Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Madhu Chemicals on 21 November, 1985
Equivalent citations: 1986(6)ECR248(TRI.-DELHI), 1986(23)ELT166(TRI-DEL)
ORDER G. Sankaran, Member (T)
1. This is an appeal filed by the Collector of Central Excise, Rajkot (the appellant) against Order No. T-30/RKT-1/85 dated 11-2-1985 passed by the Collector of Central Excise (Appeals), New Delhi (at Bombay) in favour of M/s. Madhu Chemicals, Bhavnagar (the respondent).
2. The facts of this case, in brief, are that the respondent firm holds an excise licence for the manufacture of "all other goods not elsewhere specified"- Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (CET, for short). It was engaged in the manufacture of Precipitated Silica and had submitted a classification list on 1-4-1982, effective from the same date, for the said product which was approved by the Superintendent of Central Excise, under Item 68, CET. However, on 9-8-1982, the respondent wrote to the Department claiming that as per Notification Mo. 23/55 dated 29-4-1955, the product would correctly fall under Item 14, CET (and not Item 68) and was entitled to unconditional exemption from duty under that notification. This was followed by another letter of 20-9-1982. The Assistant Collector, Bhavnagar, after hearing the respondent, passed an order dated 26-5-1984 rejecting the claim. In this Order, the Assistant Collector observed that Notification No. 23/55 covered inter alia only "silica" but not precipitated silica unlike the term "chalk (including not precipitated chalk)". He further held that the mere use of precipitated silica as extender or filler in paints or pigments would not qualify precipitated silica to be considered as paint or pigment. He ordered that the product be classified under Item 68, CET and rejected the respondent's claim for payment of duty under protest. In appeal, the Collector (Appeals) referred to the report of Chemical examiner which said that precipitated silica was an extender pigment or filler and an order (S/49-978/84 C.L. of September 84) passed by the Collector of Customs (Appeals) holding that precipitated silica was entitled to the benefit of the notification and upheld the claim of Madhu Chemicals. It is against this order that the appellant is presently before us.
3. The grounds argued in the appeal are:-
(i) The benefit of Notification 23/55 is applicable to mineral silica which, is rendered suitable for use as extender (filler) pigment by simple physical processing such as selective mining, cleaning, pulverisation and sieving. It does not apply to precipitated silica which is manufactured by chemical conversion of silicon compounds (sodium silicate, in the instant case) by reaction with sulphuric acid and steam;
(ii) The benefit of the notification is applicable only to mineral silica employed as extender or suspender and not to any other form of silica which is a synthetically produced chemical. Only mineral silica which has undergone physical processing so as to have uses such as extender or filler or diluent will attract the notification. It is a mistake to equate mineral silica with precipitated silica which is a synthetic silica.
4. Shri B.R. Tripathi, learned Senior Departmental Representative, appearing on behalf of the appellant, submitted at the outset that Notification No. 23/55 did not mention the tariff item under which precipitated silica fell. The correct classification of precipitated silica was under Item 68, CET, for, it was not a mineral product but a manufactured product. In this connection, he drew our attention to the manufacturing process which was given as a note in the Collector's appeal. The notification in question covered the specified mineral products as such or subjected to certain treatments, mainly physical in nature. The subject precipitated silica was, however, the result of chemical processing and manufacture and had wide application in rubber industry, toothpaste etc. It was very costly. Therefore, Item 68, CET was apt. Shri Tripathi then referred to the Tribunal's decision in Collector of Central Excise, Meerut v. Searsole Chemicals Ltd., 1985 (21) E.L.T. 343 holding "precipitated chalk" to be covered by the subject notification and submitted that this decision would not apply to the present case inasmuch as the notification, while it specifically included precipitated chalk within its ambit, did not so include precipitated silica.
