Madras High Court
Alco Industries vs Collector Of Central Excise, Madras And ... on 1 January, 1800
Equivalent citations: 1988(17)ECC99, 1988(15)ECR178(MADRAS), 1987(32)ELT279(MAD)
ORDER
1. The sole common question that arises for consideration in all these cases is, whether wet grinder is exigible to excise duty under Excise Tariff Item 33C.
2. The petitioner in W.P. 3233, 3244, 4281, 4282, 4348, 4473,5161, and 7494 of 1982 are traders-dealers in wet grinders among other things, The petitioners in W.P. 596, 4280, 5127 of 1981 and 8588 of 1982, are manufacturers of wet grinders.
3. In W.P. 3233, 3244, 4280 to 4292, 4348 , 4473, 5127 and 5161 of 1981, the prayer is for the issue of writs of prohibition the respondents from in any manner acting on the strength of Trade Notice No. 170/80/4G/GL/80 dated 3-10----1980 reclassifying the domestic grinder marked by the petitioners, and giving effect to such reclassification in any manner to under some other guise. The prayer in the W.Ps. Nos. 7494 and 8588 of 1982 is to quash the above said Trade Notice and for a consequential mandamus restraining the respondents from giving effect to the same. The prayer in W.P. 596 of 1981 is to quash the impugned order of the Collector, Central Excise, and for a consequential mandamus restraining the respondents from giving effect to the Trade Notice.
4. It is an admitted fact that both the traders and the manufacturers purchase from outsiders electric motors to fix the same in grinders. It is also an admitted that Excise Tariff Item 33C came into force with effect from 1-3-1969 by Finance Act No. 14 of 1969. The and circumstances leading to the filing of these writ petition may now be noted. We have noticed earlier that Excise Tariff Item 33C was introduced by Finance Act 14 of 1969. When the departmental people called upon the manufacturers in wet grinders to take out a licence under the Central Excise Act, they protested and made, made repre sentations through the Manufacturers' association. Subsequently, the manufacturers were informed by the Central Excise Act, they protested and made representations through the Manufacturers' association. Subsequently, the manufacturers were informed by the Central Excise Officers that the domestic grinders will fall within the scope of Excise Tariff item 33C. Notwithstanding the stand taken by the Central Excise Tariff official earlier at a later point of time, the department tried to make inroads by bringing out trade notices to the manufacturers stating that the domestic grinders will fall within the scope of Item 33C of Central Excise Tariff. Again representations, the Government of India, Ministry of Finance, Central Board of Excise and Customs, New Delhi, by their reference No. 154/1/75/CX4 dated 12-6- 1975, issued a circular sating that wet grinders driven by external motor system would fall outside the scope of Item 33C of the Central excise Tariff. While so, Suddenly another circular Trade Notice which is impugned in these writ petitions came to be issued stating that the wet grinders marketed without any electrical came to be issued that the wet grinders marketed without any electrical motor will fall under Tariff Item 68 and if the same is marketed with electric motor, will fall under Tariff Item 33C. The petitioner, aggrieved by the charge in the view expressed in the Trade Notice, have, filed these writ petitions for the reliefs as mentioned above.
5. The respondents, apart from raising a preliminary objection as to the maintainability of the writ petitions , have also answered the points raised in the affidavits filed in support of the writ petitions in their common counter affidavits as well as the individual counter affidavits. The substance of the counter affidavits may now be noted. According to the respondents, the impugned trade notice is just a communication advice to the trade and the same has no legal effect. The Assessing and Classifying Orders are independent quasi-judicial authorities and they are not bound by any trade notice in discharge of their legal duties. The trade notices have no legal effect and, therefore, they cannot be impugned in proceedings under Article 226 of the Constitution of India. So far as the petitioner in W.P 596 of 1981 is concerned, he has no effective alternative statutory alternative remedy. for these reasons the respondents urge that the writ petitions are not maintainable.
6. On merits, the respondents have stated that though the manufacturer of wet grinder and trader in wet grinde purchase the electric motor separately from another manufacturer, they will be liable to pay excise duty under Item 33C of the Central Excise Tariff in view of the process of manufacturer involved in fitting motor the steel frame of the wet grinder in the space asllotted for the same sand by connecting the wheel base of the grinder with the motor by using a V-belt. It is the case of the respondents that after fitting the electric motor to the steel frame, in the manner stated above, a new different product emerges and the same is so commercially consumed in the market which is different from the raw materials, namely, motor and grinder portion. Therefore, the new produce is excisable to excise duty under Item 33C of the Central Excise Tariff. For this purpose, the respondent relies upon the definition of 'manufacture' in Section 2(f) of the Central Excise and Salt Act, 1944. It is stated in the counter affidavit that invariably the petitioners are marketing the wet grinders after assembling the same, and that no consumer will venture to but a wet grinder in any unassembled condition as the assembly involves a number of manufacturing operations. The fact that electric motor fitted to the wet grinder has already has already been subjected to excise duty is of no consequence as the electric motor was subjected to excise duty under another specific tariff entry. But the excise duty levied after the motor is fitted to the wet grinder is on a commercially different and distinct product, falling under 33c of the Central Excise Tariff. The scheme of excise itself envisages levy of duty on the raw materials as well as the finished goods so long as the articles fall under different item or special item of the same Tariff item. The contention that the traders are not manufacturers and they are selling only the goods already manufactured, according to the respondents, is a misconceived one as the wet grinder marketed trader is a different from the mere wet grinder without a motor and motor purchased by them previously separately. Even otherwise, according to the respondent, the liability for payment of excise duty is fastened victoriously on the petitioners as well. The wet grinder in question is certainly a domestic appliance and it is primarily designed to operate on electrical energy. The electrical motor is an integral part of the grinder is bought to the market and called as such in the commercial parlance. The claim of the petitioners that wet grinder in question can be operated even without electricity, for example, by hand or otherwise, will make the purpose nugatory and such allegation is made only for the purpose of the case. The language used in Entry 33C is quite clear and all types of domestic electric appliances are covered under Item 33C. The legal position will be quite clear by reading the Tariff Entry vis-a-vis Notification 33/69 dated 1- 3-1969 issued under Rule 8 of the Central Excise Rules. That notification exempts the schedule annexed to the notification. The grinders and mixes are specifically included under Item No. 3 in the schedule which means that the wert grinders are liable to duty.
