Full Judgment Text
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CASE NO.:
Appeal (civil) 2657 of 1994
PETITIONER:
CEMENTO CORPORATION LTD.
RESPONDENT:
COLLECTOR CENTRAL EXCISE
DATE OF JUDGMENT: 23/10/2002
BENCH:
RUMA PAL & S.N. VARIAVA
JUDGMENT:
JUDGMENT
2002 Supp(3) SCR 210
The Judgment of the Court was delivered by
RUMA PAL, J. The Issue in this case relates to the classification for the
purposes of excise duty of a product manufactured by the appellant, which
the appellant claims is a cement substitute and not cemento. The product is
’Lympo’ which is a lime - pozzolana mixture which the appellant
manufactures under the trade name "Gajaraj Lympo". The respondent’s claim
that lympo is in fact a variety of cement and was exigible to duty as such.
The issue has arisen in the context of the Central Excise and Salt Act,
1944 prior to its amendment in 1985. Cement was then specified in Tariff
item (T.I.) 23 in the First Schedule of that Act and was exigible to duty.
The relevant entry then read as follows:
___________________________________________________________________________
_________________
Item No. 23-Cement. Item No. Tariff Description
Rate of duty
(1) Grey portland cement (including ordinary Two hundred and
portland cement, portland-pozzolana cement fifty rupees per and
portland slag cement), masonry cement, metric tonne, rapid hardening
cement, low heat cemento and waterproof (hydrophobic) cement.
(2) All others
Forty per cent advalorem
___________________________________________________________________
According to the appellant since its product was not cement, it was not
classifiable under T. 123 and was classifiable under T.I. 68 which covered
all other goods, not elsewhere specified excluding a few spepified articles
which are not material to the case before us.
The appellant’s further case is that the manufacturing activity had been
started in 1982 with technical assistance from the Khadi and Village
Industries Commission in Patna, Bihar and, therefore, was also entitled to
the benefit of notification No. 116/75-CE dated 30th April 1975 by which
products of village industries falling under tariff Item 68 of the First
Schedule to the Central Excise and Salt Act, 1944 were exempted from the
whole of the duty of excise leviable thereon provided the Khadi and Village
Industries Commission certified that the said products were the genuine
products in the industry as specified in the Schedule to the Khadi and
Village Industries Commission Act, 1956. The Director of KVIC by his
letters dated 1/2.4.1981 and 2.3.1983 had, according to the appellant,
certified that technical cosultancy services were being extended to the
appellant to establish a Lympo unit (Lime Pozzolana Mixture) and that lympo
was the substitute of cement, it was a masonry binder and not cement and
that the product fell under "Village Industry" as specified under the Khadi
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and Village Industries Commission Act, 1956. On the basis of this
certificate, the appellant cleared the lympo manufactured, at Nil rate of
duty.
On 31st July 1982, the Superintendent Central Excise, Ranchi directed the
appellant to clear its product lympo by classifying the same under T.I.
23(2) upon payment of duty as specified against that tariff entry. Samples
of the appellant’s product were taken on 8th October 1982. One of the
samples was given to the Chemical Examiner, Customs House, Calcutta which
according to the respondent submitted a report that Lympo could be regarded
as a type of cement. The report is not on record. By letter dated 3rd May
1983 issued by the Superintendent, Central Excise, Ranchi the appellant was
again directed not to clear the product without payment of duty and proper
licence treating its product as classifiable under T.I. 23(2). The
appellant filed a writ application before the High Court at Ranchi/vide
C.W.J.C. No. 691 of 1983 challenging the demand. The Court directed a fresh
sample of the appellant’s product to be drawn. This was done on 14th
September 1983 and sent to the Director General. National Test House,
Alipore, Calcutta. The Test certificate states:
"the said sample fails to meet the requirement as covered under tariff item
No. 23 (1) of Central Excise and Salt Act, 1944. It appears that tariff
item 23(2) of the said Act does not specify any particular variety of
cement but include all others. In absence of the identity of the variety of
cement it will not be possible to comment on the material covered under
T.I. 23(2) on the basis of the result of test carried out."
On the basis of this report, the High Court dismissed the writ application
and gave the appellant liberty to challenge the directive of the
Superintendent Central Excise before the Collector, Central Excise. The
appellant duly approached the Collector (Appeal) who by an order dated 3rd
April 1984 set aside the impugned directive but leaving the question of
classification open for a fresh determination in accordance with the
prescribed procedure.
