Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Essen Synthetics (P) Ltd. on 18 August, 1987
Equivalent citations: 1987(14)ECC169, 1987(13)ECR602(TRI.-DELHI), 1987(32)ELT759(TRI-DEL)
ORDER
S.D. Jha, Vice-President (J)
1. The question for decision in this appeal by the Collector of Central Excise, Calcutta is whether the respondents products Dibutyl Phthalate (hereinafter DBP) a mite repellant and Dimethyl Phthalate (hereinafter DMP) an insect repellent are eligible for exemption as insecticides under Notification No. 62/78 dated March 1, 1978.
2. The Assistant Collector of Central Excise, Calcutta II Division, Calcutta by his order dated 14-7-1983, inter alia, held that insecticides had the same meaning as defined in Section 3 of Insecticides Act, -1968. The Schedule annexed to the Insecticides Act, 1968 did not include the two products DBP and DMP as insecticides. The respondents did not hold registration under Section 9(1) or licence under Section 13(1) of the Act ibid and for these reasons the two products could not be considered insecticide within the meaning of the notification and merit exemption thereunder. He also held the respondents guilty of wilful misstatement and suppression of facts and applied the longer time limit for raising demand. The Collector of Central Excise (Appeals) Calcutta, however, by the impugned order relying on such authorities cited by the respondents before him and certificate issued by D.G.S. 4 D. held that the respondents products which were insect repellent could be insecticides within the meaning of notification. He also held that the respondents could not be denied exemption under the notification because a part of the product was sold to certain customers as plasticizers. Hence the present appeal.
3. At the hearing of the appeal Shri A.K. Rajhans, learned Sr. Departmental Representative representing the appellant reiterated the grounds set out by the Assistant Collector in his order-in-original i.e. the respondents two products are not included as insecticides in the Schedule to Insecticides Act, 1968 nor did the respondents obtain registration or licence in respect of the products as required under Sections 9 and 13 of the Act. The two products were, in fact, not insecticides as claimed. Besides, a part of the product is also used in the plastic industry as plasticizers. Therefore, it would not merit treatment as insecticide or pesticide within the meaning of the notification.
4. Shri Bhaskar Gupta, the learned counsel for the respondents took the Bench in detail through the background of the case. He explained that 90% of the respondents' production of the two products is consumed by the Ministry of Defence, Govt. of India. Earlier, the appellants till February 28, 1978 were paying Central Excise duty on the products under Tariff Item 68 of the Central Excise Tariff and the same was being reimbursed to them by the Ministry of Defence. 3y Notification No. 62/78-CE dated March 1, 1978, Central Government amended Notification No. 35/75-C.E. dated 1-3-1975 and added Serial No. 18 Insecticides, Pesticides, Weedicides and Fungicides in the Schedule appended to the Notification. The effect of this addition was that the four items falling under Tariff Item 68 aforesaid stood exempted from the whole of duty of excise leviable thereon. The respondents, after this amendment, filed revised classification list on March 2, 1978 and thereafter on 6-8-1979, 3-12-1979 and 21-6-1980 claiming exemption from Central Excise duty on the two products D.M.P. and D.B.P. in terms of the said notification. In the classification lists, D.M.P. and D.B.P. were described as insect and mite repellents. The Excise authorities were informed and were fully aware of the nature of these products and that they were insect and mite repellent -and as such insecticides or presticides. They were also aware that bulk of the goods were sold to Defence Department as insect and mite repellent. The classification lists were approved from time to time after thorough scrutiny and the respondents cleared the two products in terms of the said classification orders without paying any duty. The respondents did not charge from the Defence Department which purchased 90% of its production or from other customers in open market the Central Excise duty which it would have otherwise charged and collected. Drawing attention to the Show Cause [Notice dated 26-12-1979, he submitted that the proposal in the Show Cause Notice appeared to be to demand duty in respect of sales made by the respondent to plastic manufacturers who had used D.M.P. and D.B.P. sold to them as plasticizers. In respect of this quantity it was alleged that they had been used otherwise than an insecticides and pesticides and were thus liable to pay duty. The Assistant Collector, however, enlarged the scope of the demand and demanded duty even with respect to supplies made to different departments and for a period of 5 years even though clearances were made by the respondents with full knowledge of Central Excise Department and on the strength of approved classification lists. According to him, shorter period of 6 months' limitation and not the longer period of 5 years could apply to demand of duty, if any.
