Customs, Excise and Gold Tribunal - Delhi
National Gold Industries vs Collector Of C. Ex. on 14 March, 1989
Equivalent citations: 1989(22)ECC132, 1989(23)ECR332(TRI.-DELHI), 1989(42)ELT20(TRI-DEL)
ORDER G.P. Agarwal, Member (J)
1. Both the captioned appeals are directed against the common impugned Order-in-Appeal and the short point involved in these appeals is -
Whether the appellants are entitled to the benefit of Notification No. 35/85-C.E., dated 17-3-1985 as amended by Notification No. 78/86-C.E., dated 10-2-1986 in respect of 'liquid gold' which according to the appellants should be classified as 'ceramic colour'.
2. Short facts leading to the controversy are that both the appellants are manufacturers of liquid gold'. They are registered as a Small Scale Industry. For the manufacture of liquid gold primary gold is required as raw material which is allotted under quota system on quarterly basis by the Gold (Control) Administrator. The manufacturing as well as the marketing of liquid gold is subject to the provisions of the Central Excises and Salt Act, 1944.
3. Appellants No. 1 M/s National Gold Industries, Agra filed their Classification list No. 180/86 w.e.f.' 25-10-1986 classifying liquid gold under sub-heading 3207.90 claiming to be ceramic colour and additives (chemicals) under sub-heading 3801.90 of Central Excise Tariff Act, 1985 and claimed the exemption from payment of whole of Excise duty under Notification No. 35/85-C.E., dated 17-3-1985 as amended by Notification No. 78/86-C.E., dated 10-2-1986. However, the Assistant Collector ordered classification of the liquid gold under sub-heading 3207.90 and additives (chemicals) under sub-heading 3801.90 respectively and after holding so rejected the claim for exemption under the said Notification vide his Order-in-Original No. E/Val/87 dated 21-1-1987.
4 Likewise the other appellants M/s Indian Ceramic House also filed their Classification List No. 181/86 w.e.f. 15-10.1986 classifying liquid gold under sub-heading 3207.90 claiming to be ceramic colour and also claimed exemption from payment of whole of Excise duty under the aforesaid Notification No. 35/85-C.E., dated 17-3-1985 as amended by Notification No. 78/86-C.E, dated 10-2-1986. However, the Assistant Collector ordered for classification of liquid gold under sub-heading 3207.90 and rejected the claim for exemption under the said Notification vide his Order-in-Original No. 4/Val/87 dated 22-1-1987.
5. Against the said Orders passed by the Assistant Collector both the appellants filed their separate appeals before the Collector of Central Excise (Appeals), New Delhi but without success. Hence the present appeals.
6. Shri A.K. Jain, learned Counsel for the. appellant first drew our attention to the findings recorded by the Assistant Collector and confirmed by the Collector (Appeals). The said findings of the Assistant Collector runs as follows -
"It is not disputed by the party that the liquid gold is covered under subheading 3207.90. Sub-heading 3207.90 defines that liquid lustres and similar preparations of a kind used in the Ceramic Colour or glass industry etc. Party has also confirmed that their product is being used in the ceramic/glass industry. Explanatory notes on the above subject/sub-heading clearly defines the liquid lustres stating therein that these are solutions or suspensions of metallic compounds in spirit or turpentine or other organic solvents, used for decorating ceramics or glassware. The most widely used, are gold, silver, alumimium or chromium lustres. Since the description given of the liquid gold as well as and use shown by the, party clearly tally with the liquid lustre, therefore, order its classification accordingly. Further there is no dispute regarding classsification of additives (chemicals). I, therefore,, order classification of the liquid gold under sub-heading 3207.90 and additives (chemicals) under sub-heading 3801.90 respectively. I farther reject the claim for exemption under Notification No. 35/85 as amended vide 78/86 dated 10-2-1986. The classification list duly approved is also enclosed herewith."
