TMI Blog1983 (5) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... as under : P.V.C. Fire Resistant Anti-Static Solid Woven Coal Conveyor Belting/P.V.C. Food Conveyor Belting. 3. While submitting the AL4, the Company claimed that its products fell under Tariff Item 68 of the C.E.T. 4. On 24th October 1978, the Company was required to explain the manufacturing process and raw material to be used. Necessarily, reply was filed on 19th November 1978. 5. A show cause notice was issued on 12th of January 1979 calling upon the Company as to why its product should not be licensed under Tariff Item No. 19. The Company resisted the show cause notice and made several-fold submissions which are summarised as below :- (i) That its products were not unknown to tariff entries ; (ii) The mode of manufacture or the ingredients thereof could not be solely determinative of the exigibility to levy of duty on a given product ; (iii) The contents of a tariff entry must be understood in its trade or market sense ; (iv) The Explanation II to Tariff Item No. 19 on which reliance was sought to be placed by the Excise Authorities to reject the Company s classification had no relevance or application as it related to products which could be termed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted before him. In addition, he recorded the Company s averment that in the Collectorate of Central Excise, Calcutta, the identical product manufactured by its sister concern, M/s Multiple Fabrics Private Limited was being excised under Tariff Item No. 68. 11. We like to reproduce Para 2 of the Appellate Collector s Order to show that though he opined that the Company was not certain about its classification he does not project as to from where he got that impression :- ORDER x x x x x Para 2 : I have carefully gone through the case records, submissions contained in the appeal memorandum and those made at the time of personal hearing. At the outset, I must state that according to the appellants they are not certain whether the product is classifiable under Item No. 16A or whether the product is classifiable under 68. Tariff Item No. 19 under which the Superintendent has classified the product is for cotton fabrics including those impregnated, coated or laminated with preparations of artificial plastic materials. According to the tariff description of the entry, this item would include the all varieties of fabrics manufactured either wholly or par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the first place, to hold a fabric as a cotton fabric, predominance in weight is the primary test. To begin with, the first essential is that 40 per cent of the fabric should contain cotton by weight and 50 per cent or more by weight of non-cellulosic fibres or yarn or both in the end-product. The primary requirement under Tariff Item No. 19 is not waived or diluted under any sub-heads. To bring an item under sub-head III, it is necessary that goods must come within the ambit of cotton fabrics as defined in the main Head. 13. It must be clarified here that it is not the Revenue s case that the duty was sought to be levied and levied on base fabrics. It is an accepted position that the end product, which are conveyor beltings, were valued and subjected to excise under Tariff Item No. 19 III which, in view of definition of cotton fabrics, seems highly imaginative attitude. 14. From Para 2 of the Appellate Collector s Order reproduced above, we notice that the burden or weight of his decision has been the Supreme Court Judgment in the case of Porritts Spencers cited as AIR 1979 SC 300. Apparently, his decision resulted from the confusion of his reading in the said Judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlance. The question which arose in Ramavatar s case (supra) was whether betel leaves are vegetables and this Court held that they are not included within that term, This Court quoted with approval the following passage from the judgment of the High Court of Madhya Pradesh in Madhya Pradesh Pan Merchants Association, Santra Market, Nagpur v. State of Madhya Pradesh - 7 STC 99 at p. 102 : (AIR 1956 Nag 54 at p. 55) : In our opinion, the word vegetables cannot be given the comprehensive meaning the term bears in natural history and has not been given that meaning in taxing statutes before. The term vegetables is to be understood as commonly understood denoting those classes of vegetable matter which are grown in kitchen gardens and are used for the table and observed that the word `vegetables in taxing statutes is to be understood as in common parlance i.e. denoting class of vegetables which are grown in a kitchen garden or in a farm and are used for the table . This meaning of the word `vegetables was reiterated in M/s Motipur Jamindary case where sugarcane was held not to fall within the definition of the word `vegetables and the same meaning was given to the word `ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial is woven into a fabric, what comes into being is a `textile and it is known as such. It may be cotton textile, silk textile, woollen textile, rayon textile, nylon textile or any other kind of textile. The method of weaving adopted may be the warp and woof pattern as is generally the case in most of the textiles, or it may be any other process or technique. There is such phenomenal advance in science and technology, so wondrous is the variety of fabrics manufactured from materials hitherto unknown or unthought of and so many are the new techniques invented for making fabric out of yarn that it would be most unwise to confine the weaving process to the warp and woof pattern. Whatever be the mode of weaving employed, woven fabric would be `textiles . What is necessary is no more than weaving of yarn and weaving would mean binding or putting together by some process so as to form a fabric. Moreover a textile need not be of any particular size or strength or weight. It may be in small pieces or in big rolls; it may be weak or strong, light or heavy, bleached or dyed, according to the requirement