appeal No. 921/83, between the same parties identical issues arise, although in consequence of a show cause notice dated 10-4-81 for the period between February, 1980 and 25-11-80. Obviously, the period relevant for the said Appeal (No. 921/83) was already comprehended in the proceedings initiated in terms of the show cause notice issued in this Appeal. Nevertheless, it would appear that both the cases were adjudicated and appeals filed were also disposed of by separate orders although, as it is now rather belatedly, conceded, no amount of duty for identical periods could have been either demanded or confirmed twice over in respect of identical goods manufactured by the self same manufacturer for periods that overlap. The ratio of this decision, in the circumstances of the case, however, will apply equally to the aforesaid Appeal No. 921/83.

(a) the Respondent submitted an application on or about 4-8-79 for the issue of a licence as well as the approval of a classification list annex-ed to it, in respect of headlight covers made of glass with optical properties for use in motor vehicles and tractors under Item 68 of the First Schedule. It was alleged in the forwarding letter dated 4-8-79 that the Respondent's price list for the aforesaid goods was previously approved in terms of Item No. 23A of the First Schedule as glass and glassware. The Respondent claimed that the said classification and assessment to duty was wrong and prayed for refund of duty wrongly paid on the said basis, (p. 38 of the paper book filed by the Respondent). We are not, however, concerned with refund in the present proceedings; (b) in response, the Superintendent, Central Excise, Ferozabad, by letter dated 13-8-79, inter alia, permitted clearances under item No. 68 of the First Schedule, provisionally, in terms of Rule 9B of the Central Excise Rules, 1944 pending the report of the Chemical Examiner in regard to samples drawn on 7-8-79 [p. 43 of the Paper Book]; (c) on 11-1-80, the Inspector of Central Excise, Ferozabad, informed the Respondent that :- (i) the Asstt. Collector of Central Excise, Agra, by his letter dated 9-1-80, had finally decided that headlight covers, specially designed and meant for exclusive use in motor vehicles/ motor cycles/scooters/tractors fall under Item 68 of the First Schedule to the Act; (ii) accordingly, the Respondent was required to submit a revised classification list for approval together with proof of their optical properties and special design of the goods in question for use in motor vehicles [p. 44 of the Paper Book].