5. In reply to a query from the Bench, Shri Tripathi stated that both mineral silica and precipitated silica were designated by the same chemical formula: SiO2. However, precipitated silica which was not a mineral but was a chemical derived from sodium silicate (in the case of precipitated chalk, the raw material is chalk) was not covered by the notification. He referred in this context to Serial No. 4 of the notification-oxide of iron-which referred to also the synthetic product unlike in the instant case. The C.C.C.N. (Customs Cooperation Council Nomenclature) classified natural silica as a mineral product under Chapter 26 (heading 26.01) and precipitated silica as a chemical in Chapter 28 (heading 28.13) and silica gel under heading 38.12. Since precipitated silica was not a pigment, colour etc., Item 14 CET could not cover it, nor would Notification 23/55. Therefore, the correct tariff item was 68 CET.
6. Replying on behalf of the respondent, Shri C.S. Lodha, learned counsel, submitted that the situation was analogous to refined oil where also the question arose whether refined oil was the same thing as or ceased to be oil. The Supreme Court in the Tungabhadra Oil Industries rare-AIR 1961 S.C. 413, held that the term 'oil' would include "hydrogenated oil". Also referred to in this context was the Supreme Court decision in the case of Champak Lal Thakkar, AIR 1980 S.C. 1989. So also, said Shri Lodha, the term 'silica' would include precipitated silica. Shri Lodha added that the starting material in the respondent's case was silica, dissolved in Soda Ash and not sodium silicate, as stated by the Senior Departmental Representative. Therefore, it was a processed mineral (silica). The "Hand Book of Fillers and Reinforcements for Plastics" by Harry S. Katz and John V. Milowski (published by Van Nostrand Reinhold Company) referred to precipitated silica as a mineral. Hawley's "Condensed Chemical Dictionary" also referred to precipitated silica as a grade of silica. The use of precipitated silica as an extender, filler etc. was not in dispute. The Collector of Customs (Appeals) held in an order (page 72 of the respondent's paper-book) that imported precipitated silica was eligible for the benefit of Notification No. 23/55. There was no reason to treat indigenous precipitated silica differently. Precipitated silica was a pigment within the meaning of the term, as explained in "Pigment Hand-book-Vol. I by Temple C. Patton- (A Wiley Inter Science Publication), and the relative Indian Standard published by the I.S.I. The Chemical Examiner's report (page 5 of the respondent's paper book) also said that precipitated silica was an extender pigment or filler.
7. Shri Lodha submitted that the process of manufacture of precipitated silica was immaterial, relying on the Supreme Court's decision in Indian Aluminium Co. Ltd. v. Union of India and Ors. 1985 (21) E.L.T. 3. It was submitted that in fiscal legislation, a term which described an article in a general way would cover all forms of the article. Reliance was placed for this on the following decisions :
Supreme Court decision in the Dunlop case. 1983 E.L.T. 1566 Supreme Court decision in Aggarwal and Co. case. 1983 E.C.R. 66 Govt. of India's order-in-review in re : Gujarat State Fertilizers Co. Ltd. Baroda 1982 E.L.T. 472
8. In this rejoinder, Shri Tripathi submitted that "Pigment Hand Book" by Patton (p. 161) supported his statement that precipitated silica was a synthetic product. Its major use, as given in the same book (pp, 162-163), was not as paint, pigment etc. but elsewhere. Insofar as the meaning of the term "mineral" was concerned, our attention was drawn to the Supreme Court decision in the M.M.T.C. case-1983 E.L.T. 1542 and the Tribunal's decision in the J.K. Batteries case 1985(20) E.L.T. 889. The S.D.R. concluded by submitting that if the Bench were to hold that precipitated silica fell under 14, CET, the respondent should be put to strict proof of the use of precipitated silica before the benefit of notification 23/55 was extended to it.
9. We have carefully considered the submission of both sides. The process of manufacture of precipitated silica as given by the respondent and as embodied in the Collector's appeal is as follows :-
"STAGE 'A'-Sodium Silicate is heated by steam and reacted with sulphuric acid to form precipitated silica, Slurry.
