Customs, Excise and Gold Tribunal - Delhi
Winter Misra Diamond Tools Ltd. vs Collector Of C. Ex. on 27 February, 1996
Equivalent citations: 1996(83)ELT670(TRI-DEL)
ORDER
S.K. Bhatnagar, Vice President
1. This is an appeal against the order of the Collector (Appeals), New Delhi, dated 26-5-1994.
2. The Learned Counsel stated that the appellants were manufacturers of "Diamond Impregnated Segments" which were welded on alloy steel plates which in turn were used as saws in the sawing machines.
3. The appellants were using the segments for manufacturing the complete saw in their factory.
4. On 1-3-1988 they had filed classification list claiming assessment under Heading 8202.00 and the benefit of Notification No. 108/88-C.E., dated 1-3-1988 and this was approved by the Assistant Collector by his Order No. 118/88.
5. Again on 13-6-1988, they had filed another classification list claiming the benefit but in spite of earlier approval a show cause notice was issued on the ground that the goods were assessable under Heading 8209.00. This notice was in respect of March, 1988 and did not cover clearance of April, 1988 which were allowed after giving the benefit of the exemption Notification in accordance with the earlier approval.
6. Again on 28-11-1988 another show cause notice was issued for the period 1-5-1988 to 3-10-1988 on the ground that the item was eligible for benefit of Notification No. 108/88 because the segments were specifically not covered under that notification.
7. This show cause notice was subsequently withdrawn and the demand was dropped by the Assistant Collector's order dated 17-4-1989.
8. In spite of it another show cause notice dated 16-1-1989 was issued to the appellants in the context of the classification filed on 13-6-1988 asking the appellants as to why the benefit of the exemption should not be denied. By the same notice it was ordered that in the meanwhile the goods may be cleared by making provisional assessment.
9. On 9-3-1989 yet another show cause notice was issued for the period 1-11-1988 to 19-1-1989 on the ground that benefit of Notification No. 108/88-C.E. was not available.
10. It is significant that although a provisional assessment had been ordered by the notice dated 16-1-1989, clearances from 20-1-1989 to 17-4-1989 were allowed provisionally at the higher rate only.
11. On 17-4-1989, the Assistant Collector passed an adjudication order holding that the items were entitled to the benefit of Notification No. 108/88-C.E. and 207/88-C.E. and dropped the demands raised by show cause notice dated 28-11-1988, and further ordered finalisation of assessment which were being made provisionally in terms of a letter dated 16-1-1989.
12. In view of the above order the provisional assessment made between 20-1-1989 to 17-4-1989, the assessment should have been finalised at the lower rate by extending the benefit of the exemption Notification and the consequential refund should have been granted. However, this part of the order of the Assistant Collector was not implemented and the assessment continued to be provisional and decision was taken also on their application for refund.
13. Although above order of the Assistant Collector did not specifically refer to the show cause notices of 4-10-1988 and 9-3-1989, it was logical that these should also have been withdrawn and the demands dropped in the light of Assistant Collector's order. However, this was not done and these were kept pending illogically without justification.
14. On 20-3-1990, the appellants filed another classification in view of change in the rate of special excise duty and following the Assistant Collector's order dated 17-4-1989 claimed the benefit of Notification No. 207/88-C.E.
15. However, instead of approval they received show cause notice dated 2-5-1990 relating to the period 1-10-1989 to 31-3-1990.
16. This show cause notice was illegal because the Assistant Collector's order dated 17-4-1989 was in force and there was no order by a higher authority modifying or rescinding this order.
17. On 10-8-1990 yet another show cause notice was issued with reference to the classification list dated 20-3-1990 proposing to deny the benefit of Notification No. 207/88-C.E. and also directing that the future assessment will be made provisionally by paying the higher rate of duty.
18. This show cause notice was illegal and without jurisdiction because the previous order of the Assistant Collector dated 17-4-1989 which was under appeal before the Collector of Central Excise (Appeals), and until the Collector (Appeals) set aside and modify that order, the Department was bound, to follow the Assistant Collector's order dated 17-4-1989 and there is no question of directing any provisional assessment at this stage.
