Customs, Excise and Gold Tribunal - Delhi
Unitex Dyechem Industries vs Collector Of C. Ex. on 26 May, 1998
Equivalent citations: 1998(60)ECC632, 1998(103)ELT118(TRI-DEL)
ORDER G.R. Sharma, Member (T)
1. The captioned two appeals arise out of the same order and, therefore, they were heard together and are being disposed of by this common order.
2. The appellants are engaged in the manufacture of goods described by them as Sulphonated castor oil. The Appellants claimed classification of the product under Chapter sub-heading 3402.10. The Department alleged that the product was not sulphonated castor oil, but was a surface active agent and classifiable under Chapter sub-heading 3402.90. The Asstt. Collector observed that as per Chapter Note 3 of Chapter 34 for the purposes of Heading 3402 organic surface active agents are products which when mixed with water at a concentration of 0.5 percent at 20°C and left to stand for one hour at the same temperature, and held that the product manufactured by the assessee was classifiable under Chapter sub-heading 3402.90 is sustainable in law and thus, the ld. Commissioner Appeals rejected the appeal of the Appellants. Being aggrieved by this order, the Appellants have filed the present two appeals.
3. Shri Pradeep Jain, the ld. Advocate, submits that the product manufactured by the assessee was known in the market as Sulphonated Castor Oil and was so traded by the appellants. The ld. Counsel submitted that the ld. Collector Appeals placed reliance on the report of the Chief Chemist which was based on ISI Specification No. IS : 1044-1970. The ld. Counsel submitted that this ISI Specification was not in use during the material period inasmuch as the Technical Committee of the Bureau of Indian Standards has recommended for withdrawal of IS : 1044-1970 and that the same was subsequently withdrawn. The ld. Counsel also submitted that an affidavit was submitted from the partner of M/s. Shakti Dyes & Chemicals, In which Shri Ramgopal, The partner, had stated that sulphonated castor oil is manufactured and sold by us containing different percentages of sulphonated castor oil and water as per the requirement of the Buyer; that they manufactured and sold the goods containing 30% sulphonated castor oil and 70% water; containing 40% sul-phonated castor oil and 60% water and 45% sulphonated castor oil and 55% water etc. The ld. Counsel submitted that in view of the fact that the ISI standard was withdrawn and in view of the fact that an affidavit was given by a partner of a Firm which manufactures sulphonated castor oil arid coupled with the fact that the trade knows the product as sulphonated castor oil, therefore, the correct classification of the product should be under Chapter sub-heading 3402.10.
4. Countering the arguments of the ld. Counsel, Shri H.K. Jain, the ld. SDR submits that the sample was tested subsequently by the Chief Chemist who opined that the product was not in conformity with the ISI specification for sulphonated castor oil and turkey red oil. The ld. DR submitted that since there was no definition of sulphonated castor oil/turkey red oil in the tariff and therefore reliance can be placed on the ISI Specification. He submits that the fact was that for Sulphonated Castor oil/Turkey Red Oil, there was an ISI Specification at one time which was recommended for withdrawal does not mean that the specification cannot be applied to the goods in dispute. The ld. DR submitted that the ISI specification was a better kind of test for determining the exact nature and name of a product on the basis of scientific parameters. He submits that there is no doubt that there is a product known in the trade as sulphonated castor oil/turkey red oil. He submits that as per Para 4.1.2 of IS Specification cited above, the material shall consist of sulphonated castor oil when tested according to the method prescribed in A.3.2.2; that from this it is clear that for being specified as sulphonated castor oil, the product cannot have such a high percentage of water content. The ld. DR submitted that the product in dispute cannot be taken as sulphonated castor oil either in technical terms or as per the understanding in the trade or in common parlance. He, therefore, submitted that the lower authorities have rightly held that the product was classifiable under Chapter sub-heading 3402.90.
5. We have heard the submissions of both sides carefully. We have perused the technical literature, ISI specifications, the Affidavit and the case law cited and relied upon by both the parties. We note that in the Tariff, the relevant entries read:
Chapter Organic surface-active agents (other than soap);
Heading: 34.02 surface-active preparations, washing
preparations (including auxiliary
washing preparations) and cleaning
preparations, whether or
not containing soap.
