Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Synthetic Cutting Tools Manufacturing ... on 31 October, 1986
Equivalent citations: 1987(11)ECC78, 1987(10)ECR189(TRI.-DELHI), 1987(27)ELT353(TRI-DEL)
ORDER V.T. Raghavachari, Member (J)
1. M/s. Synthetic Cutting Tools Manufacturing Company manufacture resin impregnated/coated discs of glass fabrics which are excisable under item 22-F of the First Schedule to the Central Excises & Salt Act, 1944. The 'Assistant Collector under order dated 7.7.1979 held these discs liable for duty under tariff item No. 22F CET as they were not eligible for the exemption under notification No. 87/76-CE dated 16.3.1976. On Appeal the said order was set aside by the Appellate Collector under order dated 20.11.8.0. He held that the fabric continues to be the fabric even when cut into discs and as the entitlement of full exemption to the fabrics is not in dispute the discs were also entitled to the same exemption. The Central Government being of the view that the said order of the Appellate Collector was not proper, legal and correct, issued notice dated 14.5.81 under section 36(2) of the Central Excises and Salt Act calling upon the manufacturer to show cause why the order of the Appellate Collector should not be set aside and that of the Assistant Collector restored or any other order passed as may be deemed fit and proper. The Government was prima facie of the view that on account of the impregnation the discs had lost their identity as glass fabrics and that they were not glass fabrics in commercial parlance and therefore the exemption notification No. 87/76 was not available to the assessee. The assessee replied contending that the order of the Appellate Collector had been correctly passed. It is the proceedings initiated under the review notice that are, on transfer, now before us as this deemed appeal.
2. We have heard Shri K.C. Sachar for the Department and Shri V. Lakshmikumaran, Advocate for the respondents assessee.
3. Both sides are agreed on (i) that the subject goods (Discs of various sizes cut out of the resin coated glass fabric) are classifiable under item 22-F of the first schedule to the Central Excises and. Salt Act and (ii) the resin content of the said fabric was less than 33%.
4. Under Notification No. 87/76-CE dated 16.3.76, three types of goods falling under item 22-F and specified in the table attached to the notification were granted full exemption of duty. Item three of the table is "Glass Fabrics". The Assistant Collector under his order held that the exemption did not extend to processed glass fabrics and therefore necessarily did not extend to the discs cut out of the processed glass fabrics. The Appellate Collector proceeded on the basis that the question of full exemption to the fibre glass fabrics is not in dispute and that the Assistant Collector's conclusion that the exemption cannot be extended to the stage of cut discs is not tenable since the fabric continues to a fabric even after being cut into discs. The review notice of the Government mentions two reasons only as to why the findings of the Appellate Collector were not proper. They were (i) on account of impregnation the goods had lost their identity as glass fabrics and (ii) the goods are not glass fabrics in commercial parlance. In view of the fact that these two grounds had been mentioned in the review notice we think that it would be necessary to consider these two grounds only though the arguments before us ranged over a wider area. So far as the second reason mentioned above is concerned, we may note that except observing that the cut discs were not known as glass fabrics in commercial parlance no supporting material has been referred to in the show cause notice or even in the submissions before us. The only support Shri Sachar sought to derive in respect of this submission is that the respondents themselves had described these goods as discs in the course of their submissions before the lower authorities. But we feel that no support can be derived on this basis since the dispute was with reference to the cut discs and therefore, they had to be necessarily referred to in that fashion in the proceedings before the lower authorities, during the course of the proceedings before the lower authorities it never appears to have been put to them that the goods in question would not be glass fabrics since they were known in commercial parlance as discs only and not as glass fabrics impregnated or coated. We may in this connection take note of the fact that in their appeal to the Appellate Collector the assessee had specifically questioned the very excisability of these goods pointing out that these cut discs are not capable of being brought to the market and hence would not be goods at all and that in fact these discs are unknown to the market. These contentions were raised on the basis that the impregnated or coated fabrics are stored in an airconditioned room so that the fabric may retain its pliability and that as and when discs are to be cut the fabrics are taken out and the discs are cut for use immediately in the manufacture of the grinding wheels and that if the fabrics or the cut discs are kept for a long time in an non-airconditioned place they would lose their plaibility and would become rigid and therefore would be unusable thereafter. Thus the assessee had contended at that stage that these cut discs had no separate commercial name or identity than the glass fabrics themselves. As noted earlier, the Appellate Collector had upheld this contention. In spite of it the review notice proceeds on the basis of a different commercial identity for the discs than the fabrics but in doing so no supporting material is referred to. As earlier mentioned no such supporting material in this behalf has been produced before us also. In the circumstances the second reason mentioned in the review notice necessarily fails.
5. The other reason, as noted earlier, was that on impregnation the subject goods had lost their identity as glass fabrics. It may be noted that the goods on which duty was being demanded were not the impregnated glass fabrics themselves but the discs cut out of such fabrics. It is admitted that no duty was being demanded an the fabrics themselves. On the question whether they were impregnated or merely coated the case for the assessee is that resin coating alone was being done and that there was no impregnation as such. Leaving aside that dispute, it is admitted, as mentioned earlier, that no duty was being demanded on the fabrics after impregnation/coating. Shri Lakshmikumaran claims that this was so because the Department never disputed the entitlement of the processed fabrics to exemption under notification No. 87/76 accepting that the processed fabrics continued to be glass fabrics. In this connection he further relies upon a decision of this Tribunal in M/s. Bakelite Hylam Ltd. v. Collector of Central Excise (1986 Vol. 7 ECR 446). In paragraph 28 of the judgment it is stated as follows :
"We find that under Item 22F GET the glass fabrics by notification No. 87/76 as amended have been exempted from the payment of duty. We observe that going by the principle of contemporanea expositia, this shows the framers of the tariff entry 22F GET clearly intended the glass fabrics to fall under this entry and on the same logic impregnated glass fabrics would also be covered under this entry. We, therefore, hold that the impregnated glass (sic) fall under tariff Item 22F GET."
He contends that this would show that the Department itself as a general rule had been treating impregnated glass fabrics also as entitled to exemption treating them as glass fabrics only as mentioned in notification No. 87/76.
6. If the processed glass fabrics were to be treated as glass fabrics only for the purpose of exemption under Notification No. 87/76 the mere cutting of the fabrics into discs would not convert them into any other commodity than glass fabrics. The decision in Arvind Mills v. Collector of Central Excise, Baroda (1983 ELT 2020) is to be noted in this connection It had been held therein that when handkerchiefs are manufactured out of cotton fabrics by cutting the fabric to size and stitching, the same, the handkerchiefs do not cease" to be cotton fabrics under Tariff Item 19. Similarly the processed glass fabrics do not cease to be the same when they are cut to size for being used in that shape in the further manufacture of grinding wheels. In the circumstances we are of the opinion that the first ground mentioned in the review notice for setting aside the order of the Appellate Collector is also not acceptable.
7. In the result we dismiss this appeal and discharge the review notice of the Government.