1993(11)LCX0017
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR
Milap Chandra Jain and R.P. Saxena, JJ.
POLAR MARMO AGGLOMERATES LTD.
Versus
UNION OF INDIA
D.B. Civil Writ Petition No. 6312/91, decided on 10-11-1993
Cases Quoted
Collector v. Kutty Flush Doors and Furniture Co. (P) Ltd. 1988(03)LCX0021 Eq 1988 (035) ELT 0006 (SC) [Para 6]
Deputy Commissioner v. Pio Food Packer 1980(05)LCX0005 Eq 1980 (006) ELT 0343 (SC) [Para 7]
Dunlop India Ltd. v. UOI 1975(10)LCX0016 Eq 1983 (013) ELT 1566 (SC) [Para 12]
State of U.P. v. Indian Hume Pipe Co. Ltd. AIR 1977 SC 1132 [Para 13]
Punjab Industries v. Collector 1989 (043) ELT 314 [Para 15]
Bharat Forge & Press Industries (P) Ltd. v. Collector 1990(01)LCX0072 Eq 1990 (045) ELT 0525 (SC) [Para 15]
Amrutsheele v. UOI D.B. Civil Writ Petition No. 1654/82, decided on 22-7-1987 [Para 16]
Jain Marbles v. UOI D.B. Civil Writ Petition No. 869/82, decided on 26-5-1988 [Para 16]
Kasat Enterprises v. UOI S.B. Civil Writ Petition No. 133/83, decided on 7-11-1990 [Para 16]
J.S. Marbles v. UOI S.B. Civil Writ Petition No. 479/85, decided on 19-7-1990 [Para 16]
Collector v. Fine Marble & Minerals Pvt. Ltd. 1985 (022) ELT 128 [Paras 16]
Sangmermer India Pvt. Ltd. v. Collector 1987(01)LCX0002 Eq 1989 (042) ELT 0725 (Tribunal) [Para 16]
Associated Stone Industries Ltd. v. Collector 1992 (060) ELT 639 [Para 16]
Chjay Industries Pvt. Ltd. v. UOI 1987(12)LCX0013 Eq 1988 (034) ELT 0042 (Guj.) [Para 17]
Randip Shipping and Transport Co. Pvt. Ltd. v. Collector 1989(03)LCX0029 Eq 1989 (041) ELT 0392 (Bom.) [Para 17]
S.T.P. v. Collector 1990(12)LCX0043 Eq 1991 (054) ELT 0302 (Tribunal) [Para 17]
Beharilal Shyamsunder v. Sales Tax Officer 60 ITR 260 [Para 19]
Raza Textiles v. Income Tax Officer AIR 1973 SC 1362 [Para 19]
A.C.T.O. v. Ramesh Leather Stores 1982 (49) STC 79 [Para 19]
Kota Steel Rolling Ltd. v. C.T.O. 49 STC 80 [Para 19]
N.B. Sanjana v. E.S.W. Mills 1978 (002) ELT (J 399) (SC) [Para 19]
Advocated By : S/Shri Rajendra Mehta and Arun Bhansali, Advocates, for the Petitioners.
Shri P.P. Choudhary and S.S. Lal, Advocates, for the Respondents.
[Judgment per : Milap Chandra Jain, J.]. - This writ petition has been filed for quashing the show cause notice dated October 14, 1991 (Annexure 5) and demand notice dated October 25, 1991 (Annexure 7), for declaring that Item No. 2504 of Chapter 25 of the Schedule appended to the Central Excise Tariff Act, 1985 (In short `Act of 1985) is ultra vires of the charging Section 3 read with Section 2(f) of the Central Excises and Salt Act, 1944 (In short `Act of 1944) and for holding that preparation of agglomerated marble slabs/tiles do not involve manufacturing process and no excise duty is leviable on them and, in the alternative, for holding that agglomerated marble slabs and tiles are exigible to excise duty under Item No. 2504.21 and 2504.31 and not under Item No. 68.04 of the said Schedule.
