Customs, Excise and Gold Tribunal - Delhi
Collector Of Customs vs Sylvester And Co. on 17 September, 1987
Equivalent citations: 1987(14)ECC257
ORDER
V.P. Gulati, Member
1. The proceedings in the captioned appeal were originally initiated as a review proceeding by the Government of India under Section 131 of the Customs Act, 1962, and have been transferred to this Tribunal on statutory transfer for disposal.
2. Brief facts of the case are that the respondents imported a machine described as lacquer curtain coating machine. This machine, as seen from the record, was intended for coating or impregnating different materials with lacquers of various varieties including nitro-cellulose lacquers and acid hardening lacquers. The goods were assessed under 84.59(1) against the appellants claim for assessment under 84.59(2) which carries a lower rate of duty. The original authority ruled against the respondents but the Collector (Appeals) allowed the respondents appeal and ordered refund. It is against this order of the Collector (Appeals) that the review proceedings under Section 131 of the Customs Act were drawn.
3. Learned SDR for the appellant-Collector pleaded that it is the accepted position that the goods are classifiable under 84.59, CTA and the dispute is in regard to whether it will fall under 84.59(1) or 84.59(2). He drew our attention to the wording of 84.59. The same for. convenience of reference is reproduced as under:
Machines and mechanical appliances, having individual functions, not falling within any other heading of this chapter:
(1) Not elsewhere specified (a) 60% (2) Machines and mechanical appliances designed for the production (a) 40% of a commodity, machinery for treating metals, wood or similar materials, for stripping and cutting of tobacco leaf or for cutting or rolling tea leaves; machines for mounting card clothing; nuclear reactors.
He pointed out that item 84.59(2), CTA, among other specified machines, covers those designed for production of a commodity or for treating metals, wood or similar materials. He stated that there is no dispute what the respondents had imported was a machine but this was not intended for production of any goods as it performed only the function of coating of a surface. Therefore in this context it could not be taken to be a machine for the production of a commodity. In regard to the machines for treating materials like wood and metal he pleaded that the scope of the tariff entry could be understood from the range of machines and the treatment for which these machines were intended, as listed in the CCCN Chapter Notes under heading 84.59. He mentioned that [the] type of machines for treating metal and wood as described are such as are intended for pickling metal, friction welding, tin plating in the case of metals and in case of wood, presses for agglomerating wood fibre, etc., wood hardening press, machines for impregnating wood under pressure. He pointed out, machines, therefore, to be covered, had to be such as bring about a change in the molecular structure or the surface of the product treated. He stated that lacquer machine cannot be considered to be falling under this category. He stated the machine imported does not belong to the category of machines for treating metal and wood and in no way similar to such machines as covered in that description. In that view of the matter, the assessment under 84.59(1) was correct classification.
4. Shri K.R. Mehta, consultant for the respondents made the following pleas:
(i) Machine was used for producing goods;
(ii) Burden of proving that the machine falls under 84.59(1) was on the department and the same has not been discharged;
(iii) Machine was covered under specific description under 84.59(2) and the same was sought to be incorrectly discarded in favour of a residuary item 84.59(1);
(iv) The machine was similar to the ones intended for treating metal and wood, etc. He relied on the rationale of the Collector (Appeals) in his order.
4 A. His first plea is that by lacquering the asbestos sheets the respondents brought into existence a new category of goods known as lacquered sheets having distinct character and use and were known in the trade as different from the unlacquered asbestos sheets. He relies on the Tribunal judgment in the case of Guardian Plasticote Limited, Calcutta v. Collector of Central Excise Calcutta [1986] 8 ECC-T 71 : (1986) 7 ECR 1 (CEGAT) and in the case of Empire Industries Limited and Ors. v. Union of India and Ors. . He pleaded it has been Held that if the processing of the goods brings into existence a new commodity recognised so in the trade, it is excisable for central excise duty purposes. On the same logic, he pleaded, that the lacquering of asbestos sheets brought into existence a new category of goods. In regard to his plea that lacquering of sheets was a process similar to treatment of metal and wood, he pleaded that the machine imported was a versatile one and could be used for giving a lacquer coating to any material with a flat surface. He stated that the same could be used even for coating plywood. He pleaded that the machine imported is similar to those for providing treatment to metal and wood as lacquering is nothing but a treatment of the surface of the material.
5. Learned SDR, in his reply, stated that [the] imported machine had to be assessed as such without taking into consideration the end-use of the product produced by it. He cited the case of Dunlop India Ltd. and Madras Rubber Factory Limited v. Union of India 1983 ELT 1566 (SC).
6. The points that arise for consideration are:
(i) whether the machine imported can be considered as one similar to those for treatment of metal and wood?
(ii) whether this can be considered as machine for production of goods?
