Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 9
CASE NO.:
Appeal (civil) 1411 of 1995
PETITIONER:
Forbes Gokak Limited
RESPONDENT:
Collector of Central Excise, Aurangabad
DATE OF JUDGMENT: 26/02/2003
BENCH:
M.B. SHAH & D.M. DHARMADHIKARI
JUDGMENT:
J U D G M E N T
WITH
C.A. No. 7086 of 1999, C.A. Nos.2366-67 & 4384 of 2001
Shah, J.
CIVIL APPEAL No.1411 OF 1995.
By judgment and order dated 28th October, 1994, in Appeal
No.E/139/94-D, Customs Excise and Gold (Control) Appellate
Tribunal, New Delhi (hereinafter referred to as "the Tribunal") arrived
at the conclusion that ’Glass Moulds’ along with plastic Gasket were
classifiable under Central Excise Tariff Chapter heading 70.15 as
’other articles of glass’ and thereby confirmed the order passed by the
Collector of Central Excise, Aurangabad.
The questions for consideration before the Tribunal were:
(1) Whether grinding and polishing of Opthalmic
Blanks into Glass Moulds amounts to
manufacture?
(2) Whether the goods are known in the market as
Glass Moulds?
(3) Whether the goods should be classified under
Chapter sub-heading 84.80 or under Chapter 70.15
of the Central Excise Tariff?
For the first question, the Tribunal came to the conclusion that
the product which comes out after grinding and polishing is product
completely different from raw-material, namely, the opthalmic blanks.
The ground and polished material acquires different characteristic and
properties, and a new product distinct in name, character and use
comes into existence after the process of grinding and polishing.
Thus, the process of grinding and polishing is nothing but a process of
manufacture.
For the second question, the Tribunal found that the appellant
had described the product as Glass Moulds and that the product was
internationally known as Glass Moulds. That means, in common/
trade parlance, the product was known as glass moulds. For the
contention that the product is not marketable and does not come to the
market for being bought and sold on the ground that the technology
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 9
for manufacture of the product was a highly guarded secret and,
therefore, it was not available to trade in general, the Tribunal held
that as the product was imported by the appellant itself, it was not
necessary that the product should essentially come to the market for
being bought and sold in the market. The Tribunal held that the test is
whether the product is capable of being bought and sold in the
market or is marketable? For this, the Tribunal relied upon the
decision of this Court in U.P. State Electricity Board v. CCE [1994
(70) ELT 3].
For the last question whether the goods were moulds for
plastic articles or moulds made of glass, the Tribunal relied upon the
test of common/trade parlance and observed that the admitted position
was that the goods were known in the international market as glass
moulds; the appellants who were the manufacturer also call the
product as glass moulds; even at the time of import of the product, it
was declared as ’glass moulds’. Hence, the Tribunal held that the
product was known as ’glass moulds or moulds made of glass’.
With regard to classification of the product, the Tribunal
pointed out that lot of emphasis was laid on Chapter Note 1(c) of
Chapter 84 by the appellant whereas the Department was of the view
that the goods were articles for technical use and the plastic gaskets
were parts thereof and, therefore, not classifiable under Chapter 84
and were appropriately classifiable under Chapter Heading 70.15.
The Tribunal held that the moulds in dispute were glass moulds as
known internationally and nationally in trade/commercial parlance.
They were not moulds for making plastic articles and therefore, in
terms of the Explanatory Notes of HSN, the goods were appropriately
classifiable under Central Excise Tariff Heading 70.15.
The Tribunal also held that Gaskets are essential components
and are used for binding of male and female to form a glass mould
assembly and, therefore, were classified under Central Excise Tariff
Chapter heading 70.15 when they were imported along with glass
moulds. Gaskets were given specific shape and design for the purpose
of preparing these glass moulds assembly and, therefore, shall be
classifiable under Central Excise Tariff Heading 39 as articles for
plastic and finally held that the glass moulds along with gaskets were
classifiable under Heading 70.15.
That judgment and order of the Tribunal is challenged by filing
this appeal.
Admittedly, the Glass Moulds consist of (1) glass moulds; and
(2) gaskets. Ground of one glass mould is of concave shape while
other is convex. These pieces of ground opthalmic glass are known as
glass moulds in International Trade. A plastic gasket which holds the
two Moulds is then manufactured out of ethyl vinyl acetate. The said
two moulds are held together by this gasket. This is for
manufacturing opthalmic lenses. Admittedly, the process is as
follows:
(a) In the mould making section, the glass blanks are
subjected, first to cutting the surface by diamond to
achieve designed curvature on the surface, then these
glass blanks are subjected to grinding and polishing to
achieve a smooth surface.
