TaxTMI 
TaxTMI 
1983 (5) TMI 240
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....being accordingly disposed of as such. 1978 for their product which they described as under : "P.V.C. Fire Resistant Anti-Static Solid Woven Coal Conveyor Belting/P.V.C. Food Conveyor Belting." 3. While submitting the AL4, the Company claimed that its products fell under Tariff Item 68 of the C.E.T. 4. On 24th October 1978, the Company was required to explain the manufacturing process and raw material to be used. Necessarily, reply was filed on 19th November 1978. 5. A show cause notice was issued on 12th of January 1979 calling upon the Company as to why its product should not be licensed under Tariff Item No. 19. The Company resisted the show cause notice and made several-fold submissions which are summarised as below :- (i)  That its products were not unknown to tariff entries ; (ii) The mode of manufacture or the ingredients thereof could not be solely determinative of the exigibility to levy of duty on a given product ; (iii) The contents of a tariff entry must be understood in its trade or market sense ; (iv) The Explanation II to Tariff Item No. 19 on which reliance was sought to be placed by the Excise Authorities to rejec....
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....;      x 10. The submissions, however, did not find favour with the Appellate Collector and not only he rejected the Appeal but held that the appellant was not certain whether its product was classifiable under Item 16A or 68. He also recorded in Para 1 of his Order the contentions which had been raised before the Assistant Collector on behalf of the Company and which were reiterated before him. In addition, he recorded the Company's averment that in the Collectorate of Central Excise, Calcutta, the identical product manufactured by its sister concern, M/s Multiple Fabrics Private Limited was being excised under Tariff Item No. 68. 11. We like to reproduce Para 2 of the Appellate Collector's Order to show that though he opined that the Company was not certain about its classification he does not project as to from where he got that impression :- ORDER x      x       x       x        x Para 2 : I have carefully gone through the case records, submissions contained in the appeal memorandu....
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....is excisable under Item No. 19 as discussed above, Item No. 68 is not attracted. The appellants have mentioned that in the Collectorate of Central Excise Calcutta an identical product is assessed duty under Item No. 68. I am not aware of the basis for the classification made under that Collectorate nor is it necessary for me. As on merits, the product is liable to duty under T.I. No. 19 III. Accordingly, I do not see any justification to interfere with the impugned order. The appeal is rejected." 12. We have reproduced Tariff Item 19 with a purpose to show that, in the first place, to hold a fabric as a cotton fabric, predominance in weight is the primary test. To begin with, the first essential is that 40 per cent of the fabric should contain cotton by weight and 50 per cent or more by weight of non-cellulosic fibres or yarn or both in the end-product. The primary requirement under Tariff Item No. 19 is not waived or diluted under any sub-heads. To bring an item under sub-head III, it is necessary that goods must come within the ambit of cotton fabrics as defined in the main Head. 13. It must be clarified here that it is not the Revenue's case that the duty was sou....
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.... 1979 SUPREME COURT 300 x      x       x       x        x 3. Now, the word `textiles' is not defined in the Act, but it is well settled as a result of several decisions of this Court, of which we may mention only a few, namely, Ramavatar Budhaiprasad v. Asstt. Sales Tax Officer, Akola, AIR 1961 SC 1325 and M/s Motipur Jamindary Co. Ltd. v. State of Bihar, AIR 1962 SC 660 and State of West Bengal v. Washi Ahmed, (1977) 3 SCR 149; (AIR 1977 SC 1638) that in a taxing statute words of everyday use must be construed not in their scientific or technical sense but as understood in common parlance. The question which arose in Ramavatar's case (supra) was whether betel leaves are vegetables and this Court held that they are not included within that term, This Court quoted with approval the following passage from the judgment of the High Court of Madhya Pradesh in Madhya Pradesh Pan Merchants' Association, Santra Market, Nagpur v. State of Madhya Pradesh - 7 STC 99 at p. 102 : (AIR 1956 Nag 54 at p. 55) : "In our opinion, the word "vegetabl....
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....e can, therefore, be no doubt that the word `textiles' in Item 30 of Schedule `B' must be interpreted according to its popular sense, meaning "that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it." There we are in complete agreement with the Judges who held in favour of the Revenue and against the assessee. But the question is : What result does the application of this test yield. Are `dryer felts' not `textiles' within the ordinary accepted meaning of that word. The word `textiles' is derived from the Latin `texere' which means `to weave' and it means any woven fabric. When yarn, whether cotton, silk, woollen, rayon, nylon or of any other description or made out of any other material is woven into a fabric, what comes into being is a `textile' and it is known as such. It may be cotton textile, silk textile, woollen textile, rayon textile, nylon textile or any other kind of textile. The method of weaving adopted may be the warp and woof pattern as is generally the case in most of the textiles, or it may be any other process or technique. There is such phenomenal advance in science and technology, so wondrous is the varie....