19. This direction contained letter dated 10-8-1990 was modified later by the Collector to the extent that the provisional assessment should be allowed at the lower rate.
20. Thereafter, 4 show cause notices were issued on 25-9-1990, 30-1-1991, 10-4-1991 and 12-8-1991 relating to the period 1-4-1990 to 31-8-1990, 1-9-1990 to 31-12-1990, 1-1-1991 to 31-3-1991 and 1-4-1991 to 23-7-1991. It was their contention that all these 4 notices were without jurisdiction and invalid for the first place the Assistant Collector's order dated 17-4-1989 was still in force and there was no stay of the operation of this order. Secondly, the Department by itself in the notice dated 10-8-1990 directed provisional clearances and therefore, unless final assessments had been made there was no question, of any demand. On 28-8-1991, the Collector (Appeals) rejected the Department's appeal against the Assistant Collector's order dated 17-4-1989 and endorsed the reasons given by the Assistant Collector's findings and the assessments accordingly.
21. The Department did not file any appeal against the order of the Collector (Appeals) dated 28-8-1991. This order, therefore, acquired finality and was binding on all the subordinate authorities in view of the Supreme Court's decision in the case of Union of India v. Kamalakshi Finance Corporation Ltd. as reported in 1991 (55) E.L.T. 433. Further, as a consequence of the order of the Collector (Appeals), the Department was required to follow up action by withdrawing every show cause notice and dropped all the demands pertaining to the period prior to the order of the Collector dated 28-8-1991. However, instead of doing so, the Department suit fresh adjudication proceedings in respect of 7 show cause notices (mentioned above) dated 4-10-1988, 9-3-1989, 2-5-1990, 30-1-1991,10-4-1991 and 12-8-1991. Even any proceedings with reference to these show cause notices, the Assistant Collector agreed that the goods were classifiable under Heading 8202.00. However, she denied the benefit of the exemption Notifications. She disagreed the previous order of the Assistant Collector and the Collector (Appeals) which was binding. It was her view that Notification No. 207/88 had been amended by Notification No. 63/91 which extended the benefit to all the goods covered under Heading 8202.00 but prior to this amendment the benefit of the Notification was not available.
22. Against this order the petitioner filed their appeal before the Collector (Appeals) who by its order dated 26-5-1994 rejected the appeal. Hence, this petition.
23. It was their contention that the Department was bound by the orders of the Assistant Collector which approved the classification under Heading 8202.00 and also extending the benefit of the Notification No. 108/88 and the order of Collector (Appeals) dated 28-8-1991 confirming the benefit granted by the Assistant Collector.
24. Since the orders gave specific directions for finalising all assessments, the authorities below were bound by the same and could not issue fresh show cause notice and adjudicate upon the same at variance with the above directions and orders.
25. Further the demands can be issued only after the assessments were finalised and not before.
26. It was also their contention that during the entire relevant period description of the Tariff Heading, Note 2 to Chapter 82 and the terms of the notifications remains the same. The change occurred in the notifications only on 25-7-1991 after the period to which demands raised. In these circumstances, the question of different interpretation of the notification at different stages during the relevant period could not arise. There was no new development warranting any change in the interpretation or the findings given in the orders dated 17-4-1989 and 21-8-1991.
27. The Collectors reference to the res judicata in the impugned order was misplaced and fallacious as it was not relevant for the purpose of this case and also pleading rested on the question of binding effect of presidence and judicial discipline.
28. It was also their contention that even otherwise on merits they have a strong case inasmuch as the Collector (Appeals) has erred in holding that the diamond impregnated segments are parts of blades. It was their contention that these segments performed the same function as blades because they have cutting edges that is to say were in nature of segmented blades. In this connection they would like to file extracts from standard book on Engineering titled as 'Materials and Processes in Manufacturing' by E. Paul De Garmo, Temple Black, and Ronald A. Kohser'. The page 688 thereof would show that "Disc or Circular saws necessarily differ somewhat from straight blade forms. Larger saws use either segmented or inserted teeth. The teeth are made of high speed steel, or tungsten carbide. The remainder of the disc is made of ordinary, less expensive, and tougher steel. Segmental blades are composed of segments mounted around the periphery of the disc, usually fitted with a tongue and groove and fastened by means of screws or rivets. Each segment contains several teeths. If a single tooth is broken, only one segment need to be replaced to restore the saw to operating conditions".
