Andhra HC (Pre-Telangana)
Insulations And Plastics Pvt. Ltd. vs Assistant Collector Of Central Excise ... on 25 January, 1988
Equivalent citations: 1989(20)ECR266(AP), 1988(35)ELT445(AP)
JUDGMENT Anjaneyulu, J.
1. The Petitioner is a Private Limited company, incorporated under the Companies Act, 1956. It seeks as declaration that the approval by respondent No, 1 of the list of classification classifying the Petitioner's goods as dutiable under Tariff Item No. 19 (III) in C. No. V/19/III/17/24/82/VC, dated 25-9- 1982, as illegal and void. The Petitioner - Company seeks a further declaration that the goods manufactured by it are not dutiable under Tariff Item No. 19 III and seeks order for the refund of the duty illegally levied and paid by the petitioner Company.
2. We have heard the learned Counsel for the petitioner and also the Standing Counsel for the Central Government.
3. We may notice a few facts relevant for the purpose. The petitioner Company manufactures coated fabrics in the plant located at Chitkul village in the Medak District. The Petitioner has adopted the Self Removal Procedure under Chapter VII, 1944 ("The Act", for short) and the rules made thereunder. In terms of the Act and the Rules, every assessee is bound to submit a classification list as required under Rule 173-B for approval of respondent No. 1. The Petitioner submitted such classification list on 21-9-1982. The Petitioner classified the Coated Fabrics manufactured by it under Tariff Item No, 19 III as "Cotton Fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of plastic materials". The classification list was approved by Respondent No, 1 and the Petitioner was accordingly paying duty before removal of the Goods from the warehouse. The Petitioner company did so till November, 1982 when it doubted the correctness of the classification made by it earlier of the coated fabrics manufactured by it under Tariff Item No. 19 III. The Petitioner found that the goods manufactured by it cannot be classified as "cotton fabrics" at all, as the cotton contained n relation to the "end product" is less than 40% of the total weight of the goods manufactured. Accordingly, the petitioner submitted a revised classification list classifying its goods as not dutiable at all. In support of its claim that the cotton content is less than 40% in relation to the end product, the petitioner submitted the Analyst's reports issued by `The Silk & Art Silk Mills' Research Association, Bombay Which, it is stated, is linked to the ministry of Commerce, Government of India, for necessary chemical analysis. The first respondent did not take any action on the revised classification list submitted by the Petitioner and insisted that the petitioner should continue to pay duty under Tariff Item No. 19 III. It was in these circumstances that the present Writ Petition was filed by the Petitioner on 6-7-1983 seeking the above reliefs.
4. In the Counter filed the first respondent admits that for classifying the Petitioner's goods under Tariff Item 19 III of the First Schedule to the Act, they should be "cotton fabrics" and they should be coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials. It is claimed, for the purpose of classifying cotton fabrics coated or laminated with cellulose derivatives under Tariff Item No. 19 (III), the predominance of cotton should be in relation to the base fabric which is coated or laminated and not with reference to the end product, namely, cotton fabrics impregnated or laminated. It is further pointed out that the predominance of cotton is to be calculated by taking only the constituents of the base fabrics and not the end product. It is urged that the cotton content in the base fabric used in the manufacture of goods by the petitioner is more than 40%. It is contended that the Petitioner was in error in contending that the predominance of the cotton is to be calculated with reference to the end product and not the base fabrics. In the the circumstances, it is urged that the classification list submitted by the Petitioner initially was correct and needed no revision.
5. We may first deal with this contention urged by the first respondent in the counter that the predominance of cotton is to be reckoned with reference to the base fabric and not with reference to the end product. It is not denied that if the cotton contents is to be reckoned with reference to end product and if it is less than 40% of the Total weight then the products manufactured by the Petitioner do not qualify to be classified as "cotton fabrics", within the meaning of Tariff Item No. 19 (III). Our attention is invited to the decision of the Supreme Court in Collector of Central Excise v. Multiple Fabrics Pvt. Ltd. 1987 (2) SC 289 = 1987 (29) ELT 481 (S. C.). The question that arose for consideration in the above case was whether PVC Conveyor belting manufactured by the assessees in those cases fell within the Tariff Item 22 or would be governed by the residuary entry 68 for purposes of excise duty under the Central Excise Tariff. The goods manufactured were chemically analysed and it was found that it is composed of synthetic resin or PVC type, reinforced with textile fabric containing 43.3% by weight of cotton and rest viscose (man-made filament yarn of cellulosic origin). Thus the percentage of textile fabric in the end product was found to be 43.3% while the percentage of PVC compound was found to be 56.7. It may be pointed out that while Tariff Item 19 deals with "cotton fabrics",. Tariff Item 22 deals with "man-made fabrics". The provision contained in both the Tariff Items are pari material, the identical language in all respects is used in both the Tariff Items. The Supreme Court held that in view of the higher percentage of P. V. C> compound in the commodity (being 56.7% it becomes difficult to treat the ultimate goods as man-made fabrics for holding that it is covered by Tariff Item 22. In that view the Supreme Court upheld the Tribunal's finding that the goods manufactured are not covered by Tariff Items 22, and, therefore, the residuary Item 68 applies. In view of the identical nature of the two Tariff items, namely, 19 and 22, it must be held, following the above decision of the Supreme Court that, if the P. V. C. compound in the commodity constitute higher percentage than the basic cotton in the ultimate product, the goods manufactured by the petitioner company cannot be classified under Item 19. It is not possible to accept the suggestion made by the first respondent in the counter, that the predominance of cotton should be examined with reference to the base fabric and not the end product ultimately manufactured. Obviously, realising this position, learned Standing Counsel for the Central Government did not pursue that line of reasoning in the course of his arguments.