3402.10 - Sulphonated Castor oil, Fish oil or Sperm oil
3402.90 - Other
6. We note that the Appellant relied upon the decision of this Tribunal [1992 (62) E.L.T. 584]. In this decision, the Tribunal held that ISI Specification is meant to ensure quality control and was not relevant for determining the classification. It was, therefore, argued before us in view of this decision, reliance of the Chief Chemist on ISI Specification was misplaced, more so when the relevant ISI Specification was recommended to be withdrawn and was subsequently withdrawn. We have examined this decision of the Tribunal. We note that the Tribunal had rendered this finding on the basis that there were no test results indicating chemical composition of the disputed product. We also note that in that case, the manufacturers had neither indicated the details of the ingredients of the disputed products on the cartons nor in the literature meant for guidance of consumers. In the instant case, the facts are different. The product is a chemical product; test report was available and there was a scientific manner for determining the quality of the product. We have also perused the rulings of the Apex Court in the case of CCE, Kanpur v. Krishna Carbon Paper Company [1988 (37) E.L.T. 480] in which the Apex Court ruled that in the light of ISI Specifications and the Tribunal's decision reported in [1987 (29) E.L.T. 627], carbon paper would fall under Item 17(2) of the Central Excise Tariff during the relevant period. The Apex Court had ruled that where no definition is provided in the statute itself for ascertaining the correct meaning of a fiscal entry, reference to a dictionary is not always safe. The correct guide, it appears in such a case, is the context and the trade meaning. The trade meaning is one which is prevalent in that particular trade where that goods is known and traded. If special type of goods is subject matter of a fiscal entry then that entry must be understood in that context of that particular trade. Where, however, there is no evidence either way, then the definition given and the meaning following from particular statute at particular time would be the decisive test. Similarly, where a word has a scientific or technical meaning and also an ordinary meaning, the ordinary meaning should be preferred unless containing intention is clearly expressed by the Legislative. Where no trade evidence is available but ISI Specifications are available, they should be relied upon for interpreting a Tariff entry. In the instant case, we find that the product is a chemical product. The identification of the product is based on the contents of the chemicals. We have a report of the Chief Chemist. The Chief Chemist has given clear finding that the product does not conform to the ISI standards. We note that there was an ISI Standard for the product during the relevant period although it was recommended to be withdrawn. We note that only reliance is placed on the affidavit for common parlance test. This affidavit has been categorically held as non-acceptable evidence. In the absence of the common parlance test, the ISI Specification will be applicable to the goods in dispute.
7. We note that sulphdnated castor oil has been indicated as a specific product. The question, therefore, arises is whether the product called by the Applicant as 'sulphonated castor oil' is actually sulphonated castor oil or not. No doubt, sulphonated castor oil is a chemical product. Therefore, specification of the item shall depend on whether the components constituting the sulphonated castor oil are those prescribed by the authorities for the purpose. We note that there is no definition given in the Tariff as to what sulphonated castor oil is and, therefore, we have to go by the ISI Specification as also the Technical literature. In the Condensed Chemical Dictionary, Turkey Red Oil, Castor oil sulphonated. Castor oil soluble has been described as 'it is also known as ALIZARIN assistant and ALIZARIN oil because of its use in dyeing with ALIZARIN. We have also perused the technical literature on castor oil where the process of sulphonation has been described. This technical write-up does not help inasmuch as the water content is concerned. We have also perused the ISI Specification IS: 1044-1970. We have also seen the affidavit filed by the Appellant. We note that when a sample of the product was sent for retest, the Chief Chemist in his test report reported that the product is composed of sulphonated castor oil and water and the water content in the sample is about 53%. The Chief Chemist opined that the sample does not satisfy the requirement of Turkey Red Oil (Sulphonated castor oil) as laid down in ISI Specification IS : 1044-1970. We note that the Tribunal in the case of CCE v. Navdeep Chemicals Pvt. Ltd. [1988 (37) E.L.T. 62] held that 'after the report of the Chief Chemist was communicated to the respondent company, they could have asked for the cross-examination of the Chief Chemist if they were dissatisfied with the report about the manner of testing, the equipment for testing and other technical aspects. They never asked for cross-examination, general allegations that test report was incorrect is not maintainable.'
8. We also note that the Hon'ble Calcutta High Court in the case of Webta Private Limited & Others v. CCE & Others [1986 (25) E.L.T. 670], held that 'The CLRI opined that the samples do not satisfy the norms and conditions of finished leather as laid down in C.L.R.I. Workshop, 1977. It is not disputed that before the Customs Authorities declarations were made to the effect that at the time of the exportation of the goods, the said goods conformed to the C.L.R.I. norms. It is also admitted fact that at the material time the C.L.R.I. norms were being followed by the Traders... Since the CLRI was definitely of the view that the subject consignment were not finished leather goods within the meaning of the relevant notification therefore the Customs Authorities were justified in taking the view that the subject consignment was not exempt from duty under the aforesaid notification dated 2-8-1976.' The Hon'ble Calcutta High Court also held that it is a well settled source of law that the view taken by the Customs Authorities in this regard cannot be said to be per verse even if another view favourable to the petitioners is possible. We also note that in the case of M/s. Coramandal Fertilisers, Visakhapatnam v. CCE, Madras [1987 (31) E.L.T. 942], this Tribunal held that 'if there is no definition given in the Act or the Tariff or the notification itself, the definition and specifications as laid down by the ISI ought to be relied upon as representing the general understanding of the trade and the industry.'