5. About merits of classification, he submitted that number of insecticides specified in the Schedule to the, Insecticides Act was not an exhaustive list. He assailed the Assistant Collector's reasoning that the two products D.M.P. and D.B.P. were not insecticides as they only repelled away insect or mite. He also submitted that the Assistant Collector erroneously and illegally without any basis held that the primary use of the two products was as plasticizers. He referred to Remington Pharmaceutical Sciences published by Mack Publishing Company in support of the argument that the two products could be insecticides. He urged that the two products are dealt with and known in the market as insecticides. Government of India, Ministry of Defence used the two products insect and mite repellents and such repellents are known as insecticides. In this connection, he submitted that mosquito and arvicidal oil, although not appearing in the Schedule of the Insecticides Act, have been accepted by the Additional Collector of Central Excise as insecticides. Referring to the Schedule, he said that Item 'Deet' which is only a repellent and not a killer had been included in the Schedule of the Insecticides Act. He also referred to Dte. General of Supplies 5c Disposals, New Delhi's letter dated 11-5-1982 which would suggest that the product D.VI.P. is an insecticides. He also referred to Dte. of Plant Protection Quarantine & Storage, N.H. IV, Faridabad (Haryana)'s letter dated 10-5-1979, which intimated the respondents that the two products had till then not been included to the Schedule of Insecticides Act. Reference was also made to Ministry of Defence specification issued on 15-7-1966 about D.B.P. and D.M.P. and a similar letter issued by the same authority on 23-7-1975. Reference during arguments was also made to the portion relating to methods of insect control in Remington's Pharmaceutical Sciences (Fourteenth Edition) at Page 1278. According to this, insect repellents, fumigants and attractants are considered insecticides in a broad sense. Reference was also made to the Petroleum Products Handbook by Virgil 3. Guthrie about the meaning of 'insecticide'. According to this glossary, insecticide means "a substance or mixture of substances intended to prevent, destroy, repel or mitigate any insects present in the environment. Reference was also made to Explanatory Notes 2 of Section VI, Chapter 38.111 and 38.112 of Brussels Nomenclature dealing inter alia, with classification of insecticides and fungicides. According to these notes, products intended to repel pests are classified under this heading. Reference was also made to a letter dated 21-9-1981 from Small Industries Service Institute addressed to the respondents. This letter says that D.M.P. is used as an insect repellent by the Defence Department and as such may be considered as an insecticide. The respondents were also advised to approach the State Directorate of Agriculture or Central Insecticide Board for further clarification if required. He also referred to letters dated 9-3-1979 of Apan John & Co. dated 12-3-1980 of Technotrade Enterprises dated 30-3-1979 of Advance Chemical Co. and dated 21-4-1980 of Kroda Chemicals for the argument that the two products would merit classification only as insecticides and be thus eligible for exemption under the Notification.
6. Shri Bhaskar Gupta also submitted that Insecticides Act and the Schedule appended thereto could not control the meaning of the expressions insecticides, pesticides used in the notification. The expressions in the notification would have to understood as to how the same is understood commercially by the people dealing with the subject goods. According to him, the Insecticides Act and the Schedule appended thereto could not be read in the notification. He submitted that the order of the Collector (Appeals) was perfectly correct and the appeal deserves to be dismissed.
7. Reference during arguments was also made to a decision of the Tribunal in Collector of Central Excise, Bombay v. Bombay Chemicals Pvt. Ltd. Bombay and Standard Chemicals and Pharmaceutical Co., Bombay reported in 1986 (2f) ELT 373. This decision related to the question whether disinfectants are insecticides within the meaning of the same notification and may not be very much helpful for decision of the present controversy.
Before the merits of the appeal are taken up, it is necessary for proper appreciation to reproduce the relevant Notification No. 55/75 dated 1-3-1975 along with the relevant Serial No. 18 which was introduced by Notification No-62/78-C.E. dated 1-3-1978.
"Exemption to certain specified goods -
In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts goods of the description specified in the Schedule annexed hereto and falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) from the whole of the duty of excise leviable thereon".
THE SCHEDULE
1. x x x x x
2. x x x x x
18. Insecticides, Pesticides, Weedicides and Fungicides"
(Rest of the Schedule is not relevant)
8. We have carefully considered the arguments advanced by the parties. In the view we take, it is not necessary to discuss in detail the various arguments put-forth by Shri Bhaskar Gupta, learned Counsel for the respondent. The appeal must be dismissed on a short ground. The only ground on which the respondent is sought to be denied benefit of exemption under notification is that the two products do not find place in the Schedule in the Insecticides Act, 1968 and are therefore, not insecticides and pesticides within the meaning of the notification. Now, in another appeal, dealing with the same notification No. 55/75 dated 1-3-1975 as amended by Notification No. 62/78 dated 1-3-1978, parties M/s. Agromore Limited Bangalore v. Collector of Central Excise, Bangalore manufacturer in respect of four products i.e. (i) Ethrel plant growth regulators (ii) Ethrel latex stimulant (iii) Fruitone; and (iv) Transplantone claimed exemption under the notification on the ground that these products were included in the Schedule under the Insecticides Act, 1968. Revenue came up with the plea that notification could not be interpreted on the basis of Insecticides Act and Schedule thereto. This plea of Revenue was accepted by the Tribunal. In doing so, the Tribunal inter alia placed reliance on a decision of the Supreme Court in MSCO Pvt. Ltd. v. Union of India 5c Others reported in 1985 (19) ELT 15 (S.C.). This Supreme Court decision dealing with the expression 'industry' inter alia, observed that "while construing a word which occurs in a statute or a statutory instrument in the absence of any definition in that very document it must be given the same meaning which it receives in ordinary parlance, or understood in the sense in which people conversant with the subject matter of the statute or statutory instrument understand it. It is hazardous to interpret a word in accordance with its definition in another statute or statutory instrument and more so when such statute or statutory instrument is not dealing with any cognate subject". The Supreme Court decision also referred to observation in Clauses on Statute Law (6th Edition), which is in the following words :-
"In construing a word in an Act caution is necessary in adopting the meaning ascribed to the word in other Acts. It would be a new terror in the construction of Acts of Parliament if we were required to limit a word to an unnatural sense because in some Act which is not incorporated or referred to such an interpretation is given to it for the purposes of that Act alone".
