Bhukhanawala Diamond Tools (P) Vs. Collector of Customs - Court Judgment

Excerpt:
1. the goods involved in the present appeal were imported by m/s.bhukhanawala diamond tools pvt. ltd., bombay (hereinafter referred to as "the appellants"). they were described in the invoice as "formset dresser diamond" and in the bill of entry as "synthetic industrial diamond". the appellants claimed classification of the goods heading no. 71.02(3) of the first schedule to the customs tariff act, 1975 with the benefit of exemption notification no. 131-cus., dated 1.7.77. the claim was rejected by the assistant collector by his order dated 22.9.82 in which he ruled the classification to be under heading no.68.01/16(1). he thus directed the assessment of the-goods under heading 68.01/16(1) at 100% ad valorem plus 30% ad valorem plus 8% ad valorem as additional duty equivalent to the excise duty leviable under item no. 68 of the central excise tariff schedule. in appeal, the assistant collector's order was confirmed by the collector of customs (appeals), bombay by his order dated 15.2.83, which is now under challenge in the present appeal before us.2. we have heard shri m.a. rangaswamy, advocate for the appellants and shri vineet kumar, sr. d.r. for the respondents.3. it is seen from the assistant collector's order that the goods were, in the words of the dy. chief chemist, who inspected samples, "in the form of tiny prismatic, cylindrical and rectangular slab like pcs. each can be considered as synthetic diamond". [the goods were evidently not in dust or power form and, hence, heading 71.04 of the customs tariff schedule can be ruled out of consideration]. they have been held by the assistant collector to be agglomerated diamond abrasives, according to the manufacturer's catalogue, meriting classification under heading 68.01/16(1). this findings, upheld by the collector (appeals) seems to be based on the description of the goods in the catalogue as dressing blank tools with details of their application in the grinding industry.but, it must be noted that the dy. chief chemist's report does not show these goods to be agglomerated diamond abrasives. in fact, he has, on inspection of samples, opined that the pieces could be considered as synthetic diamonds. the literature on "formset dresser diamond" manufactured by the general electric co. of u.s.a. describes the goods as a polycrystalline diamond designed to replace single crystal mined diamond in tools for dressing aluminium oxide and silicon carbide grinding wheels. they consist of randomly oriented diamond crystals that are strongly bonded to each other by a high pressure, high temperature process that creates a dense polycrystalline diamond. we do not find anything in the literature to support the view that the subject goods are agglomerated diamond abrasives. what is excluded from chapter 71 by statutory note 2(k) to that chapter (on which reliance has been placed by the lower authorities) insofar as it is relevant are abrasive goods falling within chapter 68 or 82, containing dust or powder of precious or semi-precious stones (natural or synthetic). (the present goods are not dust or powder. nor are they abrasive goods containing dust or powder. they are diamond pieces). nor are the goods mounted on a support of base metal. thus, note 2(k) has no application to the present goods. chapter 68 is not attracted.4. as rightly pointed out by shri rangaswamy, statutory note l(a) to chapter 71 which states that subject to certain exceptions (which do not apply to the present case all articles consisting wholly or partly of precious or semi-precious stones (natural, synthetic or reconstituted) are to be classified within chapter 71 and not within any other chapter, is applicable here. thus, the proper heading for the goods will have to be found within chapter 71 only.5. we will now have to fix the correct heading within chapter 71. the choice is between headings 71.02(3) and 71.03 of the schedule. they read thus:"71.02 precious and semi-precious stones, unworked, cut or otherwise worked, but not mounted set or strung (except ungraded stones temporarily strung for convenience of transport):71.03 synthetic or reconstructed precious or semi-precious stones, unworked, cut or otherwise worked, but not mounted, set or strung (except ungraded stones temporarily strung for convenience of transport).there is nothing on record to show that the subject diamonds have been cut or otherwise worked. the collector (appeals) has ruled out heading no. 71.03 since they are "cut to shape and size (prismatic, cylindrical and rectangular) and bear specific product numbers" and also because, in his view, heading no. 71.02 covers only natural diamonds. both these reasons do not seem to have any basis. as the jewellery section of the custom house have noted (refer the asstt. collector's order), the diamond pieces are "preshaped" ("made of synthetic industrial diamond powder compressed") dresser bits. the manufacturer's literature does not indicate that the diamond pieces, after being formed, have been cut to shape and size. no evidence has either been place before us to show that they have been cut to shape and size after being ground. in fact, the indication is, as noted, that the pieces are pre-shaped and this seems to tally with the process of manufacture as set out in the manufacturer's literature, viz. that of formation under a high pressure, high temperature process. in this state of evidence, we would be inclined to consider the subject pieces as not cut to shape and size after their formation. however, it does appear that when one reads the two headings 71.02 and 71.03, the inference is inescapable that synthetic diamonds are covered by the latter heading because it is more specific and, in terms, mentions synthetic precious or semi-precious stones. in this view of the matter, we are of the opinion that the subject goods are correctly classifiable under heading no. 71.03.6. notification no. 131-cus dated 1.7.77, exempts inter alia synthetic industrial diamonds falling within chapter 71 from basic duty of customs in excess of 40% ad valorem. the notification is applicable to the subject goods in view of our finding that they fall under chapter 7. the result is that the appeal is allowed and the goods are ordered to be classified under heading 71.03 of the customs tariff schedule with benefit of notification no. 131-cus dated 1.7.77 and with consequential relief to the appellants.

Judgment:
1. The goods involved in the present appeal were imported by M/s.