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.... by the Revisional Authority today, the March 15, 1982, and we are pleased to enclose a note setting out the process of manufacture, and the components of cotton by way of weight as well as cost to the end product. As was stated at the time of hearing, the other two manufacturers of the identical product PVc conveyor belting, i.e. Dunlop India and Fenner India, are clearing the goods under Tariff entry 68. A photo copy of the specimen of the Gate Pass of Dunlop India is enclosed. We are also enclosing herewith a sample of PVC conveyor belting : Thanking you, Yours faithfully, &....
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....tton is 2.1 kg., i.e. 60% and 21% respectively. The balance components are other materials. The raw material cost of 1 sq mtr. of pvc belting is about Rs. 400/-. Component cost of pvc and cotton are as under :- pvc mix       ....          Rs. 205/- cotton        ....           Rs. 40/- i.e. 51% and 10% respectively of total cost. The balance cost is of other materials. &....
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....conveyor belting was only in the neighbourhood of 12%. The petitioners commence manufacture of p.v.c. conveyor belting in 1965-66 and for a number of years they cleared their goods when their factory was working under the system of physical control of the Central Excise authorities. Initially, their goods were not charged to duty by the lower authorities by treating the impugned goods as articles of plastic and given them the benefit of exemption Notification No. 68/71. However, sometime in 1975, a show cause notice was issued to the petitioners asking them why their goods should not be classified as cotton fabrics under Item 19 (iii) which was inserted in the Central Excise Tariff in 1969 and despite the petitioners' protestations that the goods cannot be considered as cotton fabrics, the lower authorities decided to classify them under Item 19 (iii) Central Excise Tariff and accordingly confirmed the demand for differential duties for the various periods commencing from the year onwards. The orders of the Assistant Collector in this behalf were confirmed in appeal by the Appellate Collectors and hence revision applications. The petitioners contend that the product was known to th....
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....tary to the Government of India who had passed judgment in Dunlop's case sitting with a Joint Secretary, made a note reading as follows : "Ratio of decision taken in Dunlop India's Cal. case could be applied and the R.A. allowed." Sd/- Additional Secretary &nb....
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....Government's Dunlop's case Order, by the Central Board of Excise and Customs. 25. The Hon'ble High Court, on the Writ being filed, issued directions to the Central Government to dispose of the Company's revision petition. Compliance was fixed for July 16, 1982. On July 16, 1982, the High Court passed fresh orders that no answer to the show cause notice had been filed despite opportunity given, but the Hon'ble Chief Justice gave another opportunity, which was stated to be last opportunity, to the Government to show cause by 10th of September 1982. A copy of the Order dated July 16, 1982 has been submitted before us. 26. Since the Government did not file any reply, a Division Bench of the Hon'ble High Court consisting of Hon'ble Chief Justice and Hon'ble Justice B.N. Kirpal passed fresh orders on 14th September 1982 as to why directions had not been complied with, time given was upto 13th of October 1982. There being no reply from the Government even upto 13th of October 1982, their Lordships passed order on 13th October 1982 which we would like to reproduce below :- "Copy of Order dated 13-10-1982 Mr. Wadhwa has filed an affidavit sworn by Mr. Mehta, Ministry o....
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....                         Sd/- Chief Justice 13-10-1982                   Sd/- B.N. Kirpal, Judge." 27. Relevant facts of the case we have already given and need not be repeated. When we observe this, we are in particular referring to the proceedings before the Revisionary Authority on 15th of March 1982 as also the fact that the Company had informed the Government and had also categorically stated before the Hon'ble High Court in the writ petition that the like goods manufactured by other Companies all over the country were being classified under Tariff Item No. 68. 28. The averment in the writ petition runs into 18 pages and the grounds and relief sought is on another 10 pages. 29. Shri Banerjee, Advocate for the appellants, framed four propositions on the given set of facts :- (a) That PVC Coal Conveyor Belting is not and could not be termed as fabric, much less cotton fabric. (b) Assuming that it ....