7. On appeal the Collector had confirmed the said findings by stating as follows -
"...I also observe that in the books referred to by the appellants gold had been described as colouring material. There is no dispute that gold/liquid gold is a ceramic colouring material but this relates to the aspect of use and not of classification under the C.E. Tariff. The Classification of liquid gold will have to be determined as per the express description under the appropriate Tariff heading. Under Tariff Heading 32.07, the description reads as 'Prepared pigments, prepared opacifiers and prepared colours, vitrifiable enamels and glazes, en-gobes (slips), liquid lustres and similar preparations, of a kind used in the ceramic enamelling or glass industry. I observe that the Heading uses expressions " Prepared Colours" and "liquid lustre" and they cannot be taken to include the same goods. I also observe that under the Heading Note in the HSCN liquid lustre has been explained as solution or suspension of metallic compounds in spirits of turpentine or other organic solvents, used for decorating ceramics or glassware. The most widely used are gold, silver, aluminium or chromium lustres. I observe that even though the Heading Notes of the HSCN have not been made part of the Central Excise Tariff, yet going by the Tariff description of the Heading 32.07, which is same both in the Central Excise Tariff as also in the HSCN, useful assistance can no doubt be derived in understanding the scope of a Tariff Entry. The technical literature produced by the appellants and the various certificates are useful for the purpose of understanding that gold is one of the colourents in the ceramic industry and how it is known in the trade. However, since gold along with silver, aluminium or chromium is one of most widely used liquid lustre, there is no scope for doubt that liquid gold will fall under the heading 32.07 and sub-heading 3207.90 as 'liquid lustre'. As far as the application of Notification No. 78/86 is concerned, the same does not include liquid gold/liquid lustre as an entry under the said notification. 'Ceramic colours" used in the notification are not; identical with 'liquid lustre'.
I therefore, have no doubt that liquid lustre falling under sub-heading No. 3207.90 not being specifically mentioned in Notification No. 78/86 is not entitled to the exemption under the said notification."
8. After inviting our attention to the aforesaid findings recorded by the authorities below Shri Jain attacked the same contending that 'liquid gold' is a ceramic colour decorating material as could be seen from I.S.I. Specification No. 2781-1975 on ceramic colours and also from Certificates dated 6-11-1986 and 7-11-1986 issued by the Managing Director of M/s U.P. Ceramic and Potteries Ltd., Ghaziabad, U.P. and Shri S.R. Khanna, a Member of 'liquid gold' sub-Committee of the I.S.I, respectively. He also referred to the Glossary of Terms relating to ceramicware where ceramic colours have been defined as "Inorganic oxides or prepared mixtures used for obtaining colour decoration on fired ceramicware". He also referred certain pages from a few books namely "Industrial Ceramics" by Flex Singer, "Properties of Ceramics Raw Materials (2nd Edition)" by W. Rayan, "Modern Pottery Manufacture" by R.N. Bose and CGCRI Bulletin No. 2 Volume. While elaborating on his arguments he submitted that the heading 32.07 refers to two descriptions namely, "Prepared colours" and "Liquid lustres" but the authorities below fell in error in holding that the 'liquid gold' is covered by the term "Liquid lustres" with the aid of Notes under the HSCN. At this stage he contended that the Notification No. 35/85-C.E., dated 17-3-1985 as amended by Notification No. 78/86-C.E., dated 10-2-1986 exempts "Ceramic colours" but the expression is not defined either under the Central Excise Tariff Act or under the HSCN and therefore the authorities below should have followed the understanding of the term "Lustre" in the Ceramic Industry and should not have persuaded themselves to follow the Explanatory Notes under the HSCN. He highlighted that the Collector (Appeals) after having observed that in the books referred to by the appellants gold has been described as colouring material and there is no dispute that gold/liquid gold is a ceramic colouring material erred in holding that this relates to the aspect of use and not of classification under the Central Excise Tariff Act and further misguided himself by first creating and then following the distinction between the two expressions, i.e. "Prepared colours and "Liquid lustres" completely overlooking that the term "Liquid lustres" is also followed by another expression "similar preparations". He laid emphasis on the chemical properties of the two. According to him 'liquid gold' and 'lustres' are both metal solutions having similar end-usage i.e. decoration of ceramics. Therefore keeping in view these factors 'liquid gold' can be considered to be preparation similar to 'liquid lustres' particularly in the context of ceramicware. To put it differently according to the learned Counsel metal solutions having iridescent finish ware called 'lustres' whereas other metallic solutions which do not give this finish when fired, but give only their true colours would fall within the term "similar preparations" as used in heading 32.07 because of the process of manufacture being similar. He also contended that the Collector (Appeals) finally erred in holding that for the purposes of classification under the Central Excise Tariff Act aspect of use is not relevant, completely overlooking the sub-heading which speaks of 'prepared colours', 'liquid lustres' and 'similar preparations' of a kind used in the ceramic, enamelling or glass industry. Finally he submitted that it is in this background that in the Exemption Notification under reference the Legislature prefer to use the term "Ceramic colours" instead of "Prepared colours" because according to him, the term "Ceramic colours" is much wider in scope than the term "prepared colours". To buttress his arguments he cited the following case law -
(1) Ramavatar Budhaiprasad etc. v. Assistant Sales Tax Officer, Akola, (1962) 1 S.C.R. 279 (282) (2) Commissioner of Sales Tax, Madhya Pradesh v. Jaswant Singh Charan Singh, (1967)2 S.C.R. 720 (723) (3) Indo International Industries v. Commissioner of Sales Tax, Uttar Pradesh, (1981) 47 S.T.C. 359 (361) (4) Indian Aluminium Cables Ltd. v. Union of India, 1985 (21) ELT 3 (S.C.) (5) Filterco and Anr. v. Commissioner of Sales Tax, Madhya Pradesh, 1986 (24) E.L.T. 180 (184) (S.C.) (6j Janajivan Foods Private Ltd. v. Sales Tax Officer, (1986) 65 S.T.C. 185 (189) (7) Mukesh Kumar Aggarwal & Co. v. State of Madltya Pradesh, 1988 (14) E.C.R. 353 (355) (S.C.)
