Customs, Excise and Gold Tribunal - Delhi
Shambhu Nath And Sons Ltd. vs Collector Of Central Excise on 12 January, 1983
Equivalent citations: 1983ECR291D(TRI.-DELHI), 1983(12)ELT396(TRI-DEL)
ORDER H.R. Syiem, Member (T)
1. These are two appeals from M/s Shambhu Nath & Sons Ltd., Shahabad Markanda (Haryana) (The name has been changed to Indian Sulphacid Industries Ltd. against the order-in-appeal No. 2316/CE/76 (C. No. 221/CE/APPL/CHG/76 dated 1-11-76) and the order-in-appeal No. 781-CE/76 dated 23-4-76 both of the Appellate Collector of Central Excise, New Delhi.
2. The appellants are manufacturers of battery grade sulphuric acid in their factory. Demands were issued by the Superintendent of Central Excise, Panipat, one No. CE-20/Acid/73/2195 dated 24-8-74 for the period from 1-9-73 to 31-7-74 for a sum of Rs. 10,243.35, a second notice No. CE-20/Acid/73/2411 dated 12-9-74 for the period from 9-6-64 to 31-8-73 for a sum of Rs. 72,851/36 and a third for the period 1-8-74 to 31-5-75 for a sum of Rs. 13391/84. These sums were amended by the Asstt. Collector by two corrigenda both dated 21-6-75 amending the amounts from Rs. 10243/35 to Rs. 11438/60 and from Rs. 72851/36 to Rs. 78202/50. The demands arose as a result of the central excise authorities coming to the conclusion that the battery grade acid manufactured and cleared by the appellant company was purified sulphuric acid and therefore not assessable on the basis of tariff value fixed under notification No. 173/7O-Central Excise dated 28-11-70 fixing tariff values for unpurified sulphuric acid. In his order dated 4-7-75 the Assistant Collector of Customs and Central Excise, Chandigarh, came to the conclusion that battery grade acid did not fall under the category unpurified acids. The Assistant Collector examined the process of manufacture after visiting the factory and the plant in the company of the Works Manager of M/s Shambhu Nath & Sons. During the visit the Asssistant Collector observed that "the party is manufacturing commerical grade sulphuric acid as well as Battery grade sulphuric acid. The impurities are removed in sulphur pit and silex filter. The process of purification is done at catlyte tower where SO2 gas is transformed into SO3. The SO3 gas is further transferred from catlyte tower to Heat Exchanger No. 1 after cooling down the temperature. From there, part of the gas is transferred to absorption tower and part of the gas is transferred to Battery plant. The gas which goes to absorption tower plant, which is made of MS sheets, transforms it into commercial grade acid and while the other goes to Battery grade plant which had an absorption tower made of glass. The Battery grade sulphuric acid plant is meant to convert SO3 gas into Battery grade sulphuric acid by further purification, and the purpose of glass tower is to eliminate the iron content in the sulphuric acid. Thus it would be seen that the battery grade sulphuric acid is a purified acid, and converted into special grade i.e., battery grade. In purified and made to special grade. 'Grade' implies the degree of rank, proficiency, quality and value. All these expressions are related to 'function'. Therefore, an acid though may not be 100% pure but if made to a special grade so that it is suitable for a particular use, falls outside the purview of tariff value and has to be assessed on its market value. Battery grade acid is that which can suitably be used in the batteries without fear of any harm." (Sic) He also drew support from the description of battery grade sulphuric acid appearing in the Condensed Chemical Dictionary published by Reinhold Publishing Corporation , New York :
"Battery Acid (electrolyte acid), sulphuric acid of strength suitable for use in storage batteries. The product is water-white odourless and practically free from iron. Derivation :By diluting high grade commercial sulphuric acid with distilled water to standard strength."
The Assistant Collector went on to say that the above definition goes to show that battery grade acid is manufactured out of commercial grade sulphuric acid by rendering it free from iron and that it means that the acid should be pure to the extent of practically containing no iron and that the criterion is its suitability for use in batteries and not that it would be 100% pure. In the same order however we read that the Assistant Collector during his visit found, amongst other things, that the gas which goes to the absorption tower plant which is made of M.S. sheets is transformed into commercial grade acid while the other goes to battery grade plant which has an absorption tower made of glass. From this it is clear that there are two streams of gas, one going to the M.S. sheet tower plant and another going to an absorption glass tower. The Assistant Collector says in the same order that the purpose of the glass tower is to eliminate the iron content in the sulphuric acid. In this, however, the Assistant Collector is in error because he does not stipulate that the gas that goes to the glass tower is an iron laden gas which has to be freed from iron. The fact of the matter is that the sulphuric acid formed in the glass tower will have less opportunity of coming into contact with iron and acquiring the element. This is not the case with the sulphuric acid formed in the mild steel sheet tower where the acid will acquire a certain amount of iron impurities in it. The process of manufacture discussed by the Assistant Collector shows not that the commercial grade acid formed in the M.S. sheet tower plant goes to the battery acid plant but that the two streams are independent of each other. The process in the glass tower plant is not so much the elimination of iron in the acid but the prevention of iron finding its way into the acid by contact with an iron surface as would have occurred in the mild steel sheet tower plant it is therefore not correct to any that the battery acid manufactured by the appellants has been purified in order to free it from iron content. To this extent the contention of the appellant that there has been no purification has to be accepted,.