of the purchaser. The use to which it may be put is also immaterial and does not bear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LTD., Sd/- P.K. Rajagopal Finance Manager. NOTE TO OUR LETTER DATED 15-3-1982 Process of Manufacture : Twisted cotton yarn purchased from various manufacturers who pay excise duty under Tariff Entry 18A on such yarn, is dipped and soaked in liquid pvc mix. Such twisted yarn dipped, soaked and saturated with liquid pvc mix or solution is thereafter made into carcass, which is straightaway fed into gelling plant. In the gelling plant the pvc soaked and saturated carcass is gelled. Thereafter the gelled pvc carcass is straightaway fed into a coating plant where again further coating of pvc liquid takes place. At our plant, unlike Dunlop India s case, carcass is not bought from open market. The manufacturing of the carcass with pvc soaked cotton yarn takes place at the first stage of manufacturing of our product. Component of cotton to the weight and cost of pvc conveyor belting. In one square meter of pvc conveyor belting (Approxi. weight 10 kg.), the components of pvc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nning lengths to the various users e.g. coal mines and that their conveyor beltings are manufactured to ISS as well as NCB specification by using special type of material so as to make the product fire-proof and fire-resistant. It was also pointed out at the time of personal hearing that the product contained only 18-19% of cotton in the total weight of the product. The cost component of cotton in the p.v.c. conveyor belting was only in the neighbourhood of 12%. The petitioners commence manufacture of p.v.c. conveyor belting in 1965-66 and for a number of years they cleared their goods when their factory was working under the system of physical control of the Central Excise authorities. Initially, their goods were not charged to duty by the lower authorities by treating the impugned goods as articles of plastic and given them the benefit of exemption Notification No. 68/71. However, sometime in 1975, a show cause notice was issued to the petitioners asking them why their goods should not be classified as cotton fabrics under Item 19 (iii) which was inserted in the Central Excise Tariff in 1969 and despite the petitioners protestations that the goods cannot be considered as cotton ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oper reasonings. In any case, after the Government of India s Judgment dated 28th of October 1980 in Dunlop s case, portion of which has been reproduced in Para 10 above, we find no justifiable reasons for the reluctance of the Government in not accepting the Company s revision petition. As a fact, we find that though the revision application was received on 10th April 1981 the same Additional Secretary to the Government of India who had passed judgment in Dunlop s case sitting with a Joint Secretary, made a note reading as follows : Ratio of decision taken in Dunlop India s Cal. case could be applied and the R.A. allowed. Sd/- Additional Secretary 21st April 1981 22. The above note is on the covering letter of the revision application and we have satisfied ourselves regarding its authenticity. 23. Along with the Writ Petition, a copy of which has been given to us, and in which the Company stated the history and the facts supported by an affidavit, the appellant filed among othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted July 16, 1982 has been submitted before us. 26. Since the Government did not file any reply, a Division Bench of the Hon ble High Court consisting of Hon ble Chief Justice and Hon ble Justice B.N. Kirpal passed fresh orders on 14th September 1982 as to why directions had not been complied with, time given was upto 13th of October 1982. There being no reply from the Government even upto 13th of October 1982, their Lordships passed order on 13th October 1982 which we would like to reproduce below :- Copy of Order dated 13-10-1982 Mr. Wadhwa has filed an affidavit sworn by Mr. Mehta, Ministry of Revenue. On reading the affidavit it is found that Mr. Mehta cannot be personally held responsible for not disposing of the revision petition filed to the Central Government before 14-9-1982. We must, however, observe that it is regretable that directions of the courts can be nullified on account of gross inefficiency and red-tapism. It seems not only the Department of Revenue was at fault but the litigation section of the Ministry of Law is also to share the blame to a considerable extent. We expect appropriate action to be taken by departmental authorities against the officers/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28. The averment in the writ petition runs into 18 pages and the grounds and relief sought is on another 10 pages. 29. Shri Banerjee, Advocate for the appellants, framed four propositions on the given set of facts :- (a) That PVC Coal Conveyor Belting is not and could not be termed as fabric, much less cotton fabric. (b) Assuming that it is so, and which was clearly stated as an alternative contention, opening part of Tariff Item 19 (Cotton predominance) should be the test. (c) The word belting or the word belt is not unknown to the public and the Govt. as these words find place in Tariff Item 16A and therefore the omission of these words in Tariff Item 19 makes all the difference. (d) Explanation II to Entry 19 would apply where two or more fibres named therein would go to the manufacture of the end-product and the Explanation could not be read in isolation of the main Item 19. He referred to several authorities for his submission that what is known to the market should be the test to classify a product without involving technical niceties. 30. The learned Advocate then referred to the Supreme Court Judgment in the case of Union of India and Others v. G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission and the Judgment at greater length but to us the notification though covering conveyor belting of a specification falling under sub-item (iii) of Item 19 has no relevance to the Company s product. So, we shall be dealing with this aspect a little later. 