9911796707
TMI Blog2002 (10) TMI 588X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the assessee forthwith. 2. The appellant has a manufacturing unit at Dharavi, Mumbai where it undertakes manufacture and clearance of a single product namely UNSTERILISED ABSORBABLE CATGUT SUTURES. It is an undisputed position that the product as cleared by the appellants is inevitably used in the manufacture of Sterile Surgical Sutures which falls for classification under heading 30.06 of the Central Excise Tariff Act, 1985. The issue in controversy in the present proceedings is appropriate classification of the product namely UNSTERILISED ABSORBABLE CATGUT SUTURES under CETA. The assessee claims classification of the product under Chapter sub-heading 0501.99 of the CETA but the department is claiming the appropriate classification under Chapter sub-heading 4201.90. 3. Right from the start of the production from 1962 onwards the appellant treated the product as not excisable goods up to 1975. From 1-3-1975 when tariff item 68 was introduced under the erstwhile tariff classification the product was liable to duty thereunder. However by virtue of then existing notification 118/75 and other notifications, the product was exempt since the entirety of the product was m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent. The show cause notice, which will be described later, proposed to change the classification of the product namely UNSTERILISED ABSORBABLE CATGUT SUTURES. The show cause notice inter alia reads as follows :- "1. Cutting of Sheeps' Intestines/guts obtained from outside into Ribbons. 2. Chemical Treatment i.e., Washing, Cleaning and Treating with chemical agents. 3. Mechanical Treatment i.e., passing between two stainless steel rollers and scrapping with a blunt knife. 4. Chromocizing i.e. , treating with organic chrome salt if required. 5. Twisting of two or more ribbons into strands. 6. Curing & Drying i.e., curing with Formaldehyde solution and drying overnight in a stretched condition. 7. Preguaging, i.e., mechanically ascertaining the minimum diameter of the rough unfinished strand. 8. Polishing mechanically to a specific diameter to obtain unifor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atory Notes relevant to Chapter sub-headings 5.04, 30.06 and 42.06; clauses 3(a) & (c) of the General Rules of Interpretation to the tariff; Deputy Chief Chemist's test report dated 9-9-1998 and the longer period of limitation was invoked. The assessee replied by its letter dated 2-6-1999 raising various contentions. The main thrust of the appellant's case was that heading 0501 covers products of "animal origin" whereas heading 4201 covers "articles". There is a well recognised distinction between "products" and "articles". The argument of the assessee is that the "product" in question was not an "article" which should be classified under heading 4201. The judgment of the Andhra Pradesh High Court in the case of State of A.P. v. India Rubbers - 1990 (76) STC 254 was relied on. It was submitted that heading 4201 covers complete article which can be put to immediate human use whereas the product in question require further process before it can be used as sterile surgical suture. The reply also sought to make a distinction between the structure and scheme of Chapters 5 and 42 of the tariff entry and it was submitted that they were wholly distinct from that in HSN. In reply it is argu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Credit can be granted to the Appellants (a) on the inputs which have been used in the manufacture of UAS at the Appellants' Dharavi factory and (b) for immediate availment of the Excise duty paid on the UAS [after adjustment if any under ii (a) above] which can be immediately utilized at Aurangabad factory of the Appellants against the clearance of the final product viz. Sterile Surgical Suture-catgut (3005.90) manufactured by the Appellants at their factory at Aurangabad ? (1) The submissions made as to classification (A) On the plain terms of the tariff and its headings/notes the uas are classifiable under heading 0501.00. 1. At the outset it was submitted that in terms of the provisions of Rule 1 of the General Rules of Interpretation to the CETA, classification is required to be determined according to the terms of the headings and any relative Section or Chapter Notes. 