TMI Blog2002 (10) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... the same 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 flls 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 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent. 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 uniform and smooth strands. 9. Inspection Counting of polished strands for visual defects if any such as machine damage spots, appearance defect etc. 10. The UAS obtained after the above mentioned process are then packed loose in polythene bags for on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 argued that the Deputy Chief Chemist report dated 9th September, 1999 was wrong and cross-examination of the Chief Chemist was sought. A personal hearing was held on 25-6-1999 and after hearing, the Commissioner rejected the contention of the assessee. The Commissioner, after referring to various submissions made by the Counsel who appeared before him, held at paragraph 28 thereof that UNSTERILISED ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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) viz. : (a) the product (unsterilized catgut sutures) is admittedly of animal origin; (b) it is not elsewhere specified or included; and (c) it is admittedly not a product which is specified under Chapter Note 1 to Chapter 5 of the CETA as being a product not covered under Chapter 5. 3. By the impugned Order, the Commissioner has held that the UAS cannot be classified under 0501.00 as : (a) the allegedly complex nature of the processes adopted by the Appellants took the UAS beyond the purview/ambit of 05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsumption 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 254 (AP-DB)] where the tariff utilised both the terms products and articles . The High Court held that there may not generally be a definite demarcation between the words product and article , inasmuch as while article meant finished goods. The Hon ble High Court however held that in the context of the entry which used both the terms, the item in that case, which was not a finished item of immediate use and required further processing, was classifiable as a product and not as an article . (d) By application of the well-settled interpretation of the doctrine of Noscitur a Socii, the general words articles of leather / articles of animal gut in Chapter 42 and the words other articles in heading 4201.90 would take colour from the common identifiable characteristic of the various other ite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 manufacture but would cover only articles of immediate use and consumption. Therefore, the reference of the Hon ble Tribunal s decision in Johnson Johnson v. Collector of Central Excise (supra) in the impugned Order is misplaced and misdirected. 9. During the hearing, reference was made to the judgment in the case of Zaffar Mohammad v. State of W.B. [AIR 1976 SC 171] as regards the interpretation of the term article in that case. The judgment deals with the issue of interpretation in the context of The Drugs and Magic Remedies (Objectionable Advertisements) Act. The issue under consideration in this case was whether the new machines of science and electric treatment , in respect of which an advertisement was published, is covered under the term article used in the definition of the term Drug under Section 2 (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one 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 Binny Ltd. v. CCE, Madras [1994 (71) E.L.T. 846] that where the scheme of taxing entries under the CETA are distinct from/not fully aligned with the HSN, the Explanatory Notes to the HSN cannot be referred to and relied upon to determine classification under CETA. The Commissioner has given no valid reason for not following the said judgments. (e) The reference in the impugned Order to the judgment in CCE v. Woodcraft Products Ltd. [1995 (77) E.L.T. 23] and CCE v. Bakelite Hylem Ltd. [1997 (91) E.L.T. 13] for justifying reference to the HSN Explanatory Notes, is not appropriate, as those cases do not deal the situation where the entries in the CETA were not aligned with the entries in the HSN. (f) In a situation such as in the present case where the entries in the CETA are clearly not aligned with the entries in the HSN, it is the judgments in the case of CCE, Bombay v. Drop Forgings (India) [1999 (108) E.L.T. 174 (T) = 1998 (28) RLT 130] and Binny Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anatory notes refers only to alternative classifications of non-Sterile Surgical Suture material and heading 42.06 is by way of the classification only under heading 42.06. 