Full Judgment Text
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CASE NO.:
Appeal (civil) 3579-81 of 1984
PETITIONER:
INDIAN TOOL MANUFACTURERS
RESPONDENT:
ASSTT. COLLECTOR OF CENTRAL EXCISE, NASIK AND ORS.
DATE OF JUDGMENT: 23/09/1994
BENCH:
B.P. JEEVAN REDDY & SUHAS C. SEN & K.S. PARIPOORNAN
JUDGMENT:
JUDGMENT
1994 SUPPL. (4) SCR 1
The Judgment of the Court was delivered by
SEN, J. : The appellants manufacture and sell what they call as ’THROW-AWAY
INSERTS’ (hereinafter referred to as ’the Inserts’) During the period upto
17.6.77. these Inserts were classified under T.I. No. 68. In view of the
amendment in T.I. No. 5lA, these Inserts were classified under that Tariff
Item Number from 18.6.77. Until 28.2.79, the appellants paid duty
accordingly. On 1.3.79. they filed a revised classification list in which
inserts were listed at Serial Nos. 1716 to 1741. Since the Department
intended to make certain inquiries likely to take sometime, classification
of the inserts was provisionally approved under Item Nos. 51A(iii). On
25.2.80 the Assistant Collector, Central Excise, issued a Show Cause Notice
asking the appellants as to why the classification in respect of the
Inserts approved earlier provisionally under T.I No. 51A(iii) should not be
changed to T.I. No, 62. A similar Show Cause Notice was issued in respect
of the Classification List No. 5 effective from 20.6.79 No. 6 effective
from 2.7.79 No. 7 effective from 6.7.79 No. 8 effective from 12.7.79 and
No. 14 effective from 28.11.79 in so far as these pertained to the
’Inserts’. Under an order dated 28.4.80/2.5.86, reclassification proposed
under the Show Cause Notices was confirmed. That is to say, the ’Inserts’
were classified under T.I. No. 62 as ’Tools Tips’.
Being aggrieved, the appellants filed an appeal registered as Appeal No.
1982/80 (F.No. V.2(62)1982/80). Besides this appeal, there were two other
appeals, one registered as Appeal No, 2218/80 (F. No. V2(51A)2218/80,
against the Order No. V- 51A(17)l3l/VC/80 dated 10.7.80, passed by the
Assistant Collector of Central Excise, Nasik, by which he confirmed the
demand for differential duty (as a result of reclas-sification) in respect
of the ’Inserts’ cleared from April, 1976 to December, 1978.The other
appeal was registered as Appeal No. 35/81 (F. No. V..2(62)988/81), against
the Assessment order No. 35/81 dated 7.1.81, made by the Superintendent of
Central Excise, Range ’C’, Nasik, by which he indicated that short levy in
respect of the ’Inserts’ cleared from January, 1979 to April, 1980s
differential duty demanded was on account of the reclassification made as
aforesaid.
The Collector of Central Excise (Appeals) held :-
"As I understand, the basic difference between the ’Tool Tips’ and the so-
called ’Inserts’ is that the former are mounted on Tool by brazing
(soldering), whereas the latter are clamped on the tools and are separable.
Having regard to these facts and to the scope of the expression ’in any
form or size’ appearing in T.I. No. 62,1 find difficult to persuade myself
to agree with the appellants’ contention. Now let us see what the
IS:4022.1967 for ’Cemented Carbide Indexable Throw Away Inserts’ states. It
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says "Indexable inserts are being increasingly used for machining of metal
by turning and milling. They derive their name from the fact that the
insert is held mechanically in a tool holder for turning or in milling
cutter for milling". From this, it is seen that these are known as
’Inserts’ because of the manner in which they are inserted in a Tool
Holder. In fact at Para 0.6 of the standard, it is stated that this
standard is based on Draft ISO Recommendation No. 977 "Throw Away Carbide
Tips’ of the International Organisation for Standardisation (ISO). From
this also, one can infer that these are not two different things, specially
in view of the scope of the Item 62. The mere fact that the mode of
fixation of Tips and Inserts is different, should not in any way blur the
correct classification and for the reasons stated earlier, the inserts are
classifiable under T.I. No. 62 as held correctly in the impugned order.’
The Collector further held that the demand for short levy for the period
January, 1979 to February, 1979 was barred by limitation. But the demand
for the period Match, 1979 to April, 1980 was sustainable.
