Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs M/S Amartara Ltd on 10 June, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II Appeal No. E/609/07 (Arising out of Order-in-Appeal No. 12/2006 dated 27.4.2006 passed by the Commissioner of Central Excise, Mumbai-II). For approval and signature: Honble Shri S.S. Garg, Member (Judicial) Honble Shri Raju, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair copy : Seen of the order? 4. Whether order is to be circulated to the Departmental : Yes authorities? ====================================================== Commissioner of Central Excise, Mumbai-II Appellant Vs. M/s Amartara Ltd. Respondent Appearance: Shri Hitesh Shah, Commissioner (AR) for Appellant Shri Gajendra Jain, Advocate with Shri Rajesh Ostwal, Advocate for Respondent CORAM: SHRI S.S. GARG, MEMBER (JUDICIAL) SHRI RAJU, MEMBER (TECHNICAL) Date of Hearing: 10.02.2016 Date of Decision: 10.06.2016 ORDER NO. Per: Raju
M/s Amartara Ltd. are manufacturers of plastic products. They were engaged in clearance of what they described in their invoices as Rigid PVC Foils, Rigid PVC Thermoforming Foils & PVC films and classified the same under heading 3920.11 and 3920.12. At the relevant time, the heading 3920 read as under: -
39.20 Other plates, sheets, film, foil and strip, of plastics, non-cellular, whether lacquered or metallised or laminated, supported or similarly combined with other materials or not
- Of polymers of vinyl chloride:
3920.11 Rigid, plain 60% 3920.12 Flexible, plain 60% Chapter Note 10 and 15 of Chapter 39 at the material time read as follows: -
10. In heading Nos. 39.20 and 39.21, the expression plates, sheets, film, foil and strip applies only to plates, sheets, film, foil and strip (other than those of Chapter 54) and to blocks of regular geometric shape, whether or not printed or otherwise surface-worked, uncut or cut into rectangles (including squares) but not further worked (even if when so cut, they become articles ready for use).
15. For the purposes of heading Nos. 39.19, 39.20 and 39.21, the expression film means sheeting of thickness not exceeding 0.25 millimeters. Vide Notification No. 53/88 vide entry No. 35-37 provided following exemptions: -
35. 39.20 Films (other than of regenerated cellulose) 25% ad valorem If produced out of goods falling under heading Nos. 39.01 to 39.15, on which the duty of excise leviable thereon under the Central Excises and Salt Act, 1944 (1 of 1944) or the additional duty under section 3 of the Customs Tariff Act, 1975 (51 of 1975), as the case may be, has already been paid.
36. 39.21 Cellular films or sheets, other than of polyurethanes 25% ad valorem If produced out of goods falling under heading Nos. 39.01 to 39.15, on which the duty of excise leviable thereon under the Central Excises and Salt Act, 1944 (1 of 1944) or the additional duty under section 3 of the Customs Tariff Act, 1975 (51 of 1975), as the case may be, has already been paid.
37. 39.21 Cellular plates, sheets, films, foil and strip, other than of polyurethanes 35% ad valorem Similar Notification No. 14/92 dated 1.3.1992 provided following exemption vide Entry No. 32 and 33: -
32. 39.21 Cellular films or sheets, other than of polyurethanes 25% ad valorem If produced out of goods falling under heading Nos. 39.01 to 39.15, on which the duty of excise leviable thereon under the Central Excises and Salt Act, 1944 (1 of 1944) or the additional duty of customs leviable under section 3 of the Customs Tariff Act, 1975 (51 of 1975), as the case may be, has already been paid.
33. 39.21 Cellular plates, sheets, films, foil and strip, other than of polyurethanes 35% ad valorem
--
For the period 1.3.1990 to 28.2.1994, 10 notices were issued to the respondents alleging that the product cleared by them was PVC foils and not PVC films and therefore, it was alleged that they were not entitled to benefit of Notification No. 53/88-CE or 14/92-CE. The Commissioner dropped all the notices on the following grounds: -
7. I have gone through the said Notification No. 53/88. At Sl. No. 35 of the table appended to the notification, films other than of regenerated cellulose falling under Chapter Heading 39.20 have been exempt from Central Excise duty in excess of 25% ad valorem. This exemption is subject to the condition that the said films must be produced out of goods falling under Heading No. 39.01 to 39.15, on which the duty of excise leviable thereon under the Central Excise and Salt Act, 1944 (1 of 1944) or the additional duty under Section 3 of the Customs Tariff Act, 19975 (51 of 1975), as the case may be, had already been paid. Thus this exemption is available if the following three conditions are fulfilled.
(i) the final product must be films (other than of regenerated cellulose) falling under CH 39.20.
(ii) the said films, i.e. the final product, must be manufactured out of raw materials falling under Heading 39.01 to 39.15; and
(iii) the said raw materials must be duty paid.
