Customs, Excise and Gold Tribunal - Delhi
Steel Authority Of India Ltd. vs Customs, Central Excise on 10 August, 1988
Equivalent citations: 1988(18)ECC58
ORDER
K. Prakash Anand, Members
1.The issue in this matter relates to classification of tool cabinets manufactured by M/s. Steel Authority of India Ltd. These were manufactured by Mechanical Work Zone of the unit and then transferred to the Machine Shop under the cover of factory's internal gate passes. The department's case is that the tool cabinets are moveable articles made for placing on the floor, and, having all the essential characteristics of furniture, they are liable to duty.
2. The matter was adjudicated by Additional Collector of Central Excise, Madhya Pradesh, who held that the impugned goods were classifiable under Central Excise Tariff item 40 and not under item 68 ibid, as claimed by the appellant company. He also observed that in spite of categorical directions of the local Central Excise Officer, the appellant company failed to take out licence and to pay duty. Accordingly, the learned Additional Collector confiscated the 60 pieces of tool cabinets allowing the appellant company the option to redeem them on payment of fine of Rs. 20,000. He also imposed a penalty of Rs. 10,000. The appeal before us is against this order.
3. We have heard Shri S.N. Mathur, consultant on behalf of the appellant company and Shri L.C. Chakravorty, JDR on behalf of the department.
4. The learned consultant heavily relies on the clarification issued by the Central Board of Excise and Customs vide their F. No. 33/26/68-CX. VII dated 21-11-1968. In this letter, it was clarified that specially designed manufactures of steel like counters, storage cabins, cat-walks, etc., for use in industrial establishments cannot be regarded as steel furniture. It was pointed out in this letter that as per the Explanatory Notes to the B.T.N. only moveable articles which have the essential characteristic that they are constructed for placing on the floor or ground and which are used mainly with the utilitarian purpose to equip private dwellings, hotels, theatres, cinemas, offices, churches, schools, cafes, restaurants, laboratories, hospitals, dentists surgeries, etc. or ships, aircraft, railway coaches, ambulances, caravan-trailers or similar means of transport, should be regarded as covered by the item "furniture". Shri Mathur pleads that in view of this clarification, the department has no case at all for treating the impugned goods as furniture.
5. It is also submitted, that the cabinets are not of standard size. They have been designed specially for use in their own establishments and cannot be known in the market, or be sold, as furniture.
6. It is further claimed that the appellant company was exempted from having a Central Excise licence in view of the provisions of the Notification No. 31/76-CE dated 28-2-1976 as amended by Notification No. 133/78-CE dated 10th June, 1978.
7. It is also urged that the department has invoked Rule 9(2) of Central Excise Rules which is not legally sustainable as this is not a case of clandestine removal of goods. In support of this, Shri Mathur relies on the case of Union Carbide Co. Ltd. v. Assistant Collector of Central Excise and Ors. 1978 ELT (J-180) and the case of N.B. Sanjana, Asstt. Collector of Central Excise, Bombay and Ors. v. The Elphinstone Spinning and Weaving Mills Co. Ltd. 1978 ELT (J-399).
8. In conclusion, the learned consultant urges that the imposition of penalty is a stigma on a public sector undertaking and no penalty is leviable for a mere technical or venial breach of rule (Hindustan Steel Ltd. case ).