6. Shri Nagaraja Rao, learned Standing Counsel for the Central Government urged that the question regarding the cotton content in the ultimate product is a question of fact and it would be proper if that question is left t be decided in Appeals to the Collector (Appeals). Learned Standing Counsel, therefore, suggested that we may permit the petitioner of file an appeal to the Collector (Appeals) before whom the petitioner could produce all the necessary evidence to get the matter adjudicated upon. Having regard to the fact and circumstances of the case, we do not think it necessary to remit the matter for consideration of the Collector (Appeals). Before the first Respondent the Petitioner filed analyst reports. These reports were issued by the Silk and Art Silk Mills' Research Association, Bombay which is described as a Research Association linked to the Ministry of Commerce, Government of India. According to these certificates the percentage of basic cotton in the ultimate product ranged between 14% and 15.6% while the percentage of PVC compound in the ultimate product ranged between 86% and 83.4%. It is not the case of the first Respondent that the certificate of analysis given by the REsearch Association are not acceptable. The objection raised by the first respondent is that the percentage of cotton should be reckoned in relation to base fabric which is coated or laminated and not with reference to end product, namely, cotton fabrics impregnated or laminated. In the counter filed it is specifically mentioned that the percentage of cotton must not be less than 40% with reference to the base fabric. It is urged in the counter that it is not the petitioner's case that the cotton content in the base fabric is less than 40%. Having made these claims it was finally stated in the counter that the certificates produced by the Petitioner suggesting that the cotton content in the goods manufactured by him is less than 40%, are totally irrelevant. According to the first Respondent, it is irrelevant because the cotton content should be reckoned in relation to the base fabric and not the end or ultimate product. Therefore, the dispute between the parties is only limited to the question whether the percentage of cotton should be reckoned in relation to the ultimate product or it should be reckoned in relation to the base fabric. As already observed above, this question has since been settled by the Supreme Court in MUltiple Fabrics case referred to in para 5 supra. The Supreme Court held that the percentage should be reckoned with reference to the ultimate product. Once this controversy is resolved, there is nothing further that requires examination. There are no grounds to doubt the correctness of the certificates issued by the Research Association and indeed the authenticity of the chemical analysis is not questioned either in the Counter or in the arguments before us. We do not, therefore, think it necessary to direct the petitioner to file an appeal to get this matter adjudicated upon, as there is no doubt about the real principle that is applicable in view of the Supreme Court's decision above referred and there is also no doubt, with reference to the analyst's reports, that the percentage of cotton in the ultimate product is far less than 40% by weight.
7. Having regard to the above, we allow the Writ Petition and quash the letter C. No. V/19/III/17/24/82/VC dated 25-9-1982 of the first respondent classifying the petitioner's goods as dutiable under Tariff Item 19 (III). We hold that the goods manufactured by the Petitioner are not liable to be classified as "cotton fabrics" within the meaning of Tariff Item No. 19. The Petitioner is entitled to the refund of the duty paid in respect of the goods under Tariff Item NO, 19 (III). The First Respondent shall grant the necessary refund to the petitioner within three months from the date of receipt of this order.
8. The Writ Petition in allowed. No costs.
9. After the judgment is pronounced, the learned Standing Counsel for the Central Government made an oral request for leave to appeal to the Supreme Court. We do not consider that the case involves a substantial question of law of general importance nor do we consider that there are any questions which need to be decided by the Supreme Court. In disposing of the Writ Petition, we have followed the Judgment of the Supreme Court in Collector of Central Excise v. Multiple Fabrics Pvt. Ltd. 1987 (29) ELT 481 (S. C) = JT. 1987 (2) S. C., 289. The Oral Application for leave is accordingly rejected.