Customs, Excise and Gold Tribunal - Delhi
Nageswara Pozzolana Works Pvt. Ltd. vs Collector Of Central Excise on 1 October, 1991
Equivalent citations: 1992(58)ELT321(TRI-DEL)
ORDER S.L. Peeran, Member (J)
1. In this appeal, the appellants are challenging the correctness and validity of the order-in-appeal dated 6-11-1986 by which the Collector of Central Excise (Appeals), Madras has rejected the appeal of the assessee seeking classification of their product 'Possolime' under TI 68 of First Schedule of Central Excises and Salt Act, 1944 and confirmed the classification of the product under TI 23(1) instead of TI 23(2) of the First Schedule of Central Excises and Salt Act, 1944 done by the Assistant Collector of Central Excise, Guntur vide his order-in-original dated 6-5-1986. The Revenue is also aggrieved by the said order-in-appeal and have filed cross-appeal seeking classification of the product under TI 23(1) of the First Schedule of Central Excises and Salt Act, 1944.
2. The appellants contend that they are a SSI unit set up for manufacture of lime and pozzolana mixture and commenced production on 23-7-1982 and since then, they have been selling the said mixture in the market under the trade name 'Pozzolime'. They contend that they manufacture the said product in accordance with ISI specification for lime pozzolana mixture (IS 4098 - 1983). They contend that the said standard was prepared by the Building Limes Sectional Committee of the ISI and not by its Cement and Concrete Sectional Committee which prepared ISI specification for all varieties of cement. They contend that knowhow for the manufacture of pozzolime was obtained by them from Central Road Research Institute, New Delhi under licence given by National Research Development Corporation, New Delhi. They contend that they have been selling the said product pozzolime only as a product of lime and not as a variety of cement.
3. They further contend that on 4-9-1982, Superintendent of Central Excise, Macherla Range, visited their unit and drew samples of pozzolime for the purpose of classification of the product and to decide whether the product merited classification under the TI 23(2). On the basis of the Chemical Examiner report the Superintendent by his letter dated 19-4-1983, informed them that the product fell under TI 68 and not under TI 23(2) as it mainly composed of lime, silicious matter and gypsum and that it did not merit classification as 'Sagol cement' or 'Ashmoh'. The Superintendent also granted exemption as the product fell under TI 68 and the value of the clearances was below Rs. 30 lakhs.
4. They contend that they cleared upto 31-3-1983 for the period 1982-83, pozzolime worth about Rs. 2,11,105.75 P. and for 1984-85, the clearances were upto Rs. 12,90,000/- and for the period 1985-86, it was around Rs. 9,35,000/-. They contend that in view of this clearances and the classification made under TI 68, they were exempted from taking out a licence under the Act. However, they submitted proforma application of Pozzolime. The Superintendent of Central Excise on 9-4-1985 endorsed as follows -
"Verified sales for the year 1984-85 and also agreed with the declaration".
They contend that they had given the process of manufacture also in the said declaration and also claimed exemption under Notification No. 77/83 dated 1-3-1983. They filed monthly returns from 1985 onwards till March, 1986. The Superintendent by his letter received by them on 23-7-1985 that monthly returns were required to be filed and accordingly, they complied by filing the monthly statements from August 1985 onwards and also gave information for the months of April, May and June, 1985. However, a show cause notice dated 18-10-1985 read with the corrigendum, was issued by Assistant Collector demanding duty of Rs. 2,82,264.40 P. for the period 1-4-1985 to 30-9-1985 under Rule 9(2) of Central Excise Rules, 1944 and alleged violation of Rules 174, 52A, 226, 173B, 173C, 173F and 173G of the Central Excise Rules, 1944 in as much as it had manufactured and cleared a variety of cement known as 'Pozzolime' falling under TI 23 by resorting to misdeclaration of its product pozzolime a mixture classifiable under TI 68 and claiming exemption under Notification No. 77/83-C.E., dated 1-3-1983. The appellants filed their reply on 28-10-1985 denying the allegation. They have contended that the process by which pozzolime is manufactured is that first limestone is calcinated and the resultant product is the first base material and is called 'burnt lime'. The second base material is obtained by powdering shale (a type of clay) and by calcinating it in down draught kilns at about 100° C for more than 8 hours and cooling the resultant product and crushing it in jaw crushers. The second base material is called 'pozzolina material' and it is lime reactive. Burnt lime and pozzolina material are mixed in the ratio of 5.5 : 4.5 by weight. To that mixture is added 3% by weight of gypsum and all are inter-mixed by hand and ground to powder of 150 mesh specification in roller mills. The product pozzolime obtained thus is packed and sold in 40 kg bags.