(b) Two glass blanks so processed from (called male &
female) constitute appliances or articles of glass for use
known as glass moulds, these two moulds are held
together with plastic gasket which they call a glass mould
assembly, such glass moulds are used repeatedly for
casting of the plastic lenses.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 9
It was contended by the Department that the assessees were
manufacturing glass moulds and gaskets and consuming these
products captively for manufacture of ophthalmic lenses and that
these glass moulds were classifiable under Central Excise Tariff
Chapter heading 70.15. The assessee submitted that the same are
classifiable under the heading 84.80 for which there is exemption
notification No.220/86 dated 2.4.1986.
For appreciating the contentions raised by the learned counsel
for the parties, we would refer to the relevant entries and chapter notes
thereunder, upon which reliance is placed by them.
"CHAPTER 70
Glass and Glassware
NOTES
1. This Chapter does not cover:
(a) (b) .
(c) Optical fibre cables, electrical insulators or
fittings of insulating material (Chapter 85);
(d) Optical fibres, optically worked optical
elements hypodermic syringes, artificial eyes,
thermometers, barometers, hydrometers or
other articles of Chapter 90.
5. Throughout this Schedule, the expression ’glass’
includes fused quartz and other fused silica.
HEADING
Heading 70.15 Other articles of glass including
those of a kind used for table, kitchen, office,
indoor decoration or similar purposes (other than
that of heading No.70.07 or 70.13)
CHAPTER 84
Nuclear Reactors, Boilers, Machinery and
Mechanical Appliances; Parts Thereof
NOTES
1. This Chapter does not cover:
(a) (b) .
(c) Laboratory glassware (heading No.70.12);
machinery, appliances or other articles for
technical uses or parts thereof, of glass
(heading No.70.14 or 70.15)
(d) Articles of heading No.73.21 or 73.22 or
similar articles of other base metals (Chapter
74 to 76 or 78 to 81)."
HEADING
Heading 84.80 Moulding boxes for metal foundry;
mould bases; moulding patterns; moulds for metal
(other than ingot moulds) metal carbides, glass,
mineral materials, rubber or plastics.
CHAPTER 90
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 9
Optical, Photographic, Cinematographic,
Measuring, Checking, Precision, Medical or
Surgical Instruments and Apparatus; Clocks
and Watches; Musical Instruments; Parts and
Accessories Thereof.
HEADINGS
Heading 90.01 Optical fibres and optical fibre
bundles; optical fibre cables other than those of
heading No.85.44; sheets and plates of polarising
material; lenses (including contact lenses), prisms,
mirrors and other optical elements, of any material,
unmounted, other than such elements of glass not
optically worked.
Heading 90.02 Lenses, prisms, mirrors and
other optical elements, of any material, mounted,
being parts of or fittings for instruments or
apparatus, other than such elements of glass not
optically worked."
Further, learned counsel for the appellant referred to relevant
parts of Rules 1 to 4 of the Rules for Interpretation of the Schedule of
the Excise Tariff which are as under:
"THE SCHEDULE EXCISE TARIFF
RULES FOR THE INTERPRETATION OF THIS SCHEDULE
1. The titles of Sections and Chapters are provided
for ease of reference only; for legal purposes,
classification shall be determined according to
the terms of the headings and any relative Section
or Chapter Notes and, provided such headings or
Notes do not otherwise require, according to the
provisions hereinafter contained.
2. (a)
(b) Any reference in a heading to a material or
substance shall be taken to include a
reference to mixtures or combinations of
that material or substance with other
materials or substances. Any reference to
goods of a given material or substance shall
be taken to include a reference to goods
consisting wholly or partly of such material
or substance. The classification of goods
consisting of more than one material or
substance shall be according to the
principles contained in rule 3.
3. When by application of sub-rule (b) of rule 2 or for
any other reason, goods are, prima facie, classifiable
under two or more headings, classification shall be
effected as follows :
(a) The heading which provides the most
specific description shall be preferred to
headings providing a more general
description. However, when two or more
headings each refer to part only of the
materials or substances contained in mixed
or composite goods or to part only of the
items in a set, those headings are to be
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 9
regarded as equally specific in relation to
those goods, even if one of them gives a
more complete or precise description of the
goods.
(b) Mixtures, composite goods consisting of
different materials or made up of different
components, and goods put up in sets,
which cannot be classified by reference to
(a), shall be classified as if they consisted of
the material or component which gives them
their essential character, insofar as this
criterion is applicable.
(c) When goods cannot be classified by
reference to (a) or (b), they shall be
classified under the heading which occurs
last in the numerical order among those
which equally merit consideration.
4. Goods which cannot be classified in accordance
with the above rules shall be classified under the
heading appropriate to the goods to which they are
most akin."
Now we would deal with the contention of the learned counsel
for the appellant that the glass moulds with plastic gasket
manufactured by the appellant would be covered by heading 84.80
and in any case, it would fall under Chapter 90, heading 90.02.
