TaxTMI 
TaxTMI 
1987 (3) TMI 245
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....o provide clear and convenient method of achieving accurate colour shades. The use of the masterbatches has been held to be not as a resin, but as a colorant. The appellant while claiming the assessment under 15-A(1) also claimed the benefit under notification No. 167/79 available in respect of PVC compounds. 2. The learned Councel for the appellants has pleaded before us that the PVC masterbatches or PVC compounds having a number of ingredients like plasticizers and stabilizers in addition to the colour added to it. In support of his plea he read out from page 848 of the Encyclopaedia of PVC Vol. 2 by Leonard Nass 1977 Edition. The relevant portion is reproduced as under : "Compounding PVC essentially involves adding to the base PVC resin the components that will allow it to be processed into a finished product with desired properties, at minimum cost. The 'families' of materials that will be chosen will probably fall into one of the following classifications, each of which is discussed in detail elsewhere in these volumes : (a) Plasticizers (b) Stabilizers (c) Lubricants (d) Impact modifiers (e) Processing aid resins (f) Fillers (g) Colorants (h....
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....of reference this para is re-produced as under : "A pigment is a substance that imparts colour, but in a way different from that of a dye. Many pigments are metallic inorganic substances and from the industrial point of view, these account for the largest proportion of pigments used, though some organic pigments are also used. Pigments must have colouring ability to hide, to impart aesthetic appeal, to protect. Pigments are deposited on the surface of the material to be coloured as a constituent of other substances, the principal one being the carrier or vehicle or the medium. This is the liquid that dries on application leaving a smooth protective film. The other constituents are the thinner, and, in some cases, extenders or fillers, without the polymerising film forming resins, the pigments will not be held on the surface. However, unlike dyes, a pigment that is a constituent of a coating preparation such as a paint, does not penetrate the material coated or coloured. It can be removed by scrapping and other coating/paint can be applied to give the surface a new or different coat of paint or colour." 3. The learned Councel of the appellants further pleaded that the add....
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....e specified so. He further pleaded that the addition of the pigment in the PVC masterbatches was a physical mixture and by addition of the pigment in this manner no new product came into existence. This view, he stated, is supported by the Bombay High Court decision reported in 1980 E.L.T. 696 in the case of Sandoz India Ltd. v. Union of India and Others. He has stated that the Hon'ble Bombay High Court has held change in physical form does not amount to manufacture in the context of the dye which has been formed into liquid solution by adding diluent. He further pleaded that the process of manufacture of ordinary PVC resin and the master-batches is similar and that PVC masterbatches are only pigmented form of PVC but cannot be said to be pigment as such. 6. On a query from the Bench, he stated, that both ordinary PVC without the pigment and the masterbatches are manufactured in a single stream operation and is not as if first the PVC resin is prepared and then pigment is mixed therein. 7. The learned Consultant stated that the demand raised is also time barred. He stated that until 1979, the PVC resin was being assessed under 15A(l)(ii). It was only after the issue....
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....and others, in any form, whether solid, liquid or pasty, or as power, granules or flakes, or in the form of moulding powders, namely :- (i) ..... ..... ..... (ii) Polymerisation and copolymerisation products such as Polyethylene, Polytetrahaloethylenes, Polyisobutylene, Polystyrene, Polyvinyl chloride, Polyvinyl acetate, Polyvinyl chlorocatate and other Polyvyinyl derivatives, Polyacriylic and Polymethacrylic derivatives and Coumarone-Indene Resins. " He stated that masterbatches can only be pleaded by the appellants to be covered under term polyvyinyl derivatives. This term as such does not cover masterbatches by its very nature being only a mixture of pigment and PVC resin. He stated that the materbatches is intended only for imparting colours to PVC for the manufacture of various products and has no other use. Be colorant in nature, it had to be considered only as a pigment. He has stated going by the trade parlance criteria as held by various pronouncements of Hon'ble Supreme Court followed in the latest decision of the Hon'ble Court in case of Auto Glassworks v. Union of India, the Supreme Court wherein it has been held that mirror was not an item of glassware and as ....
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.... by item 15A is illegal. 25. As pointed out by the Supreme Court in Dunlop India Ltd. v. Union of India A.I.R. 1977 S.C. 597, it is well established that in interpreting the meaning of words in a taxing statute, the acceptation of a particular word by the trade and its popular meaning should commend itself to the authority. In Ramavatar v. Assistant Sales Tax Officer, A.I.R. 1961 S.C.1325 the question was whether for the purposes of sales tax under the C.P. and Berar Sales Tax Act, betel leaves which was specified as a separate item was covered by 'vegetables' which was also a separate item by itself and the Supreme Court held that the word 'vegetable' in taxing statutes is to be understood as in common parlance, that is, denoting class of vegetables which are grown in a kitchen garden or in a farm and are used for the table. Vegetable was one of the items exempt from taxation and the Supreme Court held that the betel leaves are not exempt from taxation." He pleaded that rationale of the decision in the case of Atul Glass would not apply to the facts of the case before us as in that case, the character of the glass had completely changed and a different product with a differe....