9. Shri L.C. Chakravorty, JDR responds briefly by reiterating the view taken by the lower authorities.
10. We have carefully considered the facts of the case and the submissions made before us. The main issue that is to be decided in this case is whether tool cabinets not of standard size, designed especially for use within the plant of the Steel Authority of India and claimed to be not commercially known and saleable as furniture can be classified under Central Excise Tariff item 40. The learned consultant has relied on a clarification issued by the Central Board of Excise & Customs as far back as on 21st November, 1968. There has been considerable further thinking on this issue and there is case law including the decisions of this Tribunal as well as of some of the High Courts which give a broader interpretation to the scope of Central Excise Tariff item 40 than visualised in the Board's letter of 21st November, 1968. In the Chandan Metal Products (P) Limited v. State of Gujarat the Gujarat High Court held that shelving racks and binstacks manufactured from iron and steel and sold by a company manufacturing iron and steel products and component parts thereof were iron and steel furniture within the meaning of Bombay Sales Tax Act, 1959. Adopting this view in the case of Nima Limited v. Collector of Central Excise, Baroda (Order No. 384/1987-D) dated 12-5-1987, this Tribunal held that sliding storage system which is mounted and moved on fixed rails is correctly classifiable under item No. 40, Central Excise Tariff. This view of the Tribunal was confirmed by another Order No. 587/1987-D dated 27-7-1987 in the case of Collector of Central Excise, Cochin v. New Chelur Manufacturers. Referring to the Gujarat High Court decision which had held that storage racks would be classifiable as steel furniture, it was held that even though steel furniture of large dimensions was to be fabricated out of the products manufactured by the respondents, these would be parts of the said steel furniture and the fact that the customer may use part of the same for fabrication of not merely storage racks but also of cat-walks, ladders, mezzanine floors etc. would not make any difference in the matter of classifying these products as parts of steel furniture. It was observed that the parts in question, namely, slotted panels, strips, corner plates, cladding sheets and partition plates, metal shoes, etc. were essentially used for fabricating skeleton structures which are made into storage racks for gaining access to the storage racks of large height, cat-walks, ladders and occasionally mezzanine floors could also be erected by utilising the same slotted angles, slotted channels, partition plates, etc. but in view of the fact that the parts in question were utilized for manufacture of storage racks as well, they were held to be parts of furniture.
11. In both the above orders of the Tribunal, I was one of the Members on the Bench. On further consideration of the issue and especially in the light of the decision of the Supreme Court of India in the case of Elpro International Ltd. v. Union of India and Ors. , which was not then before us, I am now of the opinion that the view taken by this Bench in the aforementioned two cases was erroneous and merits reconsideration. Reasons for this view are as follows:
(i) The decision of the Gujarat High Court in regard to shelving racks was on an interpretation of entry 44H, Schedule C to the Bombay Sales Tax Act, 1959. This decision could not be considered applicable on the Central Excise side unless it could be shown that the entry in the Central Excise Tariff was identical to the entry in the Sales Tax Act read with relevant notification. In fact, this was not made out even in the course of arguments before us in either M/s. Nima Ltd. case or M/s. New Chelur Manufacturers case. Therefore, it was not correct to base our interpretation of item 40, CET on the basis of the Gujarat High Court decision in the case of Chandan Metal Products (P) Limited.
(ii) As far back as on 21st November, 1968, the Central Board of Excise & Customs in their Order F. No. 33/26/68-CX. VII clarified that especially designed manufactures of steel like counters, storage cabins, cat-walks, etc. for use in industrial establishments could not be regarded as steel furniture. In this connection, the Central Board of Excise and Customs relied on the Explanatory Notes to the BTN which were cited as making it clear that only moveable articles which have the essential characteristics that they are constructed for placing on the floor or ground and which are used mainly for the utilitarian purpose to equip private dwellings, hotels, theatres, cinemas, offices, churches, schools, cafes, restaurants, laboratories, hospitals, dentist's surgeries, etc. or ships, aircraft, railway coaches, ambulances, caravan-trailers or similar means of transport, should be regarded as covered by the term 'furniture'. These instructions of the Board were later on superseded by Central Board of Excise & Customs' Order No. 33/1/69-CX. 4 dated 15-5-1970, which was in the nature of a Tariff Advice, which purported to say that the Board had reconsidered the matter as regards the scope of Central Excise Tariff Item No. 40, in the light of the Gujarat High Court decision in M/s. Chandan Metal Products (P) Limited in consultation with the Ministry of Law and that it had been decided, taking also into account the ordinary meaning of furniture in the Shorter Oxford Dictionary, namely, "moveable articles in a dwelling house, place of business or in a public building" and in Black's Law Dictionary which says that the term includes "whatever must be supplied to a house, a room, place of business or a public building or the like to make it habitable, convenient or agreeable" that binstak storing boxes should be regarded as assessable to duty under item 40 of the Central Excise Tariff. This Tariff Advice of the Board also does not explain how the Gujarat High Court decision in a Sales Tax matter can become automatically applicable on the Central Excise side. Nor does it explain as to why the Central Board of Excise and Customs should cease to rely on the Explanatory Notes to BTN as it did in its earlier orders of 21st November, 1968.