The assessee applied for revision to the Central Government against the
aforesaid order passed by the Collector. These cases were transferred to
the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT). The
Tribunal held that:-
"The undisputed facts about the nature of the products are that both Tool
Tips as well as Throw Away Inserts are made from carbide powder of the
metals such as tungsten, molybdenum and vanadium. Both are pressed into the
required shapes and then sintered (heat treated). Both are affixed on the
tool handle and perform the function of machining of metals (turning and
milling etc.). Thus, both are tools. So far as the differences between Tool
Tips and Throw Away Inserts are concerned, the appellants gave an imposing
list of 10 points of difference. The Bench asked them io show the
authorities and technical literature etc, on which these points of
difference were based. The appellants were not able to produce any. The
points of difference between Tool Tips and Throw Away Inserts, as
understood by us on the basis of the samples, catalogues and Indian
Standard Specifications etc. shown to us are as under :-
(i) The Inserts are clamped on the tool handle and are detach-able. The
Tool Tips are brazed (welded or soldered) on the tool handle.
(ii) The Inserts are pre-ground (sharpened) before clearance from the
factory. Tool Tips are ground after they are welded on the tool handle.
(iii) Inserts: have multiple edges, when one edge is blunted, the other
edge can be put in place by manipulation of the angle. Tool Tips have only
one edge.
(iv) When all the edges of the Inserts are blunted after use, the Inserts
have to be thrown away. They cannot be sharpened again. The edge of the
Tool Tip can, however, be sharpened and used again."
The Tribunal further held that the proposition enunciated by the appellants
that in the absence 6f a statutory definition, reliance has to be placed on
the trade parlance and understanding for classification of goods under the
Central Excise Tariff, was correct. The only evidence the appellants
produced was Tool Tips and Throw Away Inserts, which were inter-nationally
known by two different names and that there were two separate ISI
Specifications for them. The Tribunal observed that the more important test
would be to find out the basic character, function and use of the articles,
The Tribunal recorded that the appellants themselves admitted that so far
as the names were concerned, the Inserts were also cafied as Tips’.
Item 68, was introduced in the Tariff in 1973. At that time I.S.
Specification 4022-1967 was in vogue. In the Chapter ’Foreward’ in
para-graph 03. Inserts were described as ’Tips’. Paragraph 0.6 further
stated that the said Standard was based on Draft ISO Recommendation No.
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977 Throw Away Carbide Tips’ of the International Organisation for
Standardisation. This, according to the Tribunal, went to show that the
trade and industry the world over did not consider Inserts and Tips as two
different things. In that view of the matter, the Tribunal held that the
entry Tool Tips, in any form or size.....’ encompassed Throw Away Tips as
well as Inserts.
The Tribunal further explained the position in the following manner-
"Both Tips and Inserts are made from the same raw material, undergo
practically the same process of manufacture and perform basically the same
function of machining the metal Difference in the method of fixing them on
the tool handle and the shorter life span of the Inserts do not make them
basically different goods. It only means that Inserts are a separate
variety of Tool Tips. From their disposable character or the shorter life
span, the Inserts have acquired the adjective Throw Away’ and from their
method of fixing by insertion or clamping the name Throw Away Inserts’ has
come to be more commonly used. But in their basic character and use, the
Inserts are nothing more than a separate species of the generic item Tool
Tips’."
The Tribunal concluded that Throw Away Inserts, being a variety of the
generic item Tool Tips, had to be classified as specific item 62 and could
not fall under the more generic Item 51-A(iii) - Tools’.
Aggrieved by the decision of the Tribunal, the appellants have now come up
to this Court and contend that Carbide Throw Away Inserts, manufactured by
the appellants, fell under Item 51- A(iii) of the Central Excise Tariff and
not Under Item 62, as held by the Tribunal. The relevant Tariff Items, as
they stood at the relevant time, were as under :-
"51A(iii) Tools designed to be fitted into hand tools, machine tools or
tools falling under sub-item (ii), including dies for wire drawing,
extrusion dies for metals and rock drilling bits;"
"62. Tool Tips, in any form or size, unmounted, of sintered carbides of
metals such as tungsten, molybdenum and vanadium."
A distinction has been drawn between ’Tools, designed to be fitted in hand
tools, machine tools and tools of other specified categories’ under one
heading, ’Tool Tips in any form or size’ under the other heading. In order
to find out whether Throw Away Inserts’ manufactured by the appellants fall
in the category of Tool Tips or Tools, the essential characteristics of the
Inserts will have to be examined. There is no dispute that the Throw Away
Inserts are unmounted and are of ’sintered carbides of metals such as
tungsten, molybdenum and vanadium’ Therefore, the only question that
remains to be considered is whether a ’Throw Away Insert’ is a variety of
Tool Tip. This controversy is basically one of fact. The Tribunal has
pointed out that an Insert is multi-edged, detachable and has a shorter
life span. It has to be thrown away when its edges get blunted. The edge of
an ordinary Tool Tip can, however, be sharpened and used again.