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....s or fibre and, therefore, the Revenue cannot rest its case that for determining the classification, constituents of base fibre would be governing factor. He next argued that conveyor belt would be different from V-Belts. 32. Next, Shri Banerjee meticulously read the Notification No. 273/77-C.E. and submitted that if an item is not in the Tariff, a notification could not widen the scope. He referred to the Supreme Court Judgment in this context in the case of Delhi Cloth and General Mills Co. Ltd. v. State of Rajasthan and Others, cited as AIR 1980 SC 1552 = 1980 E.L.T. 383 (S.C.). We have gone through the Judgment and find that in Para 15, the Hon'ble Supreme Court did lay down the principle that a view taken by the Revenue Board cannot have the effect of resolving a dispute regarding tariff classification. We would have dealt with Shri Banerjee's submission and the Judgment at greater length but to us the notification though covering conveyor belting of a specification falling under sub-item (iii) of Item 19 has no relevance to the Company's product. So, we shall be dealing with this aspect a little later. 33. Before we go further, we like to refer to Delhi High C....
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....cation for not holding conveyor belting as cotton fabric. This argument we are also rejecting because the question before us is not as to whether carcass by the Company which was subject to further processing for manufacture of conveyor belting was excisable, but the question is whether conveyor belting as such can be considered as cotton fabrics. In our considered view, the DCM's case judgment of the Supreme Court is relevant for the purpose in the present case than notification. 38. Shri Tayal next argued that non-exclusion of conveyor belting from Tariff Entry No. 19 makes the belting as inclusive. We do not consider the argument and submission worth taking notice of seriously and, therefore, reject it. We fail to see any reason as to how non-mentioning of conveyor belting in Tariff Item No. 19 will bring it within the scope of Excise under that item itself. 39. Shri Tayal next cited 1973 STC 31 page 115. Shri Banerjee, Advocate, however intervening at this stage submitted that in the cited case though base material was fabric, but in spite of that it was held that rubber belting would come under Tariff Item No. 16A and therefore on the basis of the case cited by....
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.... use of nylon yarn was accepted, but that would cover other materials constituting of 19% of the final end-product. 45. Before proceeding further, we like to refer to the Gujarat High Court Judgment in the case of Hind Engineering Co., Rajkot (1973 STC 31, Page 115) which is cited by both the parties. We are really surprised that the revenue sought the support from the said case. On the contrary, the Judgment clearly goes in the appellant's favour. In that case, their Lordships were dealing with the question whether rubber beltings manufactured by superimposing rubber or rubber compound on both sides of canvass and used in machineries employed for transmission of power could be termed as cotton fabrics within the meaning of Entry 15 to Schedule A to the Bombay Sales Tax Act, 1959. Their Lordships noticed that the definition of "cotton fabrics" contained in that Act was as defined vide Item 19 in the First Schedule of the Central Excises Act. It has been further held that even if it is to be assumed that canvass is comprehended within the meaning of `cotton fabrics', the process of super-imposition of rubber brings about such a basic change in its character, nature and form ....
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....y had been excised on the ground that it was a product excisable under T.I. No. 19, but what has been assessed is conveyor belting as such and which item we do not find anywhere in the Tariff Entry. 0. We are also inclined to accept the Company's submission that conveyor belting terminology is known and that is how rubber conveyor belting has been mentioned in T.I. No. 16A. If there was any legislative intention to bring Coal Conveyor Belting under any particular Tariff Item, we see no reason as to why separate entry could not have been provided. Since it is an accepted position that conveyor belting could not be brought under 16A, and since we are holding that Item no. 19 was not attracted and wrongly came to be invoked, we uphold the assessee's offered classification of excisability under Tariff Item No. 68 and allow the Appeal. 51. Before parting with the case, we like to make it clear that if we have not dealt with any particular authority cited at the Bar or argument advanced, it is because the same has not been considered relevant to the issue before us or not worth taking any notice of. 52. Allowing the appeal, we direct the concerned Revenue authorit....
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....ding of the tariff nomenclature, certain things emerge which are relevant for our present purpose : (i) A fabric to be termed "cotton fabric" within the meaning of Item No. 19 CET, one or the other of 2 basic requirements must be complied with, namely, (i) in such fabric, cotton should predominate in weight or, (ii) such fabric should contain more than 40% by weight of cotton and 50% or more by weight of non-cellulose fibre or yarn or both. (ii) In the case of cotton fabric, impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials, the 2 requirements referred to above, namely, predominance of cotton or relative percentages of cotton and non-cellulosic fibre or yarn, shall be in relation to the base fabrics which are impregnated, coated or laminated, as the case may be. Explanation I defines "base fabrics" as fabrics falling under sub-item I of Item No. 19 CET which are impregnated, coated or laminated with preparations of cellulose derivatives or of other plastic materials. (iii) Sub-item III, namely, "cotton fabrics impregnated, coated or laminated with preparations of cellulose der....