8. It has been disputed neither by the CERA nor the Department that the raw materials were indeed duty paid and fell under Headings 39.01 to 39.15. In other words, the two conditions - (ii) and (iii) stood fulfilled. It is also not in dispute that the final product was not of regenerated cellulose and fell under CH 39.20. The only issue in which there was disagreement between the CERA on one hand and the Department and the noticee on the other hand was the description of the final product. The noitcee had described their final product as foils and not as films though the Chapter heading, i.e. 39.20 given, was in accordance with the specification of the exemption Notification No. 53/88. It was CERAs contention that since the final product manufactured and cleared by the noticee was foils and not films, the noticee was not entitled to the benefit of the exemption Notification No. 53/88.
9. The noticee have challenged the view treating foils as different from films and drawn my attention to Chapter Note No. 10 of Chapter 39 of the Tariff. The said note provides that for the purposes of CH No. 39.19, 39.20 and 39.21 (all three of which deal with inter alia with films), the expression film means sheetings of thickness not exceeding 0.25 mm.
10. Neither the CERA not the Department has disputed the noticees claim of the said foils being sheeting of thickness less than 0.25 mm. Thus in terms of the Chapter Note 10 to Chapter 39, so long as the final product is a plastic sheeting of thickness not exceeding 0.25 mm, it is a film. As noted earlier, the impugned final product manufactured by the noticee was indeed a plastic sheeting of under 0.25 mm thickness. It was, therefore, indeed a film for the purpose of exemption Notification No. 53/88, regardless of the fact that the noticee had described it as foil and not as film. In this connection, I also rely on the Hon'ble Supreme Courts decision in Collector of Customs Vs M/s K. Mohan & Co., reported in 1989 (43) ELT 811 (SC), holding that the scope of the term film was wide enough to cover foils and sheets.
11. Indeed it was in the face of these facts that the CERA eventually came round to the Departments view and dropped their objection. It was accepted that the impugned final product was in fact a film and eligible for exemption under the Notification No. 53/88.
12. Given these facts of the case, no case is made out against the noticee. The ten show-cause cum demand notices listed in para 1 supra are unsustainable. Aggrieved by the said order, Revenue is in appeal inn this Tribunal on the following grounds: -
(i) That plastic films are distinct and separate from plastic sheet and plastic foils and therefore, exemption to plastic films does not cover plastic foils.
(ii) The impugned products were sold by the respondent as foils and, therefore, exemption cannot be granted to the said product as exemption is available only to films.
(iii) It has been held that plastic films are distinct and separate from plastic foils by various judicial pronouncements: -
(a) Collector of Customs Vs. K. Mohan & Co. Exports 1989 (43) ELT 811 (SC).
(b) Collector of Customs Vs. Sangli Bank Ltd. 1997 (93) ELT 3 (SC)
(c) A.V. Jain Vs. Union of India 1987 (29) ELT 872 (Bom).
(d) Precise Impex Ltd. Vs. Collector 1985 (21) ELT 84 (Mad).
(e) Continental Marketing Pvt. Ltd. Vs. Union of India 1987 (27) ELT 11 (Cal).
(f) Microna Industries Vs. Collector of Customs 1997 (91) ELT 598 (Tri)
(g) Sriram Refrigeration India Ltd. Vs. Collector of Customs 1993 (68) ELT 600 (Tri) It was argued that in the case of K. Mohan & Co. (supra), it was held that the films made of plastics fall in a category of their own and do not fall in the categories of plates, sheets, foils, strips etc. It was argued that the Commissioner has wrongly relied on the said decision to drop the demands. It was also argued that the arguments film is generic, while a foil is a specie thereof, has been rejected by the Hon'ble Bombay High Court in the case of A.V. Jain (supra). It was argued that in Customs and Excise matters reliance is placed not so much on technical and scientific definition, but on the commercial usage. Since the respondent themselves have cleared the said goods by describing them as foils, they cannot now claim that the same are films. It was argued that not all goods of thickness less than 0.25 mm be classified as films. It was also argued that the rules of interpretation are not interpreted while interpreting an exemption notification, but they are applicable only for classification of goods under the tariff. In support of this assertion, he relied on following decisions: -
(a) Samtel India Ltd. Vs. Collector of Customs 1997 (95) ELT 115 (T)
(b) Set Telecommunications Pvt. Ltd. Vs. Collector of Customs 1997 (19) RLT 629.
(c) Khoday Brewing & Distilling Inds. Ltd. Vs. Collector of Customs 1997 (90) ELT 336 (T).
(d) Nippon Precision Bearing Inds. Vs. Collector of Customs 1997 (90) ELT 57 (T).
(e) Winter Misra Diamond Tools Ltd. Vs. Commissioner of Central Excise, Jaipur 1996 (83) ELT 670 (T).
(f) Guest Keen Williams Ltd. Vs. Collector of Customs 1987 (29) ELT 68 (T) It was also asserted that the impugned product which was classified and sold by the assessee as foils is totally different from films thereby the exemption under Sr. No. 35 of Table of Notification No. 53/88 and under Sr. No. 30 of the table of the Notification No. 14/92 is not available.
2. Learned Commissioner (AR) relies on the grounds of appeal. He argued that words in the notification need not be interpreted in terms of the Chapter Note. He argued that word film in the notification is the description of goods which are covered in the Notification. He argued that this does not employ that anything which is less than 0.25 mm can be cleared availing benefit of Sr. No. 35 of Notification No. 53/88.
