Bombay High Court
Starlite Corporation, Bombay vs Union Of India on 10 December, 1985
Equivalent citations: 1989(20)ECR380(BOMBAY), 1989(39)ELT538(BOM)
Author: S.P. Bharucha
Bench: S.P. Bharucha
JUDGMENT
1. What a glass bead is a question that has periodically exercised the Excise authorities. This is because of a notification dated 1st March 1961 issued under Rule 8 of the Central Excise Rules, 1944, whereby the Central Government has exempted "glass bangles and glass beads from the whole of the duty of excise leviable thereon."
2. The petitioners started manufacturing what they say are glass beads in 1967. They are meant to be used as chatons, i.e., to say as stones in setting, in artificial jewellery. Until 1977 they got exemption from the payment of excise duty under the terms of the said notification. In 1978 samples were drawn by the excise authorities and there was some correspondence. On 8th March 1978, the Assistant Collector of Central Excise wrote to the petitioners that, having duly considered the matter, he had come to the conclusion that the articles manufactured by the petitioners were glass beads falling under Item 23A of the 1st Schedule to the Central Excises and Salt Act, 1944, but were exempted under the said notification. He confirmed that licensing formalities were not needed for the glass beads.
3. On 30th June 1979 samples were drawn again. On 29th August 1979 the petitioners were served with a notice by the Superintendent, Central Excise. It stated that it appeared that the petitioners' articles were assessable to excise duty under Item 23A and that the petitioners had cleared these articles without payment of excise duty in the sum of Rs. 1,31,605.94. The petitioners were called upon to show cause why the said amount should not be recovered from them. On 17th September 1979 the petitioners replied to the show cause notice. They relied upon authorities and affidavits in support of their contention that the articles they manufactured were glass beads entitled to exemption under the said notification. On 18th February 1980 the Assistant Collector of Central Excise noted the literature furnished by the petitioners. He recorded that the samples of the articles manufactured by the petitioners had been sent to the Deputy Chief Chemist, Bombay, to seek his opinion and that in the opinion of the Deputy Chief Chemist "technically glass beads need not be round shape always and also need not be pierced." He also recorded that market inquiries had been conducted which showed that the articles were known as glass beads or glass chatons in commercial parlance. Accordingly, the Assistant Collector came to the conclusion that, the articles manufactured by the petitioners were classifiable as glass beads and were eligible for exemption in terms of the said notification.
4. On 7th October 1980 the Collector of Central Excise sent to the petitioners a notice to show cause why the order of the Assistant Collector passed on 18th February 1980 should not be set aside. The show cause notice stated that on examination of the case records and representative samples, the Collector was tentatively of the view that the Assistant Collector's order was not correct because the articles manufactured by the petitioners were known as chatons and not beads in trade parlance, and the expression 'glass beads' in the said notification referred to glass beads white or coloured, i.e., small pierced balls more or less round in shape and used for necklaces, textile articles, imitation flowers and the like and for use as electrical insulators and that the petitioners' articles did not conform to this definition and were, therefore, not entitled to exemption under the said notification. On 8th December 1980 the petitioners sent a reply to the show cause notice, reiterating their contentions and relying upon the authorities and affidavits.
5. On 23rd January 1981 the petitioners were addressed a communication by the Superintendent, Central Excise, stating that "as per recent clarifications received from the higher authorities, glass beads----- manufactured by you are correctly classifiable as glass chatons falling under Item 23A(4)-----. Since the product manufactured by you is covered under the definition of glass chatons---- which (sic) is not exempted under the aforesaid notification." The petitioners were, therefore, required to obtain a Central Excise Licence for glass and glass-ware falling under Item 23A(4). On 2nd February 1981 the petitioners replied, once again repeating their contentions.
6. On 6th February 1981 a letter was addressed by the Central Board of Excise and Customs to all Collectors of Central Excise on the subject of the classification of glass chatons. The letter stated that the question as to whether glass chatons falling under Item No. 23A were eligible for exemption as glass beads under the said notification was discussed in the 13th West Zone Tariff Conference held on 12th and 13th November 1980. The letter noted that there were two views expressed on the question. The consensus that was reached was that the glass chatons were used in the manufacture of cheap jewellery and were not known in the market as beads. The Board had accepted the view of the Tariff Conference and, accordingly, held that glass chatons could not be called beads for the purposes of the said notification "as the glass chatons are not pierced for threading with others. Piercing is the essential requirement before the 'glass chatons' can be called 'beads' so that these can be threaded together."
7. On 3rd March 1981 a trade notice was issued by the Central Excise Collectorate, Bombay, to the effect that the glass chatons were not eligible for exemption under the said notification, "as these are not pierced for threading with others"; piercing was the essential requirement before 'glass chatons' could be called 'beads'.
8. This petition is filed to impugn the show cause notice dated 7th October 1980, the letter dated 23rd January 1971 requiring the petitioners to contain an Excise licence and the circular letter and trade notice dated 6th February 1981 and 3rd March 1981 respectively. On 19th March 1981 the petitioners obtained a stay of proceedings consequent upon the aforesaid show cause notice and letters.
9. Mr. Deodhar, learned counsel for the respondents, submitted that the court should not exercise powers under Article 226 at this stage when the show cause notice is impugned and that it should be left to the Collector to consider the petitioners' case and decide thereon. Having regard to the decision of the West Zone Tariff Conference that chatons which are not pierced for threading with others cannot be called beads, which view the Central Board has accepted, it is difficult to visualise the Collector giving the petitioners a wholly unbiased hearing. In the circumstances, it does not appear proper to dismiss the petition upon the ground that only a show cause notice is under challenge.
10. No material is referred to in the affidavits of the Central Excise authorities or is produced on their behalf before the court in support of the stand that only chatons which have been pierced for threading can be termed glass beads and be entitled to exemption under the said notification.
11. There is, on the other hand, the finding of two Assistant Collectors of Customs that the petitioners' articles are glass beads. There is the finding of the Deputy Chief Chemist that glass beads need not be pierced. There are affidavits of persons in the trade which do not state that only those chatons which are pierced for threading are known as trade parlance as glass beads.
12. The I.S.I. specifications, to which due weight must be given, define a bead to be, inter alia, "a small piece of glass solid or hollow of a given shape; for instance beads used for jewellery". The petitioners have, in the petition, cited the definition of a bead from the Illustrated Dictionary of Glass by Harold Newman, which reads thus :
"A small object usually globular but sometimes oblate, cylindrical, (polyhedral or irregularly shaped) and generally pierced for stringing, made from earliest times for personal adornment or to embellish other wares, usually in the form of strands."
Neither of these definitions consider piercing to be the sine qua non a glass bead.
13. There seems to have been no material upon which the Collector of Customs could have come to the tentative conclusion that the petitioners' articles were not glass beads. The material put before me overwhelmingly indicates that the piercing of a chatons is not essential for it to be called a bead. The petitioner's articles are, therefore, glass beads entitled to exemption under the said notification.
14. It may be mentioned that the Excise authorities took the stand they have taken here in an earlier before this court. They contended, first, that piercing was necessary before the articles could be termed glass beads and, secondly, that glass beads were entitled to exemption only provided they were used for ornamental purposes. But the first contention was not pressed at the hearing of that petition. Only the second contention was, and it was decided against the Excise authorities. Haldyn Glass Works Pvt. Ltd. v. N. L. Badhwar, 1980 Excise Law Times, 291.
15. In the result, the petition is made absolute in terms of prayer (a).
16. The respondents shall pay to the petitioners the costs of the petition.