For the alternative submission, admittedly, it was neither the
contention of the Department nor of the appellant that the product
would be covered under heading 90.02 and, therefore, that question is
not required to be considered. However, prima facie, it would be
difficult for us to arrive at the conclusion that the product is lense,
prism, mirror and other optical element, of any material, unmounted,
being part of or fitting for instruments or apparatus, other than such
elements of glass not optically worked so as to be covered by Heading
90.02. Admittedly, the product in question is for manufacture of
lenses.
Hence, we would straightway consider whether the product
would be covered by heading 84.80? Chapter Note 1(c) quoted above
clearly provides that Chapter 84 does not cover laboratory glassware
(Heading No.70.12); machinery appliances or other articles for
technical uses or parts thereof of glass (Heading No. 70.14 or 70.15).
Therefore, we have to consider whether it would be covered by
heading 70.15? Undisputedly, in the present case, the glass moulds
are articles of glass which are not covered by heading 70.07 or 70.13.
The glass moulds in question are covered by plastic gasket. As per
the Rules for Interpretation of Tariff Items, a product which is made
up of different components and goods put up in sets, which cannot be
classified by reference to rule 2 (a), are to be classified as if they
consisted of the material or component which gives them their
essential character. In the present case, plastic gasket cannot give the
essential character of glass moulds which are for the purpose of
manufacture of opthalmic lenses. Plastic gasket only holds the male
and female moulds together.
Further, relevant part of heading 84.80 deals with moulds for
metal, metal carbides, glass, mineral materials, rubber or plastics.
Reading the said heading as a whole, it appears that the said heading
covers various moulds such as, mould boxes for metal foundry, mould
bases, moulding patterns, moulds for metal, moulds for metal
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 9
carbides, moulds for glass, moulds for mineral materials, moulds for
rubber or plastics. It is nobody’s case that the product in question,
namely, ’glass mould’ is used for the aforesaid purposes. It is used
for manufacture of opthalmic lenses. Merely because lenses may be
of glass, it cannot be said that the said product is mould for glass. As
per Rule 3(a) of the Rules for the Interpretation quoted above, the
heading which provides most specific description shall be preferred to
headings providing a more general description. The heading 70.15
would specifically cover the product which is mainly consisting of
glass as ’other article of glass’. These glass-moulds are used for
casting of the lenses.
Aforesaid discussion is also in conformity with the HSN
explanatory notes. In Chapter 70 for Glass and Glassware, the general
note specifically provides that the Chapter covers glass in all forms
and articles of glass, other than goods excluded by Note-1 to the said
chapter or covered more specifically by other headings of the
nomenclature. Learned counsel for the appellant submitted that the
chapter note 1(d) specifically includes optical fibres, optically worked
optical elements, hypodermic syringes, artificial eyes, thermometers,
barometers, hydrometers or other articles of Chapter 90. As stated
above, the glass moulds cannot be termed as optical fibres or optically
worked optical elements, which would be covered by Chapter 90. It
also provides that manufacturing processes vary considerably and
inter alia include:
(D) Moulding, whether or not combined with pressing,
blowing or drawing (e.g., for the manufacture of
bottles, tumblers, certain types of optical glass,
ashtrays).
(IJ) Cutting out the required articles from blanks,
spheres, etc., obtained by any process (articles of
fused quartz or other fused silica, in particular, are
often obtained from blanks of solid or hollow
section).
This has been made clear in Chapter/Heading 90, the relevant part of
which reads as under:
"(C) Optical elements of glass, optically
worked, not permanently mounted. In order to
distinguish between optical elements of glass of this
heading and those of Chapter 70 it is necessary to
determine whether or not they have been optically
worked.
The optical working of glass is usually performed
in two stages, viz., the production of the surfaces to the
shape required (i.e., with the necessary curvature, at the
correct angle, etc.), and the polishing of these surfaces.
This working consists of grinding the surfaces by means
of abrasives, rough at first, then gradually finer, the
successive operations being roughing, trueing, smoothing
and polishing. Finally, in the case of lenses required to
be of an exact diameter, the edges are ground; this is
known as the centring and edging operation. This
heading applies only to optical elements of which the
whole or part of their surface has been polished in order
to produce the required optical properties. It applies
therefore to elements which have been ground and
polished as described above, and also to elements which
have been polished after moulding. The heading does
not apply to unpolished elements having undergone
merely one or more of the processes which precede
polishing. Such elements fall in Chapter 70."
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 9
Further, as stated above, it is nobody’s case that item in
question is covered by Chapter 90.