2. On the plain terms of the CETA, the UAS satisfies all of the requirements for classification under Chapter sub-heading 05.01 (products of animal origin, not elsewhere specified or included) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : (a) from a description and specification of the Articles covered under Heading 42.01 and sub-heading 4201.10 it is apparent that the term "Articles" under Heading 42.01 covers only finished products of ready use or consumption like saddlery, harness, travel goods, suitcases, vanity cases, executive cases, brief cases and vanity bags. (b) The work "article" in Chapter 42 (i.e.: "articles of leather, .. articles of animal gut") is used in contradistinction to the term "product" in Chapter 5 ("products of animal origin"). Though the term "article" by itself has a broad connotation, the terms "articles" and "products" as used in Chapters 42 and 5 of the CETA are of different and distinct coverage and import. Contextually "articles" in Chapter 42 would cover finished goods/items of ready consumption or use, whereas the term "Products" in Chapter 5 connotes products of animal origin which are not finished goods of ready use - products which require further processing before they could become finished products of ready use. (c) In this context, reference was made to the judgment of the Andhra Pradesh High Court in the case State of A.P. v. India Rubbers [1990 (76) STC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be no sustainable reference to the provisions of Rule 3(c) of General Rules of Interpretation of the Schedule to CETA. 8. In the impugned Order, reference is made to a judgment of this Tribunal in the case of Johnson & Johnson Ltd. v. Collector of Central Excise, Bombay-III [1999 (106) E.L.T. 49] to claim that Non-Sterile Surgical Suture made of Textile Yarn are classifiable under Heading 56.08 as Articles of Yarn not elsewhere specified and therefore by analogy UAS should also be regarded as an article of animal gut. It was submitted that in reference to the context of the word "article" under Chapter 56 such an interpretation is possible in the above case since the Non-Sterile Surgical Suture dealt with in the above case is a finished article, which are sold to the Hospitals and others by the Appellants in a saleable pack (consisting of 6 reels) and the same are meant for immediate use and consumption in the operation theatre and not an intermediate product, like in the case of UAS - which requires further processing before the same is used as aforesaid. In the context of Chapter 42, the word "article" would not cover an intermediate product required for further manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Customs Tariff Act is aligned entry for with the entries in Chapter 5 and Chapter 42 of the HSN. (b) The Chapters 5 & 42 of Schedule to the CETA is however markedly different from the HSN, inasmuch as it had only one Heading in Chapter 5 and one Heading and two sub-headings under Chapter 42. The details as to the divergence between the scheme of heading Chapters 5 and 42 of CETA vis-a-vis the HSN is set out at Ground (c) of the Memo of Appeal (Ref. Pg. 33). (c) The Legislature has consciously chosen to adopt align the Tariff structure of the Customs Tariff with the HSN and simultaneously adopt a distinct and a non-aligned Tariff Structure for the Excise Tariff. The intent of the Legislature to have a distinct Tariff structure in Excise is fortified by the fact that since 1986 for the last fifteen years the Legislature has not sought to align the Excise Tariff for Chapters 5 and 42 with the HSN although it has done so under the Customs Act. (d) It was submitted that it is settled law, inter alia, by the judgments of this Hon'ble Tribunal in CCE, Bombay v. Drop Forgings (India) [1999 (108) E.L.T. 174 (T) = 1998 (28) RLT 130] and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrect. The HSN Explanatory note to heading 5.04 establishes that the product classifiable thereunder (i.e. processed but unsterilized catgut) is used for the manufacture of sterile surgical catgut. The HSN Explanatory Note does not mention that the product classifiable under heading 5.04 is used to make an intermediate product (classifiable under Chapter 42), which is in turn used for the manufacture of sterile surgical catgut classifiable under heading 30.06. 5. In the impugned Order there is a reference to the Explanatory Note to Heading 42.06. This Heading does not specifically mention guts used in the manufacture of Sterile Surgical Suture - Catgut, although it makes a reference to guts which have other uses such as guts used in the manufacture of rackets, of fishing tackle and of machinery parts. 6. The reference in the impugned order to the Explanatory Notes to the Heading 32.06 to the effect that "The heading excludes non-sterile surgical material. These are classified according to their nature, e.g. catgut (heading 42.06), .. ..) This reference is not proper as this part of the Explanatory notes refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the UAS." 7. As against this, learned DR argued as follows :- (a) The appellant M/s. Johnson & Johnson Ltd. manufacture "Unsterilised Absorbable Sutures" catgut (UAS). They claimed classification of this products Ch. Hdg 0501.00. as product of animal origin. Department's stand is that product is appropriately classifiable under Ch. Hdg. 4201.90 as Articles of Animal Gut". (b) Ch. 0501.00 covers products of animal origin (Not elsewhere specified or included) including Guts as per the explanatory notes of Ch. 0501.00 in HSN Guts whether whole