33. Before we go further, we like to refer to Delhi High Court Judgment on which reliance was sought to be placed by the Revenue Representative. The Judgment was in the case of Porritts Spencers (Asia) Limited v. Union of India and another, cited as 1980 E.L.T. 679. In our opinion, the principle laid down in the said Judgment was the same as in the Supreme Court Judgment in Porritts Spencers case and product for classification was also the same. Therefore, Revenue cannot draw much strength from this. 34. Next, Shri Banerjee submitted that the crux of the question was what is the manufactured item, intermediate product not being the issue in the present case. He argued that if cotton is not said to be predominant as it is only 21 per cent, and there being no controversion from the Revenue on this score, the question of bringing the Company s product under Tariff Item 19 must be answered against the Revenue. 35. Em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cited 1973 STC 31 page 115. Shri Banerjee, Advocate, however intervening at this stage submitted that in the cited case though base material was fabric, but in spite of that it was held that rubber belting would come under Tariff Item No. 16A and therefore on the basis of the case cited by the Revenue itself the assessee s Appeal should be allowed. 40. Shri Tayal next contended that I.S. Specification may not necessarily conform to Excise and Tariff Items. In principle, even if we have to accept such arguments, but in the present case reliance was sought to be placed by the Company s Advocate on I.S. Specification to say that when Felt was considered as fabric, and there being no mention anywhere that conveyor belting could be considered as fabric, the onus was on the Revenue to prove the classification sought to be imposed under Tariff Item No. 19. 41. Shri Tayal also submitted that review was sought in Dunlop cases for the subsequent years, but no decision has been taken or could be taken. We have already observed above that the case is not being decided simply by referring to the Dunlop s Judgment. 42. Shri Tayal next drew our attention to the definition of word `belt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Excises Act. It has been further held that even if it is to be assumed that canvass is comprehended within the meaning of `cotton fabrics , the process of super-imposition of rubber brings about such a basic change in its character, nature and form that it loses its identity and is converted into an altogether different commercial commodity, which cannot be said to fall within the meaning and expression of cotton fabrics . Like in the Gujarat case when cotton carcass in the appellant s case consisted of only 19% of the end-product-which was conveyor belting used in the mining operation, to accept the Revenue s contention that the end-product could be brought under the Tariff Item 19 as cotton fabrics is not considered worth taking serious notice of. We should not be understood to say that conveyor belting of all types would be outside the purview of Item No. 19, because in a given case if predominance of cotton fabrics in conveyor belting is there, it may come under the Tariff Item No. 19 because of the Explanation while in the present case it would be hypothetical situation because predominance of fabrics in the Company s products which are excised under T.I. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority cited at the Bar or argument advanced, it is because the same has not been considered relevant to the issue before us or not worth taking any notice of. 52. Allowing the appeal, we direct the concerned Revenue authorities whether it be the Assistant Collector or the Collector of Central Excise to give effect to this Order and allow consequential relief within two months of the receipt of this Order. 53. [Dissenting Order per : Shri G. Sankaran]. - I have carefully perused the judgment of my learned colleagues on the Bench. For the reasons spelt out hereinafter I have to differ from their conclusion. 54. It is necessary, for a proper understanding of the matter, to consider the process of manufacture of PVC conveyor belting, which is the subject matter of the present dispute. The process, as described by the appellants before the Revisional Authorities has been set out in para 10 of my colleagues order. The following paras are extracted from the Writ Petition filed before the Hon ble Delhi High Court by the appellants :- There are three stages of manufacture giving rise to the end-product, pvc conveyor belting. At the first stage of manufacture, the industrial ya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith preparations of cellulose derivatives or of other plastic materials. (iii) Sub-item III, namely, cotton fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials is leviable with basic excise duty at a rate which is expressed as the duty for the time being leviable on the base fabrics, if not already paid, plus 30% ad. val . 56. Against the background outlined in the preceding para, we may now examine the process of manufacture. As explained by the appellants in their averment in the Writ Petition before the Delhi High Court, industrial yarn (both cotton and nylon) is twisted and beamed and the same is conveyed to the carcass making machine where in such industrial yarn is dipped and soaked in liquid pvc mix and then converted into carcass. In response to a query from the Bench, the learned Counsel for the appellants submitted that there was a process of weaving involved in the preparation or production of the carcass. However, the Counsel contended that the resultant carcass could not be termed as cotton fabric . Now, Item No. 19 CET takes in its ambit all varieties of cotton fabrics as is clear from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... density with which the weft thread is woven does not detract from the conclusion that what we have is a textile