Customs, Excise and Gold Tribunal - Delhi
Madhusudan Ceramics vs Collector Of Central Excise on 13 November, 1990
Equivalent citations: 1992(37)ECC86, 1991ECR206(TRI.-DELHI), 1991(53)ELT90(TRI-DEL)
ORDER S.L. Peeran, Member (J)
1. In this appeal, the appellants have sought for setting aside the impugned order passed by the Additional Collector of Central Excise & Customs, Ahmedabad dated 16-10-1989 holding gypsum in natural form undergoing physical and mechanical processes of crushing, grinding and calcination resulting in a form of fluffy powder known as 'Plaster of Paris' (which was in turn captively used by the appellants for manufacture of ceramics wares) is excisable and chargeable to duty. The same was classified on the basis of statutory Note 2 to Chapter 25 under Chapter Heading 2505 of GET. The Additional Collector also confirmed the demand for Rs. 1,76,954.88 P. for the period 1-3-1986 to 28-2-1987 under Section 11A of Central Excises and Salt Act, 1944.
2. The Additional Collector of Central Excise has confirmed the demand raised in the show cause notice dated 8-6-1987 signed by Collector in respect of the impugned product and has classified it under Tariff Entry No. 2505.00 and also held that the Notification No. 271/86 is not applicable as the impugned product has not been used in the manufacture. The Additional Collector has confirmed the demand for Rs. 1,76,954.88 P. for captive use of the impugned product in the manufacture of final product Sanitary wares for the period 1-3-1986 to 28-2-1987 by invoking the extended period under Section 11A of the Central Excises and Salt Act, 1944. However, he has not imposed any penalty.
3. The appellants have submitted that they are engaged in the business of manufacture and sale of Ceramics. That during the course of manufacture of the said product Plaster of Paris and glazing material comes into existence. The demand has been confirmed only on Plaster of Paris. Their case is that the impugned product comes into existence by mechanical process of crushing, grinding and calcination of Gypsum and the same cannot be classified under sub-heading No. 2505.00 of the Schedule to the Tariff Act as Chapter Note 1 of Chapter 25 specifically states that products which have been roasted, calcinated or obtained by mixing are not covered under Heading No. 2505. They further stated that the said note has also been incorporated in the Harmonised Commodity Description and Coding System (HCDCS) on the basis of which the Excise Tariff has been prepared but the HCDCS cannot be relied upon for the purpose of classification. They state that it is only the Tariff that can be relied upon for the purpose of classification. They have further contended that the process by which Plaster of Paris is obtained is not a manufacturing process as process of roasting calcination is only applied and have relied on the ratio of the Supreme Court ruling rendered in the case of DCM Ltd. (1977 ELT 199). They have further contended that they are entitled to the benefit of Notification No. 217/86 as the inputs falling under the Column No. 2 of the Table given under the said notification and used for manufacture of final products given under Col. No. 3 of the Table of the Notification, are exempted fully from the payment of the Central Excise duty. They have contended that Chapter 25 under which Plaster of Paris is sought to be classified is covered under the description of inputs and the final product for which the production in question is used falling under Chapter 69 is also covered under the said notification. They have stated that the proposed denial of the aforesaid exemption on the ground that Plaster of Paris is used to produce moulds falling under Chapter 68 on which no excise duty is payable is misconceived as moulds arc not their final products.
4. The appellants have contended that larger period of five years under the proviso to Sub-section (1) of Section 11A has been wrongly invoked covering the period from 1-3-1986 to 28-2-1987, as the concerned Departmental authorities used to visit the factory of the appellants from time to time and that the process of manufacture was well within the Department's knowledge and hence the question of suppression, wilful misstatement, fraud and collusion does not arise on the facts of the case. They have relied on the statement from the deposition of Shri K.M.Gohil, Superintendent of Central Excise (Retd.) who was examined before the Additional Collector, which is as under -
"I was a Range Superintendent from July 1985 to January 1989.I was aware that Madhusudan Ceramics is in my jurisdiction. I was also aware of the process of manufacture and the product manufactured by M/s. Madhusudan Ceramics. I agree that in the Classification List No. 2/86-87 dated 1-3-1986 Plaster of Paris is one of the items approved in the classification list. The Department is aware of the product Plaster of Paris as this was included in the classification list. I was aware of the chemical material known as Glazing material duly prepared in the factory. The Plaster of paris being manufactured basically from some gypsum. As regards the process of washing, drying, roasting and calcination is concerned, the first three processes were carried out to obtain the product and the last one is nothing but roasting. Finally, he has nothing to add."
5. We have heard Shri D.A. Dave, Advocate for the appellants and Shri S.Chakraborti, learned Departmental Representative, and carefully perused the records. The Department has sought to classify the intermediate product Plaster of Paris which has arisen during the course of manufacture of ceramics. The Plaster of Paris is made from gypsum, a raw material which is received in the form of chips. It is washed thoroughly and dried, then gypsum is crushed into powder form and then roasted and calcined at 160°, then plaster of pans is obtained. They prepare moulds out of it from which sanitary ware are prepared as final products. The contention of the appellants is that this intermediate product is captively consumed in manufacture of sanitary ware. There is no process of manufacture while preparing and obtaining Plaster of Paris by mechanical process of washing, drying, crushing, grinding and calcination. They further contended that Chapter Note 2 of Chapter 25 of CET specifically provides that products which have been roasted, calcined or obtained by mixing are not covered under Heading No. 2505 of CET and hence Plaster of paris cannot be classified under the aforesaid heading.
6. The Chapter Note 2 of Chapter 25 is reproduced below -
"Heading Nos. 25.01,25.03 and 25.05 cover only products which have been washed (even with chemical substances, eliminating the impurities without changing the structure of the product) crushed, ground, powdered, levigated, sifted, screened, or concentrated by flotation, magnetic separation or other mechanical or physical processes (except crystallisation) but not products that have been roasted, calcined or obtained by mixing.
___________________________________________________________________________ Heading No. Sub-heading Description of goods Rate of duty No. ___________________________________________________________________________ 25.05 2505.00 Mineral substances, not 12% elsewhere specified (including clay, earth colours, nature abrasives, sulphurs, slate and stone), lime; plasters with a basis of calcium sulphate, whether or not coloured, but not including plasters specially prepared for use in dentistry".
___________________________________________________________________________ Thus by reading the Note 2, it is clear that it does not cover products that have been roasted, calcined or obtained by mixing. Chapter 25.05 includes plasters with a basis of calcium sulphate but such plasters which are obtained by roasting, calcination or obtained by mixing are excluded by the Note 2. In this case, admittedly, the Plaster of Paris is obtained by a process of roasting and by calcination. Hence the impugned product gets excluded from the Chapter 25.05 by virtue of this Note 2. The reasoning adopted by the Additional Collector in the impugned order is not sustainable. The Department has failed to establish the burden of classification in this case. As we have held that the impugned product is not excisable and not covered by Note 2 of Chapter 25 of CET, the question of examining the applicability of Notification No. 217/86 does not arise. The appellants are entitled to succeed in this appeal with consequential relief, if any.