Customs, Excise and Gold Tribunal - Mumbai
Mattel Toys (India) Ltd. vs Commissioner Of Central Excise And ... on 12 October, 2001
Equivalent citations: 2004(161)ELT484(TRI-MUMBAI)
JUDGMENT
Gowri Shanker, Member (Technical)
1. Mattel Toys (India) Ltd., the appellant in this appeal, who is a manufacture of dolls and other toys. The manufacture of a doll requires application of colour on parts of its surface, colour is applied to the lips and cheeks of the doll, and its eyebrows and eyelashes painted on it. The appellant makes the colouring matter used for this purpose in its factory. In the two orders impugned in these appeals, the Commissioner, adjudicating on a notice demanding duty on the ground that the appellant, has confirmed the demand for duty him and imposed penalty.
2. The contention of the appellant was, and continues to remain, that what it manufactured was colouring matter which was not paint as commercially understood, and hence classifiable under Heading 30 of the tariff. The counsel for the appellant submits that the colouring matter manufactured by it consisted of pigment mixed with resin and thinner. This mixture was not technically or commercially paint. It does not contain dispersing agent, stabilising agent or dryer, the required in order for the paint to be slow smoothly applied evenly to prevent facilitates its drying and giving it required length of shelf life. The appellant uses the mixture that it formulated the same day; it could, in any event, not have, a shelf life of more than seven or eight days in contrast to the shelf life specified in the Indian Standard Specification of one year. The commodity in question was therefore not marketable as paint.
3. The counsel for the appellant, in support of these arguments, produced technical literature which, according to him, indicates that of paint is required to contain the additives of the kind that he has referred to, and in the absence of these additives, the commodity is not paint. He says that the report of the Central Revenue Chemical Laboratory (CRCL for short) on retest of the appellant produced is at variance with the report of the Chemical Examiner. Its request for an opportunity of cross examination of the Chemical Examiner having been denied, and it is not permissible for the Commissioner to rely upon their opinions. In the absence of these opinions, there is no evidence available to the department to show that the mixture is paint. The department has also not established marketability as it was required to do.
4. The counsel for the department contends that there is no right to a party in an adjudication proceedings to demand cross examination of any person. The test reports are specific enough. Nowhere is it laid down that paint must necessarily contain the additives that of the kind that is upon refers to. It is perfectly possible for a colouring mixture to be paid and so classified, if the conditions of its use did not warrant presence of the additives. Even inferior quality of paint or substandard paid will still be classifiable as paint. He relies upon the judgment of the Supreme Court in Andhra Pradesh State Electricity Board vs CCE Hyderabad 1994 (70) ELT 3 to support his contention that marketability is a question of fact is to be determined in each case. It is enough for the department to show that a commodity which is capable of being marketed and need not be shown that they are in fact so marketed. Thus, any manufacturer of dolls, one situated nearby could perfectly use the mixture as the appellant manufacture to colour their dolls that it made, within the shelf life of the mixture. This shelf life, according to him, should not be less than a month or two.
5. The notices issued to the appellant alleged that the goods under consideration has the essential character of paint and could be used within seven to ten days, thus possessing adequate shelf life. It contended that it is the pattern of consumption of the paint, having regard to the kind of toys that the appellant manufactured, with dictated the manufacture of paint in small quantity render the absence of shelf life. The notice not cite any technical opinion or report of the test of the product. It is only after the notice was issued, and in the course of the adjudication proceedings that the test reports were made available to the appellant, and the questions of retest and of cross examination of the Director of CRCL arose. Strictly speaking, therefore, the Commissioner's order has to be held to have traversed beyond the show cause notice to the extent that it places reliance on the reports of the Chemical Examiner and the Director of CRCL. However, the counsel for the appellant stated that he was not making this a ground, although he said that it underscore of his request for cross examination.
6. As to this, we are of the view that it is settled law that cross examination cannot be claimed as a right. Both sides relied upon the judgment of the Supreme Court in K.L.Tripathi vs State Bank of India AIR 1984 SC 257. The Supreme Court has in the judgment emphasises that "the concept of fair play in action must depend upon the particular lis, if there by any, between the parties..." "When on the question of facts there was no dispute, no real prejudice has been caused to the party aggrieved by an order, by absence of any formal opportunity of cross examination per se does not invalidate or vitiate the decision arrived at therein. This is more so, when the party against whom an order has been passed does not dispute the facts and does not desire to test the veracity of the version or the credibility of the statement."