It would be seen that the stand of Revenue or State in the present appeal is not consistent with the stand it took with respect to the interpretation of the same notification before the Tribunal in Agromore (Limited) case supra. In fact the stand is just the reverse of earlier stand. While in the Agromore (Limited) case, it pleaded that Insecticides Act and Schedule would not govern the interpretation of the notification and exemption thereunder would not depend on inclusion of the production in the Schedule to the Insecticides Act, 1968 and the manufacturer holding a licence for manufacture of insecticides, in the present appeal it is sought to be made out that interpretation would depend on the inclusion of the product in the schedule to the Insecticides Act. The Revenue cannot be permitted to take such inconsistent and diametrically opposite stand about interpretation of the same notification.
9. Following the decision supra, we hold that the Insecticides Act, 1968 or the Schedule thereto would not govern the meaning of expressions in Serial No. 18 of the notification supra. The consequence of this finding would be that the appeal must be dismissed.
10. We may, however, briefly refer to the material placed by Shri Shaskar Gupta. The letter of Ministry of Defence dated 11-5-1982 from the Directorate General of Supplies and Disposals, New Delhi addressed to the Assistant Collector of Central Excise, Calcutta and the Superintendent of Central Excise, Calcutta refers to the certificate whereby D.M.P. -an insect repellent is used by the Army Headquarters (Page 93 of the Paper Book). Government of India, Ministry of Defence specification issued on 15-7-1966 (Page 98 of the Paper Book) shows that D.B.P. is used as a mite repellent. Similar specification issued on 23-7-1975 by the Ministry of Defence at (Page 99 of the Paper Book) would show that D.M.P. is used as an insect repellent. Petroleum products Handbook published by McGraw-Hill Book Company (Photostat copy at page 101 of the Paper Book) under the heading 'insecticide' would show that insecticide means a substance or mixture of substances intended to prevent, destroy, repel or mitigate any insects present in the environment. Brussels Nomenclature (Photocopy at page 102) though not strictly relevant for interpreting classifications of excise tariff of the relevant period would support the respondents argument that products intended to repel pests would merit classification under heading disinfectants, insecticides, fungicides and the like. The four letters dated 9-3-1979, 12-3-1980, 30-3-1979 and 21-4-1980 from Apan John & Co., Technotrade Enterprises, Advance Chemical Co. and Kroda Chemicals respectively at pages 104, 105, 106 and 107 of the respondents paper book would support the respondent's claim that the products deserve treatment as insecticides. The first two letters relating to D.M.P., insect repellent describe it as being insecticide. Advance Chemical Company's letter describes D.M.P. as an insect repellent. Kroda Chemical's letter says that D.M.P. and D.B.P. are used by them as an insect repellent and mite repellent and as insecticides. According to Remingtom Pharmaceutical Sciences (Photocopy at page 92) Diethyl-toluamide, which is a mosquito repellent is treated as pesticides under USP. According to the same book, ibid Dibutyl Phthalate (D.B.P.) is used as an insect repellent. It also finds place in description as pesticides. All this leaves no room for doubt that repellents, even though they might not actually kill insects or pests, would still be treated as insecticides or pesticides. Shri Gupta had referred without challenge to inclusion of DEET a repellent in the Schedule to the Insecticides Act. This would further. support the respondent's case that a repellent even though not included in the Schedule to the Insecticides Act could still be treated as insecticides or pesticides within the meaning of the notification, if the same is, by those dealing with it, understood to be an insecticides and pesticides. The benefit of the exemption could not be denied to the respondents on the only ground that the products were not included in the Schedule to the Insecticides Act, 1968.
11. For the aforesaid reasons, we find no merit in this appeal and dismiss the same though for reasons slightly different from those found by the lower Appellate authority.