STAGE 'B'-The Slurry is filtered in Filter Press.
STAGE 'C'-The Filter Press is washed with water until the cake is free from sulphate impurities.
STAGE 'D'-Wet cake is fried to remove the moisture contents.
STAGE 'E'-The dried silica is pulverised to obtain Precipitated Silica in a powder form. To remove the iron tramp, the magnets are provided in the pulverising machinery. This Precipitated Silica is passed through a roller compactor to de-air the product, in case the Precipitated Silica is required in granular form instead of the powder form."
Both sides have stated in response to a query from the Bench that sodium silicate is manufactured only from silica sand.
10. Notification 23/55 dated 29-4-1955 reads as follows :-
"In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts the following items from the whole of the duty leviable thereon under Section 3 of the Central Excises and Salt Act, 1944 (1 of 1944), namely :
(1) Minerals, employed either as extenders, suspending agents or fillers or as diluents, namely :-
Barytes, Bauxite, Bentonite, China Clay, Celestite, Limestone, and chalk (including precipitated chalk), Fuller's earth, Gypsum, Mica, Silica, Asbestine, Talc and slate.
(2) Natural black minerals, namely :-
Graphite, llemenite black and Manganese Dioxide. (3) Omitted (4) Oxide of iron pigments-all colours, natural and synthetic. (5) *** (6) *** (7) ***"
11. In order to come within the ambit of the notification, the product must be silica (no dispute on this) and it must be a mineral employed either as extender, suspending agent or filler or diluent.
12. We have, therefore, to first consider whether precipitated silica would qualify to be called a 'mineral'. While the appellant contends that precipitated silica, being a synthetically produced chemical, would not qualify to be called a mineral, the respondent contends that it being nothing but a processed or purified mineral, would so qualify.
13. A sample of the respondent's product was tested by the Chemical Examiner of the Central Excise Department who reported-
"The sample is in the form of white fluffy powder. It is precipitated silica. Please see the note attached."
"Note :-
The sample under reference is Precipitated Silica and has been mentioned as "Extender Pigment or Filler" in the Pigment Hand.Book Vol. I page 161 by Temple C. Patton."
14. The above report does not help in ascertaining whether the subject product is a mineral. For that, we have to turn elsewhere.
15. It is obvious that the disputed product is not the naturally occurring mineral silica. As can be seen from the process of manufacture described earlier, silica sand (SiO2) is first converted into sodium silicate (Naa SiO3) which is then subjected to further processes resulting in silica (SiO2) precipitating out. The process of manufacture thus involves not merely physical changes but chemical changes as well. However, the chemical formula for both natural mineral silica and precipitated silica is the same, namely SiO2. Precipitated silica is stated to have superior properties.
16. We had occasion to consider the term "mineral filler" in the very notification in the Searsok Chemicals Ltd. case (supra). We noted therein that though precipitated chalk was a prepared product and, at the most, could be said to be a prepared or processed mineral, it was described as one of the most versatile mineral fillers in Kirk Othmer's "Encyclopaedia of Chemical Technology". It must be mentioned that in that case too, chalk underwent chemical and physical treatments resulting in precipitated chalk. Chalk (CaCO3) gets converted into Calcium Hydroxide Ca(OH)2 which, on carbona-tion, yields chalk (precipitated) (CaCO2). Even so, it was, as we noted, considered to be and classed as a mineral filler in literature. Now, the "Handbook of Fillers and Reinforcements for Plastics" by Henry S. Katz and John V. Milewski has an entire section devoted to mineral fillers. In it figures a Chapter (8) on Silica fillers, extenders and reinforcements. Silica amorphous- precipitated (hydrated) is described in this chapter. It may thus be seen that precipitated silica is considered in literature to be a mineral filler.
17. The "Glossary of Chemical Terms" by Clifford A. Hampel and Gessner G. Hawley (published by Van Nostrand Reinhold Company) has the following note on the term "mineral" at p. 177.