2.1 The learned AR argued that the impugned order does not deal with all the issues. He argued that the said decision merely relies on the decision of Hon'ble Supreme Court in case of K. Mohan & Co. (supra) to hold that the term film was wide enough to cover foils and sheets. He argued that the Commissioner was unduly influenced by the dropping of CERA objection. He argued that the decision of Hon'ble Supreme Court in the case of K. Mohan (supra) is not applicable to the impugned goods. He argued that the respondent in their reply to the notice issued to them have nowhere stated that all the goods cleared by them are less than 0.25 mm. He further argued that in the classification list filed by them during the impugned period they had disputed sheet of thickness exceeding 0.25 mm also as film and foil.
2.2 Learned AR relied on decision of the Hon'ble Supreme Court in the case of Commissioner of Trade Tax, UP Vs. S.S. Ayodhya Distillery 2009 (233) ELT 146 (SC). He argued that in the said decision, it was held that paddy husk and rice husk do not denote the same commodity. Paddy Husk cannot be treated as rice husk. He argued that every entry is different and distinct meaning from the other entry in the tariff. He argued that any of products of less than 0.25 mm were considered as films as per the expert opinion of Dr. M.A. Shenoy of Department of Chemical Technology, Bombay, that there can be nothing which can be called as a foil. It can be seen from the said expert opinion that foil of thickness of less than 0.25 mm. He argued that if the argument of the respondent is accepted then the term foil in the tariff will become redundant. In so far as the term film or the foils are concerned, they referred to different things as has been held by the Hon'ble Bombay High Court in the case of A.V. Jain (supra). In the said decision, the Hon'ble High Court has observed as under: - para 7, 10 and 12.
7.? Before turning to the decision in Precise Impex, the trade usage and the academic or academic world, I will consider the question in the light of a proposition canvassed by Mr. Dhanuka. The proposition is that Ex. A must be considered in the proper context and setting. The context is the issue of the Notification under a power conferred upon the Central Government by Section 25 of the Act. This Section empowers the Central Government to exempt generally, either absolutely or subject to such conditions as may be specified, goods of any specified description from the whole or any part of duty of customs. What has been exempted under Ex. A is articles made of plastics, all sorts. What is the extent of the exemption? According to Ex. A, it is payment of so much of the duty of customs as is leviable thereon under Section 3 of the Customs Tariff Act, 1975. This provision, namely Section 3 of the Customs Tariff Act - hereinafter referred to as the C.T.A. - deals with the levy of Additional Duty equal to excise duty. To the extent relevant, Section 3 of the C.T.A. reads thus :-
Any article which is imported into India shall, in addition, be liable to a duty (hereafter in this Section referred to as the additional duty) equal to the excise duty for the time being leviable on a like article if produced or manufactured in India..... The Explanation goes on to specify what the expression articles made of plastics shall mean. It says that the expression shall have the same meaning as in sub-Item (2) of Item No. 15A of the First Schedule to the Central Excises and Salt Act (CESTA), 1944. The Table gives the Items excluded from the exemption and one such Item is foils. A reasonable reading of Ex. A would be that Additional Duty leviable on imported articles would be the same as is excise duty leviable upon like articles if manufactured or produced in India under CESTA. The exemption would cover all articles made of plastics, except those specified as excluded in the Table. The expression all articles of elastics shall be read in the same manner as in sub-Item (2) of Item No. 15A of the First Schedule to CESTA. Sub-Item (2) of Item No. 15A in the First Schedule to CESTA reads thus :-
Articles of materials described in sub-Item (1), the following, namely :-
Boards, sheeting, sheets and films, whether lacquered or metallised or laminated or not; lay flat tubings not containing any textile materials."
Similarly, Item No. 39.3(d) of C.T.A. is worded thus :-
3. Heading No. 39.01/06 is to be taken to apply to materials in the following forms only :
(d) plates, sheets, films, foil and strip, etc. etc."
