TMI Blog1994 (3) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... ty granted under Rule 56B for removing the goods without payment of excise duty from Dhadka factory to Behala factory. Similarly, in March, 1986, the petitioner set up a factory at Hyderabad to which the Ultramarine Blue manufactured at Dhadka factory was brought following the process under Rule 56B of the Central Excise Rules, and packed in small packs and sold at the Hyderabad factory after paying excise duty thereon. From the inception, the petitioner had been submitting the list of goods for approval of the Proper Officer classifying the product under Heading 3206.19 attracting excise duty at 10% ad valorem under the Central Excise Tariff Act, 1985. The assessee had been following the assessment procedure and the assessments have been made accepting the monthly returns on that basis. On 26-7-1990, the Assistant Collector of Central Excise made an order stating that the Ultramarine Blue packed in small packets for retail sale for domestic use was correctly classifiable under the Heading 3212.90 attracting duty at 10% ad valorem, and until the issue of classification was finalised, the list submitted by the petitioner would be approved provisionally and the assessments would be m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al by the Department to the Collector (Appeals). 4.The petitioner has filed a reply-affidavit pointing out that the product remained the same and classification lists were filed by the petitioner as and when similar packs were introduced, but those lists are being approved accepting the classification until 23-12-1990 when the Assistant Collector had re-classified the product. It is also stated that after filing of the writ petition, the petitioner came to know that a Circular No. 62/90-CX. 3., dated 7-12-1990 had been issued by the Secretary, Central Board of Excise and Customs stating that Ultramarine Blue in small packs would fall under Heading 3212.90 and all the Collectors of Central Excise should assess the same under that head. It is pleaded that this circular interfered with the quasi-judicial powers of the Assistant Collector in adjudicating the issue of classification of goods and therefore, the action of the Assistant Collector, re-classifying the goods in pursuance of the circular stood vitiated. 5.We may also note the further developments in the matter. On 4-2-1991, interim stay was granted, which was made absolute on 12-8-1991, with reference to the levy of differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned counsel for the petitioner, only Courts can interpret the Law and any view expressed by a circular or other authority do not grant the jurisdiction to the authorities to review the earlier approval and re-classify the goods. 8.The learned counsel for the respondents raised a preliminary objection that there being an alternative remedy which had also been resorted to by the petitioner, this writ petition should not be carried through. Reliance was placed on the decision of this Court in Procter Gamble India Ltd. v. Union of India - 1994 (69) E.L.T. 442 (A.P). We are unable to accept this objection for two reasons. The first is, the question of the existence of an alternative remedy has been already considered by the Bench while admitting the writ petition and they have decided to entertain this writ petition and therefore, it is not proper for us to review that decision and reject it after keeping the matter pending for three years. Secondly, the proceedings of the Appellate Collector related to subsequent period and not to the period with which this writ petition is concerned. Therefore, the argument of the learned counsel that the petitioner is maintaining parallel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited - 130 I.T.R. 14. The second is that the pattern of classification under the Central Excise Tariff Act is based on the principle that each heading is mutually exclusive from the other headings i.e., goods classifiable under one heading would not be considered as falling under another heading. 12.Keeping these principles in mind, let us now look at the Heading 32.12, which is sought to be relied on for levying the excise duty under the impugned orders : 32.12 Pigments (including metallic powders and flakes) dispersed in non-aqueous media, in liquid or paste form, of a kind used in the manufacture of paints (including enamels); stamping foils; dyes and other colouring matter put up in forms (for example, balls, tablets and the like) or small packings (for example, sachets or bottles of liquid) of a kind used for domestic or laboratory purposes. 15% 3212.10 Stamping foils 15% 3212.20 Aluminium paste 15% 3212.90 - Other 20% Reading this heading, it would be apparent that the main item is "pigments'. It is also described as dispersed in non-acqueous media, in liquid or paste form, of a kind used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. v. Union of India - 1993 (67) E.L.T. 48 (Cal.), where, againt it was held, after noting that Rajasthan High Court, Allahabad High Court and Madhya Pradesh High Court had also considered that Ultramarine Blue is not recognised as a pigment, that it could not be taxed as a pigment. That decision also points out that a circular was issued by the Central Excise Department on 30-7-1990 stating that the judgment of the Supreme Court had been accepted, and in para 12 it is mentioned that Item No. 14I(5) of the First Schedule to the Central Excise corresponds to Item No. 32.06 of the Central Excise Tariff Act, 1985. However, the petitioner has not taken advantage of this to claim that the goods are not taxable even under 32.06, because the reference to 32.06 in that judgment is perhaps a mistake for 32.12, which seems to correspond to 14I(5) of the old Act, inasmuch as both of them refer to manufacture of paints, unlike 32.06 which does not refer to paints. In view of this, it is now well setlled that Ultramarine Blue is not a pigment and accordingly, it cannot fall under 32.12 or 3212.90. It is significant that in the present case also, a circular was issued on 7-12-1990 referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no such classification as is found in certain other headings, the contention of the learned counsel for the respondents cannot be accepted. To say that the Ultramarine Blue packed in small packets was not the same as the Ultramarine Blue sold in bulk, it is necessary that the Department should establish that the end-product which came into existence had a different name and was put to different use and the commodity was so transformed so as to lose its original character, as this is the test prescribed by the Supreme Court in Inandas v. Anant