7. The respondents have further stated that there are questions of fact raised by the petitioners which cannot be satisfactory decide in the proceedings under Article 266 of the Constitution and these questions must be left to be decided by the appropriate authorities functioning under the Central Excise and Salt Act, 1944. The wet grinders are commonly known and used only as an electric appliance and not otherwise. On the basis of these averments in the counter affidavits, the respondents have prayed for the dismissal of the writ petitions.
8. Mr. A.K. Kailasam, learned counsel for the petitioners, placing reliance heavily on two division Bench judgments of the Gujarat High Court namely, Balkrishna Rechhodlal Sha v. Asst. Collector of Central Excise, Ahmedabad and others, reported in 1981 ELT 121, submitted that the goods dealt with by the Gujarat High Court are identical to the goods in dispute in these cases and the Excise Law being a Central enactment, must be enforced uniformly throughout the country and, therefore, the country views taken by the central Excise authorities in Tamil Nadu State cannot be sustained. In support of this proposition, he relied on the following decisions : The Union of India and other v. The Elphinstone Spinning and weaving Mills Co. Ltd. reported in 1969 E.L.T 680, Lachmandas Tobacco dealers v. Union of India and others, reported in 1978 E.L.T 502, Geep Flahslight Industries Lts., Allahabad v. Union of India and others, reported in 1981 E.L.R 684 and Electronic Industrial Corporation and others v. Collector of Customs, Bangalore that the reasons given by the Collector of Central Excise in the impunged order in W.P 596 of 1981 that the Government have not accepted the Gujarat High Court's judgment cannot be allowed to stand. He brought to my notice that the Revenue, aggrieved by the judgment of the Gujarat High Court declined to admit the Special Leave and thereby confirmed the judgment of the Gujarat High Court.
9. The learned counsel, apart from placing reliance on the judgment of the High Court (above referred to) submitted that imediately after the introduction of Item 33C in the Central Excise Tariff, there was some doubt whether wet grinders will fall under Item 33C of the Central Excsie Tariff. It was decided by the authorities concerned after a prolonged discussion with the traders and among themselves that wet grinders will not fall under Item 33C of the Central Excise tariff in as much as they did not have in-built motors for instant operation in the system itself. But they are operated by V-belt mechanism and through external motors. This conclusion, reached by the Collector of Central Excise and Customs and they did not have in-built motors for instant operation in the system in a conference was accepted by the Central Board of Excise and Customs and the Central Government issued appropriate instructions in this regard. While so far, after a long time and whren there is no change in the Entry itself, and when there is no judicial prnouncement by way of any other High Court or Supreme Court taking a different view from that of the Gujarat High Court, the respondents have no valid reasons to issue the impugned trade notice reclassifying the wet grinders and bringing the same under Item 33C of the Central Excise Tariff. Mr. A.S. Kailasam, learned counsel for the petitioners contended that if at all the respondents can depart from their earlier stand, it must be for cogent reasons such as fresh facts subsequently brought to their notice or any relevant change relevant change in the Tariff Entry or any other prouncement of High Court or supreme Court necessating reconsideration of the issue. Otherwise they cannot depart from their earlier stand as and when they like. For this proposition, he relied on a Division Bench decision of the Delhi High Court in J.K. Synthetics Ltd. and another v. Union Of India Organic Chemicals Ltd. v. Union of India and others, 1983 E.L.T. 34 and Madras Rubber Factory Ltd. v. Asst. Collector of Central excise Madras and another, 1981 E.L.T 565.
10. Learned counsel for the petitioners further contended that in the fitment of motor into the wet grinder in the places meant for it. No manufacturing process takes place within the meaning of Section 2(f) of the Act and the assumption on the part of the respondents that in the process of fitment of motor, there was a process of manufacture, and at the end, a new product emerges out of such manufacturing process excigible to excise duty is without any basis. To substantiate his contention that there is no manufacturing process is involved, he cited a decision in Union of India and others v. Delhi Cloth and General Mills Co. Ltd. and others 1977 E.L.T. 199.
11. The learned counsel submitted that the trade notice impugned in these writ petitions will be binding on the authorities subordinate to the Collector who has issued the Trade notices and they cannot pass judgments - B. Rajgopal v. State Transport Appellate Tribunal, Madras and others, , Orient Paper Mills Ltd. v. Union of India, , Union of India and Others v. Tata Iron and Steel Co. Ltd., Jamshedpur, 1977 E.L.T (J 6), Bata India Ltd. v. Asst. Collector of Central Excise, Patna, 1978 E.L.T (J. 211), Guest Keen Williams Ltd. v. Union of India and others, 1980 E.L.T 133, Poona Bottling Co. Ltd. v. Union of India and others, 1981 E.L.T 389 and K.P Vergheese v. Income Tax Officer, Erankulam and another, . The learned counsel also cited a Division Bench judgment of this court in William Jacks and Co. Ltd. v. State of Madras, 11 S.T.C 340, to substantiate his contention that wet grinder will not come within the purview of Item 33C of Central Excsie Tariff.