5. They contend that the Superintendent took two samples of the product on 7-6-1984 to determine the composition and classification of the said product. The samples were sent to the Chief Chemist of Central Cement Research Institute of India, New Delhi. They contend that the reports of the analysis were not intimated to them.
6. They contend that the Assistant Collector had proceeded to classify the product mainly on the basis of the dictionary meaning of the expression 'cement' and the end-use of the product and also by relying on the ruling of the Tribunal as rendered in the case of Ajanta Cement v. Collector of Central Excise [1985 (21) ELT 828]. The appellants contended that the product in Ajanta Cement case was called as 'Plast well'. This product was made by grinding together granulated blast furnace slag, fly ash lime and gypsum in a certain proportion. They contended that this product is quite different from the product in question namely pozzolime.
7. The appellants contended in this appeal that the lower authorities have erred in proceeding to classify the product on the basis of dictionary meaning of the expression cement which according to them, has been deprecated by the Hon'ble Supreme Court. It is contended by them that the product has to be classified on the basis of trade understanding and the manner in which the product is understood in commercial parlance. It is contended by them that technically as per IS1 specification and even as per trade understanding, the product is not 'cement' and cannot be classified under TI 23(1) or TI 23(2). It is contended by them that the product is merely being used for plastering purposes and cannot be held to be 'cement', as the product is a mixture of lime and it is not called or described in the market or in trade or in engineering field as cement. They contended that it does not contain any portland or other variety of cement in it. It contains a minimum of 22% lime and its properties are totally different from those of cement. They contended that merely because some of the raw materials like limestone and gypsum are common in cement and the product in question, that by itself will not make the product same as, they contended, that the properties and chemical composition of both the products are different. They contended that cement is a compound consisting chiefly of silicates and aluminates of lime. They contended that lime occurs in cement in combination with silica and alumina. The German Standards Committee defines 'cement' as follows -
"Cements are bonding agents consisting essentially of compounds of calcium oxide with silica, alumina and iron oxide, which can harden in air and under water and are stable in water after they have hardened, and which furthermore satisfy the conditions as to strength and consistancy of volume laid down in the Standard Specifications for cement. The raw meal, or at any rate the main constituent of the raw materials, shall have been heated at least to sintering".
8. The definition of cement as defined in Cement (Quality Control) Order, 1962 made by the Central Government under Section 3 of the Essential Commodities Act, 1965 is defined as follows -
"any variety of cement manufactured in India and includes blast furnace slag cement, portland pozzolona cement, rapid hardening portland cement, white portland cement, hydrophobic portland cement, ordinary portland cement, low heat portland cement, high strength ordinary portland cement, cement used for the manufacture of railway sleepers, masonary cement, oil-well cement, super sulphated cement or any other variety of cement which the Central Govt. may, by notification in the Gazette, specify for the purposes of this order".
9. They relied on Cement Quality Control Order, 1962 which refers to several Indian Standards relating to different varieties of cement namely IS-8229-1976 dealing with oil-well cement and IS-6909-1973 dealing with super sulphated cement. They contended that even these two varieties of cement are not covered by TI 23(1) or under TI 23(2). They contended that similarly white portland cement falls under TI 23(2). They also relied on the Imported Cement Control Order, 1978 made by Central Government under Section 3 of Essential Commodities Act, 1955 which defines cement as meaning "any variety of cement imported into India but does not include oil-well cement and white cement and coloured (other than grey portland) cement". They also relied on the definition of cement occurring in Andhra Pradesh Cement Distribution (Licencing and Regulation) Order, 1980 made by Andhra Pradesh Government under Section 3 of the Essential Commodities, Act. It defines cement as 'any variety of cement manufactured in India and includes portland cement, pozzolana cement, blast furnace slag cement, water proof (Hydrophobic) cement, rapid hardening cement, masonary cement and high strength ordinary portland cement, but does not include oil-well cement and white and coloured cement (other than grey portland) cement".