"(1) A generally used but not precise term referring to the non-living constituents of the earth's crust, which include naturally occurring elements, compounds and mixtures that have a definite range of chemical composition and properties. Usually inorganic, but sometimes including fossil fuels, e.g. coal, minerals are the raw materials for a wide variety of elements (chiefly metals) and chemical compounds. Minerals can be, and many are, synthesized to achieve purity greater than found in natural products. The term mineral industry statistically comprehends the mining and production of metals (ores), fossil fuels, clay, gemstones, cement, glass, rocks, sulfur, sand etc. (2) As used by nutritionists, the term refers to such components of food as iron, copper, phosphorus, calcium, iodine, selenium, fluorine and other trace micronutrients. . ."
It may be seen from the above excerpts that the term "mineral" is an imprecise term and that it comprehends even minerals, synthesized to achieve higher purity than that found in natural products. The term is applied even to micronutrients in food.
18. There is internal evidence in notification 23/55 itself which helps resolve the problem. S. No. 2 therein covers three specified "natural black minerals" (emphasis added), i.e. only the naturally occurring minerals, not their synthetic or artificial substitutes ("Graphite occurs naturally, but most is made synthetically by high-temperature treatment of amorphous carbon"-p. 128 of "Glossary of Chemical Terms" by Hampel & Hawley-
"Manganese dioxide is obtained from natural sources in Africa and is also made electrolytically"-p. 170 of the same book).
But the serial No. with which we are concerned here does not have any such qualification. It would, therefore, be reasonable and legitimate to infer that the said entry would cover also substances which are recognized in literature as "minerals", though they may not be in their naturally occurring state. And, we have already noted that precipitated silica is recognised as a mineral filler in the "Handbook of Fillers and Reinforcements for Plastics" by Karz and Milewski. We have also noted that the "Glossary of Chemical Terms" says that "synthetic" minerals of higher purity than natural products are also comprehended in the term "mineral".
19. Based on the above discussion and the analogy of precipitated chalk, we are of the view that precipitated silica can also be appropriately described as a mineral falling within the purview of S. No. 1 of Notification 23/55. It is the common position that in the case of both products, the starting material is a naturally occurring mineral (chalk or silica) which undergoes chemical and physical changes, resulting in the precipitated product (chalk or silica) which is chemically the same as the starting material. We have already held that precipitated chalk is a mineral filler. The notification, in terms, included precipitated chalk under the description "Minerals". We can see no good reason to say that precipitated silica is not a processed mineral only because it is not specifically included, though it is of mineral origin and is covered by the term "silica" in that notification.
20. The view which we are taking gains support also from the Supreme Court judgment in the Tungabhadra Oil Industries case-AIR 1961 S.C. 413, and the Champaklal Thakkar case-AIR 1980 S.C. 1889. Though the disputes in those cases arose under other laws and not the Central Excise law, the ratio decidendi of the judgments would, in our view, have relevance to the present case. The question before the Court was whether hydrogenated vegetable oil (vanaspati) continued to be vegetable oil notwithstanding the physical and chemical changes brought about by the process of hydrogenation. The court said : "yes". In the present case, mineral silica and precipitated silica have the same chemical formula and are similar in physical and chemical properties; only the latter has superior properties-unlike vanaspati which did undergo a certain chemical change in addition to physical changes. The case for saying that precipitated silica is silica is, if anything, stronger than in the case of vanaspati oil.
21. Reference was made by the learned counsel for the respondents in the course of the hearing to some decisions to the effect that in fiscal legislation, reference to an article in a general way would cover the articles in all its forms. Since we have found that precipitated silica is silica, (the dispute is not that precipitated silica is not silica but that is not a 'mineral' and we have discussed this aspect at length), it is not necessary to refer to and discuss these decisions.