12. On these contentions, the learned counsel submitted that the impunged in trade notice is liable to be quashed. So far as W.P 596 of 1981 is concerned, the learned counsel submitted that the impounged order is based on the trade notice and, therefore, it is liable to be set aside even on that ground apart from the fact that the trade notice is not in conformity with Item 33C of the Central Excise Tariff.
13. Mr. T. Somasundaram, learned counsel appearing for the respondents, answering the contentions advanced by the earned counsel for the petitioners submitted that the assessing authorities are entrusted with quasi-judicial functions and as such, the trade notice, even if it is one issued by Central Excise Board, will not bind them and the assessing authorities will function independently of the trade notice. In support of this, he cited the judgment of the Supreme Court in Orient Paper Mill Ltd. v. Union of India, , Union of India v. The Elplinstone Spinning and Weaving Mills Ltd., 1978 E.L.T. 680 and Madhu Wool Spinning and Weaving Mills Ltd. v. Union of India, 1983 E.L.T 2200.
14. Next he contended that the writ petitions with prayers for the issue of writs of prohibition are misconceived as no writs for Prohibition will lie in the facts and circumstances of the case, in as much as the jurisdiction of the Assessing Officer is not in doubt. In support of this he relied on a Division Bench Judgment of this court in Collector of Central Excise, Madurai v. Madurai Coats Ltd. 1986 E.L.T 157. The learned counsel also submitted that Rule 233 of the Central Excise Rules enables the Revenue to issue trade notices, and therefore, the petitioners cannot challenge the impunged trade notice. The further contention is that Entry 33c of the Central Excise Tariff has to be construed in the light of the words employed therein and decisions interpreting the items or entries in other enactments cannot be relied on for understanding the scope of Entry 33C. For this proposition, he cited a decision in Brooke Bond India Ltd. v. Union of India, 1984 E.L.T 32. The learned counsel submitted that even though the manufacturer of wet grinder and the trader have purchased electric motors from third parties and thereafter fitted the latter into the steel frame of the wet grinder, and connected the motor with the wet grinder, a manufacturing process takes lace and as a result of such a manufacturing process, a commercially new product emerges. Section 2(f) of the Act defines that the manufacture and the process employed in fitting the electric motor into the steel frame of the wet grinder will amount to manufacture within the meaning of Section 2(f) of the Act. For this proposition, he cited two decisions, namely Empire Industries Ltd. v. Union of India and others 1985 E.L.T 279 and Vijaya Cycle and Rikshaw Co. v. Commissioner of Sales Tax, U.P. 27 S.T.C. 573.
15. Mr. T. Somasundaram, the learned counsel further submitted that a persual of the Notification 33/69 issued undr Rule 8 of the Rules framed under Central Excises and Salt Act will clearly show that the wet grinder in question will fall under Item 33(c) of the Central Excise Tariff. Even otherwise, this court and the Supreme Court in a number of cases have taken the view that for the purpose of the levy of the tax or duty, or any particular commodity, dictionary meaning given to the commodity in question by the common people or traders must be taken into account. If the test is applied, the grinder inquestion will certainly fall under Item 33C of the Central Excise Tariff as without electric motor wet grinder is incomplete.
16. The learned counsel for the Revenue distinguished the two Division Bench judgments of the Gujarat High Court on which the petitioners' counsel have placed heavy reliance by stating that the goods dealt with by the Gujarat High Court were entrirely different from the goods that are being considered in these case. The learned counsel further explained that though in the impunged order in W.P. 596 of 1981, the Collector, Central Excise, has given the reason for not accepting the Gujarat High Court judgment by stating that the Government have not accepted the judgments, the correct reason is that the goods dealt with by the Gujarat High Court will not apply to the facts of the present case.
17. So far as the impunged order in W.P. 596 of 181 is concerned, it is the contention of the learned counsel that though the Collector has referred to the impunged trade notice, the ultimate order is on the basis of his independent opinion uninfluenced by the impunged trade notice. Therefore, if the petitioner in W.P. 596 of 1981 is aggrieved, he must file an appeal against that order.
18. Mr. A.S. Kailasam, learned counsel appearing for the petitioners in reply to the arguments of the learned counsel for the Revenue submitted that it is not open to the respondents to give a new reason already given in the impunged order in W.P. 596 of 1981, alone will have to be taken into account and not the reasons given in the counter affidavits. For this contention, he relied on the following judgments - Pir Siddik Md. Shah v. Mst. Saran 58 MLJ 7, Parry & Co. Ltd. v. P.C. Pal and others, 1979-2-L.I.C 1071 and In the Hind Hosiery Mills and others, 1982 ELT 424.
19. Let me now consider the rival submissions of the learned counsel on both sides. We have noticed earlier that Item 33C was introduced into the Central Excise Tariff by Finance Act 14 of 1969 with effect from 1- 3-1969. Immediately thereafter, the Superintendent of the Central Excises, seems to have issued communication to the manufacturers and dealers in wet grinders calling upon them to comply with the all formalities under the Act and Rules. One such communication reads as follows :
"Office of the Superintendent of Central Excise M O at "A".
M/s Chandra Agencies, 13-3-1969 84 Palakarai IMMEDIATE Trichi - 1 Dear Sirs, Sub: CE Budget 1969--New Census--Licensing of dmosetic Electric appliance--regarding It has been decided that with the electric grinders are excisable and all formalities of the CE Act and Rules 1944 are to be observed.
The AL 4 application with the applicable Central Excise Revenue stamp, D-2 declaration, plan of premises in triplicate and 3 copies of the price lists of such grinders may be sent to this office immediately for necessary action.
