1981 (2) TMI 234 - CGOVT - Central Excise

Government challenges appellate classification of school bags as household utensils, upholds Central Excise duty demand

The Government disagreed with the appellate order that classified school bags as household utensils under an exemption notification. They determined that ... Exemption under Notification No. 244/77 - scope of the word 'utensil' in trade and popular meaning - classification as containers ordinarily intended for packaging of goods for sale - Tariff Item 68 of Central Excise Tariff - review under section 36(2) of the Central Excises & Salt Act, 1944Exemption under Notification No. 244/77 - scope of the word 'utensil' in trade and popular meaning - Aluminium school bags are not utensils within the meaning of Notification No. 244/77 and are not entitled to the exemption thereunder. - HELD THAT: - The Government rejected the appellate finding that the term 'utensil' should be given a broad literary meaning to include school bags. The determinative test is the trade parlance and popular understanding of the term, not a literal or strained extension. The record showed that the aluminium school bags are used to carry books and are neither household nor kitchen articles nor known as 'utensils' in trade. The manufacturer's contention of contrary practice in other Collectorates was found unsupported by evidence and contrary to verification undertaken. On these bases the Government concluded that the school bags do not fall within the exemption provided by Notification No. 244/77. [Paras 6]The exemption under Notification No. 244/77 does not extend to the aluminium school bags; they are not 'utensils' in trade or popular meaning and are not exempt.Classification as containers ordinarily intended for packaging of goods for sale - Tariff Item 68 of Central Excise Tariff - The aluminium school bags are not containers 'ordinarily intended for packaging of goods for sale' and are appropriately covered by Tariff Item 68, attracting duty. - HELD THAT: - The Government examined the manufacturer's alternative submission that the aluminium bags should be classifiable as containers under Tariff Item 27. It was held that Item 27 applies to containers ordinarily intended for packaging goods for sale, which does not include school bags used for carrying books. Consequently, the school bags are not covered by that item and are properly classifiable under Tariff Item 68 of the Central Excise Tariff; hence duty is payable. This classification conclusion supported restoring the demand confirmed by the Assistant Collector. [Paras 6, 7]The school bags are not covered by the container entry and are taxable under Tariff Item 68; the demand for duty is correct.Review under section 36(2) of the Central Excises & Salt Act, 1944 - The Government, on review under section 36(2), set aside the Appellate Collector's order insofar as it related to aluminium school bags and restored the Assistant Collector's demand. - HELD THAT: - Acting pursuant to the review power invoked by the show cause notice, the Government concluded that the appellate order allowing exemption was incorrect both in its approach to the meaning of 'utensil' and in classification. After considering the manufacturer's reply and verification of practices in other Collectorates, the Government confirmed the tentative view to review, set aside the impugned appellate order in respect of aluminium school bags and restored the earlier demand which had been confirmed by the Assistant Collector. [Paras 4, 7]The Government's review under section 36(2) results in setting aside the appellate order as to aluminium school bags and restoring the Assistant Collector's demand for duty.Final Conclusion: The Government held that aluminium school bags are not 'utensils' within Notification No. 244/77, are not containers for packaging of goods for sale, are taxable under Tariff Item 68, and accordingly set aside the appellate order and restored the Assistant Collector's demand for duty. Issues: Classification of goods under Central Excise Tariff, Interpretation of exemption under Notification No. 244/77, Review of appellate orderIn the case, M/s. Kwik Metal Industries manufactured various goods out of Aluminium and cleared them without paying Central Excise duty. A show cause notice was issued to the manufacturer for the duty payable on the goods, claiming they were not covered by the exemption under Notification No. 244/77 and should be liable under Item 68 of the Central Excise Tariff. The Asstt. Collector confirmed the demand stating that the goods did not fall under the category of utensils for the exemption under the notification.At the appeal stage, the Appellate Collector ruled that the term 'utensil' in the notification should not be limited to kitchen utensils only. He considered the goods as articles useful or necessary in a household and thus classified them as utensils, allowing the appeal.Upon reviewing the case, the Government disagreed with the appellate order, stating that school bags should not be considered household utensils. A show cause notice was issued under section 36(2) of the Central Excises & Salt Act, 1944, proposing a review of the appellate order. The manufacturer argued that school bags should be exempt under the notification based on the literary interpretation of 'utensil' and cited practices in other Collectorates.The Government determined that the popular understanding of 'utensils' in trade was crucial for classification, not just the literary meaning. Since school bags were used for carrying books and not in households or kitchens, they were not considered utensils and thus not entitled to the exemption. The Government found no evidence supporting the manufacturer's claim about classification in other Collectorates. They also clarified that school bags did not fall under Item 27 of the Central Excise Tariff but were appropriately covered by Tariff Item 68.Consequently, the Government confirmed their view in the show cause notice, setting aside the appellate order regarding Aluminium School Bags and reinstating the demand for duty on these goods.