29. It was also their contention that Notification in question as well as Heading 8202.00 used the same expression and they must carry the same meaning by application of Note 2 to Chapter 82 and in this connection they would like to rely upon the decision of Delhi High Court in the case of Khandelwal Metal and Engineering as reported in 1983 (12) E.L.T. 282 confirmed by the Supreme Court vide 1985 (20) E.L.T. 222 and the decision of the Calcutta High Court in the case of Naffarchandm Jute Mills reported in 1993 (66) E.L.T. 574, the decision of the Tribunal in the case of Norsk Data (India) Ltd. v. Collector of Customs reported in 1992 (57) E.L.T. 666 and the Order No. 15/94-B2, dated 7-2-1994 in the case of Western Refrigeration Pvt. Ltd,
30. The Collector (Appeals) has misunderstood the observations of the Supreme Court in the case of Paras Laminates [reported in 1990 (49) E.L.T. 322 (SC)] and the Tribunal's observations in the case of Western Refrigeration Pvt Ltd. and has also not properly appreciated distinction between the General Rules of Interpretation, Section or Chapter Notes and the Explanatory to the Harmonised System. The Explanatory Notes are not part of Harmonised System. It is only a complimentary publication explaining scope of various headings and sub-headings in the Harmonised System. It is noteworthy that the General Rules of Interpretation of Harmonised System and the Section and Chapter Notes (and correspondingly those of Central Excise Tariff) have legal value but the Explanatory Notes have only a persuasive value.
31. The Collector (Appeals) also relied upon certain decisions of the Tribunal for taking the view that Section and Chapter Notes cannot be applied to the exemption notifications. It was their submission that the Supreme Court's decision in the case of Khandelwal Metal and Engg. was not brought to the notice of the Tribunal in those cases.
32. It was also their contention that Note 2 of Chapter 2 equally applies to two exemption Notifications in question and therefore, expression used in Heading 8202.00 and two exemption Notifications should be given the same meaning and scope and on that basis even parts of blades would be covered under this Notification.
32(i). In response to queries regarding the scope of exemption notifications, the learned counsel further stated that this notification not only covers blades and parts of hand saws but saws of all kinds as there is a semi-colon between the words 'hand saws' and the words 'blades for saws of all kinds'. Both in the HSN and the Central Excise Tariff specific hand tools are covered under 82.01 but the Heading 82.02 covers hand saws as well as blades for even power operated saws and saws for machine tools etc. as per HSN.
32(ii). He also further stated that the explanatory notes indicate that saw blades may have integral teeth, or be fitted with inserted teeth or segments (such as in some circular saws).
33. It was also their contention that Notification No. 63/91 was clarificatory in nature and did not change the scope of Notification No. 108/88 or 207/88. It was also their contention that without prejudice to the above arguments it might be stated that even computation, of duty in the show cause notice was wrong because it did not provide any deduction for the duty payable in terms of Section 4(4)(d)(ii). That apart, there was also mistake in the computation and taking these two aspects into account, the duty even in terms of these show cause notices would work out to Rs. 74,36,766.76.
34. Learned SDR drew attention to the Order-in-Original and Order-in-Appeal.
35. He stated that the Diamond Impregnated Segments were only parts of the saw blades and they were not entitled to exemption under Notification Nos. 108/88 and 207/88.
36. It was his contention that notification is required to be interpreted strictly and in accordance with the words used therein. The Section notes and Chapter notes are not relevant for the purpose of interpretation of a notification. It was his contention that these Diamond Impregnated Segments could not be considered as blades and were distinct from them. They were merely pieces which were fitted or welded onto the blades. Hence, they could only be considered as parts of saw blades classifiable under Heading 8202.00 but not eligible for the benefit of the above notifications. It is noteworthy that notification No. 63/91 which substituted the description of the exempted goods in the earlier notification uses the words "all goods" falling under sub-heading 8202.00 and therefore, parts would be covered by this notification with effect from 25-3-1991 as it is prospective in operation and the benefit of the previous Notifications 207/88 and 108/88 which did not use the words "all goods" but covered only specified goods under the heading was not available to these parts.