Significantly, while the CESTA and C.T.A. Items both refer to films, it is only in the C.T.A. Item that films and foils are both mentioned. In the CESTA Item, there is no reference to foils. According to the Explanation given in Ex. A, the exempted articles are to be construed in the same manner as they have been dealt with by CESTA. The necessary implication is that films are covered by the umbrella of all articles, in contradistinction to the exclusions spelt out in the Table. Mr. Dhanuka submitted that the reference to CESTA was inappropriate as the sources of power being considered arose from different enactments. But if there is a reference to a statute when exercising power under another statute, the first cannot be ignored and treated as if totally inappropriate as a device for construction of the 2nd statutes language. prima facie, therefore, petitioner establishes that a film is within the exemption and not the exclusion clause of Ex. A. This satisfies the basic requirement in construing fiscal statutes that a person who wants to take the advantage of a provision relating to a concession or advantage must satisfactorily show that he falls within that provision. [See Dharamsi Morarji Chemical Co. Ltd. v. Union of India, 1980 E.L.T. 454 (Bom.)]. The burden will now shift to the Revenue which is intent upon establishing that petitioner is not entitled to the benefit of the exemption, inasmuch as the article imported was foils. The reply to this is, that this is an innocuous circumstance because the C.T.A. Entry shown in the Bills of Entry would cover films as also foils. But the entries reproduced above from the Schedules to the CESTA and C.T.A. are different. In the CESTA Schedule, there is no mention of foil. For the purposes of that Schedule, a film and foil could not be said to be synonymous. Even in the C.T.A. Schedule, films and foils are not treated as synonyms but separately specified. This would show the legislative intent to treat the two entries as distinct and different. It would, therefore, mean that films mentioned in CESTA Item No. 15A(2) would be within the sweep of the words all articles made of plastics. Though foil is mentioned in the C.T.A. Schedule, it is not so specified in the CESTA Schedule, but the C.T.A. Schedule refers to films and foils both. The conclusion is that the two words mean and imply different things. According to Ex. A, all plastics, except those mentioned in the exclusionary Table, are entitled to exemption from Additional Duty. Therefore, the film would be within the exemption, rather than the exclusion.
10.? This brings me to the technical data relied upon by parties. Let me first set out the pleading of respondents on this aspect of the matter. In their affidavit-in-reply, the relevant excerpts read thus :-
If the thickness of the film is above 0.025 mm., the Item in question would not amount to Foil. However, the thickness of the film in the instant case is 25 micron which is equal to 0.025 mm and therefore the same comes under the term Foil. Since the foil which is nothing but very thin film of a thickness not exceeding 0.025 mm the same is expressly excluded from the exemption under the said Notification. As the Petitioners goods fall within the expression Foil in all respects, it is outside the purview of the said Notification. ... ... ... In effect film and foil upto a thickness of 0.025 mm is synonymous. Technically and scientifically the term foil is very thin film having a thickness upto 0.025 mm. The goods in the present petition being metallised polyester film of a thickness of 25 micron (0.025 mm) therefore fall within the term foil. ... ... ... The expression Foil scientifically and technically means very thin material or sheeting or film having a thickness upto 0.025 mm."
Reliance is placed upon an opinion given by the Chief Chemist of the Customs. A copy of the report has been made available and therefrom I reproduce the portion relied upon :-
Film :- A sheeting having nominal thickness not greater than 0.25 mm.
Foil :- Note. In the case of some materials this term is reserved for the thinner materials, e.g., unsupported PVC film is less than 0.003 inch (0.0762 mm). Modern Plastics by Harry Barron (Page 355) defines technically foil, film and sheet, according to thickness.
Foil is the term applied to materials which are made in continuous rolls and is less than 1/l000h of an inch thick (0.0254 mm). Foil is familiar as the well-known wrapping materials such as Cellophane.
In the book Basic Chemistry of Textile Preparation by S.R. Cockett and K.A. Hilton (page 73) it is stated that thinnest sheet plastics of thickness upto 1 mil (0.025 mm) are termed as foil.
From the above information it can be said that a thin film (upto 0.025 mm in thickness) can be recognised as a foil. Although no lower limit of thickness of film has been specified, very thin film of dimension of thickness not exceeding 0.025 mm, can be optionally termed as foil and hence distinguished from film."
12.? Now, I turn to how the trade understands the two expressions film and foil. It is not necessary to mention in support of the proposition that one principle fairly well-settled in determining the meaning or connotation of words and expressions describing an article in a tariff schedule, is, that those words and expressions should be construed in the sense in which they are understood in the trade by the dealer and the consumer. According to the case of Indian Aluminium Cables Ltd., the reason is, that it is the understanding of those who are in the trade which constitutes the definitive index of the legislative intention. Petitioner relies upon Brochures brought out by Japanese manufacturers of polyester films, metallised or otherwise. In the Brochure of Sakurame Metallic Yarn, polyester films, metallised with micron 12 to 25, are categorised as films. In Dia Luster Film Brochure, the thickness of films is shown to range from 0.012 mm. to 0.025 mm. In the Nakai Mamilon Brochure, material of 12 to 25 microns Brochure, the fine metallic yarn produced by them is described as an Item made of 12 microns or 25 microns polyester film which is metallised. In the Brochure of Sanwa, metallised polyester film is shown as being of 12 microns or 25 microns. This would not mean that there cannot be films of lesser microns. As pointed out by Dr. Kantawala, the Import and Export Policy, 1984-85 lists at serial No. 116 in Appendix 13, page 206, the following:-
Polyester film plain/metallised except metallised film below 6 microns used in the electronics industry. Petitioner also refers to the CESTA classification made by the only manufacturer of polyester metallised films in India. The relevant documents will be found at Exs. 1 and 2, produced along with the affidavit-in-rejoinder made by the petitioner. In these documents, the thickness of the article is shown as 24 microns. Mr. Dhanuka contends that this does not furnish any indication, for his submission is that a film can include a foil.