10. Thus they contended that pozzolime does not contain any compound of chemical oxide with silica and iron oxide and contains only free lime. Pozzolime is only mixture of lime and pozzolona which is nothing but burnt clay and that merely because it is used for laying bricks and plastering brick walls, cannot by itself be considered as cement when it is known in the market as well as in the technical sense as cement. They contended that the product undisputedly is different from cement from the point of view of strength, setting, plasticity and other building properties. They also contended that it is a low cost material and a substitute for cement for laying bricks and for plastering just like lime and sand mortar mixture. They contended that the lower authorities have not differentiated between the cement and the impugned product on the basis of technical definitions of cement as well as on the trade understanding. They further contended that the demand is hit by limitation and that the classification cannot be opened retrospectively as they had not removed the goods clandestinely or by any misdeclaration or suppression of any facts. They contended that the Department had taken samples and being satisfied on the declarations filed by them, had communicated to them about their product being classified under TI 68.
11. Mr. M.G. Ramachandran, learned advocate, appearing for the appellants, submitted that the impugned goods 'pozzolime' was not a variety of cement as held by learned Collector and it was not covered under TI 23(2) of the erstwhile CET. He submitted that the copy of the test certificate relied by the lower authorities was not supplied to the appellants. He submitted that the lower authorities had ignored the ISI specification and the test report was not against the appellants. He contended that a product with gypsum and lime need not become cement. He contended that the lower authorities had wrongly relied on the ruling of the Ajanta Cements as reported in 1985 (5) ETR 821. He contended that the product has not been considered as cement in ISI specification covering the product and further Cement Control Act was also not applicable to the product in question. Even in trade, the product was not considered as 'cement'. It only had a function 'bonding agent'. It was marketed as 'pozzolime' and as alternate to cement but by itself it cannot be 'cement'. He contended that the learned Collector had gone wrong in relying on the dictionary meaning of cement and in rejecting the ISI specification. He contended that the learned Collector had classified the product under TI 23(2) of CET considering the product to be masonary cement. He contended that the product fell under TI 68 of the First Schedule of erstwhile CET and was entitled for the benefit of the exemption Notification No. 83/83. He drew comparison of the product to the one in the case of O.N.G.C. v. Collector of Central Excise as reported in 1989 (42) ELT 420 wherein it had been held that merely because lean gas had been used as fuel it would not ipso facto become fuel. He contended that the Collector had classified the product on the basis of end-use, which has been disapproved in the case of Dunlop India v. Collector of Central Excise as reported in AIR 1977 SC 597. He contended that the product has to be classified on the basis of trade parlance and commercial understanding. The product was not understood as 'cement' in commercial parlance and ISI specification is to be taken as indicative of trade understanding. In this context he relied on the ruling of Collector of Central Excise v. Pharmaceutical Capsules Ltd. [1986 (25) ELT 211]; Collector of Central Excise v. Krishna Carbon Co. [1988 (37) ELT 480 (SC)]. He also relied on the material placed on the record. The opinion of National Research Development Corporation of India was that the product is a 'surkhi mixture'. He also referred to the test result of Centre for Calibration Testing and Quality Control. He also referred to the Technical dictionary meaning of cement and drawing a difference between 'cement' and 'pozzolime', submitted that the product was classifiable only under TI 68 of CET. He further contended that retrospective classification done in this case was not proper. He contended that there was no clandestine removal or misdeclaration as alleged in the show cause notice and hence, there was no case for the department to confirm duty even for six months in this case. In this context, he relied on the ruling rendered in the case of Madhumilan Syntex (P) Ltd. v. Collector of Central Excise as reported in 1988 (35) ELT 349.
12. Sh. L.N. Murthy, learned JDR appearing for the department, contended that the Assistant Collector had followed the Ajanta's case (supra). The cross-appeal of the department was against the change of classification done by the learned Collector from TI 23(1) to TI 23(2) of CET. He therefore, submitted that the classification done by the Assistant Collector be confirmed in this case. On a query from the Bench, he submitted that the department did not dispute the party's contention that it was not being marketed as cement.