(d) on examination the National Physical Laboratory, New Delhi had certified on 14-7-80 that Respondent's headlight covers specially designed for use as accessories for motor vehicles, motor cycles and tractors etc. had optical properties, such as light transmission and distribution to meet the requirements of the specifications governing the manufacture of headlights [p. 45 of the Paper Book]; (e) pursuant to another report from the National Physical Laboratory, New Delhi dated 1-9-80 and Tariff Advice No. 25/79. the Asstt. Collector of Central Excise, Agra wrote on 3-2-81 of the Manufacturers' Association (of which the Respondent was a member) to say that headlight covers with optical properties used in motor vehicles are classifiable under Item 68 of the First Schedule to the Act [p. 46 of the Paper Book]; (f) nevertheless, the Respondent was required by notice dated 15-5-81 to show cause as to why Central Excise duty amounting to Rs. 3,59,914.44 only should not be paid under Rule 10 of the Central Excise Rules, 1944, on account of the clearance of headlight covers from 1-12-79 to 30-4-81 valued at Rs. 17,99,572.80 without payment of duty at the appropriate rate of 20% ad valorem under a false declaration to the effect that they had optical properties and were specially designed for use in motor vehicles and tractors etc. (It will be observed from the paper book filed in this appeal that the show cause notice at pp. 47-48 was a notice issued in Appeal No. 921/83. The notice in this case was filed in the paper book relating to Appeal No. 921/83. This mix up need not have occurred); (g) the aforesaid notice to show cause would appear to have been amended by a corrigendum dated 22 2-82 requiring the respondent to pay duty under Rule 10 of the Rules for the period 1-12-79 to 16-11-80 and under Sec. 11A of the Act for the period 17-11-80 to 30th April, 1981. The corrigendum was, perhaps, thought necessary in the context of the repeal of Rule 10 and its re-enactment as Sec. 11 (A) on or about 17-11-80. A copy of the corrigendum was not, however, filed by either party to the Appeal; (h) in adjudication, it was held by the Asstt. Collector, inter alia, that- (i) the process of manufacture adopted for the headlight covers by the use of a manually operated or automatic press is the same as that of other articles of glass and glassware like tumblers etc. No additional process is adopted for the final finish of the goods in question for creating optical properties; (ii) the optical properties of glass and glassware depend upon the composition. Two main optical properties, namely, refractive index and dispersion depend upon the density of glass. The process of manufacture of the goods in question being identical to that adopted for the manufacture of glass and glassware, optical properties also remain identical; (iii) item 23A of the First Schedule to the Act covers glass and glassware and sub-item 4 of the said item, residuary in nature, pertains to other glass and glassware including tableware. Glassware manufactured by a manually operated process is specifically entitled to a concessional rate in terms of Entry No. 3 of Notification No. 329/77, dated 26-11-77, as amended by Notification No. 25/79, dated 1-3-79. Once the process adopted in the manufacture of the goods in question was the manually operated process, the goods are glassware and they do not cease to be glass and glassware just because they are used in automobiles; (iv) if the goods in question contained optical properties, other articles manufactured by the self-same process will also have such optical properties and accordingly, they have all to be classified under Item No. 68. Such a construction would render Item 23 A altogether otiose and nugatory; (v) optical properties in glass cannot be achieved without resort to optical annealing as distinguished from chemical annealing resorted to by the Respondent. It is only optical glass manufactured by an altogether different process that can be said to have optical properties, like for example, refractive indices for various wave lengths of light; (vi) accordingly, the goods in question are correctly classifiable under item 23A (4) and not under Item 68 of the First Schedule; and duty in a sum of Rs. 3,59,914.44 (basic) and Rs. 8,359.14 (Special Excise Duty) under Rule 10 of the Central Excise Rules for the period from 1-12-79 to 16-11-80 and under Section 11A of the Act for the period 17-11-80 to 30-4-81 was demanded to be paid; (i) in Appeal against the aforesaid order, however, the Appellate Collector held that :- (i) the Asstt. Collector should not have ignored the overwhelming expert opinion to the effect that the headlight glass covers, in question, indeed, have optical properties; (ii) in the classification of diverse products and articles, resort should not be to the scientific and technical meanings of the terms and expressions used but to their popular meaning [Reliance on AIR 1981 SC 1079- Mo-International Industries v. Commissioner of Sales Tax, Uttar PradeshSwadeshi Mills Co. v. Union of India-it is not Swadeshi Mills but Maharashtra Glass Works that was the Appellant], glass wind screens for motor vehicles were held to be classifiable not as glass or glassware but as motor vehicles parts under Item 34A of the First Schedule as it then read. Wind screens are sold only by those who deal in motor vehicle parts and not by those who deal in glass and glassware. Following the ratio of the aforesaid ruling, the headlight glass covers would rightly fall under Item 68 because they are not sold by persons dealing in glass and glassware; (iv) the Department has not produced any evidence in support of its contention that the product in question was classifiable under Item 23A(4) of the First Schedule; (v) it is the properties and use of the goods in question rather than the process of manufacture that has relevance to the determination of the issue in question. Nor had the Department ever denied the use of the goods as headlight covers in motor vehicles and tractors etc.; (vi) it is also found that headlight covers for each particular type, make or model have to be specifically designed and the headlight covers from the Respondent are bought and sold accordingly; (vii) unless the goods had optical properties required for headlight covers, they would serve no useful purpose whatsoever; (viii) consequently the goods in question are to be classified under Item 68 (since they have not been specifically mentioned in Tariff Item 34A) rather than under Item 23A(4).