Yours faithfully sd.........
For Superintendent of Central Excise M.O.R."A" Palakrai Trichi -- 1"
It appears that the concerned dealer complied with the formalities in response to the communication sent by the Superintendent of Central Excise. Subsequently, the said dealer received a communication which read as follows --
M.O.R. "A" Trichi, 25-5-69 M/s Chandra Agencies 84 Palakrai, Trichi Dear Sir, Sub: AL 4 application bearing Rs. 100/- Central Excise revenue stamp and ground plan--returned Your application in AL 4 bearing Rs. 100/- Central Excise revenue stamp and ground plan in triplicate are returned herewith, as license is not required for manufacture of wet rice grinders. This may please be acknowledged.
Your faithfully Sd/-- .. .. .. 25-5-69 Superintendent of Central Excise M.O.R "A" Palakrai, Trichi - 1"
The same dealer further received another communication expressly stating that the wet rice grinders are excisable. That communication is set out below :-
OC/1545/69 M O R "A", Palakrai, Trichi-1".
M/s. Chandra Agencies 84 Palakrai, Trichi - 1.
Sir, Sub: Central Excise--Wet rice grinders- Instructions received -- Communicated.
Instructions have been received from the Assistant Collector of Central Exciser IAO Trichi, to the effect that, wet rice grinders are not excisable and the same are communicated to you for your information.
Your faithfully Sd/-- .. .. .. 30-5-1969 Superintendent of Central Excise M.O.R "A" Palakrai, Trichi - 1"
Yet another communication from the Central Excise Integrated Office, which is to the following effect :- CENTRAL EXCISE INTEGRATED DIVISIONAL OFFICE TRRICHIRAPALLIC.No. V/33C/14/1/69/IDO DT. 19-8-1969 To The Superintendent of Central Excise, MOR 'A', Trichi.
Sub: Central Excise--1969 Budget--Domestic Electrical appliance-- Grinding--AL 4 of M/s. Chandra Agencies. Ref : Range Officers O.C. 1205/3-5-1969 In view of the fact wet rice grinder is not excisable the AL-4 application with Central Excise revenue stamp for the value of Rs. 100/- (Rupees one hundred) and the ground plan of M/s. Chandra Agencies received in this office for issue of L-4 license are returned herewith. the papers may be handed over to the party and necessary acknowledgement obtained and filed in the M O R office. Sd./-
V. Thirumalachari for Asst. Collector Encl : AL-4 and ground plan Copy to M/s. Chandra Agencies, 84, Palakrai, Trichi".
A communication from the Government of India, Central Board of Excise and Customs received by M/s. Wet Grinders Manufacturers Association is set out below :-
"GOVERNMENT OF INDIA Central Board of Excise and Customs F.NO. 46/2/69/CX-4 New Delhi the 15th January, 1970 From The Secretary Central Board of Excise and Customs To M/s. Wet Grinders Manufacturers Association, C/o Jayaradha Industries, Ganapathinagar, Mayuram, Tanjore Dt. Tamil Nadu.
Sub : Domestic Electric Appliances --Excise duty on Dear Sirs, I am directed to refer to the correspondence resting with your letter dated 25th October, 1969 on the above subject and to say that necessary instructions have been issued to the Collector of Central Excise, Madras, who may kindly be contacted.
Yours faithfully Sd/- Bharat Das for Secretary, Central Board of Excise and Customs".
The above communication was received in the wake of the department's sudden change in the attitude in respect of exigibility to excise duty on manufacture/sale of wet grinders. In other words, the Central Excise Officials, taking a different view, sudenly began to seize the goods with them without payment of excsie duty under Item 33C of Central Excise Tariff and started issuing notices for further action. After the referred to above, the following communication was sent by the concerned assessing authority --
"OFFICE OF ASSISTANT COLLECTOR OF CENTRAL EXCISE IDO : ERODE C.NO. V/33/C/W16-2-74 Dt. 3RD JULY, 1974 Sub : Central Excise - Domestic Electric appliances - Electric Grinder Seizure of - dutibility - Reg.
Ref : case records for No.s 20/74, 21/74 and 23/74 of Prevention Group, Erode.
In as much as the electric grinders seized from M/s. K.A.S and Sons erode, and from M/s. Sri Ganesh Industries, Erode, do not fall within the scope of Item 33C of the Central Excise Tariff attracting excise duty, they are ordered to be released to the parties concerned.
Sd/-
N.K. Srinivasan Asst. Collector Attested : Sd/-. K raghunathan, Superintedent (Tech.) To The Superintendent, Preventive Group, Erode.
Copy to : M/s. K.A.S & Sons, 588/1 Cauvery Road, Erode.
Sri Ganesh Industries, 158 Netaji Road, Erode.
Files C.V. 33-c/15-1-74-B2, C.No. V/33c/15-3-74 Bi and Dode/V/33/C/20- 1- 69".
This was followed by the communication issued by the Government of India, Ministry of Finance, Central Board of Excise and Customs, New Dlehi. This communication is of some importance, and therefore, it is set out in full-
"Copy of letter F.No. 154/1/75CX-4, Dt. 12-6-1975 from Government of India, Ministry of Finance (Central Board of Excise and Customs), New Delhi.
Sub : Central Excise-Domestic electrical appliance-inclusion of a point wet grinder from South Zone.