On 30th May 1984 a show cause notice was issued to the appellant by the
Superintendent, Central Excise. The. appellant gave its reply in which it
was contended that lympo was not a cement but was a cement substitute.
Material was also submitted and reliance was placed on the Indian Standard
specifications to show that there was a marked difference between the
compressive strengths and composition of different varieties of cement and
lympo. In addition the names of various manufactures in West Bengal who
were manufacturing lympo and taking the benefit of the Exemption
Notification dated 30th April 1975 were also submitted.
The Collector, Central Excise by his order dated 29th September 1987
accepted that there was a difference between the plasticity and setting
property of lympo and ordinary portland cement, but rejected the
appellant’s case on the following grounds:
1. Since lympo serves the purpose of all types of residential
constructions, save and except R.C.C. work, the characteristics and actual
uses of the product conforms fully to cement, as it is known in common
parlance.
2. Tariff item 23 covers all varieties of cement including inferior
variety with lower compressive strength such as ’Sagol’ and ’ Ashmoh’ and
that these inferior varieties of cement were covered by Tariff Item 23(2)
as was clear from Notification No. 5/70 dated 31st January 1970 and 14/79
dated 27th January 1979.
3. Tariff item 23 was not based on Indian Standard Specifications and,
therefore, merely because lympo did not meet the I.S. Specification for
cement or its varieties did not mean that lympo was not classifiable under
Tariff Item 23.
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Accordingly, the Collector held that lympo was correctly classifiable under
Sub-Item (2) of item 23 and was subject to duty during the relevant period,
namely, upto the amendment of the 1944 Act.
This decision was upheld of 14.9.1993 by the impugned decision of the New
Delhi Bench of Customs, Excise and Gold (Control) Appellate Tribunal
(CEGAT). In rejecting the appellants appeal, the Tribunal said:
"The ultimate test of classification is how the product is known in the
trade parlance. ’Lympo’ is put to practically all the uses to which cement
is put - except for RCC construction work. Considering all the facts and
circumstances, it appears to be an inferior type of cement like ’Sagol and
’Ashmoh’ as held by the Collector - though described as a Cement
substitute. When the substitute is so much like the real think, it is
difficult not to hold it as the same."
Before dealing with the submissions of the parties, it may be noted at this
stage in 1985, the first Schedule to the 1944 Act was repealed and re-
enacted with some changes, as the Schedule to the Central Excise Tariff
Act, 1985 (hereinafter referred to as’ 1985 Act’). Cement has now been
classified under Chapter 25 of the Schedule to the 1985 Act along with
’Salt Sulpur: Clay and Stone: Plastering Materials: and Lime’. The specific
tariff entry relating to cement is 25.02 which reads:
___________________________________________________________________________
_____
Heading Sub- Description of goods Rate
of
No. Heading
Duty
(1) (2) (3)
(4)
25.02 2502.10 Cement clinkers Rs. 200
per tonne
Portlant cement (including or-dinary portland cement, Portland pozzolana
cement and Portland slag cement)
25.02.21 White cement, whether or not 25% artificially
coloured and whether or not with rapid hardening properties
25.02.29 Others
Rs. 350 per
tonne
2502.30 Aluminous cement (Cement 25% fondu)
2502.40 Sagol: ashmoh 25%
2502.50 High alumina refractory cement 25%
2502.90 Other 25%
It is not and cannot be disputed by the respondents that lympo is not
classifiable under T.I. 25.02 but under T.I. 25.05 which reads:
Heading Sub-No. Heading Description of goods Rate of
Duty
(1) (2) (3) (4)
25.05 2505.00 Mineral substances not Nil elsewhere specified (including
clay, earth colours, natural abrasives, sulphurs, slate and stone) lime:
Plasters with a basis of Calcium Sulphate, plasters specially prepared for
use in Dentistry.
___________________________________________________________________________
___________
Although lympo has not been mentioned either in T.I. 25.02 or 25.05, :he
appellant has drawn our attention to the Budget speech of the Finance
Minister in 1988 where in paragraph 135, it is stated :
"It is time that we think innovatively and use unconventional materials for
housing which could be cheap and functional. The excise duty on blocks,
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slabs, lintels, etc. constituting structural intermediates and components
of pre-fabricated building is being reduced from 12% to 5% ad valorem.
Similarly, fly ash bricks will pay a lower duty of 5% ad velorem, and
lympo, a cement substitute, will bear a zero rate of duty." Soon after this
a Notification was issued being Notification No. 33/88-C.E. dated 1st March
1988 exempting lympo from the whole of duty of excise leviable thereon.