13. We have heard both the sides, carefully considered their submission and also perused the material on record and the findings of the lower authorities. The question that arises for our consideration is as to whether to classify the product Pozzolime under TI 23(1) or TI 23(2) or TI 68 of the First Schedule of the erstwhile Tariff. The TI 23(1) and (2) reads as follows -
"(1) Grey portland cement (including ordinary portland cement, portland Pozzolana cement and portland slag cement), masonary cement, rapid hardening cement, low heat cement and water-proof (hydrophobic) cement (2) All others"
14. The Assistant Collector in his order has noted that the ingredients of the product Pozzolime are namely Quarts free lime, gypsum muscovite, Biototo, folds par as per the test certificate issued by the National Council for Cement and Building Materials, New Delhi. The appellants contended that this test certificate was not supplied to them and the reliance by the Asstt. Collector on this test certificate vitiates the order. The Asstt. Collector has also proceeded to consider the product in question as cement being same on the basis of ingredients gypsum and has rejected their contention that merely because the impugned product is not used in RCC works, is not sufficient to take away the product from the category of cement. He has conceded the TI 23 to cover cement of all varieties. He has seen the dictionary meaning of cement as in McGraw Hill Encyclopedia of Science and Technology which defines cement as any substance that acts as a binding agent. He has also noted the Webster's Third New International dictionary which defines cement as binding element or agency, any fabricated substance to make objects adhere to each other as asphalt, gypsum, lime paster or plaster. The Asstt. Collector has also rejected the appellants' contention that they have neither used any clinker nor mixed any portland cement that by itself, cannot take out the impugned product from the category of cement and according to the Asstt. Collector, the cement can be manufactured without the process of clinkering also. He has also held that there is no authority that only cement that goes through clinkering process is classified as cement. He has classified the product under TI 22.
15. The Collector has upheld the classification under the category of cement and has relied on the definition of cement as appearing in Concise Oxford Dictionary 5th Edition on page 192 which defines cement as "paste and hardening into stony consistence for binding walls etc., strong mortar of calcinated lime and clay; any substance applied soft for sticking things together".
He has also relied on the definition of the word 'Mosain' appearing in the said dictionary which means "to complete, strengthen with masonary'. Therefore, on the basis of this definition, the Collector (Appeals) has held that any work of building construction which used stones or bricks, will be considered as masonary work as per definition in dictionary. He has held that this pozzolime is admittedly used for binding of bricks and stones and for plastering and thus would be classifiable under Item 23(1) and not under TI 23(2), as according to him, the product is masonary cement but some variety of cement not specifically mentioned in TI 23(2).
16. The Revenue is aggrieved with this portion of the classification and hence they filed a cross appeal. The Revenue has merely gone by the grounds of Assistant Collector to seek classification under TI 23(1) in their cross-appeal.
17. Now it has to be seen by us as to whether to consider the product as cement mainly on the basis of the presence of lime and gypsum being common in the product in question and that cement and whether ignore the trade understanding, ISI specification and go by the dictionary meaning as relied upon by the Revenue? The burden of proof as is well known for classification, is always on the Revenue. It is also well-settled now that dictionary meaning cannot be relied upon and it is only the trade understanding and manner in which the product is understood in commercial parlance, is the deciding factor for classification. It is also well-settled that ISI specification should be preferred unless there are strong reasons to the contrary as has been laid down by the Supreme Court in the case of Collector of Central Excise v. Krishna Carbon Paper Co. [1988 (37) ELT 480] at page 486. It has been held therein that in the absence of a definition in the Act or the Tariff, or the notification itself, the definition and specification as laid down by ISI, had to be relied upon as representing the general understanding of the trade and the industry. The ISI specification in this case, in respect of the product lime pozzolana mixture under ISI No. 4098-1983 has described the product as an alternative to cement and not as a 'category' of cement. The portland cements are classified under different specifications IS-3460-1988, IS-12600-1989. As can be seen from these specifications, there are two Committees under the ISI - one Committee is called Cement and Concrete Secondary Committee and other called Building Lime Secondary Committee. The characteristics and standards of cement are dealt with by Cement and Concrete Secondary Committee and that of the pozzolana are dealt with by Building Lime Secondary Committee. Therefore, as can be seen from this classification of the two committees, the product in question is not controlled by Cement Committee. The definition of cement as given in dictionary of Chemistry is given below -