Further, with regard to the applicability of Chapter 84, Chapter
Notes to Chapter 84 provide as under:
"Chapter 84
NUCLEAR REACTORS, BOILERS, MACHINERY AND
MECHANICAL APPLIANCES; PARTS THEREOF
Chapter Notes
1. This chapter does not cover:
(c) Laboratory glassware (heading No. 70.17);
machinery, appliances or other articles for
technical uses or parts thereof, of glass (heading
No. 70.19 or 70.20);
GENERAL
(A) GENERAL CONTENT OF THE CHAPTER
Subject to the provisions of the General
Explanatory Note to Section XVI, this Chapter covers all
machinery and mechanical appliances, and parts thereof,
not more specifically covered by Chapter 85, and not
being:
(a) (c)
(d) Laboratory glassware of heading 70.17; machinery
and appliances and parts thereof, of glass (heading
70.19 or 70.20).
In general, Chapter 84 covers machinery and
mechanical apparatus and Chapter 85 electrical goods.
However, certain machines are specified in headings of
Chapter 85 (e.g. electro-mechanical hand tools and
electro-mechanical domestic appliances) while Chapter
84 on the other hand covers certain non-mechanical
apparatus (e.g. steam generating boilers and their
auxiliary apparatus, and filtering apparatus).
It should also be noted that machinery and
apparatus of a kind covered by Chapter 84 remain in this
Chapter even if electric:
Since ceramic articles and parts thereof (Chapter
69), laboratory glassware (heading 70.17) and machinery
and appliances and parts thereof, of glass (heading 70.19
or 70.20) are excluded from this Chapter, it follows that
even if a machine or mechanical appliance is covered,
because of its description or nature, by a heading of this
Chapter it is not to be classified therein if it has the
character of an article of ceramic materials or of glass.
(B) GENERAL ARRANGEMENT OF THE CHAPTER
(5) Heading 84.80 covers, in addition to moulding
boxes for metal foundry and moulding patterns,
moulds (other than ingot moulds) used, by hand or
in machines, for moulding certain materials.
8480.50 - Moulds for glass
8480.60 - Moulds for mineral materials
- Moulds for rubber or plastics:
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 9
This heading covers the moulding boxes used in
metal foundry, mould bases and moulding patterns, with
certain exceptions referred to later, it also covers all
moulds (whether or not hinged, and whether used by
hand or in presses or moulding machines) which are of a
kind used for moulding the following materials into
blanks or finished articles:
(I) Metals (including metal powders, sintered metal
carbides and cermets.
(II) Glass (including fused quartz or other fused silica)
or mineral materials such as ceramic pastes,
cement, plaster or concrete.
(III) Rubber or plastics.
In general, the essential function of a mould is to
retain the material in a predetermined shape while it
sets; some moulds also exert a certain pressure on the
material. But the heading excludes stamping dies of
heading 82.07 since these shape the material solely by
means of a powerful blow or compression (e.g., dies for
stamping out sheet-metal goods).
MOULDS FOR GLASS
This group includes:
(1) Moulds for glass paving stones, bricks or flags,
and compression moulds for glass tiles.
(2) Bottle moulds for hand or machine working,
including pedal operated moulds (e.g., blank or
finishing moulds, ring moulds).
(3) Moulds for hollow glass ware, for insulators, etc.
(4) Shaping moulds for glassmakers’ lathes.
(5) Moulds made of steel or cast iron, used to make
lens or spectacle blanks etc."
Reading the aforesaid notes, it would be difficult to hold that
glass-moulds in question are moulds for glass. It is apparent that
Chapter 84 covers machinery and mechanical apparatus and certain
non-mechanical apparatus e.g. steam generating boilers and their
auxiliary apparatus and filtering apparatus. Further, the Chapter
excludes ceramic articles and parts thereof, laboratory glassware,
machinery and appliances and parts thereof, of glass, that means even
if a machine or mechanical appliance is covered by a heading of
Chapter 84 by its description or nature, the item is not to be classified
therein if it has the character of an article of ceramic material or of
glass.
Further, heading 84.80 covers moulds used by hand or in
machines for moulding certain materials like moulds for glass, moulds
for mineral materials and moulds for rubber or plastics. The product
in question ’glass mould’ is not for moulding such articles of glass.
Moulds for glass include moulds for glass paving stones, bricks or
flags, compression moulds for glass tiles, bottle moulds for hand or
machine working, moulds for hollow glassware and for insulators,
shaping moulds for glassmakers’ lathes and moulds made of steel or
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 9
cast iron used to make lens or spectacle blanks.
In the result, Civil Appeal No.1411 of 1995 and Civil Appeal
No.7086 of 1999, filed by the appellant Forbes Gokak Ltd. are
dismissed.
Civil Appeal Nos.2366-67 of 2001 filed by Commissioner of
Central Excise, Mumbai is allowed and the impugned judgment and
order passed by the Tribunal is set aside.
As nothing has been pointed out as to how the impugned
judgment and order is erroneous, Civil Appeal No.4384 of 2001 filed
by Commissioner of Central Excise and Customs, Aurangabad is
dismissed.
There shall be no order as to costs in all the appeals.