I am directed to state that the question whether wet grinders etc. produced for domestic use and run by V-Belt mechanism connected to external electrical motor with the grinding system is classifiable as 'Domestic electrical appliances" for levy of duty under Item 33C CET and that whether the scope of Board's classificatory Letter F.No. 46/2/69-CX-4, dated 15-1-1970 requires any review or classification was considered by the Collector in conference. The conference considered the various aspects including the recommendations of the Dts. General of Technical Development etc. and decide that such grinders which do not have in-built motors for instant ooperation in the system external motors should fall outside the scope of Item 33C- CET' 2. Board agrees with the decision of the Collectors in conference and it is clarified that the scope of the word "instantaneous" used in the Board's letter dated 15-1-1970 would cover only those electrical appliances having in-built motors for such instant operation. All other mechanisms depending upon the external motor system as in this case and driven by V-Belt would fall outside the scope of Item 33C CET".
On this basis, the manufacturer as well as the dealers in wet grinders were carrying on business without subjecting themselves to payment of excise duty under Item 33C of Central Excise Tariff. While so, suddenly another communication was issued by the Central Board, Excise and Customs whoich is to the following effect :
"DOMESTIC ELECTRICAL APPLIANCES Central Excise-Item No. 33C Domestic Electric appliance-- Classification of wet grinders--Reg.
1. A question has been raised whether a wt grinder, which has a detachable motor with a "V" belt arrangement for transmission of motion would be classifiable as a "Domestic Electrical Appliance" under Item 33C of the Central Excsie Tariff.
2. The issue was discussed in the Seventh South Regional Central Excise-cum-genenral conference held at Madras on 15th December, 1978.
3. The conference noted that the Budget instructions issued at the time of insertion of Item 33C in the Central Excise Tariff in 1969 had emphasised that for an appliance to attract levy under the item, it should be eesentially of the doemstic tyoe and the appliance should also be one which has an in-built electrical system so as to work when connected with a circuit. the conference also noted that in Tariff advice No. 37/77 the Board had considered that the arrangment of adirve through "V" belt was only a matter of convinience and the washing-cum- drying machine which a had a motor used in the cabiner and which corked thorugh the "V" belt arrangement would definitely fall within the scope of Item 33C of Central excise Tariff. According to the conference, the criterion for in-built mechanism for instantaneous operation with emphasis on the mode of transmission as stipulated in Tariff Advice No. 23/75, dated 12-6-1975 (F. No. 154/1/75-CX-4) are not explicitely built into Tariff.
4. the Conference therefore observed that the mode of trasmission of the motion generated in the motor from the power source as the explanation contained in the entryb under Tariff Item 33C it must essentially be capable of domestic use and it must also be the Tariff Advice issued in the case of 'Washotax" (Tariff Advice No. 37/77, dated 10-10-1977 F. No. 154/4/77-CX-4) should apply to the wet grinder in question, as well subject, however, to the amodel being otherwise on merits, as falling under T.I. 33C of the Central Excise Tariff.
5. The Board agree with the above views of the conference and accordingly, hold that the wet grinders would be classifiable under Item No. 33C of the Central Excise Tariff.
6. Tariff Advice 23/75, datetd 12-6-1975 may, therefore, be treated as cancelled.
7. Necessary instructions mauy please be issued to the filed formations. The Trade interest may also be suitably informed as per annexure.
(C.B.E & C.F.No. 154/5/78/CX-4, dated 18-6-1979) (Tariff Adv. No. 27/79)"
1. This was followed by another communication which is to the following effect - Central Excise--Item No. 33C--Domestic appliances -- Classification of wet grinders. Attention is invited to Tariff Advice No. 27/79, dated 18th June, 1979, vide which the issue of classification of wet grinders was decided.
2. In this connection, it is to clarify that where the grinder is shown to be marketed without an electric motor, it would not be domestical electrica; appliances covered under T.I.33C, and, therefore, stated in the Tariff Advices mentioned above that the mode of transportation of the motion generated in the motor from the mode of power source should not make any difference to the question of classification as the explanationj contained in the entry under T.I 33C makes it clear that for a product to attract levy under the Item, it must essentially be capable of domestic use and it must also be of the cases where the wet grinder is markted, wihoout an electric motor, it would have to be considered for assessment under T.I. 68 and not under T.I. 33C.
(C. B.E & C. F. No. 154/5/78-cx-4, dated 6-9-1980)".
Based on the above two communications the impunged trade notice was issued by the Central Excise Collectorrate which read as follows:
"THE MADRAS CENTRAL EXCISE COLLECTORATE - MADRAS 35 Trade Notice No. 170/80 40/General/80 Sub : Central Excise Item No. 33C Domestic Electrical appliances-- Classification of wet grinders. The trade is advised that where a wet grinder is marketed without an electric motor, such wet grinders will hve to be considered for assessment under T.I. No. 68 and not under T.I. No. 33C. However, wet grinder marketed with electric motor will fall under T.I. No. 33C.
The contents of this trade notice may please be brought to the notice of all constituent members of the Association.
(Issued from File C.No. V'33C/30-3-80/C-D-III) Sd/-
S.K. Choudhary Deputy Collector of Technical for Collector ".
To complete the narration, it is necessary to set out Entry 33C of the Central Excise TAriff which is to the following effect:-
"ITEM No. 33C--Domestic Electrical appliances ____________________________________________________________________________ Item Tariff Description Rate of duty No. ____________________________________________________________________________ 33C Domestic Electrical appliances, not Thirty percent elsewhere specified ad valorem.
Explanation-1.- 'Domestic electrical appliances' means electrical appliances normally used in the household and similar appliances used in hotels, restaurents, hostels, offices, educational institution hospital;s, train, kitchens, aircraft or ship's pantries, canteens, tailoring establishemnts laundry shops and hair dressing saloons.
Explanation-II. - Interchargeables parts or auxillary devices accompanying appliance to make it suitable for various purposes shall be assessed to duty along with the appliance".
With this bacground, let me processed to consider the common issue raised in all these cases.