"Cement - A powdered mixture of calcium silicates and aluminates, which is made by heating limestone (Ca Co 3) with clay and grinding the result when mixed with water reactions occur with water (hence the name hydraulic cement) and a hard solid aluminosilicate is bonded"
Comparing this definition with the other definitions relied on by the appellants, it is very clear that the product in question and cement are two different independent products with different composition, characteristics and properties. The Revenue has merely gone on the basis of the bonding nature of the impugned product to consider it as a cement. They have also gone on the basis of its use in the brick laying and plastering. This is by itself, is not sufficient to consider the product as cement, reason being, that cement contains chemical silicates and aluminates and also iron oxide. The various legislative controls on cement are with a view to maintain specific standards of cement manufacture. The product, therefore, has not been brought within the ambit of cement in the Cement (Quality Control) Order, 1962 as well as under the Essential Commodities Act. It, therefore, cannot by any stress of imagination be held to be cement merely because of common of two ingredients mainly limestone and gypsum. The dictionary meaning of cement cannot be the factor for considering the product in question as cement as cement has a different meaning and trade understanding. The product which is an alternative, is used for such purposes as laying bricks and plastering which function can be obtained by mixture of limestone and, therefore, cannot be considered as a cement. The manufacturing process of both the products are different and admittedly cement has to satisfy very high standards laid down in the technical literature, ISI specifications and also Cement (Quality Control) Order, 1962, besides other legislations like Essential Commodities Act. The learned Collector has classified this product under TI 23(2) as other categories of cement. In order to fall under this residuary item, it has to in the first instance, be a cement and in case it does not come within the categories of cement specified under Item 23(1), only then it can be brought under residuary item of 23(2) as "others". The technical literature, ISI specification as well as the trade understanding has clearly considered this product as different from cement. The Department of Industries, Government of Andhra Pradesh, have issued a letter dated 28-11-1985 directly to the Asstt. Collector which is produced in the paper book, which states that the product has been opined by the National Research Development Corp. of India, New Delhi and CISR Polytechnology Transfer Centre, Hyderabad that the limestone pozzolana mixture is different even from masonary cement which is covered by a different Indian standards and it is also quite different from ordinary portland cement. The CSIR - Polytechnology Transfer Centre (Council of Scientific and Industrial Research), Hyderabad by letter dated 18-11-1985 informed that they had given the knowhow to the appellants in respect of the impugned product. This letter is also annexed in the paper book which has been submitted by the Directorate of Industries to the Asstt. Collector also. This letter states that the product is a limestone based product and quite different from ordinary portland cement both in composition and properties. It also states that the reactive surkhi and lime reactive surkhi mixture (Lime pozzolana mixture) are quite different from ordinary portland cement.
18. The letter dated 6-11-1985 written by the National Research Development Corp. of India to the appellants is also annexed in the paper book which was also given to the Asstt. Collector. This letter confirms that the constituents of reactive surkhi and limestone reactive surkhi mixture are entirely different from that of the ordinary portland cement. This letter further states that ordinary portland cement is a mixture of calcium di and tri - silicate, tetra calcium alumina ferrate etc. The strength of the cement depends on the proportion of the above constituents and all physical properties of the cement are entirely different from lime reactive surkhi mixture which is the impugned product.
19. The Department of Industries, Andhra Pradesh has also issued a letter to the Assistant Collector on 30-10-1985 by which they have informed them that the lime mixture manufactured by the appellants, cannot be treated as a variety of cement and that it is not a substitute for cement for all purposes. The test result of the Engineering Materials Laboratory relied on by the appellants is also noted which gives a different compressive strength in respect of the impugned product.
20. Taking all these materials into consideration and also the various definitions in technical dictionaries and ISI specifications besides the trade parlance understanding of cement and lime pozzolime mixture i.e. the impugned product, it cannot be considered that the impugned product is a cement or a variety of cement to be classified under TI 23(1) or TI 23(2) of the First Schedule of erstwhile Tariff.
21. The Revenue has relied on the ruling of Ajanta Cement. The product in question was plast well (cement). The Bench considering the various ingredients and materials in the product, had come to the conclusion that the product was a variety of cement. In this particular case, the product does not come as a variety of cement both on the basis of technical understanding and trade parlance and, therefore, the ruling is clearly distinguishable and not applicable to the facts of the case.
In the result, the appellants succeed in the appeal and the Revenue's crossappeal is rejected.