2000(08)LCX0089

IN THE CEGAT, EASTERN BENCH, KOLKATA

Smt. Archana Wadhwa, Member (J) and Dr. S.N. Busi, Member (T)

SHALIMAR PAINTS LTD.

Versus

COMMISSIONER OF CENTRAL EXCISE, CALCUTTA

Order No. A-1242/CAL/2000, dated 10-8-2000 in Appeal No. E-5010/93

CASE CITED

S.D. Kemexc Indus. v. Collector — 1994(11)LCX0044 Eq 1995 (075) ELT 0377 (Tribunal) — Followed................. [Para 7]

Advocated By :   Shri S.K. Bagaria, Advocate, for the Appellant.

Shri R.K. Roy, JDR, for the Respondent.

[Order per : Archana Wadhwa, Member (J)]. - The appellant in the instant case is engaged in the manufacture of paints, varnishes, cut-backs and other allied products. The dispute involved in the present appeal relates to the correct classification of Bituminous mixtures commonly called Cut-back Bitumen. Whereas the appellants have claimed the classification of the said product under heading 27.15, the Revenue’s contention is that the same are properly classifiable under heading 32.10.

2. Prior to 28-2-1986 the said products were being classified by the appellants under the old tariff item 14(II)(i). With the change in the tariff w.e.f. 28-2-1986 the appellant filed four classification lists claiming the classification of the Bituminous mixtures under heading 27.15. The said classification lists covered total number of 30 items bearing 30 different product codes of Bituminous mixtures. As per the appellants the said items were being manufactured by them by using only Bitumen/Asphalt/Mineral tar pitch and thinners/solvents. The Revenue drew samples of 9 items out of 30 different items. Out of the said samples relating to 9 items, the test reports have been supplied to the appellants only in respect of 4 items. Admittedly there is no test report relatable to remaining 5 items of which samples were drawn or in respect of the balance items for which no samples were drawn at all.

3. Test reports conducted by the chemical examiner in respect of 4 samples were part of the show cause notice issued on 16.5.88 to the appellants. As per this test report, the samples were black coloured free flowing liquid compound of Bitumen in volatile organic solvent and the same gave tack free transparent adherent coating. During adjudication the appellants requested for re-test and thereafter samples were sent to Central Revenue Control Laboratory (hereinafter referred to as CRCL) on 8-12-1988. The report of CRCL was given on 7-2-1990 which was to the effect that two of the said samples contained Bitumen, Epoxiresin and volatile organic solvents. As the appellants had not used Epoxi resin in the manufacture of the Bituminous mixtures they made a request to the Asstt. Commissioner to supply the detailed analysis report of the constituent as found by CRCL, which request was turned down by the Asstt. Commissioner.

4. Based upon the above, the Asstt. Commissioner vide his impugned order classified all the 30 products under sub-heading no. 3210.90. The appeal filed by the appellant against the above order of the Asstt. Commissioner was dismissed by the Commissioner vide his impugned order-in-appeal dated 20-6-1992. Hence the present appeal before us.

5. Shri S.K. Bagaria, ld. adv. appearing for the appellant has challenged the impugned order on various grounds, which shall be dealt by us in the succeeding paragraphs.

6. Shri R.K. Roy, ld. JDR appearing for the Revenue supports the impugned orders passed by the authorities below.

7. The first grievance of the appellant is that though the classification lists in question covered about 30 products, test reports relatable to only 4 products are available and there is absolutely no material against the appellant in so far as the remaining 26 products are concerned. He submits that presuming though denying that the test reports of CRCL are correct, the same can be made the basis for classifying only those products to which the test report relates. The same cannot be made applicable to the other items for which no samples were either drawn or if samples were drawn, there is no test report. For this proposition he relied upon the Tribunal’s decision in the case of S.D. Kemexc Indus. v. CCE - 1995 (075) ELT 377. In the said decision assessee was manufacturing 22 different types of chemicals. The Department drew samples only from two types of chemicals. It was held that test reports can be made applicable only for the two products for which the samples were drawn and not to the rest of the products. Following the ratio of the above decision we fully agree with the contention of the ld. adv. that the test reports, if at all could be made applicable only to the 4 items in question to which it belonged to. The balance 26 products would be classified under Heading 27.15 on the basis of the declarations made by the appellant which is based upon their technical literature as well as the production records and for which the Revenue has not adduced any evidence to shift the classification to heading 32.10.

