Customs, Excise and Gold Tribunal - Delhi
Indian Explosives Ltd. vs Collector Of Central Excise on 31 March, 1986
Equivalent citations: 1986(10)ECC121, 1986(8)ECR19(TRI.-DELHI), 1986(24)ELT345(TRI-DEL)
ORDER H.R. Syiem, Member (T)
1. These two appeals arose from the orders of the Appellate Collector of Central Excise, Calcutta, one No. 494/ BR/84 dated 14-9-1984 and another No. 590/BR/84 dated 7-11-1984. The facts are the same except that the material in one case is aluminium and in the other case copper. The manufacturers M/s. Indian Explosives Ltd. (IEL) make detonators which are used in explosive for blasting work in coal-mines, stone quarries. In both cases sheets of the metal, aluminium or copper, as the case may be, are taken to make a small cylinder like article in which the initiating charge is put and embedded in the blasting explosive compound. Another fact which needs to be taken note of at the beginning is that the Collector (Appeals) said that the article manufactured from the aluminium strip was a container, while the similar article made from copper was a tube; and there lies the paradox.
2. The learned counsel for the appellants said that they manufactured the aluminium article, called a container by the Appellate Collector and the copper article called a tube by the same Appellate Collector, in a punch. A circle taken from the aluminium or copper strip is pressed in the die in a series of operations. The circle emerges as a cylindrical object with one end closed. There are the detonator caps. At the hearing the learned counsel was asked whether they also make the same article by taking a sheet or strip of aluminium or copper, rolling it into a tube, welding the edges, cutting required lengths out of it and closing one end by fusing or by any other process. He replied in the negative, emphasising that they do not manufacture the aluminium articles in that fashion. This went uncontradicted by the department's counsel.
3. Therefore, the aluminium and copper caps used as detonators, from the beginning took the shape in which they are seen in their ultimate finished stage. The Assistant Collector called the aluminium and the copper caps, aluminium tubes and copper tubes. For reasons that are not very clear, the Appellate Collector decided in September, 1984 that the copper cap was a tube, while in November, 1984 he decided that the aluminium cap with the very same configuration and shape as the copper cap, was a container. He even referred in his later decision to his earlier decision in respect of the copper and said that after referring to the explanation under item 27 and item 46, it did not appear that this could be a container; it was a tube, especially when aluminium tooth paste tubes were known as collapsible tubes. Thus, he thought that while the aluminium ca p could be a container, the copper cap could not be a container. Unfortunately, if the aluminium could be a container, the copper also could be a container because they both receive and hold similar kinds of substances, that is, explosives. On the other hand, if the copper cap can be a tube, the aluminium cap can just as easily be a tube. The two caps look alike in form and, therefore, we can see no good reason why one should be a container, while the other should be a tube.
4. A container is defined in the tariff under items 27 and 46 as "ordinarily intended for packaging of goods for sale, including collapsible tubes, casks, drums, cans, boxes, gas cylinders, and pressure containers, whether in assembled or unassembled condition and containers known commercially as flattened or folded containers."
This definition seems to have convinced the Appellate Collector that the copper product could not be a container but the aluminium could. He cites collapsible aluminium tooth paste tubes to say that the fact that one end of the tubular cylinder is closed was no proof that the article was not a tube. This overlooks the fact that the aluminium tooth paste tube was in fact a tube when it was made; it is only after it is filled with paste that its end is closed. Till then it is an open tube and qualifies to be called a tube in all circumstances. This is not true of the caps. They were never open at both ends even when they were first punched, pressed, and till they were finished. They started with one end closed and remained in that condition till the end of their life in an explosion.
5. But let us see if the aluminium cap can be a container as held by the Appellate Collector. We have seen the definition of a container that it should be one ordinarily intended for packaging of goods for sale. These caps, whether copper or aluminium, were not for packaging of goods for sale. They merely held priming explosive charges to be used in detonating explosive dynamite etc. The substance that the caps contain were not for sale; there was not even a packaging; there was only containing. The Act requires packaging, not simply containing. If we were to go by simply containing, then every bomb would be a packaging of goods for sale and every cartridge would qualify because it has the explosive under the outer shell; every explosive device contains trinitrotoluene or gelignite or nitroglycerine or some such explosive substances in an outer hard shell or case. The packaging that qualifies a container to the tariff item, must be a packaging for sale, not a mere packing to contain or to hold. Packaging requires that the container as well as the contained material will change hands one day in commerce and both the container and its contents will become the property of a new owner on such transaction. The detonator cap is not only not meant to present the explosive in it for sale so that it will find a new buyer with the contents in it, but it is meant only to hold a primary igniter of the bigger charge that sets off the explosion in mines. The cap as well as the charge it holds are both destroyed. Even if the prepared detonators are sold to a buyer who might use them in his factory to make explosives, the cap and the detonator become inseparable or are used as one unit, unlike what we traditionally understand a case of packaging when contents can be taken out of the packaging or packages and used, with the packing or packaging material remaining more or less permanently behind, long after the contents have been consumed. The cap is not for presentation of its explosive contents in sale as packaging does. When the goods are brought in a container, that is, packaged, say, in an aluminium can, the buyer buys it for the contents of the can, though in doing so he inevitably has to take the contents with the can or the container. We have not heard of anybody buying the priming inside the aluminium or the copper caps, taking out the contents and discarding the container. The use of the detonator is as one unit and this must be understood very clearly if we are to understand this problem.