37. It was his contention that Chapter Note 2 which provided that the parts are to be classified with the articles of which they are part except where specifically specified is not relevant or applicable as the notification in question could, not be interpreted to cover or include parts of articles specified therein.
38. In support of his contention, he would like to cite the cases of Collector of Customs v. O.E.N. India Ltd. reported in 1989 (42) E.L.T. 235 (Tribunal), Guest Keen Williams Ltd. v. Collector of Customs, Calcutta reported in 1987 (29) E.L.T. 68 (Tribunal) and Johnson and Johnson Ltd. v. Collector of Customs, Bombay reported in 1987 (29) E.L.T. 428 (Tribunal) in which the Tribunal had held that the Rules of Interpretation and the Section Notes cannot be applied for interpretating a notification.
39. Learned DR also drew attention to the Explanatory Notes of the BTN and HSN and stated that it has got an exclusion clause which indicates that toothless discs fitted with, abrasive rims (e.g., for cutting marble, quartz or glass) or with a series of peripheral inserts of abrasive material are not classifiable under this heading and in this connection, the exclusion clause itself refers to Explanatory Note of Heading 68.04.
40. Learned counsel stated in reply that the above orders were passed by the Tribunal in those cases where the wordings of the notification were different from those used in the Tariff Headings and sub-headings wherein the cases which he has cited show that the chapter notes and section notes are relevant and applicable in those cases where the wordings used in the notification are the same or similar to those used in the heading or sub-heading. In the present case, the words have been literally lifted from the sub-heading and incorporated in the notification i.e. are exactly the same in the latter as in the former. He would reiterate that the Tribunal's orders in the case of Western Refrigeration Pvt. Ltd. v. Collector of Customs, Bombay reported in 1995 (77) E.L.T. 673 (Tribunal), NORSK Data (India) Ltd. v. Collector of Customs reported in 1992 (57) E.L.T. 666 (Tribunal) and Naffar Chandra Jute Mills Ltd. v. Assistant Collector of C. Ex. reported in 1993 (66) E.L.T. 574 (Cal.) of Hon'ble Calcutta High Court are relevant and applicable to the present case.
41. Learned counsel also emphasised that the Explanatory Notes to HSN and BTN have no legal value and are only persuasive in character.
42. We have considered the above submissions. We observe that it is a settled point of law by now that whereas the Rules for Interpretation of the Schedule and the Section Notes and Chapter Notes are primarily and principally meant for the interpretation .of the Tariff (including the Headings and the sub-headings), the exemption notifications have to be strictly interpreted in accordance with the words of the Notification thereunder and the intention thereof; Indeed, their scope could be different from that of the heading in cases where, they may seek to cover only one or a few and not all the items covered by heading or sub-heading or the conditions prescribed therein may so indicate or imply. At the same time, the doctrine of harmonious construction is also to be kept in view and wherever wordings used in the Notification are the same as the ones used in the Rules or the Notes or the Headings or sub-headings, or the scope is similar, it is open to call in aid, or take the assistance of the Interpretative Rules and/or the Section Notes or Chapter Notes and the Notification(s) has to be read in the same sense and the wordings have to be assigned the same meaning unless the context indicates otherwise or some items are expressly excluded. In the present case, the wordings used in the Notifications No. 108/88 and 207/88 are exactly the same as in the Heading 82.02. Therefore, the Chapter Note 2 could be called in aid in order to interpret and ascertain the meaning and scope of the wordings used in the notification, although, these notifications have been issued under Rule 8(1) of the Central Excise Rules and not under the Tariff Act.