7. It was submitted that under the HSN the only specific reference to guts used in the manufacture of Sterile Surgical Suture is under Heading 05.04 and in terms of this specification under the HSN Explanatory Notes Heading 05.04 would apply in preference to any other heading. (II) THE ALTERNATIVE CLAIM FOR MODVAT 1. In the alternative to the arguments as to classification it is submitted that if it was held that the UAS is to be classified under Heading 42.01 and therefore subjected to a payment of duty, as per settled law, the Appellant is entitled to (a) abatement on account of eligible Modvat on inputs which have been used in manufacturing the quantities of UAS in question at the Appellants Dharavi factory and (b) Modvat credit on the balance of the Excise duty paid after the adjustment mentioned in 1(a) above, which should become immediately available to the Appellants at their manufacturing unit at Aurangabad, where the UAS is, after processing by a job worker, used in the manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtained from sheep undergoes many manufacturing process. The only dispute therefore remains that according to them that the product came out after process of animal Gut is not a finish product and therefore can t be termed as an article. To this contention they have taken support of Andhra Pradesh High Court decision in one of the sale tax case wherein it is held that product is different from article . (e) This contention of the appellant is however not correct as Hon ble Supreme Court in the case of Zaffar Mohammed v. State of West Bengal (AIR 1976 S.C. 171) held that Article means a piece of goods or property or a commodity, as any useful thing or any article of commerce. (f) Thus it can be seen that article is any useful thing which can be bought and sold in the market. During the course of his argument the learned Counsel of the appellant did not dispute regarding marketability of the said article by them. It can be bought and sold. The instances to this effect have been incorporated in the show cause and also in Adjudication order (Para 7 of 010). (g) Further the argument of learned Counsel for the appellant that an article should be a finished good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t credit at their Aurangabad factory. (n) This claim of the appellant is baseless, and not supported by any statutory provision. There is no provision in Modvat Rules to allow such type of credit. There is a provision of adjustment of credit under Rule 57E as per which, the Modvat credit, already availed against the specified duty paying documents varied subsequently due to demand or by refund, as the case may be, can be adjusted as per this Rule. Whereas in the present case, duty was not paid originally and credit was not taken by the Aurangabad unit or any other person. Therefore, question of allowing adjustment of credit under this Rule does not at all arise. 8. We have considered the rival submissions. From the show cause notice as extracted above, it is to be seen that the product undergoes certain changes as mentioned above from the raw material stage to finished stage. As far as the manufacturing process is concerned, we have extracted above the relevant portion from the show cause. 9. The approach of the department is that exclusion note to Chapter 0504 in the Explanatory Note of HSN excludes artificial guts. Therefore it does not fall under Chapter 5. The argumen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Chapter 42. CHAPTER 5 PRODUCTS OF ANIMAL ORIGIN, NOT ELSEWHERE SPECIFIED OR INCLUDED Heading No. Sub-heading No. Description of goods Rate of duty (1) (2) (3) (4) 05.01 0501.00 Products of animal origin, not elsewhere specified or included. Nil Chapter 30 Heading No. Sub-heading No. Description of goods Rate of duty (1) (2) (3) (4) 30.01 3001.00 Glands or other organs, dried, whether or not powdered; extracts of glands or of their secretions for organo-therapeutic uses; heparin and its salt; other human or animal substances prepared for therapeutic or prophylactic uses, not else where specified or included. 12% 30.02 3002.00 Antisera; Vaccines, Toxins, Cultures of micro-organisms (including ferments but excluding yeasts) and similar products. Nil 30.03 Medicaments (including veterinary medicaments) -Patent or proprietary medicaments, other than those medicaments which are exclusively Ayurvedic, Unani, Sid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rile surgical catgut or similar sterile suture materials (Chapter 30); (b) Articles of apparel or clothing accessories (except gloves) lined with furskin or artificial fur or to which furskin or artificial fur is attached on the outside except as mere trimming (Chapter 43); (c) Made-up articles no netting (Chapter 56); (d) Articles of Chapter 64 ; (e) Headgear or parts thereof of Chapter 65; (f) Whips, riding-crops or other articles (Chapter 66); (g) Cuff-links, bracelets or other imitation jewellery (Chapter 71); (h) Fittings or trimmings for harness, such as stirrups bits, horse brasses and buckles, separately presented (generally Section XV); (i) Strings, skins for drums or the like, or other parts of musical instruments (Chapter 92); (j) Articles of Chapter 94 (for example, furniture, lamps and lighting fittings); (k) Articles of Chapter 95 (for example, toys, games, sports requisites); or (l) Buttons, press-fasteners, snap-fasteners, press-studs, buttons moulds or other parts of these goods, button blanks of Chapter 96. (1) (2) (3) (4) 42.01 Articles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TE OF THESE PRODUCTS. 05.07 - IVORY, TORTOISE-SHELL, WHALEBONE AND WHALEBONE HAIR, HORNS, ANTLERS, HOOVES, NAILS, CLAWS AND BEAKS, UNWORKED OR SIMPLY PREPARED BUT NOT CUT TO SHAPE; POWDER AND WASTE OF THESE PRODUCTS. 05.08 - CORAL AND SIMILAR MATERIALS, UNWORKED OR SIMPLY PREPARED BUT NOT OTHERWISE WORKED; SHELLS OR MOLLUSCS, CRUSTACEANS OR ECHINODERMS AND CUTTLE-BONE, UNWORKED OR SIMPLY PREPARED BUT NOT CUT TO SHAPE, POWDER AND WASTE THEREOF. 05.09 - NATURAL SPONGES OF ANIMAL ORIGIN. 