8. As regards the 4 products we find that the impugned orders are based upon the second test report of CRCL and the fact that the appellants were classifying their products under Erstwhile Heading 14 prior to 28-2-1986 which belonged to paints and varnishes. The appellants’ contention is that the Erstwhile Tariff Item No. 11(4) did not mention about the Bituminous mixtures and the same were specifically mentioned under Erstwhile Tariff Item No. 14(2)(ii) which specifically covered Bituminous and Coal tar blacks. However, w.e.f. 28-2-1986 the entire tariff structure was changed and the Bituminous Mixtures came to be specifically mentioned under sub-heading on 27.15. For better appreciation of the appellants’ contention we reproduce below the relevant Erstwhile Tariff entries as also the present tariff entries under disputes :

ERSTWHILE TARIFF

Item 11. Coal (excluding lignite) and coke, all sorts, including calcined petroleum coke, asphalt, bitumen and tar-

4. Asphalt and bitumen (including cutback bitumen and asphalt) natural or produced from petroleum or shale

Item 14. Pigments, colours, paints, enamels varnishes, blacks and cellulose lacquers -

(II) Varnishes and blacks

(III) Bituminous and coal tar blacks

CENTRAL EXCISE TARIFF ACT, 1985

27.15  Bituminous mixtures (including emulsions, suspensions and solutions) based on the natural asphalt, on natural bitumen, on petroleum bitumen, on mineral tar or on mineral tar pitch (for example, bituminous mastics, cutbacks)

- Cut-back bitumen or asphalt

32.10  Other paints and varnishes (including emamels, lacquers and distempers), prepared water pigments of a kind used for finishing leather.

9. A comparative reading of the above entries supports the appellants’ contention that the goods were being classified by them under Erstwhile Tariff Item 14 because the same specifically cover the Bitumen and coal tar blacks. Under the new tariff Bituminous mixtures came to be classified under Heading 27.15 and there was no mention of the same under Heading 32.10. We agree with the ld. Counsel that there is no estoppel under the law and their claim for classification under Heading 27.15 cannot be rejected on the ground that under the Erstwhile Tariff the goods were being classified under item relatable to paints, varnishes etc. especially when the entire tariff structure has been changed and the classification under the new Tariff Act is required to be made in the light of interpretative rules, chapter notes and section notes with guidance from explanatory notes in Harmonised commodity description and coding system. In this matter the appellant has referred to a number of decisions. It is seen that there is no dispute about the said legal position that in the matter of classification there cannot be any res judicata and assessee can always claim change in classification of the goods.

10. The appellants’ claim for classifying the goods in question under heading 27.15 which covers Bituminous mixtures (including emulsions suspensions and solutions) based from natural Asphalt, Natural Bitumen, Petroleum Bitumen, mineral tar or mineral tar pitch, is based upon their production records. The appellants are diluting the asphalt, Bitumen etc. in solvents for manufacture of the said goods. There was no allegation whatsoever that the appellant’s products records are not correct or their manufacturing process has not been represented correctly to the Revenue. Even as per the first report of the chemical examiner in respect of 4 items, the same is to the effect that sample consisted of black coloured free flowing liquid compound of Bitumen in solvents. As such even according to the said report no other material was used for the manufacture of the goods in question. As such it makes it clear that the products manufactured by the appellants composed of nothing other than black Bitumen and solvents. The factual position stressed by the appellant to this effect before the Asstt. Commissioner has not been disputed or rebutted by the Revenue. As such we find that the goods in question are more appropriately classifiable under Heading 27.15.

11. Shri Bagaria has also taken us to the definition of cut-back as appearing in various dictionaries. For better appreciation we reproduce the same :-

Glossary of Terms - M/s. Burmah Shell Storage & Distribution Co. of India Ltd.

“Cutback : Bitumen, the viscosity of which has been reduced by volatile diluent”.

Organic Coating Technology volume II - by Henry Fleming Payne.

“Solutions of bitumen in solvent without fillers.”

12. The aforesaid tests of cut-back Bitumen are satisfied in the appellants’ case as they were manufacturing the same by reducing the viscosity of volatile diluents.

13. On the other hand we find that Heading no. 32.10 covers other paints and varnishes and is nowhere near to Bituminous mixtures or cut-back Bitumen. The various definitions of paints and varnishes appearing in ISI and referred to by ld. adv. only go to show that there can be Bituminous paints which are paints based essentially on Bituminous ingredients and there can be Bituminous varnishes based on Bituminous/asphalt ingredients. But such paints and varnishes based on Bituminous ingredients have to be first paints and varnishes which are essentially based on resins.

14. Now the question arises as to whether the test report of CRCL (New Delhi) can be pressed into service for supporting the Revenue’s contention. The goods were first chemically examined by the departmental chemical examiner, Calcutta according to which the samples were black coloured free flowing liquid compound of Bitumen in solvents. Admittedly no other constituent, whatsoever, was found by the examiner in the said samples. The said report in fact favoured the appellants inasmuch as the goods consisting of only Bitumen and solvents and nothing but Bitumen, are classifiable under heading 27.15. As for the report of CRCL is concerned, the appellants have challenged the same on various grounds and have questioned the correctness and authenticity of the same. In their written submissions filed during the course of hearing the appellants have submitted as under in respect of the said report of the CRCL :-

“(i) The said samples were sent to CRCL on 8.12.88 and were registered at CRCL on 9-3-1989, that is, after about 4 months. Nothing is known as to what happened to the samples during the said period of 4 months.