2. The case of the petitioner is thus. It is engaged in the business of manufacturing marble agglomerated slabs/tiles. They are made from lumps/chips of naturally excavated marble which are purchased from market. They are crushed and pigments and binding agents are mixed with it. The mixture is poured into moulds. Thereafter, pressure is applied to the mixture and it is subjected to vacuum vibral process. Marble agglomerated blocks are formed and therefrom slabs are prepared by sawing them. The slabs are trimmed, polished and finally cut into slabs/tiles of the required sizes. Marble agglomerated blocks contain more than 90% natural marble and 6 to 8% pigments and binding agents. They have all the characteristic qualities of natural marble. There is no difference in between marble slabs and tiles obtained from excavated marble blocks and marble slabs and tiles obtained from agglomerated marble blocks, except that the latter contains pigments and binding agents. According to Section 3 of the Act of 1944, duty of excise is on manufacture and production of goods specified in the Schedule to the Act of 1985. No duty is exigible where process of manufacture is not involved in the making of goods. Manufacture must bring into existence a new commercial commodity having distinct name, characteristics and use. Making of slabs/tiles from agglomerated marble blocks does not involve any process of manufacturing. Marble blocks, slabs and tiles have been specifically classified under Heading 25.04 of the Schedule appended to the Act of 1985. No extended definition has been given in the Notes of Chapter 25 of the said schedule. Despite this, the Central Excise Authorities insisted upon the petitioner to obtain Central Excise Licence and also to submit classification list. Classification List was submitted, classifying the said products under sub-heading 2504.90 and claimed exemption from duty under Notification No. 16/90-C.E., dated October 20, 1990. The Superintendent, Central Excise, Range II, Udaipur (Respondent No. 4) directed the petitioner to submit revised classification list classifying marble slabs and tiles under Heading 2504.21 and 2504.31 respectively. The petitioner did so under protest but it was not formally approved by the Assistant Collector. On the instructions of the Collector. Central Excise (Respondent No. 2), the Assistant Collector (Respondent No. 3) issued notices Annexure 5 to the petitioner to show cause as to why its product may not be classified under Heading 68.07 of the Act of 1985 relying upon Explanatory Note given under Chapter 68 of HSN. Thereafter, demand-cum-show cause notice Annexure 7 was issued. Reply was filed, seriously opposing the said notices. M/s. Kedia Agglomerated Marble Ltd., Halol (Gujarat) is the only other factory engaged in making similar marble agglomerated slabs/tiles. The Assistant Collector approved their classification under Headings 2504.21 and 2504.31. Reasonable opportunity of hearing is not being given by the Central Excise Authorities. The petitioner has no alternative but to approach this Court under Article 226 of the Constitution of India.
3. In their reply, the respondents have taken two preliminary objections, namely, that the petitioner has alternate remedy and disputed questions of fact are involved. They have averred that manufacturing process is involved in the preparation of agglomerated marble blocks from the marble chips and lumps and also in sawing the agglomerated marble blocks for obtaining agglomerated marble slabs and tiles. The petitioners products are distinct from marble slabs and tiles. Their properties are different. Addition of pigments and binders differentiate its product from the natural marble. The peti- tioners product is a new commercial commodity. The Collector, Central Excise did not issue any instructions. Demand notice Annexure 7 was served to save limitation. Reasonable opportunity of hearing was duly given to the petitioner.
4. Arguments of the learned counsel for the parties have been heard and their written arguments have been perused.
5. Taxable event under the Act of 1944 is manufacture. The question for consideration is whether the aforesaid processes amount to manufacture? The definition of the word `Manufacture given in Section 2(f) of the Act of 1944 is inclusive in nature. It itself does not give the meaning of Manufacture. It may be mentioned here that in the Notes given in Chapter 25 of the Schedule of the Act of 1985, extended meaning of manufacture has not been given as has been given in other chapters, namely, 13, 24, 33 and 52. As such amendment made in Section 2(f) of the Act of 1944 by Act No. 5 of 1986 has not changed the position. Mere change is insufficient. A new and different product should emerge having distinctive name, character and use. There must be transformation and there should be loss of original identity. The fact that the produce has undergone a degree of processing is irrelevant if the original commodity continues to possess its original identity.
6. It has been observed in Collector of Central Excise, Madras v. Kutty Flush Doors and Furniture Co. (P) Ltd., 1988(03)LCX0021 Eq 1988 (035) ELT 0006 (SC) paras 4 and 5, as follows :-
It is well-settled that excise-duty becomes chargeable only when a new and different article emerges having a distinct name, character and use. See in this connection the observations of this Court in Union of India v. Delhi Cloth & General Mills 1977 (001) ELT (J.199) = 1963(1) Suppl. SCR 586 and South Bihar Sugar Mills Ltd. etc. v. Union of India and Ors. 1978 (002) ELT (J.336) = 1968 3 SCR 21. This principle is well settled. This is a question of facts depending upon the relevant material whether as a result of activity, a new and different article emerges having a distinct name, character and use. The use of expression `manufacture as explained in the case of Allenburry Engineers Pvt. Ltd. v. Ramakrishna Dalmia and others 1978 2 SCR 257. In State of Orissa & Ors. v. The Titaghur Paper Mills Co. Ltd. and Another 1985 3 SCR 26 which was a decision on the Orissa Sales Tax Act, this question was considered in the back ground of the fact whether planks, cut into sizes, etc., sawed out of logs, are different from logs in its nascent state.