(a) in the adjudication proceedings, it was not the contention of the Respondent that headlight covers are parts of motor vehicles and as they do not fall within Item 34A, they have necessarily to come within Item No. 68 of the First Schedule nor was any reliance placed on 1982 E.L.T. 237; the Respondent, accordingly, is precluded from reliance on 1982 E.L.T. 237 or contend that the goods fall within Item 68 of the First Schedule; (b) the facts in the aforesaid case were substantially different from those in the instant case, inasmuch as wind screens in that case were manufactured out of duty paid glass. Still, the conclusion in the aforesaid case to the effect that a motor vehicle part, if specifically included in any item other than 34A of the First Schedule, will be assessable, not as a part of a motor vehicle but in terms of the particular entry within which it is included, could be applied to the instant case as well; (c) admittedly, the manufacturing process for the goods in question is by resort to a manually operated press like any other article of glass or glassware. Accordingly, the goods in question come within Sl. No. 3 of the Table appended to Notification No. 329/77 and are hence squarely covered by Item 23A(4) of the First Schedule; (d) optical glass has to conform to several general requirements as laid down in is No. 1400-1961. Admittedly, the goods in question do not have all the properties certified in the ISI specifications for optical glasses. Consequently, the goods do not come within item 68 of the First Schedule and are correctly classifiable in "glass and glassware," falling under item 23A(4) of the First Schedule; (e) in accordance with Trade Notice No. 33/82 dated 10-2-82, headlight covers would fall for classification under item 23A(4) of the First Schedule. The Respondent, despite notice issued on 10-2-82 to file revised classification under Rule 173B of the Central Excise Rules for classification and assessment in terms of item 23A(4), failed to do so. Accordingly, the Respondent had contravened the provisions of Rule 173B of the Rules with an intent to evade payment of duty and in terms of Section 11A of the Act, the period for collection of duty not paid would be accordingly, 5 years. The demand is thus not barred by limitation; (f) in any view of the matter, there is no question of limitation since admittedly, the approval of the classification and assessment on that basis was provisional.

Shri Tayal had relied upon a decision in 1980 E.L.T. 249 (Garware Nylons v. Union of India and Ors.), apart from the Tribunal's unreported orders in Ram Dass Motor Transport Co. (Appeal No.479/81-Order No. 568/83 dated 15-9-83 and Appeal No. 1014/80-Order No.577/83 dated 15-9-83).

5. Shri S.P. Kampani and Shri K.K. Kapur, Consultants appearing for the Respondent had argued to the contrary.

6. Incidentally, it would appear that the Respondent had filed a memorandum of cross-objection in this Appeal, notwithstanding that no cross-objection can be taken against the Appellate Collector's order, seeing that it was entirely in favour of the Respondent. It is not as if any part of the relief claimed by the Respondent had been disallowed by the Collector of Appeals. The cross-objections are, accordingly, rejected.

7. On perusal of the papers and in the light of the submissions of the Counsel and otherwise it would appear to us that- (a) the Respondent is not precluded from contending in the Appeal before us that headlight covers are parts of motor vehicles and since they dp not fall within item 34A, they have necessarily to come within item No. 68 of the First Schedule. Nor is it as if no reliance can be placed on 1982 E.L.T. 237. The question is one of classification and is thus a mixed question, fact and law. There is no dispute about the factual aspect. The contentions raised by the Respondent, touching the legal aspect can, in our opinion, be urged at any stage of the proceedings; (b) the true test for classification of the goods in question under Item 23 A is not the actual process adopted for manufacture but the identity of the manufactured goods with the relevant description or definition in the First Schedule or failing that, in terms of commercial parlance. As was observed by the Supreme Court in Indo-International Industries v. Sales Tax Commissioner, U.P. (AIR 1981 SC 1079) "if any term or expression has been defined in the enactment then it must be understood in the sense in which it is defined but in the absence of any definition being given in the enactment, the meaning of the term in common parlance or commercial parlance has to be adopted"; (c) while, therefore, the process of manufacture for headlight covers may be identical with that adopted for the manufacture of glassware this, by itself, cannot conclusively establish that headlight covers fall, necessarily, within the generic description 'glass' or 'glassware'. Thus, it was held in the aforesaid Supreme Court case that, although 'glassware' generally comprehends all articles made of glass, clinical syringes, for example, cannot, in commercial parlance, be considered as 'glassware'; (d) nor is it proper to import the concept of "optical properties" (meaning thereby the special requirements of optical glass) into the consideration of the question of classification under item 23A(4).