43. A doubt could, however, still arise as to whether these notifications cover parts of the blades of saws other than hand saws because apart from the word 'hand saws' used in Serial No. 1, all other entries in the notification .relate to hand tools or parts thereof and therefore, the semi-colon between '{hand saws' and 'blades for saws of all the kinds' notwithstanding it is required to be seen whether the entry would cover only blades of hand tools. Hence , in view of the admitted position that the parts in these cases were intended to be welded, fixed or fitted to machine tools whether the item will be covered by the entry. However, at the same time, we notice that even the HSN and BTN include under the Heading 82.02 not only hand saws but blades for saws of all kinds including those meant for power operated tools and machine tools; and the Explanatory Notes further clarify that "saw blades may have integral teeth, or be fitted with inserted teeth or segments (such as some circular saws). The teeth may be of base metal or base metal fitted or covered with metal carbides, diamond (black diamonds in particular) or, in some cases with abrasive powders. In some saws the teeth may be replaced by diamonds or by elements of metal carbides set around the periphery of the disc." There is an exclusion clause also but it relates to toothless discs fitted with abrasive rims or with a series of peripheral inserts of abrasive material which fall under Heading 68.04. The items in our case 'diamond impregnated segments' which were welded, fixed or fitted to the saw blades of the machine tools but sufficient material has not been placed before us to show that they will be hit by this exclusion clause. The technical literature produced before us by the Counsel shows that in case of circular saws the larger ones use segments or inserted teeth which are made of high-speed steel, or tungsten carbide and the segmental blades are composed of segments mounted around the periphery of the disc, usually fitted with the tongue and groove and fastened by means of screws or rivets. Therefore, diamonds impregnated segments obviously are parts of such saws. They will get excluded from this Heading 82.02 only if the conditions of Heading 68.04 are satisfied i.e. they lose their identity after application of abrasive material otherwise they remain within 82.02 because the Explanatory Notes indicate with reference to Heading 68.04 that "it should, however, be noted that certain abrasive tools are excluded and fall in Chapter 82. The later Chapter, however, covers only those tools with cutting teeth, flutes, grooves, etc., which retain their identity and function even after application of the abrasive material (i.e. tools which, unlike those of this heading, could be put to use even if the abrasive had not been applied). Saws with cutting teeth covered with abrasive, therefore, remain in Heading 82.02. Similarly, crown drills as used for cutting discs from sheets of glass, quartz, etc., are classified in this heading if the working edge is smooth apart from the abrasive coating, but in Heading 82.07 if toothed (whether or not coated with abrasive)". In other words, "Saw blades may have or be fitted with inserted segments of base metal fitted or covered with diamond (black diamonds in particular) or be replaced by diamonds or set around the periphery of the disc or toothless discs may be fitted. The heading includes separately presented base metal parts of hand saws and base metal teeth and toothed segments for insertion in saw blades. Therefore, it would be seen that even if Chapter Note 2 was not applied, the parts of saw blades would also be covered under 82.02 by virtue of Explanatory Notes. Admittedly, the Explanatory Notes do have persuasive value and have gained national (and even international) acceptance and therefore, they cannot be lightly brushed aside and this Tribunal has been normally calling them to aid whenever and wherever necessary.
44. As regards the Notification No. 63/91, undoubtedly, it explains the scope of the exemption to include 'all goods' falling under specified chapters and it is apparently prospective in character but in so far as the present case is concerned, it can be decided on the basis of the Interpretation Notification No. 108/88 and 207/88 relating to the relevant period on its own merits.
45. At the same time, the appellants are correct in pointing out that once the Assistant Collector has passed an order and it is confirmed by the Collector (Appeals) and no appeal is filed against the order of the Collector (Appeals), the order attains finality. Therefore, the Department was bound to follow the Assistant Collector's order of 17/4/1989 as confirmed by the Collector (Appeals)' order dated 28-8-1991 and finalise all the pending matters in the light of these orders. These will include cases in which the assessment was made provisional as well as those in which cases demand/show cause notices had been issued but not disposed of till then as all the subordinate authorities were bound by the orders of the superior appellate/judicial authorities in view of the Hon'ble Supreme Court's decision in the case of Union of India v. Kamlakshi Finance Corporation Ltd. reported in 1991 (55) E.L.T. 433 (S.C.). However, we need not labour this point any further in view of our findings on merits recorded above.
46. In view of the above position, we hold that the appellants were entitled to the benefit of Notifications 108/88 and 207/88 during the relevant period.
47. The appeal is, therefore, accepted as already announced in the open Court.