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....ntended for industrial use. The rayon tyre cord employed as a component in the manufacture of rayon tyre cord fabric is also sold directly as such. It is sold packed on cones, somewhat like yarn is sold. Tyre cord is purchased directly by some tyre manufacturers, who by applying the same process of putting in the wefts, convert it into a tyre cord fabric for use in the tyre". The product so manufactured, namely, tyre cord fabric was held by the Supreme Court to fall under Item No. 22 CET, namely, "Rayon or artificial silk fabric". Paras 12, 13 and 14 of the judgement which contain the reasoning leading to the conclusion are reproduced below :- "On a comprehensive consideration of the material before us, there is no escape from the conclusion that by and large a tyre cord fabric is regarded as a textile fabric. The peculiar feature that the tyre cord constitute the dominating element indicating the use to which the fabric is put and the close concentration in which it is packed in contrast to light density with which the weft thread is woven does not detract from the conclusion that what we have is a textile fabric. We are concerned with the product manufactured and sold by th....
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.... needs of a special category of consumers and is devoted to a particular use only. Now, the tyre manufacturing industry is growing importance and had an increasingly important role to play in everyday life. That is evident from the overwhelming expansion of automobile traffic prompted by the complex needs of a constantly enlarging economy. The daily life of an average citizen is profoundly affected by the automobile, be it passenger bus or a goods truck or the ubiquitous scooter. Tyres are needed for all. In rural areas tyres are now coming into use for bullock carts. It is futile to suggest that the tyre plays a less substantial role than other popular commodities in modern life. And, therefore, it is but a short step to recognising the status of what goes into the manufacture of a tyre-the rayon tyre cord fabric as "goods of special importance". It may be that unlike the cotton, silk, woollen and rayon fabrics used as wearing apparel or furnishing material the rayon tyre cord fabric is not directly employed for `the' satisfaction of a domestic need. Nevertheless, as an integral and vital constituent of an automobile tyre it is intimately involved in the diurnal activity of human ....
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....s). In coming to this conclusion, the Court took into account the commercial parlance test as also the definition of the terms "fabric" in the "Mercury" dictionary of textile terms, "The Man-Made Textile Encyclopaedia" and other authorities. In the present case, as has been noted earlier, the so-called carcass comprises solely of twisted cotton yarn, of course, subjected to the process of dipping and soaking in liquid pvc mix. The appellants have themselves stated that M/s Dunlop buy the carcass from outside. On the question whether beltings used in industrial application such as power transmission or for handling or conveying materials are known as "fabrics", the learned Departmental Representative has placed reliance on "The New Encyclopaedia of Textiles", 3rd edition, brought out by the Editors of American Fabrics and Fashions Magazine. Pages 502 and 503 in that publication contain a write-up on different types of beltings used in industrial application and these beltings are included in the section on industrial fabrics which deals with "a large and important group of textiles which includes woven and non-woven cloths vital to many industries, ranging from primitive agriculture....
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....ecifies transmission, conveyor or elevator belts or belting of vulcanised rubber. The latter argument is, in my opinion, manifestly wrong for the simple reason that Item No. 16A is restricted in its coverage. The title of the item reads "Rubber products, the following, namely, :-". It is, therefore, natural that only specified rubber products could be brought within the purview of the said item. The only possible inference can, therefore, be that transmission and conveyor beltings have been specifically mentioned as a sub-item, since they were sought to be taxed as specified rubber products. On the other hand, Item No. 19 relating to cotton fabrics takes within its ambit "....all varieties of fabrics manufactured either wholly or partly from cotton ......". On the other contention that pvc conveyor belting is not known as a fabric, it has already been noted that industrial belting used for power transmission or in handling and conveying material is known and recognised as industrial fabrics by trade, industry and commerce as evidenced by the "New Encyclopaedia of Textiles" published by the Editors of American Fabrics and Fashions Magazine to which reference was made by the Departme....
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....Court, the Board of Revenue (Rajasthan) had, in holding that rayon tyre cord fabric is not a fabric within the meaning of Item No. 18 of the Schedule to the Rajasthan Sales Tax Act ["All cotton fabrics, rayon or artificial silk fabric, woollen fabrics as defined in the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (Central Act 58 of 1957)". The expression "cotton fabrics", "rayon or artificial silk fabrics" and "woollen fabrics" were assigned, by virtue of Section 2(c) of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, the meanings assigned to them in the corresponding items of the Central Excise Tariff Schedule], had noted that the tyre body or carcass consisted of a series of layers of cord fabric in the form of plies buried in rubber and that the significant factor in the tyre cord fabric is represented by the tyre cord. It was this type of tyre cord fabric which was the subject-matter of the dispute before the Supreme Court. The Tariff Advice No. 68/80, dated 3-11-1980 does not speak out the reasoning or logic leading to the view expressed therein. This is apart from the fact that the said Tariff Advice is not binding on this Tribu....