(ii) For a period of about 1 year 3 months since sending of the said samples on 8-12-1988 CRCL remained totally inactive in the matter. The purported test reports of the three samples were given by CRCL in its letter dated 7-2-1990. Nothing is known as to what happened to the samples during the said long period of more than one year and as to why the testing was not conducted during the said long period or as to in which condition the samples were kept during the said period.

(iii) There is every possibility that the samples of the appellant’s said three products were mixed up with some other samples. This is clear from the fact that in the purported reports of CRCL, in respect of two samples it was alleged that the same also composed of epoxy resin. This was simply impossible inasmuch as no epoxy resin was ever used at the appellant’s factory in manufacture of the said goods. In fact, no such allegation about use of any epoxy resin was made either in the show cause notice or in the reports of Departmental Chemical Examiner, Calcutta. On the other hand, the Departmental Chemical Examiner, Calcutta had clearly stated in his reports that the samples only consisted of free flowing liquid compound of bitumen in solvents. Thus, when there was no presence of epoxy resin in the samples at the time of testing thereof by the Departmental Chemical Examiner at Calcutta, the same very samples could never contain epoxy resin when tested after about more than one year and particularly when the appellant never used any epoxy resin in manufacture of the said goods and when this position was also quite clear from its production records.

(iv) With regard to the purported observation of CRCL in respect of two of the said three samples to the effect that the same were other than cut back asphalt, it is submitted that the said purported observation/ allegation/ finding is totally misconceived, baseless and incorrect. Firstly, no such allegation was made even by the Departmental Chemical Examiner, Calcutta. Secondly, absolutely no reason whatsoever has been indicated by CRCL for making the said allegation and the said allegation is totally baseless. Thirdly and even otherwise, CRCL was only required to give the composition of the goods and it was beyond its jurisdiction of authority to comment on the classification thereof. The wholly arbitrary nature of the said purported report given by CRCL would also be evident inter alia from this that CRCL has not even given the composition of the goods as found by it which is primary job of any testing authority.

(v) In support of the aforesaid submissions the appellant relies on the following decisions:”

15. After going through the above points raised by the appellants we fully agree with them. There was no mention of presence of any epoxy resin in the first report of the chemical examiner. The appellants’ production records also do not show that any resin has been used by them. This was also not the case of the Revenue in the show cause notice. The appellants’ request for giving composition of the goods was also turned down. In these circumstances there remains no doubt that such a report given by CRCL after a period of one year and three months of drawing of the sample cannot be given much evidenciary value, especially when the same is contrary to the earlier report and the other entire facts on record. If the said report is taken out of consideration nothing remains on record to tilt the case in favour of the Revenue.

16. The appellants have also referred to the HSN explanatory notes in support of their contention that Bitumen mixtures are properly classifiable under Heading 27.15. The use of the expression “includes” in the explanatory notes under Heading 27.15 only shows that the list is exhaustive and cannot be limited to the very view mentioned therein. Clause (d) below Heading 27.15 in respect of excluded category of items also supports them. The said clause (d) is reproduced below :-

“Bituminous paints and varnishes (heading 32.10), which differ from certain mixtures of this heading by, for example, the greater fineness of the fillers (if used), the possible presence of one or more film producing agents (other than asphalt, bitumen, tar or pitch), the ability to dry on exposure to air in the manner of paints or varnishes and the thinness and hardness of the film formed”

The appellants have submitted that from the aforesaid clause, the following specialities or distinguishing features of Bituminous paints and varnishes falling under Heading 32.10 emerges :-

(i) Bituminous paints and varnishes have got greater fitness of the fillers. In the appellant’s products in question, no fillers were used.

(ii) Bituminous paints and varnishes have got the presence of one or more film producing agents (other than asphalt, bitumen, tar or pitch). In the present case this condition or ingredient is not at all satisfied. The goods in question are made simply by using bitumen, asphalt tar or pitch etc. and diluting the same in solvents. No other film producing agent is used in manufacture of the said goods.

iii) The said bituminous mixtures/cut-backs manufactured at the appellant’s factory have got much longer drying time which is in no manner similar to paints or varnishes which dry much faster.

We agree with the above submission of the ld. adv. that HSN explanatory notes also support their case. As a result and in view of the foregoing we hold that all the 30 items manufactured by the appellants are properly classifiable under Heading 27.15. Accordingly, we set aside the impugned order and allow the appeal.

_______

Equivalent 2001 (134) ELT 0285 (Tri. - Kolkata)