These facts are not disputed. In fact, the Assistant Collector, who
personally visited the factory of the appellant, has recorded :-
"..,....none of the blanks as such can be used as finished product. Blanks
for tool tips are first brazed (welded) to the tool or to be more precise
tool holder and after welding the same the tips are ground and only one
edge of the tip is available for cutting. In case of blanks for inserts all
the edges are available for cutting.
Thus there being no difference in the process of manufacture and in the end
use except the difference that the so- called inserts which are nothing but
tool tips are affixed to the tip of the tool through clamping device and
they are replaceable easily while the other tips are permanently welded and
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not easily detachable. But in the Case of the latter if the customer has
the facilities for brazing the tips to the tools, the customer purchases
these tool tips (unground blanks for tips) from the manufacturer and to
that extent one can say that even the so- called tool tips are also
replaceable."
On behalf of the appellants, it has been contended that to decide this
controversy, regard must be had to the market parlance. A customer wanting
to buy Throw Away Inserts will not ask for Tool Tips. Similarly, a person
wanting to buy Tool Tips will not look for Inserts in the market.
That may be the position. But that will not solve the controversy in this
case. If there is a general heading for the purpose of levy of Excise Duty,
then every variety of goods falling under that general heading will have to
be taxed under that heading. The fact that a particular variety is known by
a particular name in the market will not take it out of the general
heading. For example, when duty is leviable on biscuits, then every variety
of biscuits will be taxed under that heading. A particular type of thin
crisp biscuits is known in the market as ’wafer’, but basically it is a
biscuit. It was held by the Andhra Pradesh High Court in the case of
International Foods v. Collector of Central Excise, Hyderabad, (1978)
E.L.T. (J 50), that ’wafer’ was a kind of biscuit, although it may be
different in size and shape from an ordinary biscuit. A pear-shaped
drinking glass with a small opening is known as ’snifter’. Because of that,
’snifter’ will not cease to be a drinking glass. To decide the question,
whether Throw Away Inserts are Tool Tips, nature and function of Inserts
will have to be examined. The form or size of the Inserts are quite
immaterial for this purpose. From the finding of fact recorded by the
departmental authorities and the Tribunal, it appears that the basic
character, function and use of an Insert is not different in any way from
a Tool Tip.
The finding of the Department which has been upheld by the Tribunal is that
both Tool Tips as well as Throw Away Inserts were Carbide Tips for
machining of metal. The Inserts had shorter functional life and were
replaceable. The Tool Tip had one cutting edge while the Insert had
multiple cutting edges. These facts did not alter in any way the basic
character and function of the two articles. Both were tips meant for
machining of metal. Both were manufactured by the same process and had been
made out of same metals. The Inserts were clamped on the holders. The
ordinary Tool Tips were brazed on the holders. This will not take the
Inserts put of the amplitude of the description in Tariff Item 62 ’Tool
tips in any form or size....,.’. This wide description will encompass every
type of Tool Tips detachable or otherwise. Whether a Tool Tip is brazed:on
a tool handle or clamped on a tool handle will not alter its basic
character, function or use. The form of the Tool Tip is also immaterial.
The detach-able Tool Tip is only a variety of Tool Tips and the fact that
it is identified by the name ’Throw Away Insert’ will not take it out of
the ambit of the heading ’Tool Tips in any form or size..,,..’.
Moreover, the Tribunal dealt with the argument based on trade parlances :
":__we find that all that they have to show by way of evidence of trade
parlance is that (1) Tool Tips and Throw Away Inserts are known by
different names and that (2) there are two separate Indian Standard
Specifications for them. We find that these two factors by themselves can
hardly constitute adequate evidence of trade parlance...... We find farther
that the appellants themselves admit that even so far as the name is
concerned, until recently the Inserts were also called as Tips. Item 62
was introduced in the Tariff in Specification IS : 4022-1967 was in vogue.