5. It may be worthwhile to note that `manufacture implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more was necessary and there must be transformation; a new and different article must emerge having a distinct name, character or use. See Union of India v. Delhi Cloth Mills (supra) at page 596 of the report. Having regard to the facts found in this case by the Tribunal, which ultimately is the final fact finding authority, we are of the opinion that regard being had to the principles for determining the questions which were correctly applied in the decision of the Tribunal, in the facts of this case, the conclusion of the Tribunal is unassailable."
7. In Deputy Commissioner of Sales Tax v. Pio Food Packer - 1980(05)LCX0005 Eq 1980 (006) ELT 0343 (SC) = 46 STC 63 (SC) at page 66, it has been observed as under :-
Referring to Anheuser-Busch Brewing Association v. United States (52 L.Ed 336, 338), the Court said :
Manufacture implies a change, but every change is not manufacture and yet every change in an article is the result of treatment, labour and manipulation. But something more is necessary ............There must be transformation; a new and different article must emerge, `having a distinctive name, character or use.
And further :
At some point processing and manufacturing will merge. But where the commodity retains a continuing substantial identity through the processing stage we cannot say that it has been manufactured."
8.Now, the question is whether marble agglomerated block is a new product. It is not in dispute that preparation of agglomerated marble blocks involve the following processes :
1. Crushing of lumps/chips of marble,
2. Mixing of pigments and binding agents i.e. Polyster, resin, white cement etc. (6% to 8%) with crushed marble (over 90%)
3. Pouring the mixture in the moulds; and
4. Application of pressure.
The petitioner has stated in para No. 4 of its rejoinder that the properties and characteristics of agglomerated marble remains the same as that of excavated marble, it remains as marble even after agglomeration process and all the characteristics of a marble as given in para No. 5 of the writ petition are present in the product of the petitioner. In their reply to these averments, the respondents have stated as follows :-
That as regards para 4 of the rejoinder it is respectfully submitted that the fact that the characteristics of marble contained in the product manufactured by the petitioner is not denied but the product contains other substances also besides marble, therefore, it cannot be equated with the natural marble because of the process of manufacturing deployed by the petitioner firm.
9. Rule 2 (b) of the Rules for interpretation of Excise Tariff runs as under :-
(b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles contained in Rule 3.
10. Admittedly, petitioner sells its product under the trade name of VILLA NOVA. It has filed advertisement memo Annexure 19 (pages 181-182) along with an additional affidavit dated February 5, 1993 (pages 176-178) of its Secretary. It would be best to quote here relevant portions of this advertisement-memo. They run as under :-
WHAT IS VILLA NOVA?
VILLA NOVA is made from natural materials bounded together. Its original physical characteristics remain the same except for the resin used in the bonding process.
Being primarily made from natural stones, VILLA NOVA maintains all the basic characteristics of the natural product.
Abrasion and chemical resistance : These resistance factors are the same for VILLA NOVA AS FOR ANY other kind of marble.
Does the tile or slab tend to bend?
If not laid and exposed to direct sun light for long time, then, due to natural inherent properties of marble or granite it might slightly bend.
Can Villa Nova be used internally as well as externally?
One must keep in mind that with time all natural marble and granite under the sun and unsettled climatic conditions undergo aesthetic changes.
How can Villa Nova be cut?
Villa Nova can be easily cut with a normal hand cutting machine used for cutting natural marble or ceramic tiles.
About repolishing
Yes VILLA NOVA can be repolished by the same machine as natural marble is polished to get back its luster after it becomes dull on prolonged use and improper maintenance. VILLA NOVA, because of its unique structure will look as new, even after repolishing.
About Shade variation
Due to the basic raw material itself being non-uniform in nature, there may be a possibility of minor shade variations. However, accuracy in uniformity is achieved to an extent not found in nature.
About stains
VILLA NOVA has the same staining characteristics as marble. It is prone to the staining effect of the following substances."