9. We also note that the Adjudicating Authority has observed that the Affidavit of Shri Ramgopal was verified on 16-4-1993 and attested by the Notary Public on 20-4-1993. The adjudicating authority has very categorically held that this affidavit has no evidenciary value. After examining all the facts and the case law cited and relied upon, we find that there is no definition of Sulphonated Castor oil given in the tariff. We also note that the Technical Literature does not throw much light on the water content in the sulphonated castor oil. We also note that there was an ISI Specification and the date of withdrawal of the ISI Specification is not known. We also note that the ISI Specification is based on scientific investigation into the contents of the Product. We note that the Chief Chemist of the Central Revenue Control Laboratory, after examining all the facts, relied upon the ISI Specification. Since the product is a chemical product, test report is necessary for determination of the nature and use of the product. Therefore, the report of the Chief Chemist becomes more relevant and pertinent. The Test Report has not been assailed. Having regard to all the facts of the case and the observations on different issues as set out above, we hold that the product in dispute was classifiable under Chapter sub-heading 3402.90. In this view of the matter, the impugned order is upheld and the Appeals are rejected.
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(G.R. Sharma) Member (T) Dated: 26-9-1997 S.L. Peeran, Member (J)
10. With due respect to my learned Brother, I am not able to agree with the final conclusion that the product has to be classified in terms of ISI Specification as Organic Surface-active Agents under sub-heading No. 3402.90 as against the claim made by the assessee in this case. My learned Brother has confirmed the lower authorities contention that the classification in the present case has to be as per ISI Specification preceding the trade parlance and commercial test and understanding. However, in this present case as has been pleaded by the appellants themselves, the ISI Specification has since been withdrawn and to this effect a letter has been produced from the concerned authority and supporting affidavit has been filed. The finding arrived at that it does not have evidential value by the lower authorities and agreed to by the learned Brother, may not be correct in the facts and circumstances of the present case. The authority who has issued the ISI Specification themselves asserted that the said IS has been recommended for withdrawal. The letter which is at page 135 of the paperbook is reproduced herein below :
"BUREAU OF INDIAN STANDARDS Manak Bhavan,
9, Bahadur Shah Zafar Marg,
New Delhi -110 002
Phones 3310131 Telex 031-65870 Fax 91113314082
3311375 Grams Manaksanstha
1993-11-05
Our Ref.: CED 925/F
Subject: IS 1044 : 1970 Specification for Turkey Red Oil (first revision)
(Amendment No. 2 of 1977) - Withdrawn.
M/s. Unitex Dyechem Industries
1085, Rithala Post Office,
Rithala,
New Delhi-110 085.
Dear Sirs,
Please refer to your letter dated 7 September, 1993 on the subject mentioned above, it is for your information that the above Indian Standard had been recommended for withdrawal by the concerned technical committee in its meeting held on 11 January, 1989, and subsequently withdrawn.
Thanking you, Yours faithfully, (T. Rangasamy) Joint Director (Chemicals)"
11. Therefore, the very basis on which the case made out for classification on IS 1044 :1970 Specification for Turkey Red Oil does not survive. It has been well laid down that the ISI Specification is meant for quality control and does not apply for classification, as has been held in the case of Veto Co. v. Collector of Central Excise, as reported in 1992 (62) E.L.T. 584 and that of Plasmac Machine Mfg. Co. Pvt. Ltd. v. Collector of Central Excise, as reported 1990 (51) E.L.T. 161 (S.C.). Therefore, the classification to be adopted is to be on the basis of commercial understanding and the manner in which the goods are traded in the market. It has also been pointed out by the learned Counsel that the goods have been traded and marketed as sulphonated castor oil and in this regard, the evidence has been also produced by the appellants. In view of this evidence, which is on record, the contention of the appellants that the goods are sulphonated castor oil for classification under sub-heading No. 3402.10 is required to be accepted.
12. In that view of the matter, the impugned orders are set aside and the appeals are allowed.
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(S.L. Peeran) Member (J) Dated: 6-10-1997 DIFFERENCE OF OPINION
13. In view of the difference of opinion, the matter is to be referred to the Hon'ble President to constitute Third Member to consider the following points.