In the Chapter ’Foreword’ in paragraph 0.3, this Specification describes
the In-serts as ’Tips’. Paragraph 0.6 thereof states further that the said
Standard was based on Draft ISO Recommendation No. 997 ’Throw Away Carbide
Tips’ of the International Organisation for Standardisation (ISO), This
shown that the trade and industry the world over did not consider Inserts
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and Tips as basically two different things, so much so that Inserts were
commonly referred to as Tips. Therefore, in the context of such trade
understanding, when they entry ’Tool Tips, in any form or size.....’
appeared in the Central Excise Tariff, the only reasonable conclusion can
be that it encompassed Throw Away Tips or Inserts as well. IS : 4022-1967
has remained current till about three months ago. The appellants state that
the revised Specification has dropped the name Tips’ for Inserts. We have
not been shown the revised Specification, but even, if it is so, it can
only mean that a different name has been given to Throw Away type of Tips.
There has, however, been no change in the character or use of the
article."
The assesses has been unable to bring to the notice of the Court anything
to show that the nature and function or composition of a Throw Away Insert
is in any way different from an ordinary Tool Tip. The highest that can be
said for the appellants is that a Throw Away Insert is a detachable Tool
Tip with multiple edges.
We were also referred to the judgment of this Court in the case of Plastnac
Machine Manufacturing Co. Pvt, Ltd .v. Collector of’ Central Excise,
Bombay, [1991] Supp. 1 SCC 57. In that case, the question was whether Tie
Bar Nuts’ of base metal or alloys manufactured with the aid of power and
having ’acme threads’, could be classified under Tariff Item 52, which at
the material time was as under :-
"52. Bolts and nuts, threaded or taped and screws, of base metal or alloys
thereof, in or in relation to the manufacture of which any process is
ordinarily carried on with the aid of power.
Explanation,-The expression "Bolts and nuts, threaded or tapped and screws"
used in this item shall include bolt ends, screw studs, screw studding,
self-tapped screws, screw hooks and screw rings."
In that case, it was pointed that there was no dispute that Tie Bar Nuts
conform to the popular idea of nuts. It was observed :-
"Applying the foregoing principles and considering the fact that the Tie
Bar Nuts’ function of fixing the platens as stated by the appellants and
that of fastening, as argued by them, are not basically different, and the
appellants themselves having called the goods as ’nuts’, we are of the view
that the Tribunal is correct in classifying Tie Bar Nuts under Tariff Item
52. We, therefore, do not find any reason to interfere with the department
’s prospective modification of the classification. We find no justification
for classifying those in the residuary Item 68. As was held in Dunlop
India Ltd. v. Union of India, [1976) 2 SCC 241, if an article is
classifiable under a specific item, it would be against the very principle
of classification to deny it the proper parentage and consign it to the
residuary item."
Our attention was also drawn to Brussels Tariff Nomenclature relating to
Tool Tips’, which is as under :-
"82.07-TOOL-TIPS AND PLATES, STICKS AND THE LIKE FOR TOOL-TIPS, UNMOUNTED,
OF SINTERED METAL CARBIDES (FOR EXAMPLE, CARABIDES OR TUNGSTEN, MOLYBDENUM
OR VANADIUM),
This heading covers products made by sintering metal carbides (e.g., of
tungsten, molybdenum, titanium, tantalum, vanadium or niobium) usually with
a binder such as cobalt or nickel.
They are usually in the form of tool-tips, plates, sticks, rods, pellets,
rings, etc, and are characterised by great hardness, even when hot, and
great rigidity.
In view of their special properties these tips, plates, etc., are welded or
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brased on to lathe tools, milling tools, drills, dies or other high-speed
cutting tools used for working metals or Other hard materials. They fall
within this heading whether sharpened or not, or otherwise prepared, but
not if already mounted on tools; in the latter case, they fall within the
headings for tools, particularly heading 82,05."
This heading and the explanation thereunder do not support the case of the
appellants in any way. On the contrary, it makes it clear that the products
made by sintering metals carbides of, inter alia, tungsten, molybdenum,
vanadium, will fall under this beading. It has been clarified that these
products are usually in the form of Tool Tips, plates, etc. These products
will fall within this heading whether sharpened or not or other-wise
prepared, but not if already mounted on tools.
It is not the case of the appellant that its products are mounted on tools.
The composition of its product is same as mentioned in Tariff Item 62. In
shape or form it is not different from a Tool Tip, except that it has
multiple cutting edges. Its function is the same as that of a Tool Tip.
The fact that it is detachable and has to be thrown away after use, will
not change its basic character or function.
In view of the aforesaid, these appeals fail and are dismissed. The parties
will bear their own costs,
CIVIL APPEAL NO. 1357 OF 1993
In view of our decision in Civil Appeals Nos. 3579-81 of 1984,.this. ...
appeal is also dismissed. There will be no order as to cost.