20. Though the learned counsel on both the sides advanced arguments on various aspects, after carefully going thorugh the Division Bench decision of the Gujarat High Court in Balakrishna Rechhodlal Shahj and others v. Asst. Collector of Central Excise, ahmedabad and others, 1979 ELT 377, I consider that the matter is not re integra. Though, strictly speaking, the Division Bench judgment is not binding on me, yet, in view of the fact that the subject matter under consideration being one falling under Central enactments, and in the interest of all concerned, the enforcement of the levy must be uniform throughout the country and in addition to the that Iam in resepctful agreement with the ratio laid down by the DivisionBench, I am following the same ratio. If once I come to the conclusion that the ratio of the Division Bench judgment of the Gujarat Hight Court that (referred to above) applies to the facts of this case, ther is no need for me to deal with all the aspects argued before me. It is enough if I give reasons how the ratio of the Division Bench judgment applied in all the fours to the facts of the present case.
21. Mr. T. somasundaram, the learned counsel for the Revenue, as pointed out earlier, submitted that the ratio of the Division Bench judgment will not apply to the facts of the present case as the goods dealt with by the Gujarat High Court are different from the one under consideration in these cases. On a careful scrutiny of the Division Bench judgment, I find that the learned counsel for the Revenue is not right in his above submission. Further, more than the nature of the goods that the ratio is important. Let me now analyse the facts and goods that were the subject matter of the Division Bench judgment of the Gujarat High Court and the ratio laid down by the learned Judges. The division Bench judgment of the Gujarat High Court as reported is extracted in full :-
" 1. The short question which arises in all these three petitions is whether the domestic grinding mills ir flour mills in questions manufactured by the petitioners attract the duty under the amended Entry 33C, which cam into force with effect from March 1, 1969 by the Finance Act. No. 14 of 1969. so far as the first two petitioners are concerned, at the initial stage the authorities had required them to apply for the license for manufacture of these domestic appliance. The authorities had asked these two petitioners to include in the price list the value of the electric motor. However, finally, the authorities took a view that this domestic grinders were non-exciable under 33C as they did had no built-in motor. However, finally, the authorities took a view that this domestic grinders were non- excisable.
Therefore, so far as the petitioners manufacturers were concerned, the aforesaid entry 33C was not attracted. So far as the other similar products were concerned even the Central government had in their order dated May 31st 1972, taken this view. the Government found the manufacturer's contention justified that such domestic appliances which had in-built motors would not attract Central Excise Item 33C, because that entry was applicable to sophisticated types of units in which electric motors was used in the unit itself and the working parts were so specially designed and were integrated into a whole unit which was used in unit itself and the working parts were so specially designed and were integrated into a whole units of parts as to form such domestic electrical appliances. In view of this decision of the Central Government, all the petitioners had not to pay any such excise duty. This view was in accordance with the relevant trade notice dated March 5, 1969 No. 26 of 1969 dated March 1, 1969 by which certain categories of domestic electric appliances were brought under exemption purview should be construed as referring only to such appliance as have in- built electric devices to operate them instantaneously when connected with the main or with the power. In other words, the appliancers referred to in the notification which did not have in-built motos did not attract the levy. All trade Association, Chambers of Commerce and Members of E.A.O, were requested to bring this to the notice of their members, manufacturers. Thereafter the Central Government has now sought to levy duty on the very same article by taking a different view as per the order which is challenged by the second petitioner, dated September, 17, 1973. In that order they have pointed out that according to the size, capacity output and was clearly a domestic appliance and it was adevertised as such domestic appliance. It was further pointed out that the design in the unit was such that the motor specifically fitted to the unit, and therefore, such grinders were liable to be assessed as domestic electrical appliance and it was advertised as such domestic appliance. It was further pointed out that the design in the was that the motor specifically fitted. Accordingly, even the first petitioner in whose case the Collectorate has taken a final decision that these domestic flour mills were non-excisable under Entry 33C were also required to pay duty under this item. The same is the case of the third petitioners who are fresh manufacturers. Therefore, all these petitioners have challenged the aforesaid in these cases levy under Item 33C.
2. ..... ...... ......... ........
3. Therefore, this entry 33C will have to be read along with the relevant exemption modification issued under Rule 8 by the Central Government as they formed one integrated scheme of levy of Excise. Under Item 33C domestic electrical appliance not elsehwere specified are included and under Explanation-1, these electrical appliances used in hotels, restaturents, hostels, offices, educational institutions, hospitals, train kitchens, air create or ship pantries canteens, tailoring establishments, laundry shops and hair dressing saloons. Under Explanation II along with the appliances, even interchangeable parts or auxiliary services accompanying an appliance to make it suitable for various purposes are to be assessed to duty along with the appliance. The exemption notification of March 1, 1969, however, exempted domestic electrical appliance falling under this Item 33C other than those electrical appliances falling under this Item 33C other speicified in the 20 which were specified in the schedule: The speicfic entry in the schedule which is referred to in this connection in Item "3. Grinders and Mixers". In fact, all these schedules entries make one thing clear that all these appliances are completely assembled appliances, and, therefore, they would have the electric element of motor fitted with them. Unless the manufacturer has manufactured a complete domestic electric grinder, excise duty in question would not be attracted. The excise duty falls on the manufacturer or production of the goods in question. It is not a duty on the sales, therefore, whether may have happened at the stage of sale as in this case, that a particular manufacturer at the time of sale is supplying to the customer this request electric unit manufactured by some to the manufacturer or the customer at his place gets the electric motor fitted in to this unit, it is obvious that what was manufactured by the petitioners was not an electrical appliance but what can be completed into one whole electrical appliance after purchasing a separator electric motor manufactured by another manufacturer. That is why even the further exemption notification, which was issued on the same day i.e. March 1, 1969 for giving partial exemption to the extent of duty was paid on electrical appliances. Unless electrical part is fitted into it by which give the specific character to the goods of this description as electrical appliance works which could not fall within the specific Tariff Item of electrical appliances, but would be any other kind of power driven domestic grinder. It is only when the electric motor is fitted into it that it becomes a domestic electrical grinder so as to attract duty under Item 33C. Therefore, the Central Government's first order was clearly in accordance with the scheme of this Tariff Item. This interpretation was even accounted to the trade by the aforesaid trade notice.