3. The demands dated 24-8-74 and dated 12-9-74 were raised under Rule 10A of the Central Excise Rules. The party had raised the question of time bar in respect of these demands. There can be little doubt that the resort to Rule 10A was forced upon by the Central Excise authorities by the realisation that the demand was time-barred under Rule 10. In his order dated 8-4-76. the Appellate Collector deals with this dispute by saying that the Assistant Collector had specifically stated in the adjudication order that the appellants did not submit any classification list about battery grade acid. It appears that they had all along been intimating to the department that they would be manufacturing iron free sulphuric acid. They had not given any explanation as to why they did not declare the subject acid in the classification list when it was known by this name in trade parlance. In his order of 4-7-75, the Assistant Collector rejected the appellant's argument about the time bar on the ground that the party had not submitted any classification list to the department and it had suppressed the information in order to evade appropriate Central Excise duty ;he held there was an element of fraud in such suppression and so Rule 10 was not applicable.
4. The question therefore has to be considered whether the Central Excise authorities were aware of the nature of the acid said to have been described by the appellants as iron free sulphuric acid [the appellants have been describing the goods as battery grade acid in their gate passes and gate passes are available to the assessing officers]. The appellants are said to have even written letters in June, 1964 to the Inspector, Central Excise, Shahabad and Superintendent, Central Excise, Yamunanagar that they expected to start manufacture of iron free sulphuric acid. The Appellate Collector says in his order of 8-4-76 that according to the Chemical Dictionary (Hawley) battery acid is practically free from iron and it is used as an electrolyte in batteries and that the above view is very well known in industry. Therefore, since the appellants are known to have intimated to the assessing officers that they would manufacture iron-free sulphuric acid, it is not clear why the Central Excise authorities did not know that the acid would be comparatively freer from iron content than the commercial acid which the appellants were also manufacturing. In our opinion the description iron-free sulphuric acid was even better than the description battery grade acid to tell one that the former would be freer from iron impurities than the latter. If the assessing officers were ignorant of the distinction even when the description was so revealing, we cannot understand why the description battery grade acid would have been any more informative for their purpose. We cannot support the conclusion that the Central Excise authorities were not in possession of sufficient material which would enable them to learn that the acid contained less iron than the commercial grade acid. It is clear therefore that when the Central Excise authorities took resort to Rule 10A, they did so only because they found the demand would be hit by time bar under Rule 10 and not because the assessees had not given sufficient description to enable correct assessments to be made. This being the case, we must hold the demands to be time-barred.
5. The notification 173/70-Central Excise does not specify the purification required of the acid nor does it state the nature of impurity the acid should contain to make it eligible for assessment under tariff value. Acids can contain various impurities ; while one kind of impurity may be tolerated for one purpose, it may not be so tolerated if the acid is to be used for some other purpose. But in actual life it is next to impossible to obtain a pure substance i.e., a substance totally free from all impurities. The best and purest gold has less than 100% purity. Whether the substance is a metal or a liquid or a gas, total purity cannot be achieved in actual practice. This is why in most scientific usage, the freedom of a substance of cartain impurities when a particular use is desired, specifies the limit of tolerance for the presence of such impurities, depending on the use. Even in the present case, the iron free acid is only relatively free from iron ; it still contains traces of iron but of a tolerance so low that it does not interfere with the use to which the acid is to be put, that is to say, as an electrolyte in storage batteries.
6. Even otherwise, as we have discussed above, we have seen from the process of manufacture detailed by the Assistant Collector that the acid is not a purified acid but one of two kinds of acids manufactured by the appellant. The appellants urged before the Tribunal that purification of acid stipulates the presence of unpurified acid which is subjected to purification to free it from unwanted contents. The process detailed by the Assistant Collector does not show that there has been set a purification process. We are, however, not going into this question in view of what is discussed above.
7. We set aside the three demands because they have to recommend themselves. Besides, two of them are time-barred. When a fact that is well-known to industry remains unknown for 10 years to Central Excise, a department that administers a tariff of tax rates that are categorised goods by their scientific and technological properties, we are compelled to reflect upon the application of the officers. But if the officers were ignorant of what was well-known to industry, they have only themselves to blame. That this was no more error of judgment is manifest.
8. The appeals are accordingly allowed. Refunds of the sums demanded should be given if the assessees have already paid them.