2003(04)LCX0052
IN THE CEGAT, WEST ZONAL BENCH, MUMBAI
S/Shri Krishna Kumar, Member (J) and C. Satapathy, Member (T)
CAMLIN LIMITED
Versus
COMMISSIONER OF CENTRAL EXCISE, MUMBAI
Order No. 702/2003-WZB/C-III, dated 17-4-2003 in Appeal No. E/1495/2002-Mum.
CASES CITED
Ajay Industrial Corporation v. Commissioner — 2002(04)LCX0288 Eq 2002 (147) ELT 0786 (Tribunal) — Referred [Para 4]
Atul Glass Industries Ltd. v. Collector — 1986(07)LCX0018 Eq 1986 (025) ELT 0473 (S.C.) — Referred........................... [Para 5]
Bharat Wagon & Engg. v. Commissioner — 2001(01)LCX0096 Eq 2001 (131) ELT 0681 (Tribunal) — Referred.......... [Para 4]
Collector v. Blue Star Ltd. — 1996(04)LCX0042 Eq 1996 (085) ELT 0193 (Tribunal) — Referred......................................... [Para 4]
Collector v. K.W.H. Heliplastics Ltd. — 1998(01)LCX0120 Eq 1998 (097) ELT 0385 (S.C.) — Referred.............................. [Para 4]
Collector v. Nettur Technical Training Foundation — 1997(05)LCX0156 Eq 1997 (093) ELT 0732 (Tribunal) — Referred [Para 4]
Collector v. New Tobacco Co. — 1998(01)LCX0123 Eq 1998 (097) ELT 0388 (S.C.) — Referred........................................... [Para 4]
Collector v. State of Kerala — 1993(03)LCX0015 Eq 1993 (066) ELT 0351 (Ker.) — Referred................................................. [Para 4]
D.C.M. Shriram Industries v. Collector — 1996(03)LCX0049 Eq 1996 (084) ELT 0221 (Tribunal) — Referred................ [Para 4]
D.H. Patkar & Sons v. Commissioner — 2001(02)LCX0087 Eq 2001 (129) ELT 0651 (Tribunal) — Referred................. [Para 4]
Fedders Lloyd Corporation Ltd. v. Commissioner — 2001(05)LCX0215 Eq 2001 (135) ELT 1331 (Tri.-Del.) — Referred [Para 4]
Garware Synthetics Ltd. v. Collector — 1999(08)LCX0282 Eq 2000 (125) ELT 0740 (Tribunal) — Referred.................. [Para 4]
Hind Metals v. Commissioner — 2000(10)LCX0309 Eq 2001 (127) ELT 0822 (Tri.-Del.) — Referred............................... [Para 4]
Indian Farmers Fertilizer Co-operative Ltd. v. Commissioner — 2002(02)LCX0242 Eq 2002 (141) ELT 0791 (Tribunal) — Referred [Para 4]
Karan Packaging (P) Ltd. v. Commissioner — 1999(08)LCX0283 Eq 2000 (125) ELT 0745 (Tribunal) — Referred...... [Para 4]
Luxor Pen Company v. Collector — 1993(11)LCX0056 Eq 1994 (070) ELT 0294 (Tribunal) — Referred........................... [Para 4]
Nestle India Ltd. v. Commissioner — 2001(03)LCX0052 Eq 2001 (132) ELT 0134 (Tri.-Del.) — Referred....................... [Para 4]
Paharpur Cooling Towers Pvt. Ltd. v. Collector — 1995(03)LCX0103 Eq 1995 (077) ELT 0018 (S.C.) — Relied on.... [Paras 4, 7]
Reliance Cellulose Products Ltd. v. Collector — 1997(07)LCX0045 Eq 1997 (093) ELT 0646 (S.C.) — Referred ............. [Para 4]
Satellite Engineering Ltd. v. Assistant Collector — 1991(03)LCX0077 Eq 1992 (058) ELT 0503 (Guj.) — Referred........ [Para 4]
Tapex Corporation v. Collector — 1998(06)LCX0102 Eq 1998 (103) ELT 0580 (Tribunal) — Referred............................ [Para 4]
Tata Iron & Steel Co. Ltd. v. Collector — 1994(12)LCX0069 Eq 1995 (075) ELT 0003 (S.C.) — Referred................................. [Para 4]
Departmental Clarification Cited
C.B.E. & C. Circular No. 609/46/2001-CX, dated 26-12-2001............................................................ [Para 4]
REPRESENTED BY : Shri M.H. Patil, Advocate, for the Appellant.
