1984 (1) TMI 331 - HC - Central Excise

Summary

Issues Involved:
1. Whether the surface coating composition is a nitrocellulose lacquer within the meaning of Tariff Item 14-III(i).
2. Whether the composition in question is "clear and pigmented" within the meaning of Tariff Item 14-III(i).
3. Whether the surface coating composition qualifies as "goods".
4. Whether the duty levied was barred by time under Rule 10(1) of the Central Excise Rules, 1944.

Detailed Analysis:

1. Whether the surface coating composition is a nitrocellulose lacquer within the meaning of Tariff Item 14-III(i):

The court examined the definitions of "lacquer" from various dictionaries and concluded that nitrocellulose lacquer is a surface coating composition that dries rapidly by evaporation of volatile constituents, forming a film on the substance it coats, and contains a substantial quantity of nitrocellulose. The composition in question met these criteria as it was used for coating cellulose film to make it moisture and heat proof, dried quickly, formed a film by evaporation, and contained 50 Kgs of nitrocellulose out of 103 Kgs of non-volatile material. Therefore, the composition was deemed nitrocellulose lacquer within the meaning of Item 14-III(i).

2. Whether the composition in question is "clear and pigmented" within the meaning of Tariff Item 14-III(i):

The court interpreted the term "clear and pigmented" to mean that the articles should be clear or pigmented, as goods cannot be both simultaneously. The composition in question was not pigmented but was clear, as it gave a clear transparent tack-free film on drying. The court noted that murky appearance due to small amounts of resins did not affect its classification as clear. Thus, the composition was covered by the term "clear and pigmented".

3. Whether the surface coating composition qualifies as "goods":

The court referred to the Supreme Court's definition of "goods" as something that can ordinarily come to the market to be bought and sold. Although the composition required continuous agitation to prevent settling, it could still be used after storage by reheating and stirring. Therefore, the composition was considered "goods" despite not being marketed, as excise duty is on the manufacture of goods, not their sale.

4. Whether the duty levied was barred by time under Rule 10(1) of the Central Excise Rules, 1944:

The court examined the relevant rules and concluded that Rule 9(2) applied, which did not provide a time limit for demand or payment of excise duty at the relevant time. Rule 10(1) covered cases where duty had been short-levied, not cases where duty had not been levied at all. As the duty in question had not been levied, Rule 10(1) did not apply, and the demand was not barred by time.

Conclusion:

The court dismissed the petition, finding no merit in the arguments presented by the petitioner. The surface coating composition was classified as nitrocellulose lacquer, clear under Tariff Item 14-III(i), and considered "goods". The duty levied was not barred by time as per the applicable rules. The parties were left to bear their own costs.