7. Regarding the first point, we observe that the Collector (Appeals) has dealt with the matter at length. His findings in this regard are as under:
Their machine only contributes one process in the manufacture of a commodity. However, certain specific operations or individual processes are also covered by the same heading 84.59(2) even if they do not amount to manufacturing a commodity. Such processes are enumerated in the said heading. They include (a) machinery for (a) treating metals, wood or similar materials (b) machinery for strip and coating of tobacco leaves (c) machinery for coating or rolling tea leaves, (d) machine for mounting card clothing, etc. The appellant's claim alternatively that the machine imported by them would come under (a) above, namely machinery for treating metals, wood or similar materials. I am really unable to see how one could say that this is a machine aptly covered by this terminology, namely machines for treating metals, wood or similar materials. Assistant Collector has brushed aside this contention of the appellants veay lightly. He simply observes that the process of coating lacquer cannot be deemed to be treating metal, wood or similar materials. Actually a lacquer coating even for wood is a preservation process. Colours are added to give a particular desired effect. Even without any colouring plain transparent lacquer can and is also applied to wood and then acts as a preservative, lacquer coating is very definitely a method which will be covered by the terminology 'machinery for treating metal, wood or similar materials'. Besides, in such printed leaflets the manufacturer will emphasise that operation for which sales appeal would be the just.
We observe that the revenue has sought to interpret the scope of the maehines which are similar to the ones for treatment of metal and wood with reference to CCCN Chapter notes. In CCCN the machines for treatment of metals and wood are described by name and the functions these perform are also set out. Customs tariff, however, although it is based on the Scheme of CCCN, has not incorporated all the chapter notes and amplifications given thereunder and therefore entries in this have to be interpreted as these are worded. There is no amplification in it of the machines for treating metals and wood and similar other materials. The nature of the machines and the treatment these should be capable of subjecting the material to, has not been set out. The plea of the revenue is that these treatments should be such as bring about a change in the molecular structure by processes like heat treatment or to bring about any other structural change. Ordinary meaning as understood in the trade and common parlance will have to be given to the word "treating" of metals, wood and other materials. The revenue has not pleaded that asbestos is not a material similar to metal and wood. Their objection is only in regard to the process and which is pleaded to be not similar to treating metal and wood. No authority or published literature has been cited to show as to what are the recognised processes of treating metals and wood, So far as the word "treat" is concerned, the same as set out in the Concise Oxford Dictionary is defined as under:
act towards, behave to, (treated me abominably, kindly, as if I were a child, better treat it as a joke) 2. deal with or act upon (person, thing) with view to obtaining particular result, apply process to subject to chemical agents, etc. (treated him for sunstroke, how would you treat a sprained ankle, must next be treated with acid).
and the ward "treatment" has been defined as under:
(mode of) dealing with or behaving towards a person or thing (received rough treatment from him; must follow the prescribed treatment; is now ready for treatment with acid) mode of treating a subject in literature or art or speaking; the (full etc) (colloq.) the customary way of dealing with a particular type of person etc. Taking the word "treat" in the ordinary sense, it would mean subjecting the material to a certain process to obtain a certain result. In case of metal and wood, the treatment of these as pleaded by the revenue would result in some change in the surface structure of the material to impart to these certain desired qualities. Now by treating metal certain qualities can be imparted to the same, which may be only peculiar to metals and likewise, in the case of wood, treatment may result in imparting of certain qualities to the wood peculiar to it only. Likewise in the case of other materials, the treatment by a machine will produce effects peculiar to those. It is not the case of the revenue nor it sounds to reason that machines other than those for treating metal and wood should be such that these should impart qualities to the treated materials similar to those in the case of metal and wood. The only rational way to look at this would be that the machines which are covered under the heading should be capable of treating the other materials with a view to bring about some qualitative change in these materials. Surface treatment is one such process. In the case before us plain asbestos sheets are coated with a lacquer and the surface of the asbestos acquires the characteristics of smoothness, hardness and also becomes decorative. The machine as pleaded before us can be utilised for lacquering other materials. Now lacquer as described in the Condensed Chemical Dictionary (10th Edition) by Gessner G. Hawley and Concise Oxford Dictionary is as under:
Chemical Dictionary:--A protective or decorative coating that dries primarily by evaporation of solvent, rather than by oxidation or polymerization. Lacquers were originally comprised of high-viscosity nitrocellulose, a plasticizer (dibutyl-phthalate or blown castor oil) and a solvent. Later, low-viscosity nitrocellulose became available; this was frequently modified with resins such as ester gum or rosin. The solvents used are ethylalcohol, toluene, xylene, and butylacetate. Together with nitrocellulose, alkyd resins are used to improve durability. The nitrocellulose (q.v.) used for lacquers has a nitrogen content of 11 to 13.5%, and is available in a wide range of viscosities, compatibilities, and solvencies. Chief uses of nitro-cellulose-alkyd lacqures are for coatings for metal, paper products, textile, plastics, furniture and nail polish. Various types of modified cellulose are also used as lacquer bases, combined with resins and plasticizers. Many non-cellulosic materials, such as vinyl and acrylic resins, are also used, as are bitumens, with or without drying oils, resins, etc. Oxford Dictionary:--Coloured varnish of shellac dissolved in alcohol used esp. as coating for brass, sap of--tree (Rhu vernicifera) taking hard polish and used to varnish wood etc; synthetic liquid that dries to form protective film; substance sprayed on hair to keep it in place. 2. coat with lacquer, (f.obs.F. lacre, sealing-wax. f.unexpl. var of Port laca Lagl).
From the above it is seen that the lacquering does bring about a qualitative change in the surface of the material.
8. It is seen that the lacquering can be done on various surfaces and even metal and wood. In this view of the matter the machine imported has to be held to be similar to those for the treatment of metals and wood. In view of the above we hold the machine is assessable under 84.59(2), CTA. In view of this we do not find it necessary to deal with the other arguments put forth by the respondents. We therefore find no merit in the revenue's appeal and dismiss the same.