1981 (10) TMI 40 - HC - Central Excise

Strips - Insulation of bare copper/aluminium strips as a conductor is not manufacture - Tariff advice - Validity

Summary

Issues Involved:
1. Classification of varnish bonded glass-fibre covered rectangular copper strips/conductors under the Central Excises and Salt Act, 1944.
2. Whether the process of insulating copper strips amounts to 'manufacture' under Section 2(f) of the Act.
3. Validity of the reliance on Tariff Advice 1978 for reclassification.
4. Determination of appropriate Tariff Item for duty assessment.

Detailed Analysis:

1. Classification of varnish bonded glass-fibre covered rectangular copper strips/conductors under the Central Excises and Salt Act, 1944:
The petitioners initially classified their products under Tariff Item 26A(2) which pertains to "Copper and the Tariff Description of Item 26A(2) is 'Manufactures, the following, namely: plates, sheets, circles, strips, and foils in any form or size.'" This classification was accepted by the Excise Authorities until the introduction of Tariff Item 68 in 1975 and Tariff Item 22F in 1976. Despite these new items, the petitioners continued to pay duty under Tariff Item 26A(2).

2. Whether the process of insulating copper strips amounts to 'manufacture' under Section 2(f) of the Act:
The Assistant Collector and the Appellate Collector concluded that the process of insulating copper strips with glass fibre and enamel transformed the product into a distinct article, thereby classifying it under Tariff Item 68. This was based on the rationale that the insulated strips had a different name, character, and use. However, the Supreme Court in the case of Dy. Commr. Sales Tax (Law) Board of Revenue (Taxes), Ernakulam v. M/s. Pio Food Packers, elucidated that merely processing an article does not necessarily amount to manufacturing a new and distinct article unless the original commodity loses its identity and is recognized as a new product in the trade.

3. Validity of the reliance on Tariff Advice 1978 for reclassification:
The authorities' decision to reclassify the products under Tariff Item 68 was influenced by Tariff Advice issued on April 1, 1978. This advice suggested that the insulated strips acquired a separate and distinctive character as conductors. The court found this reliance on Tariff Advice to be erroneous and not sustainable, as it contradicted the Department's earlier consistent view and circulars from 1962 and 1966 that classified such products under Item 26A(2).

4. Determination of appropriate Tariff Item for duty assessment:
The court concluded that the insulated copper strips should be classified under Tariff Item 26A(2) and not under Item 68 or 22F. The insulated aluminium strips, however, would be liable to duty under Item 27(b) of the Act. The court emphasized that the mere application of a special process or different naming in trade does not alter the fundamental classification of the product.

Conclusion:
The court set aside the orders of the Assistant Collector and the Appellate Collector, declaring that the products manufactured by the petitioners are liable to duty under Tariff Item 26A(2) for copper strips and Item 27(b) for aluminium strips, not under Item 68 or 22F. The petitioners, having paid duty under protest, are entitled to apply for a refund, which the Department must process within six months. There was no order as to costs.