Whether the goods manufactured by the appellants described as sulphonated castor oil is to be classified under sub-heading No. 3402.90 of the Customs Tariff Act and appeals to be rejected as held by Member (T).
OR They are required to be classified under sub-heading No. 3402.10 as claimed by the assessee and the appeals, to be allowed.
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(G.R. Sharma) (S.L. Peeran)
Member (T) Member (J)
Dated: 6-10-1997
G.A. Brahma Deva, Member (J)
14. Since there has been difference of opinion between the two Members of the Bench, the following point has been referred to me to resolve the issue :
"Whether the goods manufactured by the appellants described as sulphonated castor oil is to be classified under sub-heading No. 3402.90 of the Customs Tariff Act and appeals to be rejected as held by Member (Tech.) or They are required to be classified under sub-heading No. 3402.10 as claimed by the assessee and the appeals are to be allowed."
15. Heard both sides with reference to difference of opinion.
16. Shri Pradeep Jain, ld. Advocate contended that the point to be considered in this case is whether sulphonated castor oil is classifiable under Heading 3402.10 as claimed by the party or under 3402.90 of the Customs Tariff Act as per the department. He submitted that though item in question consists of 53% water and 47% oil and not in conformity with the quality and specification as per ISI standards, still it is called sulphonated castor oil as understood in the commercial parlance and accordingly item is to be classified under 3402.10. He submitted that ISI Specification is meant for quality control and does not apply for classification and in support of his contention, he referred to the decision in the case of Veto Co. v. CCE reported in 1992 (62) E.L.T. 584 and reliance has also been placed in the case of Plasmac Machine Manufacturing Co. (P) Ltd. reported in 1990 (51) E.L.T. 161 (S.C.) in support of his contention that the item is to be classified based upon the commercial understanding and the manner in which the goods are traded in the market. Further he said that ISI Specification has been withdrawn by the very authorities and accordingly same cannot be taken as basis in determining the classification.
17. Countering the arguments, Shri H.K. Jain, ld. SDR submits that there was no mention of sub-standard sulphonated castor oil either in the tariff or under HSN and since as such it is not mentioned and the tariff entry 3402.10 specifies sulphonated castor oil and the item being not sulphonated castor oil and not in conformity with the ISI Specification, item is to be classified under 3402.90. He said that ISI Specification was withdrawn as per letter dated 23-9-1993-and in the case of CCE, Kanpur v. Krishna Carbon Paper Co. reported in 1988 (37) E.L.T. 480, Apex Court ruled that in the light of ISI Specifications and the Tribunal's decision reported in 1987 (29) E.L.T. 627, carbon paper would fall under Item 17(2) of Central Excise Tariff during the relevant period. He justified the order of the Member (Technical) in classifying the item under 3402.90.
18. I have carefully considered the submissions made by both sides with reference to the difference of opinion. I have perused the respective orders written by my learned Brothers. I find that there is no definition of sulphonated castor oil in the Tariff. The Chief Chemist have found that it is not sulphonated castor oil since it is not in conformity with the ISI Specification. According to the Chief Chemist, it consists of 53% water and 47% oil and since the water content is more than 50%, the sample does not satisfy the requirement of Turkey Red Oil (Sulphonated castor oil) as laid down in ISI Specification IS : 1044-1970. According to the party it may not satisfy the quality of sulphonated castor oil as per specification laid in IS : 1044-1970, but nevertheless it is sulphonated castor oil as understood in the trade and in fact traded as such. It was also the contention of the party that the ISI specification has since been withdrawn the same cannot be relied upon in determining the classification. There is some force in the arguments advanced on behalf of the party that ISI Specification is meant for quality control and does not apply for classification.
19. Relying upon the decision of the Tribunal in the case of Veto Co. referred to above, the classification has to be determined based upon the commercial understanding as it was held in the case of Plasmac Machine Manufacturing Co. Pvt. Ltd. (supra). In the facts and circumstances, particularly in view of the commercial understanding and that the goods are being treated and marketed as sulphonated castor oil supported by evidence, I am of the view that the item is classifiable under Heading 3402.10. Accordingly, the view expressed by the Member 0udicial) is concurred with.
20. Case file is returned to the original Bench to pass an appropriate order.
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(G.R. Sharma) Member (T) MAJORITY ORDER
21. In terms of the majority view, the goods Sulphonated castor oil is required to be classified under sub-heading No. 3402.10 of the Central Excise Tariff and therefore, the impugned orders are set aside by allowing the appeals.