As learned Counsel puts it, the expression film is generic, while a foil is a specie thereof. If this interpretation is accepted, very few articles made of plastic would escape the tabular exclusions, for every article could somehow be fitted into the words tubes, rods, sheets, foils, sticks, etc. etc.. The legislative intent was to maintain a distinction between the two expressions. This is clear from what has been stated above vis-a-vis the words used in the C.T.A. and CESTA entries. Additional Duty under C.T.A. is in lieu of excise. Excise is leviable under CESTA. Under CESTA, the Indian manufacturer describes a film as being of 24 micron thickness. The ISI Glossary accepts sheetings of a thickness not greater than 0.25 mm. as being a film. Scientifically and commercially, the imported article would, therefore, be a film, and, not in the generic sense of including a foil, but something distinct and different, therefrom. This brings me to the Precise Impex decision.
2.3 Learned AR also argued that in terms of decision of K. Mohan & Co. (supra), relied by the Commissioner, also the film and foils are separate and different items, and therefore Commissioner has wrongly interpreted the said decision. According to learned AR, Commissioner should have relied on the very same decision of Hon'ble Supreme Court to come to a conclusion that the foils are not covered by the description films. For this purpose, he cited the following para of the said decision which read as under: -
2.?The respondent - M/s K. Mohan & Co. - imported, from Japan, metallised polyester films under an import licence dated 14-5-1978. The goods were admittedly in the shape of film rolls several metres long. They were cleared on payment of customs duty leviable under the Customs Act, 1962 (CA) as well as the additional duty of customs (or countervailing duty) leviable under Section 3 of the Customs Tariff Act, 1975 (CTA). Subsequently, the respondent firm made three applications for the refund of the amount of the additional duty of customs paid by it. The claim for refund was based on the terms of a notification of exemption issued under Section 25(1) of the CA. Under Notification No. 228/76, dated 2-3-1976, an exemption from the customs duty payable under Section 3 of the CTA was granted in respect of articles made of plastics, all sorts, but excluding those specified in the table annexed hereto and falling within Chapter 39 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). The annexed table excepted the following items from the purview of the exemption :
Tubes, rods, sheets, foils, sticks, other rectangular or profile shapes, whether laminated or not, and whether rigid or flexible including tubings and polyvinyl chloride sheets. Notification No. 443 dated 29-11-1976 omitted the words of Notification No. 228 which have been underlined above but left the main notification otherwise untouched.
4.?There is no dispute before us that the goods in question are articles made of plastics. This being so, the assessee is entitled to the exemption conferred by the notification unless the goods answer the description of one or other of the specific items set out in the table. The onus of showing this is clearly on the Revenue. The department contends that the goods are sheets or foils or other rectangular or profile shapes and hence liable to duty. On the other hand the assessees case is that they are films, a specie of plastic articles different from any mentioned in the table. It is alternatively contended that, even if they are treated only as thin sheets of plastic material, they can be more accurately described only as sheetings and not sheets. It is pointed out that the goods are in the form of large rolls containing films several metres long. Such huge lengths can only be called sheetings for the expression sheets, it is said, connotes only smaller lengths or bits cut out from sheetings which mean sheets of immense lengths. Also, being in the form of rolls, they cannot be said to be articles of rectangular shape merely because, when cut into segments, they may fall into rectangular pieces.
7.?The answer given by the Bombay High Court to the contention that the goods were `foils was that while it may be that, technically and scientifically speaking, the articles in question may be capable of being characterised as `foils, one is concerned in a customs or excise matter not so much with the technical or scientific definitions of these terms but rather with commercial usage. One has to see how the trade understands the expression films and one should also bear in mind in this connection that the expressions set out in the table are applicable not merely to the articles with which we are at present concerned but also to various other types of articles of plastics with varied commercial use. The question is whether the trade understands the article presently in question as a `film or whether there is a distinction in trade usage also between `foils and `films. It has been pointed out by the Bombay High Court, on the basis of the evidence before it, that in the understanding of those who are in this particular trade, metallised polyester films are referred to as `films. Reference has been made to the classification made by the only manufacturer of polyester films in India for purposes of CEA. Reference has also been made to the brochures brought out by the Japanese manufacturers of the goods in question which show that metallised polyester `film could consist of films of the thickness of even 12 to 25 microns. It has been pointed out that, under the Import-Export Policy of India for 1984-85, reference has been made to metallised polyester `films having thickness of even less than 5 microns which are used in the electronic industry.
8.?In the light of the above material and the absence of any additional material led in the present case, we agree with the view of the Bombay High Court that, though for certain purposes there is a distinction between `films, `foils and `sheets, so far as the article presently in question is concerned it is recognised in trade only as `film. It is difficult to imagine any person going to the market and asking for these films by describing them either as `foils or as `sheets. We are therefore of opinion that the goods under consideration cannot be described either as `foils or as `sheets.