In 1990, Notification No. 16/90-CE dated 20th March 1990 was issued under
Section 5(A) of the 1944 Act exempting certain goods described in column
(3) of the Table annexed to the notification and falling under the heading
number or sub-heading number of the 1985 Act from the levy of excise duty.
Among the goods so exempted were cement which was described as being under
TI 2502.20 and lympo which was described as being under Tariff Entry 25.05
of the Schedule to the 1985 Act.
In supersession of this notification another was issued by the Central
Government under 5A(1) of the 1944 Act being notification No. 7/92 dated
1st March 1992 again exempting lympo from the whole of the duty and
describing the corresponding entry in the 1985 Act as 25.05. Therefore for
the period after the 1985 came into force, a distinction has been
statutorily maintained, between cement, the different varieties arid
’other’ cement which have been classified under T.I. 2502.02 and lympo
which has been classified under TI 25.05. The only question which remains
is whether for the period 1982 to 1985 the lympo manufactured by the
appellant could be classifiable under the TI 23(2) of the Schedule to the
1944 Act.
In our view, the Tribunal and the Collector have incorrectly interpreted
the provisions of Tariff Item 23 of the First Schedule to the 1944 Act. The
Tariff heading of the entry is ’Cement’. Therefore when T.I. 25(2) speaks
of "all others" it means "all other kinds or varieties of cement". It is
axiomatic that if the product is not cement but can be used for some
purposes like cement, such product is not cement. The test as enunciated by
the Tribunal for determination of the question of classification is no
doubt how the product is known to the trade The appellant has produced
evidence to show that lympo had never been known or indeed advertised as
’cement’ whether of a superior or inferior quality, but was known as a
cement substitute. The respondents have produced nothing to show to the
contrary. A substitute necessarily implies a difference in identity. When
once it is admitted that lympo is a cement substitute, the Tribunal could
not have come to the conclusion that lympo was cement or a Variety of
cement. In our view, there is no ambiguity in the definition of T.I. 23(1)
or 23(2). Even if there were, on the principle that when two constructions
can be equally drawn, the one (See: Dunlop India Limited v. Union of India
and Ors.. [1976] 2 SCC 241.) favourable to the tax payer should be adopted,
the Tribunal should have held in favour of the appellant.
Indeed an earlier Bench of the same Bench of CEGAT, in Nageswara Pozzolana
Works Pvt. Ltd v. Collector of C. Ex. (1992) 58 ELT 321 had clearly held:
"The dictionary meaning of cement cannot be the factor for considering the
product in question as cement as cement has a different meaning and trade
understanding. The product which is an alternative, is used for such
purposes as laying bricks and plastering which function can be obtained by
mixture of limestone and, therefore, cannot be considered as a cement."
In that case after considering a vast volume of technical material and
taking into consideration the trade parlance and understanding of cement
and Lime pozzolana mixture, the Tribunal came to the conclusion that the
latter cannot be considered as a variety of cement to be classifiable under
T.I.23(1) or T.I.23(2) to the First Schedule of the 1944 Act but under
Tariff Item 68. Appeals (C,A. No. 7504-7505 of 1995) filed by the Collector
of Central Excise against this decision of CEGAT were dismissed by this
Court on 15th February 1996.
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In any event, the position has been clarified by the 1985 Act beyond doubt.
Cement and all its varieties including ’Sagol’ and ’Ashmoh’ have been
separately provided for under TI 2502. Lympo on the other hand has been
classified under a different Tariff item altogether. The Schedules to the
1944 and the 1985 Act deal with the same commodity. If lympo is not cement
or a variety of it under the 1985 Act it could not have been cement under
the Schedule of the 1944 Act either. [See in this connection Income Tax
Officer v. Mani Ram, AIR (1969) SC 543. Since even according to the
respondents there was no other entry of the Schedule to the 1944 Act, under
which lympo could have been classified, necessarily it would have to be
classified under the residuary Tariff item viz., TI 68.
For all these reasons, we set aside the impugned decision of the Tribunal
and allow the appeal and hold that lympo was not classifiable under
T.I.23(1) or 23(2) but under T.I.68 of the Schedule to 1944 Act. Since the
appellant’s case was dismissed in limine by the Tribunal and the respondent
authorities, the further question whether the appellant was entitled to the
benefit of Notification 116/75-CE dated 30th April 1975 had not been
considered by them. With this judgment the respondent will consider the
appellant’s claim to exemption from excise duty under the notification
treating the appellant’s product for the period in question as classifiable
under T.I.68.
The appeal is allowed accordingly without any order as to costs.