(iii) As against the above orders of the High Court in the Chandan Metal Products (P) Ltd. dated 3rd July, 1968 and the Board's Tariff Advice of 1970, we have the decision of the Bombay High Court in the case of Materials Handling Engineering Co. v. M.G. Waknis, Superintendent of Central Excise and Ors. 1980 ELT 231. This decision was not on a reference on Sales Tax side and was directly on the scope of item 40 of Central Excise Tariff, and the High Court was pleased to order as follows:
In the present case, the items which are held to be liable to excise duty are metal tube trolley, mini trolley, trolley structure and gas-trolley. It is not in dispute that these items though described as trolleys are not the ordinary trolleys which are used in household or in the clinic by a Doctor. The affidavit-in-rejoinder filed by the petitioners gives a clear picture of the disputed articles, and it is obvious that though the articles are described as trolleys they are used only in the factories for the purpose of shifting the goods from one place to another. By no stretch of imagination these articles can be described as articles of steel furniture. The word 'furniture' has got a peculiar connotation and indicates that the article can be used for the convenience or comfort of a human being either in the house or in the office. In regard to item storage bins and stainless steel pump stands and box with door, it is equally clear that these are not the articles which are used as items of furniture. Mr. Korde is right in his submission that merely because the articles manufactured by the petitioners, resemble with a cupboard or irrigator stand or a metal container is not sufficient to describe them as an article of furniture. It is obvious that the Assistant Collector was more impressed by the nomenclature given to the articles than to determine whether it is an item of a furniture. In my judgment, the view taken by the Assistant Collector is clearly erroneous and the reliance on the Notification was totally wrong. It is not in dispute that the expression 'steel furniture' is known in common parlour as an article devised for giving comfort to a human being. The seven articles manufactured by the petitioners do not satisfy that test and the order of the Assistant Collector and the Appellate Authority holding contrary is clearly erroneous and cannot be sustained. The petitioners are, therefore, entitled to the relief claimed in the petition.
(iv) Even as regards interpretation for Sales Tax purposes, the Bombay High Court in their decision in the case of Union Sales Corporation (1977 Vol. 39 STC 452) held that motorised elevator mobile copper roller road racks would not be furniture. These were power operated storage racks used in the printing department and were moved backward and forward as well as upward and downward by use of electric motor power. The High Court stated that from a common sense point of view, it was difficult to treat an article of this kind as a piece of furniture. This decision deserved a more careful consideration while considering the Gujarat High Court decision in Chandan Metal Products (P) Ltd. case.
(v) The scope of Central Excise Tariff Item 40 has also in the meantime, come in for consideration by the Supreme Court in an appeal filed against the orders of the Bombay High Court in case of Elpro International Ltd. v. Union of India and Ors. . The products to fas classified in that case were operating tables and X-Ray protective screens used as a secondary shield for operators of diagnostic or superficial therapy equipment, both used in hospitals. However, the High Court of Bombay while considering the classification of these goods has made observations on the scope of Central Excise Tariff item 40. The High Court took into account the view taken in M/s. Chandan Metal Products (P) Ltd. case as well as the definition of furniture in Shorter Oxford English Dictionary, the Webster's Third New International Dictionary, the Random House Dictionary and observed that the item "Steel Furniture" in item No. 40 has to be understood keeping in view the fact that under the First Schedule of the Tariff, the classification is resorted to so that items are included under different headings, such as, food, beverage, crude materials, minerals, fuel, etc. Furniture comes under the heading manufactured goods and, therefore, the emphasis appeared to be on the metal out of which it is prepared. Accordingly the High Court observed, furniture may have to be interpreted as furniture understood by a common man in common parlance.
12. In the above context, the definition of furniture in the Oxford English Dictionary has also been referred to by the High Court as under:
Moveable articles, whether useful or ornamental, in a dwelling house, place of business or public building. Formally including also the fittings In view of this definition, it was observed that it is necessary for purposes of classification to bear in mind the concept of decoration as well as utility and specific use in the dwelling house or place of business or some other building.
In the words of the High Court When the word 'furniture' is thus to be understood in common parlance in our opinion, this concept of user and perhaps also, of the price to be paid for those items, would offer us a good guide in concluding whether they are pieces of furniture.