Shri S.S. Bhagat, SDR, for the Respondent.
[Order per : C. Satapathy, Member (T)]. - Shri M.H. Patil, learned advocate for the appellants states that the main issue involved in this case is classification of crayplas shapeless plastic crayon which according to the appellants should be under sub-heading No. 9609.00 but the department has classified the same under sub-heading No. 3204.19. He states that the appellants manufacture plastic crayon falling under sub-heading 9609.00 which is chargeable to nil rate of duty, in the manufacture of which an in process product known as crayplas shapeless plastic crayon (impugned good) comes into being. According to him, the impugned goods is the mixture of various raw-materials in shapeless and solid form, which only needs to be molded into plastic crayon. The appellants had filed a classification list No. 6/1994-95 on 4-4-1994 in respect of the impugned good claiming classification under sub-heading No. 9609.00 as an in-process material on 31-3-1995. A show cause notice was issued to the appellants suggesting classification of the impugned goods under sub-heading 3202.19 and demanding duty for the period from 1-4-1990 to 28-2-1995 amounting to Rs. 35,17,492.63. This was followed by adjudication order passed by the CCE, Mum. I under his Order-in-Original No. 16/95, dated 24-11-1997 confirming the demand and imposing a penalty of Rs. 10 lacs on the appellants. Another Bench of this Tribunal vide Order No. CII/848/WZB/1999, dated 12-4-1999 held that the impugned goods was marketable but on the issue of classification, the Commissioner’s order was set aside and the matter was remanded for de novo adjudication. There is no report whether the case has been decided de novo.
2. In the mean time, the appellants shifted production of the impugned goods from their Andheri Unit to Tarapur Unit in respect of which initially they had filed a classification declaration in 1998-99 claiming classification of the impugned goods under sub-heading 3204.19 in view of the earlier order of CCE, Mumbai-I but subsequently they filed a revised declaration on 4-3-1999 claiming classification under sub-heading 9609.00 claiming nil rate of duty with AC, Boisar Division. Thereafter, four show cause cum demand notices dated 23-8-1999, 23-12-1999, 23-3-2000 and 4-5-2000 were received by the appellants for the period from March, 1999 to April, 2000 on the ground that the impugned goods were classifiable under sub-heading 3204.19. These were adjudicated by the Deputy Commissioner, Boisar Division vide Order-in-Original No. 156/00, dated 20-11-2002. He dropped all the four show cause notices holding the impugned goods to be classifiable under sub-heading 9609.00. However, the said order-in-original was reviewed by the Commissioner, Mumbai-III which resulted in a departmental appeal to the Commissioner (Appeals) and the same has been decided by him under the impugned order-in-appeal dated 6-2-2002 confirming the demand for Rs. 6,38,382/- and imposing a penalty of Rs. 60,000/-.
3. Shri M.H. Patil, learned advocate challenges the impugned order-in-appeal on the following grounds :-
(1) The impugned goods are nothing but unfinished plastic crayon and therefore, the same are classifiable under sub-heading No.9609.00 as crayon in view of the General Interpretative Rule (GIR) 2(a).
(2) The grounds raised in Revenue’s appeal were not in the show cause notices and hence the appeal was not sustainable and therefore, the impugned order-in-appeal allowing the appeal is not sustainable.
(3) Imposition of penalty of Rs. 60,000/- by the Commissioner (Appeals) without complying with the provisions of Section 35A(3) of the Central Excise Act, 1944 is not sustainable.
(4) In the event of the order-in-appeal being upheld, the appellants should be allowed to take Modvat/Cenvat credit on the inputs used by them in the manufacture of the impugned goods.