11. Certificates of Gem Marbles, Royal Marble House and Sri Mani-dhari Stones have been filed to the effect that agglomerated marble is known in the trade market and is being sold as natural marble. Along with the affidavit dated July 27, 1993, the petitioner has also filed certificate (Annexure 29) of Technical Assistant R.S. Sharma dated October 12, 1992. It states - It is certified that the natural marble blocks and agglomerated marble blocks (produced by using marble waste) are identical in physical characteristics just as appearance, strength etc. and its end-use. The slabs and tiles of natural and agglomerated marble are marketed as Marble slabs and Tiles only. Test reports Ex. 25, 27 and 28 have also been filed. They also go to support the petitioners case. The respondents have not filed report of any expert or any other documents except the prospectus Annexure R/1 of the petitioner mentioning that agglomerated blocks are obtained through manufacturing process. As already observed above, mere manufacturing process is not sufficient to attract duty but the product should have different characteristics and properties. Moreover, admission made in ignorance of correct position of law or facts are not binding upon a party. This prospectus does not show that the agglomerated marble blocks have different characteristics properties than the natural marble blocks.
12. It has been observed in Dunlop India Ltd. v. Union of India, 1975(10)LCX0016 Eq 1983 (013) ELT 1566 (SC), as follows :-
The meaning given to articles in a fiscal statute must be as people in the trade and commerce conversant with the subject generally treat and understand them in the usual course. But once an article is classified and put up in a distinct entry, the basis of classification is not open to question. Technical and scientific tests offer guidance only within limits. Once the articles are in circulation and come to be described and known in common parlance, there is no difficulty for statutory classification under a particular entry ......It is well established that in interpreting the meaning of words in a taxing statute, the acceptation of a particular word by the trade and its popular meaning should commend itself to the authority.
13. It has been observed in State of U.P. v. M/s. Indian Hume Pipe Co. Ltd., AIR 1977 SC 1132 at page 1133 para 3, as follows :-
It is well settled that when we are dealing with the articles used for business purposes, the terms must be interpreted in a purely commercial sense. In Ramavtar Budhal Prasad etc. v. Assistant Sales-tax Officer, Akola 1962 (1) SCR 279 at P. 282 - [AIR 1961 (SC) 1325 at pp. 1326, 1327] this Court while construing the import of the word vegetables", observed as follows :-
But this word must be construed not in any technical sense nor from the botanical point of view but as understood in common parlance. It has not been defined in the Act and being a word of every day use it must be construed in its popular sense meaning that sense which people conversant with the subject matter with which the statute is dealing would attribute to it. It is to be construed as understood in common language.
14. The word Agglomeration is defined in W.K.V. Gale, the Iron and Steel Industry - A Dictionary of Terms, published by David and Charls, Newton Abbot at page 8 as under :-
Agglomeration Collecting together into lump form of fine iron ores, dust and other materials which could not otherwise be smelted, Sintering (qv) and pelletizing or balling (qv) are the common processes used today.
15. In Punjab Industries v. Collector of Central Excise, 1987(07)LCX0068 Eq 1989 (043) ELT 0314 (Tribunal), it has been held that no new commodity emerges by conversion of coal dust into coal briquettes by mixing molasses. It has been held in Bharat Forge & Press Industries (P) Ltd. v. Collector of Central Excise, 1990(01)LCX0072 Eq 1990 (045) ELT 0525 (SC), that merely because goods after processing become different commercial commodity or have a distinctive name does not change Excise classification if they continue to be goods of same species and there is no change in physical properties and uses. It can, therefore, be held that marble agglomerated blocks prepared by the petitioner is not a different and distinct commodity from the excavated marble blocks.
16. It has been held in the following decisions of this Court that conversion of marble blocks into marble slabs/tiles by sawing does not involve any manufacturing process :
1. D.B. Civil Writ Petition No. 1654/82 - M/s. Amrutsheele & Anr. v. Union of India and Ors., decided on 22-7-1987.
2. D.B. Civil Writ Petition No. 869/92 - M/s. Jain Marbles and Anr. v. Union of India and Ors-, decided on 26-5-1988;?
3. S.B. Civil Writ Petition No. 133/83 - M/s. Kasat Enterprises and Anr. v. Union of India and Ors., decided on 7-11-1990; and
4. S.B. Civil Writ Petition No. 479/85 - M/s. J.S. Marbles and Anr. v. Union of India and Ors. decided on 19-7-1990.
Similar view has been taken in Collector of Central Excise, Jaipur v. Fine Marble and Minerals Pvt. Ltd, Makrana, 1985 (022) ELT 128, Sangmermer India Pvt. Ltd. v. Collector of Central Excise , 1987(01)LCX0002 Eq 1989 (042) ELT 0725 (Tribunal), Associated Stone Industries (Kota) Ltd. v. Collector of Central Excise, 1992 (060) ELT 639. It is mentioned in Associated Stone Industries (Kota) Ltd. v. Collector of Central Excise, 1992 (060) ELT 639 para 3, that the Revenue filed appeal against the order given in Collector, Central Excise v. Fine Marbles, 1985 (002) ELT 128 and the Honble Supreme Court dismissed it. Similar will be the position for the conversion of agglomerated marble blocks into agglomerated marble slabs/tiles.