4. ........ ........ ....... .............
5. Mr. Vekharia next contended that the aforesaid trade notice could not control the plain meaning of the statute. Even in this connection, the legal position is now settled. In J.K. Steel Ltd. in terms pointed out that it was permissible to look at notification issued by the Central Government which had given reliefs of various kinds. Even in the dissenting judgment of his Lordship Hegde J. the same view is taken after referring to the settled legal position. At page 1186 it was pointed out that it was clear that several Judges in England had referred to the subordinate legislation made under a statute for the purpose of knowing how the department which was entrusted with the tasks of implementing that statute, it might not be inappropraite to take into consideration the exemption granted in interpreting the nature and the scope of the impost. In the mater of fiscal legislation the initiative was in the hands of the executive. Generally speaking, the question of exemption granted in interpreting the nature and scope of the impost. In the matter of fiscal legislation the initiative was in the hands of the executive. Generally speaking, the question of exemption was left to the discretion of the Government. It ought to be so because the exercise of that power depended on various circumstances some of which could not be anticipated in advance. But yet the levy and exemptions were parts of the same scheme of taxation. The two together carried into effect the purpose of the legislation. For finding out the true scheme of a taxing measure the Court has to take into consideration not merely the levy but also but also the exemptions granted. The Supreme Court in Kailasnath v.State of U.P., held that the exempotion granted in pursuance of notification issued under the U.P Sales Tax Act must be considered as having been contained in the parent Act itself. One English decision which earlier referred to by his Lordship was of the House of Lords reported in 1951 A.C. 531 where it was pointed out that although the regulations could not control the construction of the Act, it was of some importance to consider whether they fitted into the construction which the Act, properly bore. Therefore, even though the trade notice could not control the construction of the Act, it was of some importance to consider whether they fitted into the construction which the Act, properly bore. Therefore, even though the trade notice could be looked at as being an interpretation placed by the appropriate Government department on the words of the statute. Here we are not reading a trade notice for the purpose of controlling the plain meaning of the Tariff Entry. We are only reading it is even the Government construction fits in and support our prima facie construction the relevant entry, when it is read with the entire exemption scheme. As earlier pointed out by us, the excise levy is on the production or manufacture and is not a sales tax levy. Therefore, what is taxed is production or manufacture was an unassembled article at the stage of production or manufacture and if the article or was not completely integrated whole domestic electrical appliance, it is obvious that the excise duty under the relevant Entry 33C would not be attracted. Keeping in mind this relevant scheme of the exemption which was given of duty paid at the earlier stage on the electric motor in the second para of that notification is it is clear that it is only when the electric motor, rotor or starter is in-built to the electrical appliance that such domestic electrical appliance attracts duty under the relevant Entry 33C. Therefore, the trade notice was completely in accordance with the relevant scheme on this taxing statute and the Central Government has in the subseaquent decision proceeded on a complete misconception and has plainly misread the provisions of this entry.
Therefore, the impugned levy in case of the petitioners is wholly ultra vires the aforesaid Entry 33C so far as these domestic flour mills or domestic grinders are concerned.
6. Mr. Varkharia has of course vehemently argued that so far as the petitioner No. 1 was concerned, it was stated even in the petitions that the domestic grinder is a mechanical device consisting of two stones and other mechanical parts. These mechanical parts operate by power provided by a separate electric motor and V-belt. In fact, in all the three cases there is no dispute that the petitioners, manufacturers by them had to be fitted with the electric motor.
It was only when the customers wanted an electric motor by a different manufacturer that the electrical part was added in this mechanism. Therefore, the electric motor was totally separate part which was not manufactured by these manufacturers. It had to be fitted into the manufactured item of the petitioners. It is wholly immaterial that at the stage of sale, the petitioners at the request of the customers fit an electric motor or leave it to the customers to get electric remitted into this unit. That would not make the article in its original state excisable as manufactured by the petitioners. In that view of the matter, all three petitions must be allowed by quashing the impugned levy and declaring that the petitioners' domestic grinders do not attract duty under the relevant Entry 33C. Therefore, respondents authorities are restrained from levying any duty under the aforesaid Entry 33C on these goods in question, Rule is accordingly made absolute with costs in each case ........"
The gods in question were domestic grinding mills or flour mills. The description of the goods makes me to think that those goods are nothing but domestic grinders. In fact, presumably the Department itself accepting the fact that the goods dealt with in the judgment of the Gujarat High Court and the goods in question are identical, the reasons given in the impugned order in W.P. 596 of 1981 is that the Government have not accepted that the goods considered by the Division Bench of the Gujarat High Court were different. Further, I find from the discussion in the judgment that almost all the questions raised before the learned Judges of the Gujarat High Court, but did not find acceptance with them. The learned judges have considered similar trade notices issued by the government of India holding that the domestic grinders were non- excisable under Entry 33C as they had no inbuilt electric power motor and that Entry was applicable to sophiscated types of units in which motor was used in the unit itself and the wroking unit as to from sub- domestic electric appliance. The lerned Judges also considered that the effect of Notification helps only the case advanced by the traders and manufacturers of wet grinders. The learned Judges also considered the argument whether there was any manufacturing process in fitting the electric motor with that portion of the wet grinder and connecting both by V-belts. The learned Judges have held that would not make the article motor with that portion of the wet grinder and connecting both by V-belts. Ultimately, the ratio seems to be that only when the electric motor, rotor or starter is inbuilt in the electric appliance that such domestic applicable attracts duty under Entry 33C. In all these cases, under consideration, it is connected with the week grinder by V-belt. Therefore, applying the principles laid down by the Division Bench judgment of the Gujarat High Court, I do not find any difficulty in holding that the wet grinders in question will not fall under Entry 33C of Central Excise Tariff.