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....ursuance to these instructions and the appellants were availing of the benefit of the Notification 167/79. The action taken by the authorities against the appellants for demand of duty is obviously on the basis of the advice of the Board which resulted in the issue of the Trade Notice on 20-4-1979. 12. The Central Excise Tariff entry 15A-(1) as it stood at the relevant time is as under: "15A. - Artification or synthetic resin and plastic materials and cellulose esters and others, and articles there - (1) The following artification or synthetic resins and plastic materials, and cellulose esters and ethers, in any form, whether solid, liquid or pasty, or as powder, granules or flakes or in the form of moulding powders, namely :- (i) ......          ......       ......   (ii) Polymerisation and copolymerisation products such as polyethylene, Polytetrahaloethlene, Polyisobutylene, Polystyrene, Polyvinyl Chloride, Polyvinyl acetate, polyvinyl chlorocatate and other polyvinyl derivatives, polyacriylic and polymethacrylic derivatives and coumarone-Indene Resins." We observe tha....
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....ellant it has been conceded that the PVC masterbatches cannot be and are not used for the manufacture of any product directly therefrom. These are used only as additives for imparting necessary colour effects to the PVC compounds. Thus, there is a basic difference between the PVC compounds and PVC masterbatches in their character and composition and use. 13. The appellants plea that the product should be assessed based on the predominance of PVC resin in the masterbatches in the light of Tribunal decision in the case of Bhor Industries Limited, Bombay v. Collector of Central Excise, Bombay : 1983 : E.L.T. : 179 (CEGAT). We observe that the issue in that case related to the classification of articles of plastics entry 15A (ii), and the ratio of that decision cannot be applied to the instant case as it is not the case of appellants that PVC compound is an article of plastics. It is only in the context of article of plastics that question as to what gives the product its character and how it is known in the trade can be considered for the purposes of classification as pointed out by the appellants. So far as entry 15A (1) is concerned, this has to be strictly interpreted based....
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.... is intended for proper dispersal of the colour in the PVC compound. The masterbatches have a high concentration of the pigment dispersed uniformly in the PVC by using specialised machines for the purpose. The masterbatches for admixture with the PVC compounds have the properties of miscibility and uniform dispersion in the PVC compound resulting in a proper dispersion of the colour creating a desired effect for the purpose of manufacture of specified products. The use of masterbatches is only in the PVC industry. While masterbatches's impart colour to the PVC compound, these are not bought and sold as pigment or colour nor it has been shown by Revenue. These are also not known in the trade as pigments or colours. Anything which process colouration need not be considered as pigment and colour as set out in the Central Excise Tariff unless it satisfies the trade parlance criterion. 15a. The Revenue have cited the Supreme Court judgment in the case of Atul Glass Works : 1986 E.L.T. in support of the plea that the PVC masterbatches are not known as PVC compounds and that character of the product has changed by addition of the pigment for showing that the product does not fall ....
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....re 'B'. In this show cause notice in para 5, it has been stated that this was issued in suppression of the earlier show cause-cum-demand notice dated 7.5.1979. Further an amendment to the show cause notice of 29.9.1980 was issued by a letter dated 18.4.1984 by the Superintendent and the amount demanded was Rs. 1,50,643.89 Basic + Rs. 4,784.87 Special Excise duty. 17. The question to be considered is which show cause notice is to be taken as the relevant one for the purpose of issue of demand in the proceedings before us. 18. We observe that the first show cause notice of May, 1979 raised the demand on the premise that the appellants had wrongly availed of the benefit of Notification No. 206/77. The appellants replied in the context of this show cause notice. This show cause notice was however not pursued further by the Department and therefore in suppression of the same, issued another show cause notice wherein while demand amount was the same, the basis was totally changed and the goods were sought to be assessed under 14(l)(ii) CET. The amount indicated however was not correct and later amended to a much lesser amount as indicated above. The question that arises i....
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....rvive being not a proper show cause notice for the purpose of these proceedings. It is only the second show cause notice which is valid show cause notice for these proceedings. We find from the Assistant Collector's order that no suppression of facts has been alleged for invoking the extended period for the demand. In fact, the Assistant Collector has given the appellants clean chit so far as this aspect was concerned. Reckoned from the date of issue of second show cause notice the demand is already time barred. The appeal is allowed on the above terms. [Per : S.D. Jha, Vice President ]. - The manufacturing process of Master Batches appears to be concentration of colour which could be presumed to have discharged duty liability as colour under T.I.14 is mixed in single stream operation with PVC. This mixture of PVC with concentration of colour is called Master Batches. The product so obtained not having been specifically mentioned in T.I.15A would not be covered therein. It is PVC with concentration of colour, ingredient colour already having discharged duty liability as such. I would therefore agree with brother Gulati that its proper classification would be under residuary item....