13. The above discussed view was upheld by the Supreme Court.
14. While passing orders in the case of Nima Limited v. Collector of Central Excise, Baroda (supra) and Collector of Central Excise, Cochin v. New Chelur Manufacturers (supra), the orders of the Bombay High Court and of the Supreme Court in the case of Elpro International Ltd. v. Union of India and Ors., (supra) were not cited. In view of these orders, I must depart from my earlier view in taking a decision as regards classification of tool cabinets in the present matter. Appellants have contended before us that they are not manufacturers of steel furniture. The impugned goods are made to specific and special requirement of the plant and they are not bought and sold in the market as furniture. In the order appealed against, there is no denial of these facts; nor are these denied before us by the learned SDR.
15. In the light of the foregoing discussion, it has to be held that the goods in question fall outside Central Excise Tariff Item 40.
Appeal allowed.
G. Sankaran, Sr. V.P.
1. I have read the order proposed by Brother Prakash Anand. I agree with his conclusion that the appeal should be allowed but would like to state my reasons.
2. The appellants had contended before the lower authority that the Tool Cabinets in question had been made to specific and special requirement of the steel plants and that they were not of standard size furniture. Elaborating this point they had stated that the cabinets had specially attached sideboard to enable the worker to look at the drawing and use the tools stored in the tool cabinets for the specialized purpose of machining and such other jobs being undertaken in the workshop. It was contended that this type of cabinet was not known commercially as "Steel Furniture" in trade parlance. These contentions have not been adverted to and negatived in the impugned order. Nor has any material been placed before us in rebuttal of the above contentions. The onus to show that the subject goods were the same as or similar to steel cabinets which are recognised in the trade and in commercial parlance as "furniture" was on the Department. This onus has not been discharged. Having regard to these circumstances, I agree that the subject steel cabinets have not been shown to fall under Central Excise Tariff item 40.
V.T. Raghavachari, Member
1. When this appeal came up for hearing on 19-2-1988 Shri Mathur, Consultant for the appellants submitted that the argument for the appellants would be that the goods in issue are furniture but would fall outside item-40 CET since no power had been used in the manufacture thereof. When it was pointed out to him that no such plea had been raised either before the original authority (Additional Collector) or even in the grounds of appeal before us, he wanted time to make an application to raise that additional ground. The representative for the Department had no objection to the adjournment being granted. It was in these circumstances that the appeal was adjourned to 5-4-1988. When the appeal came up for hearing on 5-4-1988 Shri Mathur submitted that he was making no application to raise that additional ground but that he would submit that the goods in issue are not furniture and for that reason itself would fall outside item 40, CET. I am mentioning this fact only to highlight that even the appellants were evidently originally of the impression that the goods in issue are furniture but only that they fall outside item 40, CET. But that does not disentitle them from contending that their original impression was wrong and they should be entitled to contend that the goods are not furniture.
2. After this Tribunal had issued orders in the cases of Nima Ltd. (supra) and New Chelur Manufacturers (supra) the question as to what would be furniture again came up for consideration in the case of M/s. Telco Ltd. in Excise Appeal Nos. E/744/82-D, E/1276/82-D & E/1559/82-D. In the hearing of those appeals the Learned Counsel for the appellants therein drew our attention to an unreported decision of the Bombay High Court in the case of M/s. Elpro International Ltd. and the decision of the Supreme Court on appeal therefrom (with reference to one of the articles under consideration in that case) as . After taking into consideration the said decision of the Supreme Court I had held, summarising the discussion with reference to the considerations that should prevail for a decision as to whether an article would merit to be called furniture or not, as follows:
To summarise, an item could be termed as an article of furniture if (i) it is an article of convenience or decoration; (ii) is used for either purposes in the house or an office or a public building or an industrial establishment; (iii) is not fabricated specially to perform special functions; and (iv) is not so constructed as to be not useable in the line of ordinary furniture, as found in the house, office, etc.
3. Applying the said principles it appears to me that the earlier decisions of this Tribunal in the cases of M/s. Nima Ltd. and New Chelur Manufacturers is not incorrect. So far as the present appeal is concerned it has to be considered whether applying the above principles the product in issue (tool cabinets) could be called furniture. As pointed out in the order of the Senior Vice President these cabinets had specially attached side-boards to enable the worker to look at the drawings and use the tools stored in the cabinets for the specialised purpose of machining and such other jobs as were undertaken in the workshop. I, therefore, agree that these tool cabinets, though they may in part resemble a storage cabinet used in a house or office for keeping papers, files, etc., could not be called furniture since they have been fabricated specially to perform special functions and, therefore, could not be used in the line of ordinary furniture. I, therefore, agree that the appeal is to be allowed.