4. Shri M.H. Patil, learned advocate also argues that the impugned goods have no other use except for making crayons. He also cites the Apex Court decision in the case of Paharpur Cooling Towers Pvt. Ltd. v. C.C.E., Calcutta - 1995(03)LCX0103 Eq 1995 (077) ELT 0018 (S.C.) to the effect that once goods satisfy the basic characteristics then their shape, etc., would be immaterial. He also places reliance on Board’s Circular No. 609/46/2001-CX, dated 26-12-2001 to the effect that duty should not be charged if no identifiable product comes into existence at intermediate stage of a continuous process. He further states that the Deputy Chief Chemist’s opinion on the issue of classification is in favour of the appellants and the same cannot be brushed aside in view of the decision of the Apex Court in the case of Reliance Cellulose Products Ltd. v. Collector of Central Excise, Hyderabad - 1997(07)LCX0045 Eq 1997 (093) ELT 0646 (S.C.). It is his contention that the decision of the Special Bench in the case of Luxor Pen Company v. Collector of Customs, Calcutta - 1993(11)LCX0056 Eq 1994 (070) ELT 0294 (Tri.) will not apply as the said decision has not considered the possibility of classification under Chapter 96 as it is well settled that precedent is not binding if the same has not considered all arguments. He also refers to the Explanatory Note to HSN under Chapter 96 and Chapter 32 to say that Chapter 96 covers carving and moulding materials and therefore, the impugned goods would fall under Chapter 96 whereas since the same are not coloring matter, the same would not fall under Chapter 32. Finally, he states that if the impugned goods are charged to duty the Government’s intention to exempt crayon from duty would be defeated by charging duty at an earlier stage of production. He cites the following case laws in his support :-
(1) D.C.M. Shriram Industries v. C.C.E., Meerut - 1996(03)LCX0049 Eq 1996 (084) ELT 0221 (Tri.)
(2) C.C.E., Bombay-II v. Blue Star Ltd. - 1996(04)LCX0042 Eq 1996 (085) ELT 0193 (Tri.)
(3) Nestle India Ltd. v. C.C.E., New Delhi - 2001(03)LCX0052 Eq 2001 (132) ELT 0134 (Tri.-Del.)
(4) C.C.E., Madras v. Nettur Technical Training Foundation - 1997(05)LCX0156 Eq 1997 (093) ELT 0732 (Tri.)
(5) Hind Metals v. C.C.E., Chandigarh-II - 2000(10)LCX0309 Eq 2001 (127) ELT 0822 (Tri.-Del.)
(6) Ajay Industrial Corporation v. C.C.E, Meerut - 2002 (147) ELT 786 = 2002 (51) 165 (CEGAT - Del.)
(7) Indian Farmers Fertilizer Co-operative Ltd. v. C.C.E., Vadodara - 2002(02)LCX0242 Eq 2002 (141) ELT 0791 (Tri.) = 2002 (051) RLT 0167 (CEGAT-Del.)
(8) C.C.E., Bombay v. K.W.H. Heliplastics Ltd. - 1998(01)LCX0120 Eq 1998 (097) ELT 0385 (S.C.)
(9) C.C.E. v. New Tobacco Co. - 1998(01)LCX0123 Eq 1998 (097) ELT 0388 (S.C.)
(10) Garware Synthetics Ltd. v. C.C.E., Mumbai - 1999(08)LCX0282 Eq 2000 (125) ELT 0740 (Tri.)
(11) Karan Packaging (P) Ltd. v. C.C.E., Indore - 2000 (125) 745 (Tri.)
(12) Bharat Wagon & Engg. v. C.C.E., Patna - 2001(01)LCX0096 Eq 2001 (131) ELT 0681 (T) = 2001 (044) RLT 0557 (CEGAT - Kol.)
(13) D.H. Patkar & Sons & Anr. v. Commissioner of Customs (G), Mumbai - 2001(02)LCX0087 Eq 2001 (129) ELT 0651 (T) = 2001 (044) RLT 0563 (CEGAT-Mum.)
(14) Fedders Lloyd Corporation Ltd. v. C.C.E., Mumbai-II - 2001(05)LCX0215 Eq 2001 (135) ELT 1331 (Tri.-Del.)
(15) Tapex Corporation v. C.C.E., Belgaum - 1998(06)LCX0102 Eq 1998 (103) ELT 0580 (Tri.)
(16) Tata Iron & Steel Co. Ltd. v. C.C.E. -1994(12)LCX0069 Eq 1995 (075) ELT 0003 (S.C.)
(17) Collector of Customs, Cochin v. State of Kerala - 1993(03)LCX0015 Eq 1993 (066) ELT 0351 (Ker.)
(18) Satellite Engineering Ltd. v. Asstt. C.C.E. - 1991(03)LCX0077 Eq 1992 (058) ELT 0503 (Guj.)