Bhukhanawala Diamond Tools Pvt. Ltd., Bombay (hereinafter referred to as "the appellants"). They were described in the invoice as "Formset Dresser Diamond" and in the Bill of Entry as "Synthetic Industrial Diamond". The appellants claimed classification of the goods Heading No. 71.02(3) of the First Schedule to the Customs Tariff Act, 1975 with the benefit of exemption Notification No. 131-Cus., dated 1.7.77. The claim was rejected by the Assistant Collector by his order dated 22.9.82 in which he ruled the classification to be under Heading No.68.01/16(1). He thus directed the assessment of the-goods under Heading 68.01/16(1) at 100% ad valorem plus 30% ad valorem plus 8% ad valorem as additional duty equivalent to the excise duty leviable under Item No. 68 of the Central Excise Tariff Schedule. In appeal, the Assistant Collector's order was confirmed by the Collector of Customs (Appeals), Bombay by his Order dated 15.2.83, which is now under challenge in the present appeal before us.

2. We have heard Shri M.A. Rangaswamy, Advocate for the appellants and Shri Vineet Kumar, Sr. D.R. for the respondents.

3. It is seen from the Assistant Collector's Order that the goods were, in the words of the Dy. Chief Chemist, who inspected samples, "in the form of tiny prismatic, cylindrical and rectangular slab like pcs. Each can be considered as synthetic diamond". [The goods were evidently not in dust or power form and, hence, Heading 71.04 of the Customs Tariff Schedule can be ruled out of consideration]. They have been held by the Assistant Collector to be agglomerated diamond abrasives, according to the manufacturer's catalogue, meriting classification under Heading 68.01/16(1). This findings, upheld by the Collector (Appeals) seems to be based on the description of the goods in the catalogue as dressing blank tools with details of their application in the grinding industry.

But, it must be noted that the Dy. Chief Chemist's report does not show these goods to be agglomerated diamond abrasives. In fact, he has, on inspection of samples, opined that the pieces could be considered as synthetic diamonds. The literature on "Formset Dresser Diamond" manufactured by the General Electric Co. of U.S.A. describes the goods as a polycrystalline diamond designed to replace single crystal mined diamond in tools for dressing aluminium oxide and silicon carbide grinding wheels. They consist of randomly oriented diamond crystals that are strongly bonded to each other by a high pressure, high temperature process that creates a dense polycrystalline diamond. We do not find anything in the literature to support the view that the subject goods are agglomerated diamond abrasives. What is excluded from Chapter 71 by statutory Note 2(k) to that Chapter (on which reliance has been placed by the lower authorities) insofar as it is relevant are abrasive goods falling within Chapter 68 or 82, containing dust or powder of precious or semi-precious stones (natural or synthetic). (The present goods are not dust or powder. Nor are they abrasive goods containing dust or powder. They are diamond pieces). Nor are the goods mounted on a support of base metal. Thus, Note 2(k) has no application to the present goods. Chapter 68 is not attracted.

4. As rightly pointed out by Shri Rangaswamy, statutory Note l(a) to Chapter 71 which states that subject to certain exceptions (which do not apply to the present case all articles consisting wholly or partly of precious or semi-precious stones (natural, synthetic or reconstituted) are to be classified within Chapter 71 and not within any other Chapter, is applicable here. Thus, the proper heading for the goods will have to be found within Chapter 71 only.

5. We will now have to fix the correct heading within Chapter 71. The choice is between Headings 71.02(3) and 71.03 of the Schedule. They read thus:"71.02 Precious and semi-precious stones, unworked, cut or otherwise worked, but not mounted set or strung (except ungraded stones temporarily strung for convenience of transport):71.03 Synthetic or reconstructed precious or semi-precious stones, unworked, cut or otherwise worked, but not mounted, set or strung (except ungraded stones temporarily strung for convenience of transport).

There is nothing on record to show that the subject diamonds have been cut or otherwise worked. The Collector (Appeals) has ruled out Heading No. 71.03 since they are "cut to shape and size (prismatic, cylindrical and rectangular) and bear specific product numbers" and also because, in his view, Heading No. 71.02 covers only natural diamonds. Both these reasons do not seem to have any basis. As the Jewellery section of the Custom House have noted (refer the Asstt. Collector's order), the diamond pieces are "preshaped" ("made of synthetic industrial diamond powder compressed") dresser bits. The manufacturer's literature does not indicate that the diamond pieces, after being formed, have been cut to shape and size. No evidence has either been place before us to show that they have been cut to shape and size after being ground. In fact, the indication is, as noted, that the pieces are pre-shaped and this seems to tally with the process of manufacture as set out in the manufacturer's literature, viz. that of formation under a high pressure, high temperature process. In this state of evidence, we would be inclined to consider the subject pieces as not cut to shape and size after their formation. However, it does appear that when one reads the two Headings 71.02 and 71.03, the inference is inescapable that synthetic diamonds are covered by the latter Heading because it is more specific and, in terms, mentions synthetic precious or semi-precious stones. In this view of the matter, we are of the opinion that the subject goods are correctly classifiable under Heading No. 71.03.

6. Notification No. 131-Cus dated 1.7.77, exempts inter alia synthetic industrial diamonds falling within Chapter 71 from basic duty of customs in excess of 40% ad valorem. The notification is applicable to the subject goods in view of our finding that they fall under Chapter 7. The result is that the appeal is allowed and the goods are ordered to be classified under Heading 71.03 of the Customs Tariff Schedule with benefit of Notification No. 131-Cus dated 1.7.77 and with consequential relief to the appellants.