Optical properties of glass cannot be confused with the specifications prescribed for optical glass. It is not necessary that article of glass should have any or all the properties or requirements of optical glass so as to fall outside item 23A(4); (e) again, no article of glass is without the common optical properties like reflection and refraction, as the case may be. The existence or otherwise of optical properties, as distinguished from the exact specifications required for optical glass, is no criterion for inclusion in or exclusion out of item 23A(4); (f) indisputably, such of the optical properties that are necessary for the production of a concentrated beam of light do exist in the headlight covers in question. There is no reason as to why the Assistant Collector should ignore the evidence on record in this context and assume that the headlight covers have the same optical properties as glass tumblers just because the process of manufacture, according to him, is the same in both cases; (g) the erroneous assumption that item 23A would altogether be rendered otiose and nugatory in the event of exclusion from out of its ambit all articles with identical optical properties resulting from their manufacture by the self-same process is a result of adoption of a wrong test for classification of goods in the said item. As already stated, it is neither the process of manufacture nor the existence of optical properties that determine the exclusion of an article from out of its ambit; (h) again, the assumption that optical properties in glass cannot be achieved without resorting to optical annealing is erroneously derived from confusing optical properties of glass with properties of optical glass; (i) similarly, the resort to the description of manufacture contained in the Notification No. 329/77, dated 26-11-1977, for the purpose of equating the goods in question with glass and glassware for inclusion in item 23A(4), had been occasioned by an incorrect approach to the question of classification of the said goods. The process of manufacture is altogether irrelevant for ascertaining if the goods came within the ambit of the said item. The process of manufacture becomes relevant for the purposes of the exemptions contained in the aforesaid notification only if the goods came, in the first instance, within the description of "glass and glassware" and not vice versa. One cannot identify the process of manufacture with that contained in the notification and thereby come to a conclusion that the process being identical, the goods answer the description contained in item 23A(4); (j) the decision in 1982 E.L.T. 237 cannot be distinguished from the facts of the case merely on the ground that the glass in the said case was duty paid. The issue decided therein was as to whether wind screens for motor vehicles were glass or glassware. It was decided they are not. It was nowhere stated in the judgment that wind screens are not glass and glassware just because they were made out of duty paid glass. Nor can it be contended that for headlight covers, as for wind screens, the specific entry is 23A(4) and not 34A of the First Schedule; (k) a perusal of the aforesaid decision in 1982 E.L.T. 237 would reveal that- (i) it was one of the contentions for the Revenue that wind screens must be deemed to have been excluded from item 34A in view of item 23A(4); (ii) this argument was rejected since, as observed in the judgment, it cannot be said that item 23A(4) specifically provided for wind screens; (l) we cannot find any support in the said decision for the contention of the Revenue before us; (m) nor does reliance on 1980 E.L.T. 249 etc. help the Appellant.

All that has been stated in the said decision was that item 68 of the First Schedule is rather too wide in its ambit and residuary in character and, in the context of technological advances, can hardly subserve the purpose of earning the revenue. This may be so but the decision itself is an authority for the proposition that it is essential to classify the goods according to the general and commercial usage and known denominations of the various goods. In accordance with trade usage and denomination, we find that headlight covers cannot be described as 'glass' or 'glassware'.

8. In the view we have taken on the first question, it is unnecessary for us to go into the second.

9. In the result, we see no merits in the Appeal and dismiss it accordingly.