22. The learned Sr. D.R. referred to para 8 of the Supreme Court decision in Minerals & Metals Trading Corporation of India v. Union of India and Ors.-1983 E.L.T. 1542-for ascertaining the meaning of the term "mineral". We have perused this judgment. The issue there was whether wolform ore concentrate containing WCb 65% was a "metallic ore, all sorts" within the meaning of item 26 of the Indian Customs Tariff of 1934. The imported concentrate, the court found, was of the merchantable quality and known commercially as such and imported as ore. Following the commercial sense of the term "ore", the Court held that the ore concentrate was "ore". The concentrate was the result of "selective mining" i.e. wolform ore taken out from rock and concentrating the WO3 content by washing or magnetic separation. In the case before us, it is not a question of simple physical separation of impurities and concentrating the active ingredient of the mineral but of subjecting the mineral to the chemical and physical process we have rioted. The M.M.T.C. case does not seem to be of direct relevance to the case before us.
23. During the hearing, the classification of precipitated silica in the C.C.C.N. was referred to by Shri Tripathi. C.C.C.N. classifies Silicon Dioxide SiOa (pure silica and silicic anhydride etc.) obtained by treating silicate solution with acids (as in the present case) as a chemical under heading 28.13 reading: "Other inorganic acids and oxygen compounds of non-metals (excluding water)". Silica Gel would fall under heading 38.12. Natural silica sand, it was pointed out, would fall under heading 25,05. All these may be so but what is good for the C.C.C.N. which is a self-contained code with section and chapter notes, rules of interpretation and a commentary in the shape of explanatory notes, may not be so for interpreting the Central Excise Tariff. It is well to remember that, for the resolution of the dispute before us, we do not have to interpret any items in the C E.T. because notification 23/55 does not refer to any tariff item; we have to interpret only a certain serial number and the entries relating thereto in the notification. This is quite apart from the fact that the C.C.C.N. has an appropriate item for precipitated silica viz. 28.13 unlike the C.E.T. The analogy of the C.C.C.N. is not, therefore, apt.
24. The departmental representative also referred to the Tribunal's decision in Collectors of Customs, Bombay and Calcutta v. J.K. Betteries, Bhopal and Ors. 1985 (2) E.L.T. 89. We have perused this decision. The question therein was whether Battery grade Manganese Di-oxide was a metallic ore falling under Chapter 26 or a mineral substance falling under Chapter 25 of the Customs Tariff Schedule, 1975. The said schedule is a self-contained code with its own statutory rules for interpretation and sections and chapter notes of statutory nature. The decision in the J.K. Batteries case, is, in our view, of no help in resolving the dispute presently before us.
25. As to the departmental representative's contention that precipitated silica would not fall under item 14 C.E.T., it may be mentioned that for the purpose of notification No. 23/55, it is not necessary that the substance should be classified under item 14 C.E.T. This is because the notification does not refer to the Central Excise Tariff item under which the substance should fall, in order to become eligible for the exemption. What is necessary is that the substance should be known to be employed either as extender, suspending agent, filler or diluent. Temple C. Patton's "Pigment Handbook" in the chapter on Synthetic Silica (precipitated) describes the multifarious uses of the substance. Among the uses are filler and extender. "The Handbook of Fillers & Reinforcements for Plastics" by Henry S. Katz & John V. Milewski, also describes precipitated silica as a filler and extender. The departmental representative contended that the respondent should be put to strict proof of the use of the substance for the purpose of exemption under the notification. Looking at the notification, it does not appear to us that such use should be proved. What appears to be relevant is that the substance should be known to be used or employed as extender, suspending agent etc. There are several exemption notifications under Central Excise Rule 8(1) which set out specific procedures to be complied with in order that exemption may be earned. In the present notification, there is no such stipulation.
26. Summing up, we hold that the precipitated silica manufactured by the respondent was eligible for the benefit of notification No. 23/55 dated 29-4-1955. We uphold the impugned order of the Collector (Appeals) and dismiss the appeal.