Ramchandra - AIR 1982 SC 127. Applying that test, it is impossible to say that the Ultramarine Blue packed in small packets was a different commodity from the Ultramarine Blue sold in bulk, as the product did not lose its character by being packed in small packs. It is interesting to note that in the latest Finance Bill, 1994, the following amendment is proposed. "in Chapter 34, - after NOTE 5, the following NOTE shall be inserted, namely(a) :- In relation to products of sub-heading No. 3402.90, packing6. or repacking into smaller packs, including packing or repacking of bulk packs to retail packs or adoption of any other treatme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ternational convention of "Harmonised Commodity Description" and "Coding System" (HSN). The excisable goods under the new Central Excise Tariff Act, 1985 has been classified basically using four digit system, with two more digits added for further sub-classification wherever needed. The scheme has been outlined in the General Explanatory Notes contained in the Schedule to the new Central Excise Tariff Act. The Rules for the interpretation of Schedule state that the titles of Sections and Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the provisions hereinafter contained. Rule 2(a) specifies that any reference in a heading to goods shall be taken to include a reference to those goods incomplete or unfinished, provided that, the incomplete or unfinished goods have the essential character of the complete or finished goods. Thus, Ultramarine Blue has the essential character of the completed goods even in bulk and therefore, has to be considered for classification in that sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mounting litigation and uncertain economic impact. All this has effectively eroded the tax base and buoyancy of the system and created serious economic distortions. Therefore, we are entitled to look into the explanatory notes of the HSN which forms part of the Harmonised System to understand the scope of the chapter heading which is identical with that code. In that explanatory notes under the heading"other colouring matter" in 32.06, we find "Ultramarine Blue and preparations based thereon" as 3206.41. Obviously, the Tariff Act has, instead of having a separate sub-heading for Ultramarine Blue as in the international code, lumped them together as "other" in 3206.90. In contrast, in 32.12, it is mentioned that other colouring matter would fall in item "Dyes and other colouring matter", only if it is in small packings for retail sale and is used for domestic purposes and was sold as household dyes. We are therefore, fortified in our decision that other "colouring matter" in 32.12 must be in the nature of a dye and that Ultramarine Blue falls only under 32.06. 19.The second issue in this case relates to the jurisdiction of the respondents to re-classify the goods. In order to u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return is filed. In this scheme of self-assessment procedure, the contention of the Revenue is that in respect of every monthly return there is a fresh list and even though the earlier returns had been accepted, nothing precludes the proper officer from coming to a different conclusion as there is no estoppel against Statute and the earlier assessments under Rule 173-I will not operate as res judicata. The alterantive contention is that even if the monthly return is accepted, Section 11A grants the jurisdiction to re-open the same within six months from that monthly return and within five years, if there is any fraud or misrepresentation. In the present case, it is stated in the counter-affidavit that there was no fraud or misrepresentation and therefore, it is claimed that within six months from every monthly return, the matter of classification can be reopened under Section 11A. According to the learned Counsel the subsequent proper officer had, on his own application of mind to the facts on record, come to a different conclusion, as otherwise he cannot exercise the powers vested in him under Section 11A, or even under Rule 173-I. The learned counsel for the petitioner submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss, the Revenue seeks only to the application of the rule of estoppel and res judicata for not following the earlier decision. At the same time, it cannot be disputed that the earlier decision even if it is not to be taken as conclusive was a relevant fact and cannot be ignored. As pointed out earlier, the question of classification is a question of fact. That finding of fact is vitiated, only if it has taken into account irrelevant material or has ignored a relevant material or is contrary to any legal provision. In the present case, a fresh finding re-classifying the goods will be clearly vitiated, for it ignored the earlier decision which is a relevant fact. The contention of the Revenue that the earlier decision was a routine approval without application of mind cannot be countenanced in view of Section 114, illustration (c) of the Indian Evidence Act, under which it can be presumed that judicial and official acts have been regularly performed. Therefore, if the earlier approval should be ignored as irrelevant, the only manner in which it can be done is to show that the facts on which the earlier decision of approval was given have changed or that the earlier approval was con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that. There are also similar decisions under the Central Excise Act, such as Oriental Paper Mills Limited v. Union of India - 1978 (2) E.L.T. (J 345) (SC). In view of this position, it is apparent that inasmuch as the circular re-classifying the goods is not binding on the assessee, it would not be a relevant material for revising the assessment if it is shown to be contrary to law. In the present case, we have already found that the Ultramarine Blue can be classified only under 3206.90, since the Supreme Court has held it not to be a pigment and therefore, the circular which is contrary to that legal position will be an irrelevant material for the purpose of revising the assessments either under Rule 173-I or Section 11A. 21.To sum up our finding on the classification is that Ultramarine Blue falls to be taxed under 3206.90. This is also a jurisdictional fact, and unless there is material to give a finding that the Ultramarine Blue can be classified under 32.12, the authorities concerned will have no jurisdiction to revise the classification in exercise of powers under Rule 173-I or Section 11A. They may initiate proceedings, that is, every time the monthly return comes up for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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