or in pieces and whether or not edible, fresh, chilled, frozen, salted in brine, dried or smoked. Thus the limitation of Ch. 0501.00 are clear. Therefore only those products of Gut will fall under Ch. 0501.00 which are either fresh, chilled, frozen, salted in brine, dried or smoked. The manufacturing of UAS involves total 9 process as given in the SCN. It involves so many chemical as well mechanical process to give it a specific uniform diameter and to obtain a smooth strand. Thus it becomes a totally different identifiable article correctly classified under Ch. 4201.90. (c) & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be allowed to take Modvat credit for past clearances. They argued before Hon'ble Bench that in many cases the Hon'ble Tribunal has allowed the benefit of Modvat for past clearances. (j) This is however, not correct, the Modvat scheme is having so many procedural formalities to be followed by the assessee. It involves maintenance of records. The appellant have not done any thing of this sort. They have not even registered themselves with C. Ex. department. (k) There may be cases where Modvat credit is allowed by Hon'ble Tribunal, but in such cases the Hon'ble Tribunal have observed that the respective appellants either have been denied Modvat on some inputs, final products itself or they have been denied benefits of exemption under certain Notifications by the Deptt. The Tribunal in such cases consider that, had the department not denied such benefits which otherwise admissible to them, it would have been availed by the particular assessee. In such cases only Hon'ble Tribunal have considered the Modvat benefits. (l) In the present case, as it could be seen from the brief facts, the department on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther processing was classifiable as a product and not as an article. It was also emphasised the well settled interpretation of the doctrine of Noscitur a Socii. 10. When we take up this point for consideration, we refer to what is mentioned in item 5 various heads, 0501.00 "products of animal origin, not elsewhere specified or included" whereas in item 42 of Chapter 42 "articles of leather; saddlery and harness; travel goods; handbags and similar containers; articles of animal gut (other than silk-worm gut). The argument of the learned Counsel is put in a different way. What is contained in Chapter 42 is of the finished goods like leather, saddlery and harness, travel goods, handbags and similar containers and if we look into the term "ARTICLE OF ANIMAL GUT", it will take within its ambit the shadow or the colour of the previous words i.e. before the words "articles of animal gut" namely "articles of leather, saddlery etc.". Here it is an admitted fact that at the Aurangabad plant they undergo further processing as reflected in the show cause notice and extracted above, whereas the products mentioned in item 42 are already finished goods. Therefore, this will not be applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acrime Hydrochloride; Chloroquine diphosphate; Doxycycline, its salts and esters; Erythromycin, its salts and esters, Mebendazole 3003.12 Anaesthetics Nil 3003.13 Medicinal grade oxygen Nil 3003.14 Medicinal grade hydrogen peroxide Nil 3003.19 Other 15% 3003.20 Medicaments (other than patent or proprietary) other than those which are exclusively used in Ayurvedic, Unani, Siddha, Homoeopathic or Bio-chemic systems. Nil 3003.30 Medicaments, including those used in Ayurvedic, Unani, Siddha, Homoepathic or Bio-chemic systems Nil 30.04 3004.00 Wadding, Gauze, Bandages and similar articles (for example, Dressings, Adhesive Plasters, Poultices), Impregnated or coated with Pharmaceutical substances or put up in forms or packings for Medical, Surgical, Dental or Veterinary purposes 15% 30.05 Pharmaceutical goods, not elsewhere specified. 3005.10 Chemical contraceptives Nil 3005.20 Dental cements and other dental fillings. 15% 3005.90 Other 15% CHAPTER 42 ARTICLES OF LEATHER, SADDLERY AND HARNESS; TRAVEL GOODS. HANDBAGS AND SIMILAR CONTAINERS; ARTICLE OF ANIMAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al blood, liquid or dried); (b) Hides or Skins (including furskins) other than goods of heading No. 05.05 and parings and similar waste of raw hides or skins of heading No. 05.11 (Chapter 41 or 43); (c) Animal textile materials, other than horsehair and horsehair waste (Section XI); or (d) Prepared knots or tufts for broom or brush making (heading No. 96.03) 2. For the purposes of heading No. 05.01, the sorting of hair by length (provided the rot ends and tip ends respectively are not arranged together) shall be deemed not to constitute working. 3. Throughout the Nomenclature, elephant, walrus, narwhal and wild boar tusks, rhinoceros horns and the teeth of all animals are regarded as "ivory". 4. Throughout the Nomenclature, the expression "horsehair" means hair of the manes or tails of equine or bovine animals. 