22. There is one more weighty reason for my agreeing with the Division Bench judgment of the Gujarat High Court and that it is, that judgment was taken on appeal to the Supreme Court by the Revenue and the same was dismissed in line by the Supreme Court by rejecting the special Leave petition. the same High Court followed that judgment in Shri Pudit Ghar Ganti v. Union of India and another, 1981 ELT 121.
23. I would like to give some more additional reasons to sustain the view that wet grinders will not fall under Item 33C of the Central Excise Tariff. Though the Division Bench Judgment of the Gujarat HIgh Court is reported in 1979 E.L.T 377 the judgments of the Gujarat High Court is reported in 1979 E.L.T 377 the Judgments was delivered on 18- 12-197. WE have already noticed the view taken by the Government of India, Ministry of Finance (Central Board of Excise and Customs), New Delhi on 12-6-1975, accepting the conclusion reached in the Collectors' conference. It can be reasonably presumed that before coming to the conclusion that those electrical appliances having in- built motors for instant operation will fall under Item 33C of Central Excise Tariff, and all other mechanisms depending upon the external motor system such as the electric motor driven by V-belt would fall outside the scope of Item 33C of the Central Excise Tariff, the department must have had the advantage of the Division of Gujarat High Court, If so the impugned trade notice which is based on the subsequent communication of the Central Board of Excise and Customs, dated 18-6-1979, cannot be sustained in the absence of any change in the Tariff Item or the subsequent judges of the other High Courts or Supreme Court. As rightly contended by the learned counsel for the petitioners placing reliance on a Division Bench judgment of the Delhi High Court in J.K. Synthetics Ltd. v. Union of India and other, 1981 ELT 328, before the departments departs from its earlier stand, they must give cogent reasons such as fresh ACts or change in relevant Tariff Entry or any further decision of a High Court or Supreme Court necessiating the reconsideration of the earlier view. In this case, the only reason given is that Washotax has been brought under Item 33C and consequently the wet grinders must also be classified under Item 33C and consequently the wet grindes must also be classified under Item 33C of the Central Excise Tariff. This reason does not satisfy the conditions for chnage of view as laid down in the Division Bench judgment of the Delhi High Court with which I respectfully agree. The Division Bench judgment of the Delhi High Court in the case cited above, has held as follows :-
"The question which we are now calles upon to consider is as to the precise scope of this limitation. What will be its effect in a case where there are no changes in the circumstances, either factual or legal? Will it be open to the department, without any cogent reasons and merely at its own caprice, to refuse to follow the conclusion reached on the earlier occassion and to take-up a totally different stand in a subsequent year ? In answering this question, it has to be appreciated that, while what is sought to be done in this case is to ignore or brush aside the decision taken by one of departmental authorities on the same issue for an earlier period, it should make no difference in principle even in a case where the decision for the earlier year had been confirmed by the High Court or Supreme Court in appropriate proceedings for, as pointed out by Lord Radcliffe, the rule operates not because of the nature of the proceedings in which the decision was taken earlier. If that be so, the question for consideration would be whether, for a subsequent period, the department can contend that the decision on an issue on an earlier occassion would have no importance or relevance whatever when the issue arises, subsequently, even if it had been contested upon and decided by, the High Court or Supreme Court for the earlier period. If the matter is looked at from their larger perspective, we think it will be clear that there can be only one answer to this question, viz. that the department can contend that the decision on an issue on an earlier occassion would have no importance or relevance whatever when the issue arises that the department should not be permitted to take different stands unless there is any good ors cogent reason for the change in view. For example, if the facts are different or it further and fresh facts are brought on record or if the process of manufacturer has changed or if the relevant entries decision there has been the pronouncement of a High Court or the Supreme Court which necessities reconsideration of the issue, it can hardly be doubted that the department can take a different view and have the matter agitated right upto the Supreme Court, if necessary. But when there is no change at all and when the position is exactly the same, legally, and factual, as it was on the earlier occassion then we think that the department should be restrained from capriciously changing its stand and inflicting unnecessary proceedings and hardship upon assessees".
24. Though Mr. T. Somasundaram, learned counsel for the Revenue, strongly emphasised the fact that trade notice is not binding on the assessing authority and they are expected to pass orders independent of inforamtion contained in the trade notice and has levied excise duty on wet grinders under Item 33C of Central Excise Tariff. Therefore, the contention that the writ petition are premature and not maintainable against the trade notice cannot be accepted.
25. In the light of the gorging discussion, I hold that the wet grinders false outside the scope of the Item 33C of the Central Excise Tariff. I answer the question posed at the outset accordingly. In view of the above conclusion, there is no need or necessity to formally quash the impugned trade notice as this decision is binding on the assessing authorities in W.P. 596 of 1981 is set aside and the writ petition is allowed. All other writ petitions are dismissed on the ground that no formal absolute rule nisi need to quashing the trade notice for reasonsalready given, I direct the parties to bear their own costs.