17. Great reliance was placed by the learned counsel for the respondents on HSN. HSN has not been followed in respect of Chapter Nos. 25 and 26 of the Act of 1985 and, therefore, it cannot be invoked for the purpose of interpreting the entries of these Chapters. It has been held in Chjay Industries Pvt. Ltd., Bombay v. Union of India and Ors, 1987(12)LCX0013 Eq 1988 (034) ELT 0042 (Guj.), Randip Shipping and Transport Co. Pvt. Ltd. v. Collector of Customs, 1989(03)LCX0029 Eq 1989 (041) ELT 0392 (Bom.) and S.T.P. v. Collector of Central Excise, 1990(12)LCX0043 Eq 1991 (054) ELT 0302 (Tribunal) that HSN has not been adopted completely in respect of all the items. Merely because some change has been made in the HSN method that would not necessarily mean that the classification under the Act can be made according to the change in the HSN.
18. There is no substance in the contention of the learned counsel for the respondents that goods prepared by the petitioner fall under the Entry 68.07, All other articles of Stone, Plaster, Cement, Asbestos, Mica or similar materials not specifically mentioned or given in the first note of this Chapter (No. 68). It is mentioned in Chapter 68 itself that it does not cover the goods of Chapter 25. It is well settled law that a more specific item should be preferred to one less so. The above quoted rule says that any reference to material or substance in a heading shall include reference to combination of that material or substance with other material or substance and that the classification of goods consisting of more than one material shall be as per Rule 3. Rule 3(a) says that in case of composite material the heading which provides more specific description shall be preferred. The petitioners products are described as marble and, therefore, they can only fall under Heading 25.04. It is not in dispute that the petitioners goods contain more than 90% excavated marble. As such it has to be classified under Chapter 25 and not under Chapter 68.
19. It was also argued by the learned counsel for the respondents that the writ petition is not maintainable as the petitioner had alternative remedy by way of filing appeal and secondly disputed questions of facts are involved in the writ petition. Admittedly, the petitioner has challenged the vires of the entries of 2504.21 and 2504.31 of Chapter 25 of the Schedule of the Act of 1985 and has sought declaration that they are ultra vires of the charging Section 3 read with Section 2(f) of the Act of 1944. The respondent Nos. 2 to 4 have no power to decide this question. It has to be decided by this Court in the writ petition. Reference of Beharilal Shyamsundar v. Sales Tax Officer, CUI Circle, Cuttak and Anr., 60 ITR 260 may be made here. In view of the admission of the respondents in their reply to the rejoinder, quoted in para 8 supra, it cannot be said that disputed questions of fact are involved in this writ petition. Moreover, the respondents have not filed any report of expert or any other document in rebuttal of the aforesaid documents of the petitioners. The respondent Nos. 2 and 3 have proceeded in the case with the wrong assumption that manufacturing process is involved in the preparation of agglomerated marble slabs and tiles and had thus wrongly acquired jurisdiction in the matter. It has been held in M/s. Raza Textiles v. Income Tax Officer, Kanpur, AIR 1973 SC 1362, that the question whether the jurisdictional fact has rightly decided or not is a question that is open for examination by the High Court under Article 226 of the Constitution. It is also well settled that the question as to whether certain goods fall within a particular entry or not is a question of law. Reference of A.C.T.O. v. Ramesh Leather Stores, 1982 (49) STC 79, Kota Steel Rolling Ltd. v. C.T.O., Kota , 49 STC 80 may be made here. Even at the stage of show cause notice, party can approach the High Court. Reference of N.B. Sanjana v. E.S.W. Mills, 1978 (002) ELT (J 399) (SC) = AIR 1971 SC 2039, may be made here.
20. In view of the aforesaid findings, it is not necessary to decide that Item No. 2504 of Chapter 25 of the Schedule of the Act of 1985 is ultra vires of Section 3 read with Section 2(f) of the Act of 1944.
21. Accordingly, the writ petition is allowed. It is held that the petitioners product Agglomerated Marble Slabs/Tiles (VILLA NOVA) is not exigible to tax under the Act of 1944. The notices Annexures 5 and 7 are quashed. No order as to costs.
Equivalent 1994 (073) ELT 0536 (Raj.)