05.10 - AMBERGRIS, CASTOREUM, CIVET AND MUSK; CANTHARIDES; BILE, WHETHER OR NOT DRIED; GLANDS AND OTHER ANIMAL PRODUCTS USED IN THE PREPARATION OF PHARMACEUTICAL PRODUCTS, FRESH, CHILLED, FROZEN OR OTHERWISE PROVISIONALLY PRESERVED. 05.11 - ANIMAL PRODUCTS NOT ELSEWHERE SPECIFIED OR INCLUDED; DEAD ANIMALS OF CHAPTER 1 OR 3, UNFIT FOR HUMAN CONSUMPTION. For the purposes of heading Nos. 30.03 and 30.04 and of Note 3 (d) to this Chapter, the following are to be treated. (a) As unmixed products : (1) Unmixed products dissolved in water (2) All goods of Chapter 28 or 29; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S SPECIFIED IN NOTE 3 TO THIS CHAPTER. CHAPTER 42 ARTICLES OF LEATHER; SADDLERY AND HARNESS; TRAVEL GOODS, HANDBAGS AND SIMILAR CONTAINERS; ARTICLES OF ANIMAL GUT (OTHER THAN SILK WORM GUT) CHAPTER NOTES : 1. This chapter does not cover : (a) Sterile surgical catgut or similar sterile materials (heading No. 30.06); (b) Articles of apparel or clothing accessories (except gloves), lined with furskin or artificial fur or to which furskin or artificial fur is attached on the outside except as mere trimming (heading No. 43.03 or 43.04); (c) Made-up articles of netting (heading No. 56.08); (d) Articles of Chapter 64; (e) Headgear or parts thereof of Chapter 65; (f) Whips, riding-crops or other articles of heading No. 66.02; (g) Cuff-links, bracelets or other imitation jewellery (heading No. 71.17); (h) Fittings or trimmings for harness, such as stirrups, bits, horse brasses and buckles, separately presented (generally Section XV); (ij) Strings, skins for drums or the like, or other parts of musical instruments (heading No. 92.90); (k) Articles of Chapter 94 (for example, furniture, lamps and lig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one keeps clothes, toiletry etc. for travel. But the words articles of animal gut which is a specific entry here, we therefore cannot agree with the submissions made by the learned Senior Counsel on behalf of the appellant that we have to derive support from the Andhra Pradesh High Court judgment. 14. As far as the Andhra Pradesh High Court s judgment is concerned, that was a case which was decided under Entry 101(ii) of the First Schedule to the Andhra Pradesh General Sales Tax Act. The question is whether it will fall under Entry 101 dealing with Rubber Products or Entry 41 reading seat cushion etc. The question considered was whether it was a product or an article and also discusses the ejusdem generis principle. We do not think that the fact of a semi-colon has been considered in that case. Here the words articles of animal gut are preceded by semi-colon. This type of fact is absent in that case. Hence we cannot follow that case. 15. But however with great alacrity, learned DR brought the judgment of the Supreme Court in Zaffar Mohammad v. The State of West Bengal AIR 1976 S.C. 171 wherein construing the provisions of the Drugs and Magic Remedies (Objectionable Advertisem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) E.L.T. 1018. 19. The matter therefore will have to be remanded to the Commissioner for him to satisfy that the inputs that the appellant received were in fact are duty paid and that they were in fact used in the manufacture of the finished product. 20. There are no precedents for classification of these products. As far as marketability is concerned, our attention has not made to any specific grounds in the grounds of appeal before us. If the product is not marketable, how the same could be sold. (Please refer to invoices in SCN at page 68 of the paper book). 21. We are indeed indebted to the eloquent and elegant argument put forth by the learned Senior Counsel on behalf of the appellant and also the learned DR on behalf of the department. 22. Appeal stands disposed of upholding the classification made by the Commissioner and remanding the matter with regard to the question of Modvat claim. 23. [Assent per : Gowri Shankar, Member (T)]. - While agreeing with the conclusion in the order of the Member (Judicial), that the product should be classifiable in heading 42.01 as an article of animal gut, I would like to say the following. 24. We are concerned herewith whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the term article of animal gut should be read ejusdem generis with the words preceding it is again not acceptable. We do not find anything in the words of the heading which support this view. The heading in fact is an assemblage of various goods, which are common only to the extent that they are often made of leather. It is well to keep in mind that this heading, as the rest of the tariff of which the heading is formed derived from the heading of the Harmonised Commodity Description and Coding System in the Customs Co-operation Council. Chapter 42 of that system has a separate heading for articles of leather, saddlery and harness for any animal, articles of apparel and clothing accessories, of leather or of composition of leather and articles of gut. A comparison of the headings in that Code and in the tariff leads to the clear conclusion that heading 42 of the tariff seeks to keep in one heading the various products and articles classified in separate headings in Chapter 42. The Explanatory Notes to Chapter 42 of HSN say This Chapter principally covers articles of leather or composition of leather; however headings 42.01, 42.02 also include certain articles characteristically ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