7. There is, in the matter before us, very much a lis between the parties. The dispute revolves around whether the product manufacture by the appellant is technically and commercially paid or not. The opinions of the Deputy Chief Chemist and the Director of CRCL, are that the substance is capable of being used as paid, and the appellant hotly disputes this. The technical literature extensively cited by the counsel for the appellant does indicate that various additives are added to paint. Some of this impart to it qualities generally for its better application and use whereas others are added to impart special qualities. The paint hand book edited by Guy E Weismantel says, for example at page 332 "additives are ingredients formulated into a paint to modify the properties of either the vehicle or the pigmentation, or both. They give the wet paint or dried paint film properties not present in the vehicle and pigmentation system. Additives also improve certain other properties of the vehicle (such as deed of drying), the pigment (such as resistance to fading), or the entire paint (such as ease of application)." Organic Coating Science & Technology by Zeno W. Wicks says "Additives are materials that are included in small quantities to modify some property of the coating. Examples are catalysts for polymerisation reactions, stabilizers, and flow modifiers." We have only quoted two out of the many that were cited before us. The literature thus indicates that additives are commonly added to paint. It also indicates that different additives fulfil different functions, as it would be evident from the extracts that we have quoted. These books, however, deal with manufacture of paints and its technology. They do no, address the question as to whether a substance can be a paint in the absence of some or all of these additives. To rephrase the question, they do not say which, if any of the additives is an essential ingredient of paint. The appellant has also relied upon an opinion of Dr Shenoy of the University Department of Chemical Technology, Mumbai. He had said that the product manufactured by the appellant was, int eh absence of wetting or dispersing agent, not paint.
8. However, the Commissioner has not approached the problem in this manner. He has merely gone by the opinions. The issue is one involving considerable scientific knowledge, dealing with properties of paints and other such material of the Deputy Chief Chemist and the Director of CRCL.
9. The issue is one involving considerable scientific knowledge, dealing with properties of paints and other such material. The question essentially, as to whether, in the absence of certain ingredients, the substance can be considered to be paint or not. Two opinions of the chemists staff of the Government of India did not give any reason for their conclusion that the product was a paint. They are merely blunt statements that it is not. In the light of the evidence that the appellant has produced, a doubt clearly does arise as to whether the substance in question is or is not a paint and can be so used or not. The Commissioner was at least required to rebut the evidence that the appellant has produced.
10. In the circumstances of this case, we think that the technical authorities of the Government ought to come and disclose before the adjudicating authority and to the appellant the basis upon which they have concluded that the substance was paint. The appellant ought to be in a position to question them as to whether they have considered the contemporaneous technical literature. The cross examination of these authorities in short ought to be permitted.
11. There is also dispute as to the shelf life of the product. The appellant had cited the report dated 16.10.1997 of the Department of Chemical Technology that a sample of the product became hard after four or five days, indicating its shelf life to this period. The counsel for the appellant however points out that the report indicates that the sample was received sealed in a plastic out that the report indicants that the sample was received sealed in a plastic tin with the stamp of the Central Excise authorities dated 30.9.1997 and suggest that this shows that four or five days referred to in the report would commence from the date on which the tin was opened and the sample taken out for being tested. The shelf life is thus much longer than 4 or 5 days. In the absence of precise detail, we are unable to comment on the correctness of this claim. However, it does show that the shelf life of the paint is longer than four to five days. The shelf life of the product has to e determined more precisely, and it has also be seen whether that would constitute sufficient shelf life for the paint. The Commissioner has also not commented upon another report of the Department of Chemical Technology dated 24.11.1997 that the appellant's product settle down within four hours. According to the counsel for the appellant this shows that the solid contents separate from the liquid rendering it unusable for application as paint. This also is a factor that has a vital bearing on the shelf life.
12. In the light of these discussions, we are of the view that the matter should receive proper attention at the hands of the Commissioner. We are alive to the possibility that if the requirement of the user does not demand it, a substance need not have wetting or disbursing agent, or any prolonged shelf life and still may be used as a paint. In that case, it would be difficult to say that it is not paint a commercially understood. We however emphasises that this is a matter to be established, and while keeping in mind the judgment of the Supreme Court that the counsel for the department has cited that onus of establishing marketability is upon the department.
13. One of the show cause notices issued to the appellant also invoked the extended period contained in the proviso under Section 11A (1) of the Act. We have heard the arguments on this aspect. However, we prefer not to deal with this question now. Determination on the merits of the issue is inevitable for the disposal of this appeal, since the other notices did not invoke the extended period. We are of the view that in order to better appreciate the arguments regarding the limitation in their correct perspective, a decision on the merits is relevant. We therefore propose to remand the matter for determining in accordance with law, and keeping mind our directions the question as to whether the product is paint as technically and commercially understood. In the event that the Commissioner finds that the product is not so and drops the proceedings, the Tribunal would then not require to give a finding on limitation. If the Commissioner holds the commodity to be paint, the Tribunal which heard the appeal against that order will also go into the question of limitation.
14. With these observations, we allow the appeal and set aside the order impugned before us and remand the matter for adjudication afresh by the Commissioner in accordance with law.