9.?There is also another reason why the articles in the present case, to the extent they have thickness of more than 0.25 mm cannot be described as `sheets. Shri Ganesh for the assessee contended - and we think rightly - that a film roll of indefinite length and not in the form of individual cut pieces can be more appropriately described as `sheetings rather than `sheets. The Indian Standard Institution also defines `sheets as a piece of plastic `sheeting produced as an individual piece rather than in a continuous length or cut as an individual piece from a continuous length. We have also earlier pointed out that there are various items in various notifications making distinct reference to sheets and sheetings. Actually, we also think that there is a factual confusion on this aspect. While one of the Collectors has referred to the goods as being of thickness varying between 0.025 mm and 0.501 mm, it is seen from another of the orders that the goods are 3000 metres in length, 0.501 mm in width and 0.025 mm in thickness. If the latter is the correct version and all the goods are only 0.025 mm in thickness, the question now posed will not at all arise. However, as indicated above, there is force in the contention of Shri Ganesh that if the articles be held not to be `films, because they exceed 0.25 mm in thickness, they would be `sheetings rather than `sheets and would therefore not fall within the meaning of the expression sheets in the table.
He argued that the interpretation adopted by the Commissioner obliterates the identity of foils from the tariff in so far as to foil would be covered by the term film.
3 Learned Counsel for the respondent argued that the films is generic and foils is species thereof, he argued that all foils would be covered in the description of films. He argued that the decision of Hon'ble Supreme Court in the case of A. Mohan & Co. is clearly applicable to the present case. He argued that in all the invoices, whether under the description the goods were disputed as foils under the heading name of excisable commodity, the same were described as PVC film. He argued that in all the invoices, the name of excisable commodity has been described as PVC film. He produced certain sample invoices. He argued that while in the invoices covered in the show-cause notice issued upto 18.12.1991, the description was given as film in respect of show-cause notices issued thereafter the description has been given as film and not foils. He argued that this fact was recorded in the show-cause notices, where it was alleged that they were clearing Rigid PVC Thermoforming foils by claiming the same as Rigid PVC Thermoforming film. He argued that in all the invoices, they have described the goods as PVC films under the heading name of excisable commodity. He argued that while interpreting the description in the Notification, the Chapter Notes are relevant. For this purpose, he relied on the decision of Hon'ble Supreme Court in case of Commissioner of Central Excise Vs. Fenoplast 1994 (72) ELT 513 (SC). He relied on para 2, 3 and 7 of the said decision to state that understanding in common parlance or commercial parlance would be relevant only in absence of any definition given in the enactment. The said para reads as follows: -
2. The respondent purchases 100% cotton cloth and coats it with P.V.C. resin and other plasticizers. The product is popularly known in the market as rexine cloth. The composition of the rexine cloth manufactured by the respondent is to the following effect :
(1) Cotton Fabrics 8.0% (2) PVC resin 24.5% (3) Plasticizers (DIP/DIOP/BBP) 13.0% (4) Other [fillers, (calcium carbonate) secondary plasticizers, pigments, solvents, thinners, foaming agents] 54.5% The above composition is by weight.
3. The main contention of the respondent which found favour both with the Collector (Appeals) and the majority of the Members of the CEGAT is that the rexine cloth manufactured by the respondent cannot be called a cotton fabric in view of the fact that cotton fabric represents a mere 8% of the final product (by weight) whereas the remaining 92% is represented by coating material. The respondents case which has been reiterated before us by its learned counsel, Shri Soli Sorbajee is that in commercial or in common parlance, rexine cloth is not understood or dealt with as a cotton fabric but as a distinct commodity. It cannot, therefore, be called a cotton fabric and even if it is treated as one by virtue of Tariff Item 19, the predominance or percentages referred to in the said Tariff Item should be applied in relation to the final product and not with reference to the cotton cloth which represents a very minor portion of the final product. The contention of the Revenue, on the other hand, is that coated fabric (in the case of the respondent, rexine cloth) is expressly placed within the purview of the cotton fabric by the Parliament. In the face of such express inclusion, there is no room for arguing that the rexine cloth or coated fabric is not cotton fabric. May be that rexine cloth is not called or dealt with as a cotton fabric in the commercial world or in common parlance but that does not prevent the Parliament from treating it as a cotton fabric for the purposes of the Act and indeed the Parliament has chosen to include it within the ambit of cotton fabrics for the purposes of levying excise duty. Since the power of the Parliament to do so is unquestioned, the respondents product is bound to be treated as cotton fabrics within the purview of Tariff Item 19 and subjected to duty prescribed under sub-item (III) thereof. So far as the predominance or percentages referred to at the end of the first para of the Tariff Item is concerned, they are wholly irrelevant in the case of the respondents product inasmuch as the said predominance or percentages are applicable in relation to the base fabric and the base fabric in the case of respondents product is 100% cotton.