fabric. We are concerned with the product manufactured and sold by the appellant. It is wholly immaterial that once tyre cord fabric has, in the hands of the tyre manufacturer, undergone the process of rubberising and is embedded in the tyre body the significance of the weft thread is greatly reduced. It may also be that in the more modern process of manufacturing tyres what is used is cabled rayon with hawser twists with the cords assembled in parallel order and rubberised without the intermediate process of weaving on a loom. The material on the record, however, indicates that the product manufactured by the appellant does not fall in that category. It is a woven fabric in which the intermediate process of weaving the weft thread across the warp cord is an integral stage of manufacture. When the purchaser buys the product, it is the entire integrated woven fabric which he buys, it is not merely the tyre cord by itself. If tyre cord was all that he desired, he would purchase that commodity, which is readily available, and not tyre cord fabric. We may also point out that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ployed for `the satisfaction of a domestic need. Nevertheless, as an integral and vital constituent of an automobile tyre it is intimately involved in the diurnal activity of human life. 57. It has been strenuously urged by the learned Counsel for the appellants that the end-product, namely, pvc conveyor belting should alone be looked at for the purpose of resolving the present dispute and not the so-called carcass which admittedly, is a woven product. (The Counsel had fairly stated that the carcass was presently being subjected to duty as fabric, but the said assessment was being contested). This argument is clearly untenable if we look at the rate of duty shown against sub-item III of Item No. 19 CET which, as noted earlier, is expressed as a duty for the time being leviable on the base fabric if not already paid, plus 30% ad. val. Therefore, even if the base fabric (carcass in this case) had not been subjected to duty, while assessing the end-product (assuming that it falls under sub-item III of Item No. 19), the duty to be levied can be determined only after ascertaining the duty leviable on the base fabric. And, for this purpose, it is essential to determine the classific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustrial fabrics which deals with a large and important group of textiles which includes woven and non-woven cloths vital to many industries, ranging from primitive agriculture to jet transportation . The authorities referred to in the Supreme Court judgement also clearly set out that the term fabric could cover all textiles, no matter how constructed, how manufactured or the nature of the material from which made. In my view, the ratio laid down by the Supreme Court in the DCM case is squarely applicable to the facts of the present case. There is thus little doubt that the product carcass comprised, in so far the fibre or yarn constituent goes, of only cotton, would come within the ambit of the expression cotton fabrics as defined in Item No. 19 CET. The contention of the appellants that since the cotton content of the end-product namely, pvc conveyor belting is only of the order of 21%, it cannot come within the scope of Item No. 19 is clearly untenable because, as I have stated earlier, the classification of the base fabric has to be first determined and in this determination, it is the composition of the base fabric that is relevant and not the composition of the end-produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commerce as evidenced by the New Encyclopaedia of Textiles published by the Editors of American Fabrics and Fashions Magazine to which reference was made by the Departmental Representative, just as tyre cord fabric used for the production of tyres, which was the disputed product in the DCM case, is also known and recognised by trade, commerce and industry as an industrial fabric. It should also be noted that the Glossory of Textile Terms published by the Indian Standards Institution (IS : 2364-1979), though it does not in terms show belting in the alphabetical arrangement of terms, contains 2 terms, namely, impregnated fabrics and industrial fabrics and assigns meanings to them as follows : Impregnated Fabrics Fabrics whose interstices in the yearn have been filled with chemical compound so as to cover the entire surface. Commonly used for leather bags, garments, insulation tapes, etc. Industrial Fabrics Fabrics made from man-made or natural yarn which are commonly used on machines such as belting duck, filter cloth, sizing flannel, etc. It is clear that the subject pvc conveyor belting would fall within the ambit of impregnated fabrics, though the use in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 does not speak out the reasoning or logic leading to the view expressed therein. This is apart from the fact that the said Tariff Advice is not binding on this Tribunal as fairly stated by the learned Counsel for the appellants. 60. In the light of the foregoing discussions, Notification No. 273/77-C.E., dated 11-8-1977, which exempts pvc coated or impregnated conveyor belting, falling under sub-item III of Item No. 19, from so much of duty of excise leviable thereon as is in excess of 24% ad. val., provided the appropriate duty of excise has been paid on the base fabric, need not, in my view, be considered as seeking to bring in, as if by the back-door, pvc conveyor belting within the scope of the said sub-item when the product does not actually fall under Item No. 19. In the view I have taken, the product falls under sub-item No. III of Item No. 19 CET. 61. In the result, the appeal, in my view, deserves to be rejected. EDITOR S COMMENTS Proviso to Tariff Item 19 of the Central Excise Tariff provides that in the case of impregnated, coated or laminated cotton fabrics, the cotton predomination or the percentage of cotton contents shall be determined in relation to ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