05.01 - HUMAN HAIR, UNWORKED, WHETHER OR NOT WASHED OR SCOURED; WASTE OF HUMAN HAIR. 05.02 - PIGS', H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) Salts and concentrates obtained by evaporating natural mineral waters. 30.01 - GLANDS AND OTHER ORGANS FOR ORGANITHERAPEUTIC USES, DRIED, WHETHER OR NOT POWDERED; EXTRACTS OF GLANDS OR OTHER ORGANS OR OF THEIR SECRETIONS FOR ORGANO-THERAPEUTIC USES; HEPARIN AND ITS SALTS; OTHER HUMAN OR ANIMAL SUBSTANCES PREPARED FOR THERAPEUTIC OR PROPHYLACTIC USES, NOT ELSEWHERE SPECIFIED OR INCLUDED. 30.02 - HUMAN BLOOD; ANIMAL BLOOD PREPARED FOR THERAPEUTIC, PROPHYLACTIC OR DIAGNOSTIC USES; ANTISERA AND OTHER BLOOD FRACTIONS; VACCINES; TOXINS CULTURES OF MICRO-ORGANISMS (EXCLUDING YEASTS) AND SIMILAR PRODUCTS. 30.03 - MEDICAMENTS (EXCLUDING GOODS OF HEADING NO. 30.02, 30.05 OR 30.06) CONSISTING OF TWO OR MORE CONSTITUENTS WHICH HAVE BEEN MIXED TOGETHER FOR THERAPEUTIC OR PROPHYLACTIC USES, NOT PUT UP IN MEASURED DOSES OR IN FORMS OR PACKINGS FOR RETAL SALE. 3003.10 - Containing penicillins or derivatives thereof, with a penicillanic acid structure, or streptomycins or their derivatives. 3003.20 - Containing other antibiotics - Containing hormones or other products of heading No. 29.37 but not containing antibiotics : 3003. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... example, toys, games, sports requisites); or (m) Buttons, press-fasteners, snap-fasteners, press-studs, button moulds or parts of these articles, button blanks, of heading No. 96.06. 42.01 SADDLERY AND HARNESS FOR ANY ANIMAL (INCLUDING TRACES, LEADS, KNEE PADS, MUZZLES, SADDLE CLOTHS, SADDLE BAGS, DOG COATS AND THE LIKE), OF ANY MATERIAL. 42.03 ARTICLES OF APPAREL AND CLOTHING, ACCESSORIES, OF LEATHER OR OF COMPOSITION LEATHER 42.05 OTHER ARTICLES OF LEATHER OR OF COMPOSITION LEATHER 42.06 ARTICLES OF GUT (OTHER THAN SILK WORM GUT), OF GOLDBEATHER'S SKIN, OR BLADDERS OR OF TENDONS." 12. When we go through the corresponding entries in HSN and the CETA they do not identically match with each other. Therefore the argument of the learned Senior Counsel for the assessee regarding application of the HSN to the present case has to be accepted which he has forcefully and elegantly put before us. Therefore, we are not referring to the case laws cited by him for the proposition. In fact this point has been urged by the counsel who appeared before the Commissioner as well. (Please see paragraphs 16 & 17 and the findings of the Commissioner at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticle" requires no great learning either to expound or to understand. A machine is a tangible thing which can both be seen and felt and as such it answers the description of an "article" within the meaning of Section 2(b)(iii) of the Act. The "Shorter Oxford English Dictionary" (Ed. 1964, Vol. 1, p. 102) says that "article" means, inter alia, "a piece of goods or property". Webster's New World Dictionary" defines an "article" as "commodity" and "commodity" as "any useful thing" or "any article of commerce". (See Ed. 1962 pp. 93 and 295). Putting it simply, a "machine" is a "thing" and is therefore an "article". Law may not all be common sense and logic may not be the life of law but common sense is not taboo in law courts. A machine is after all intended to be and is conceived as a useful thing and is therefore an article." 16. For the reasons which we hold that (1) the facts of the case of the Andhra Pradesh High Court are different (2) in reply to that, the judgment of the Supreme Court is well taken. We therefore reject the contention raised by the assessee that the Supreme Court judgment supports the assessee's case. But there is no doubt in our mind that it is an article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an article of animal gut or as a product of animal origin not elsewhere specified or included (heading 05.01) which what the appellant claims. 25. The judgment of the Andhra Pradesh High Court in State of Andhra Pradesh v. India Rubber - 1990 (76) STC 254 does not lend support to the view that an article is a finished product capable of use and commerce, while a product is not. The Court was concerned with the classification of tread rubber, for the purposes of sales tax, either in entry 41 of the First Schedule which read "sheets, cushions, mattresses, pillows, and other articles made of rubber, plastic, foam, synthetic form or other similar material" or entry 101 which read "Rubber products other than those specifically mentioned elsewhere including... (not reproduced)". After referring to the meanings in the dictionary of the words "article" and "product" it found it difficult to distinguish an article from a product and specifically rejected the contention that "article" means finished goods, while "product" may be finished goods or not. It also rejected the contention that item other articles in entry 41 should be construed ejusdem generis with the preceding words. Havi ..... 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