9. In reply Shri C.V. Durghayya, learned Departmental Representative while refuting the contentions raised by the learned Counsel for the appellants supported the impugned order.
10. We have considered the arguments of both sides. Notification No. 35/85-C.E. as amended by Notification No. 78/86-C.E. unconditionally exempted from duty "ceramic colours". Chapter 32 covers, among other things, "colours". Heading 32.07 covers -
"Prepared pigments, prepared opacifiers and prepared colours, vitrifiable enamels and glazes, engobes (slips), liquid lustres and similar preparations, of a kind used in the ceramic enamelling or glass industry; glass frit and other glass, in the form of powder, granules of flakes".
This heading does not mention ceramic colours specifically but refers to them as liquid lustres and similar preparations of a kind used in ceramic enamelling or glass industries. Therefore, the question before us boils down to whether liquid gold can be considered as ceramic colours.
11. The Assistant Collector rejected the appellants' claim for the exemption because according to him the description given of liquid gold as well as use indicated that it was liquid lustres. The Appellate Collector observed that as Notification No. 35/85 as amended does not include liquid gold/liquid lustres as an entry, the concession cannot be given. He further noted that ceramic colours referred to in the Notification are not identical with liquid lustres. In effect the reason for rejection was that liquid gold was not specifically mentioned in the Notification (The Collector referred to the amending Notification only but it is clear that he meant Notification No. 35/85 as amended by Notification No. 78/86).
12. In our view the interpretation given by the lower authorities renders the notification inoperative. When the Notification exempted ceramic colours, the question that should have been examined was whether liquid gold, whatever be its clarification, can be considered as "ceramic colour". There is nothing to show that a liquid lustre or similar preparation cannot be a ceramic colour. It is clear that the Notification exempts ceramic colours and merely because ceramic colours are not specifically mentioned under heading 32.07 it does not mean that the exemption should or can be denied.
13. The words used in the Notification refer to "ceramic colour". This description is functional and end-use is relevant for deciding on the nature of the goods as "ceramic colours" are not defined in the Tariff. Therefore, reference to technical authority, trade parlance and actual use are necessary to decide whether the commodity liquid gold is a ceramic colour or not. The Assistant Collector in his order observed that "party has also confirmed that their product is being used in the ceramic/glass industries". The Collector (Appeals) also recorded that there is no dispute that gold/liquid gold is a ceramic colour material. In the Order-in-Original and the appellate order before us and during the course of hearing there was no dispute that liquid gold is used as a ceramic colour material. The evidence brought in by the appellants (referred to in Para 8 supra) supports this view. Therefore irrespective of the fact that for purposes of classification and in order to fit liquid gold into one or the other items enumerated in Tariff heading 32.07 it may be called by some other name, liquid gold does not cease to be a ceramic colour which the Notification sought to exempt. In this view it is not necessary to examine the elaborate case law cited by both sides. However, we respectfully refer to the judgment of the Supreme Court in Indian Aluminium Cables Ltd. v. Union of India and Ors. (supra) where the Hon'ble Court laid down principles guiding classification of the goods. One of the principles which is relevant to the present matter is that "in determining the meaning or connotation of words and expressions of an article in a Tariff Schedule one principle which is well settled 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. The reason is that it is they who are concerned with it and it is the sense in which they understand it which constitutes the definitive index of the legislative intention...."
14. As a result we hold that liquid gold is a ceramic colour and is entitled to the exemption under Notification No. 35/85 as amended by Notification No. 78/86-C.E. The appeals therefore deserve to be allowed accordingly.
15. In the result we set aside the impugned Orders and allow the appeals with consequential relief, if any.