5. Shri S.S. Bhagat, learned S.D.R. appearing for the Revenue states that the appellants have mis-declared the impugned goods as shapeless crayons whereas the same are nothing but plastic crayon compound and are covered under Chapter 32 in view of being a preparation. He relies on the Apex Court decision in the case of Atul Glass Industries Ltd. and Others v. Collector of Central Excise and Others - 1986(07)LCX0018 Eq 1986 (025) ELT 0473 (S.C.) to the effect that how a product is identified by a class or section of people dealing with or using the product is relevant for classification. He submits that the impugned goods are not known as plastic crayon and therefore, the same cannot be classified as plastic crayon under Chapter 96. He also refers to the test report which describes the product to be in big sized lumps and therefore, he states that the same cannot be considered as crayon either by the dealers or by the users.
6. After hearing rival submissions and perusal of case records and case laws cited, we find that sub-heading 3204.19 relates to “pigments and preparation based thereon other then those in unformulated and unstandardized or unprepared form, not ready for use” whereas sub-heading 9609.00 covers “pencils, crayons, pencil leads, pastels, drawing charcoals, writing or drawing chalks.” GIR 2(a) states that any reference in a heading to goods shall be taken to include a reference to those goods incomplete or unfinished provided that incomplete or unfinished goods have essential character of the complete or finished goods. GIR 4 states that goods which cannot be classified in accordance with the above rules (Rules 1, 2, 3) shall be classified under the heading appropriate to the goods to which they are most akin. The adjudicating Deputy Commissioner has reproduced the gist of the test report from the office of the Deputy Chief Chemist as follows :-
“Shapeless Plastic Crayons are in forms of lumps of irregular shapes and colours comprising of waxy, fatty and organic colouring matter bound together with other binding matter, inorganic fillers and additives. It is not possible to give %age of each ingredient used in the product. It has the same composition as that of finished product crayon (article) which are known to find use writing or drawing.
Finished crayplas plastic crayon is manufactured article in the form of sticks of different colours pointed and kept in small containers. This is also composed of waxy, fatty and organic colouring matter bound together with other binding matter, inorganic fillers and additives. It is not possible to give %age of each ingredient used in the product. It has the composition of crayon and is appropriately covered under Chapter sub-heading 9609.00 of Central Excise Tariff Act, 1985.
Shapeless crayon compound, in the form of lumps has got all the essential characteristic such as composition and shade, etc., similar to those of finished product crayon and may find use in manufacturing of crayons.”
7. A perusal of the relevant Tariff entries, the test reports and the provisions under GIR 2(a) and GIR 4 clearly point to appropriate classification of the impugned goods under sub-heading 9609.00 in preference to sub-heading 3204.19. In coming to this conclusion, we have taken note of the fact that the impugned goods have the essential characteristics of finished crayon and also of the Apex Court decision in the case of Paharpur Cooling Towers Pvt. Ltd. v. C.C.E., Calcutta - 1995(03)LCX0103 Eq 1995 (077) ELT 0018 (S.C.) to the effect that once the goods satisfy the basic characteristics then their shape, etc., would be immaterial. GIR 2(a) also, allows classification of incomplete or unfinished goods having the essential characteristics of complete or finished goods under a heading appropriate to such complete or finished goods. In the instant case, the impugned goods only require to be given the shape of crayons before they can be made into finished crayons and as such, they can be considered as incomplete or unfinished goods. In any case, GIR 4 requires goods to be classified under a heading appropriate to the goods to which they are most akin. In the instant case, application of this rule is not required in view of application of GIR 2(a), but we do note that the impugned goods are more akin to crayons under sub-heading 9609.00 than to pigments and preparations based thereon falling under sub-heading 3204.19. The rule of interpretation [GIR 3(c)] also allows classification under a heading lower in the numerical order where a product merits equal classification under more than one heading. Though in our view there is no need to take recourse to this rule in the instant case, we do observe that under these various rules of interpretation, the preference clearly lies in classification of the impugned goods under sub-heading 9609.00 as was originally determined by the Deputy Commissioner. We also note that such classification does not militate against the Government’s clear intention to exempt crayons in public interest from the whole of the excise duty keeping in view its intended users.
8. In view of the foregoing, we set aside the impugned order-in-appeal and restore the order-in-original. The appeal is allowed.
Equivalent 2003 (155) ELT 0138 (Tri. - Mumbai)