6. To say that the copper cap is a tube is also a fallacy. A tube is a cylinder open at both ends, of sufficient length if it is to serve as a tube. The copper caps never had the ability to convey fluids since, as we have recorded, they were made always with one end closed. In those conditions it will never qualify to be a tube. We can get a good picture of what a tube is understood to be if we refer to the Harmonised customs tariff. The Harmonied customs tariff was introduced in the Customs Tariff (Amendment) Bill, 1985, and is a more elaborate version of the Customs Co-operative Council Nomenclature, Here is how it describes tubes and pipes:
"Hollow products, coiled or not, which have a uniform cross-section with only one enclosed void along their whole length in the shape of circles, ovals, rectangles (including squares), equilateral triangles or regular convex polygons, and which have a uniform wall thickness".
This tariff contains the most scientific tariff descriptions we have seen; it is the work of international experts in the field. We gain much knowledge by referring to how it defines products, whatever the product may be. Neither the tube (copper) nor the container (aluminium) has an enclosed void along its whole length. The void is terminated by the metal bottom of the cap on one side.
7. There has been serious contradiction in the two orders of the lower authorities; one order calls the cap a container and another order calls a similar cap, though made of different metal, a tube. There is no reconciliation between the two. And the learned counsel for the department told us that there has been no appeal against these orders or at least against the order they consider incorrect. Since such contradictory orders cannot both be correct, we will have to hold that they are both incorrect. Therefore, we set both the orders of the Appellate Collector aside.
8. We have not been able to convince ourselves that the manufacturer of the caps produced tubes or containers. They did nothing of the kind. Whatever they may have produced, they were neither tubes nor containers. There has been little or no argument from the learned counsel for the department that would satisfy us that the department had done right in assessing the goods the way they did. This is to say nothing of the contradictions we have already discussed.
9. We are also told that the production of these goods started in 1966 and that nothing was done till the beginning of the 1980's to charge the party with having manufactured goods without declaration, and with having suppressed information and kept facts hidden in order to evade duty. The central excise knew quite well what the factory was doing. The Appellate Collector says as much in his order on the copper caps. He said that the central excise officers at Dhanbad who were in charge of the factory of the appellants should have known of the manufacturing process of the appellants and they should have raised the demand earlier. Legally, it was the duty of the appellants to declare what they produced in the factory even if it was for captive consumption. There had been mandatory violation of rule 173 but this did not justify imposition of penalty. He accordingly set the penalty aside. This is another contradiction in the orders of the lower authorities. Even otherwise, we are not satisfied that the manufacturers had suppressed the manufactures and that from 1966 the central excise remained ignorant of this. As a matter of fact, the factory was paying duty on the detonators from 1975 under item 68 when this item was first introduced. If this was so we cannot see how the central excise profess ignorance of the process of manufacture of the detonators; there was no secret about it. The detonators could not have been made without these caps; the same process was followed and the assessment under section 68 of the finished goods would show the "tubes/containers" clearly. If the central excise people were interested, they would have seen the caps being made in the manufacture of the detonators. The true explanation is that they saw what was happening, but did not think that duty was attracted in the way they later drew up the proceedings and in the decisions they took.
10. The department's counsel said it was not correct for the appellants' counsel to argue that the caps were not goods and should not be excisable. She said that according to the DCM judgment of the Supreme Court, the articles must only be ordinarily capable of being sold; they need not be actually sold. These goods command a highly sophisticated market and are not bought and sold like other products. Because a thing is not sold does not mean it is not tube. The factory has a tube shop and this proves the thing was a tube. We cannot follow this. The factory does not have a "container shop", but this did not prevent the aluminium caps being called containers.
11. The department's counsel also referred to the Supreme Court Dunlop judgment to say that use was irrelevant. We are of the same mind; but the department's argument is about a tube and a container where use is the same. Do they claim that use of the products was irrelevant because when the aluminium thing was used in a [detonator, it is a container and where the copper thing was used likewise, it is a tube ? Does one use produce two products ? or do two products become one product, and if so, what product ? It is wacky.
12. The judgment of the New Delhi High Court in 1980 ELT 735 Hyderabad Asbests was preferred as a ruling that proved the department's case. It does not. That ruling was on a product that was what it was said to be, asbestos. In this case the department is in two minds what the products should be called.
13. The learned counsel for IEL was correct when he said there had been no suppression. We believe not a word of the story of suppression because the tubes/containers were there for all to see if they cared to see them. The central excise could not have assessed these detonators without seeing the aluminium "container/copper tube" they said should have been declared; may be they should have been declared, but we cannot see the suppression, or the misstatement, or the fraud. If there was collusion, we suggest the departments investigate and establish it positively, and without loss of time.
14. IEL produced a number of affidavits to buttress their case but they are not of much utility. For example, one affidavit says the caps are not commercially known articles and are not bought and sold. This is a prior induction to arrive at a conclusion on the basis of variable premises. It may be true the caps are not sold today; but there is nothing to prevent their being sold tomorrow. Such affidavits should be presented as little as possible. They clutter things up.
15. The proceedings to recover duty on the aluminium caps as an aluminium container, and to recover duty on the copper cap as a tube are contrary to law. We set all the orders aside.