7. Shri Sorabjee cited several decisions of this Court holding that in interpreting the meaning of the words in a taxing statute like the Excise Act, the meaning assigned to the words by the trade and its popular meaning should be accepted and that the test to be applied is to see how the product is identified by the class or section of people who deal in the product or who use the product. There can be no quarrel with the said proposition but it applies only when the words in question are not defined in the Act. This is so held by this Court in Indo International Industrial v. Sales Tax Commissioner, Uttar Pradesh [1981 (2) S.C.C. 528]. It says: it is well settled that in interpreting items in statutes like the Excise Tax Acts or Sales Tax Acts, whose primary object is to raise revenue and for which purpose they classify diverse products, articles and substances, resort should be had not to the scientific and technical meaning of the terms or expressions used but to their popular meaning, that is to say, the meaning attached to them by those dealing in them. If any term or expression has been defined in the enactment then it must be understood in the sense in which it is defined but in the absence of any definition being given in the enactment the meaning of the term in common parlance or commercial parlance has to be adopted. In this view of the matter, we do not think it necessary to deal with the several decisions cited by Shri Sorabjee regarding the relevance of commercial or common parlance test. 3.1 Learned Counsel relied on the decision of the Hon'ble Supreme Court in the case of Gujarat State Fertilizers Co. 1997 (91) ELT 3 (SC). In the said case, the availability of exemption to Amonia used captively for manufacture of Urea, which was in turn used for manufacture of Melamine was examined. It was held that though Urea was not used as fertilizers, still it was to be considered as fertilizer in terms of the Heading 31.02 in terms of the Chapter Note 31 of Chapter 38. The Hon'ble Supreme Court in the said case observed as follows: -
12.?Consequently, on a conjoint reading of the express terms of Notification No. 40 of 1985 and the relevant headings and sub-headings of Chapter 31 of the Tariff Act, it must be held that the appellant by captively consuming ammonia had manufactured molten urea, a chemical fertiliser. It is difficult to appreciate the contention of Shri Bhat, learned Additional Solicitor General that the spirit of the notification was to give the benefit only to soil fertilisers as final product which could be utilised by the cultivator in agriculture and with that end in view the notification was promulgated. On the express language of the notifications, it is not possible for us to agree with this contention. If that was the view of the Central Government while promulgating the said notification, nothing prevented the Central Government from indicating that it was not seeking to cover the goods mentioned in Chapter Heading No. 31 or in not confining the said exemption notification only to soil fertilisers. In the absence of any such restrictive words in the said notification, the express and wide terminology `fertiliser employed in the notification cannot be curtailed by any process of reasoning about the supposed intention of the Central Government underlying the issuance of the said notification. It is also not possible to agree with the contention of Shri Bhat, learned Additional Solicitor General placing reliance on a decision of this Court in The Tata Oil Mills Co. Ltd. v. Collector of Central Excise [1989 (43) E.L.T. 183 (S.C.)] that the supposed object and purpose of exemption should also be kept in view. In paragraph 6 of the Report, Ranganathan, J. speaking for a two-Member Bench of this Court has observed that in trying to understand the language used by an exemption notification, one should keep in mind two important aspects : (a) the object and purposes of the exemption and (b) the nature of the actual process involved in the manufacture of the commodity in relation to which exemption was granted. It must be kept in view that the object and purpose of the exemption has to be culled out from the express language of the notification. If the express language of the notification does not indicate a contrary intention conveyed by the wide words employed by the notification, full effect has to be given to the wide terminology employed by the notification otherwise the result would be that in trying to search for the supposed intention underlying the notification, the intention flowing from the express language of the notification would get stultified or truncated. To recapitulate, on the express language of the notification an inevitable conclusion follows that the Central Government meant to exempt excise duty on the captively consumed ammonia if it had resulted in the manufacture of fertilisers and as it had resulted in the manufacture of molten urea which by itself was a chemical fertiliser covered by Chapter 31 expressly mentioned in the said notification, the scope and ambit of the said notification could not be curtailed on the basis of the supposed latent intention underlying the said notification, namely, that only soil fertiliser was required to be produced by the captive consumption of ammonia and not any other type of fertiliser like molten urea which was a chemical fertiliser. If the contention of Shri Bhat, learned Additional Solicitor General, is accepted, Condition No. 2 as laid down by the said notification will have to be redrafted by adding the restrictive words `soil fertiliser instead of the wide word `fertiliser as employed by the exemption granting authority in its wisdom. It is obvious that the term `fertiliser is genus which may consist of various species of fertilisers, namely, chemical fertiliser, soil fertiliser, animal or vegetable fertilisers, as seen from description of various types of fertilisers found in Chapter 31 of the Tariff. It has also to be noted that the chapter notes of the Chapters referred to by the said notification have to be read as a part and parcel of the said notification. In this connection, we may usefully refer to a decision of this Court in Fenner (India) Ltd. v. Collector of Central Excise, Madurai [1995 (77) E.L.T. 8 (S.C.)] wherein one of us S.P. Bharucha, J. speaking for a two-Member Bench of this Court observed that the Tariff Schedule contained rules for its interpretation which required that for legal purposes classification would be determined on terms of the headings and any relative Section or Chapter Notes. As we have already seen Note to Chapter 31 dealing with fertilisers clearly states that Heading No. 31.02 would cover mineral or chemical fertilisers even when they are not used as fertilisers. Therefore, it must be held that if molten urea as covered by Heading No. 31.02 was not to be used as fertiliser and on the other hand was utilised as an input for producing melamine, still it would remain a chemical fertiliser within the sweep of Chapter 31. If it remained a fertiliser, it could not be said that ammonia which was captively consumed for manufacturing molten urea had not satisfied the condition for earning total exemption under Notification No. 40 of 1985 as ammonia had resulted in the manufacture of molten urea being a fertiliser.
14.?Shri Bhat, for the Revenue, next contended that the term `fertiliser as employed by the notification must be given its ordinary meaning that is accepted in common parlance. He submitted that to a common man fertiliser would denote only a soil fertiliser which could be utilised by the agriculturist for improving his agricultural yield. It is difficult to appreciate this contention. As noted earlier, the notification in terms seeks to encompass in its coverage goods of the description falling under Chapters 25, 27, 28, 29 and 31 or 32 of the Tariff Act. When there is an express reference in the notification covering the goods, amongst others, those referred to in Chapter 31 and as Chapter 31 in its turn includes chemical fertilisers, it is difficult to appreciate how despite such an express reference in the notification, the supposed common parlance test can be adopted. In fact, such was not the contention of the department even before the CEGAT or for that matter before the Assistant Collector or the Collector (Appeals). The only stand of the department was that exemption Notification No. 40 of 1985 would not apply to ammonia as it had resulted into the final product melamine which was not a fertiliser and the intermediate product of molten urea was utilised in a continuous process of manufacture and, therefore, it must be held that ammonia was captively consumed for the purpose of manufacturing the ultimate product of melamine and not molten urea. On the express language of the notifications, in question, it is not possible to agree with the contention of Shri Bhat, learned Additional Solicitor General that the term `fertiliser employed by the said notification must be understood by adopting the common parlance test to be referred to soil fertiliser only. 3.2 Learned Counsel also argued that the individual rate prescribed in the Notification are exclusively for the purpose of countervailing duty and are not intended for the levy of Central Excise duty.
4. We have gone through the rival submissions. We find that the order of Commissioner is based on two grounds: -
(i) That the CERA has dropped their objection, and
(ii) That Hon'ble Supreme Court in the case of K. Mohan & Co. (supra) has held that the term film is wide enough to cover foil and sheets.
We find that the dropping of objection by CERA has no relevance whatsoever for the purpose of adjudication.
4.1 It seen that the sole ground in the entire proceedings to allege that the respondents have cleared Foil is the description on the invoice. No definition of Foil has been relied upon by the appellants in the review order. It has not been stated how the Foil is different from Film. It has not been disputed that the products cleared by the respondents are of less than 0.25 mm thickness as can be seen from the invoices submitted by the respondents. No other material to counter this claim has been produced. We find that the only reason for alleging that Foil has been cleared is the description on the invoices.
4.2 Therefore we examine the invoices produced before us. We find that in all the invoices the product has been described at two places. At the top of the invoice in the column Name of Excisable Commodity the product has been described as the PVC Film during the entire disputed period. However in the column Description the product has been described as Foil during some period and as film later on. The respondents have described the product as Foil and as Film at two places in the same invoice during certain period. In all the invoices produced before us the thickness has been given ranging from 0.18 mm to 0.25 mm. It does conform to the description of film.
4.3 The entire argument of the revenue is based on the fact that for some period the product has been described as Foil in the invoices. On the basis of this fact, it was argued that in commercial parlance the product is known as foil. It is not a correct conclusion reached on any reasonable basis. It is noticed that the same invoice also describes the product as PVC Films. If revenue wanted to distinguish Film from Foil they have to first describe the attributes of both Film and Foils. It is undisputed that the product in question answers to the definition of Films given in the Chapter Notes. In absence of any definition of Foil, it is not reasonable to assert that the product, which does answers to the description of Film, is a Foil.
4.4 We find that the decision of Hon'ble Supreme Court in the case of K. Mohan & Co. was given in the circumstances where the dispute was whether explanation of Notification implied exclusion of films also from the purview of Notification. In the said case, in para 4, the Hon'ble Supreme Court observed that the exemption was available to all goods except certain goods described in the notification. Since the exemption was available to all goods except certain exclusions, the onus of showing that the impugned goods fall in the exclusion was on Revenue. It is seen that the decision in the case of K. Mohan & Co. were given in the circumstances where it was the Revenue, on which the onus to prove that the films and foils are one and the same was put, and it failed to establish the same. In the instant case, the exemption is to films. The onus to establish that the product cleared by the respondent is film, is on the respondent. The product cleared by them fall under the definition of Film as given in the chapter notes. The product has been described as Film in addition to description Foil in the invoices. In these circumstances the onus to prove the claim of the revenue that the product cleared by them is foil and not Film falls on the revenue. Revenue has not given any definition of the term Foil. The invoices describe the product both as Foil and Film at different places during certain period and as Film only for the rest of the period. The sole ground of the revenue that invoices for a part of the period described the product as both Foil and Film, is not sufficient to discharge the burden. The revenue has failed to give any reason to exclude the product from the description Film. The Revenues appeal is dismissed.
(Pronounced in Court on 10.06.2016)
(S.S. Garg) (Raju)
Member (Judicial) Member (Technical)
Sinha
15
Appeal No. E/609/07