1985 (2) TMI 54 - HC - Central Excise

Summary

Issues Involved:
1. Classification of glass fabrics (epoxy B stage) and varnished fibre glass sleeves under the Central Excises and Salt Act, 1944.
2. Applicability of Tariff Items 22B and 22F.
3. Validity of the two notifications and subsequent decisions by the Assistant Collector of Central Excise.
4. Entitlement to exemption under Notification 87/76.
5. Authority of the Assistant Collector to review or revise the classification.

Issue-wise Detailed Analysis:

1. Classification of Glass Fabrics (Epoxy B Stage) and Varnished Fibre Glass Sleeves:
The petitioners, a partnership firm, challenged the decisions of the Assistant Collector of Central Excise, which reclassified their products from Tariff Item 22F to 22B. The petitioners argued that their products-glass fabrics (epoxy B stage) and varnished fibre glass sleeves-should be classified under Tariff Item 22F, which pertains to "Mineral fibres and yarn and manufactures therefrom." The Assistant Collector had reclassified these products under Tariff Item 22B, which deals with "Textile fabrics impregnated, coated or laminated with preparations of cellulose derivatives or other artificial plastic materials not elsewhere specified."

2. Applicability of Tariff Items 22B and 22F:
The court examined the definitions of Tariff Items 22B and 22F. Item 22F includes "Mineral fibres and yarn and manufactures therefrom," while Item 22B covers "Textile fabrics impregnated, coated or laminated with preparations of cellulose derivatives or other artificial plastic materials." The court found that the Assistant Collector's decision was based on the additional application of impregnating, coating, or laminating the fibres or fabrics, which led to their reclassification under Item 22B. However, the court held that the fundamental nature of the products as mineral fibres did not change due to these processes, and thus, they should remain classified under Item 22F.

3. Validity of the Two Notifications and Subsequent Decisions:
The court scrutinized the notifications dated 19-6-1981 and 20-6-1981, which called upon the petitioners to show cause why their products should not be reclassified. The court found that the Assistant Collector's decisions, as reflected in the orders of February 1983, were flawed. The decisions were based on an incorrect interpretation of the entries and ignored the fact that the products were predominantly mineral fibres. The court emphasized that any further process on the products did not alter their basic character as mineral fibres.

4. Entitlement to Exemption Under Notification 87/76:
The petitioners contended that their products were eligible for exemption under Notification 87/76, which exempted "mineral fibres and yarn and manufactures therefrom" falling under Item No. 22F from excise duty. The court upheld this contention, noting that the products had been consistently classified under Item 22F and were thus entitled to the exemption. The court also highlighted that the products were not known as textile fabrics in the market or trade circles, further supporting their classification under Item 22F.

5. Authority of the Assistant Collector to Review or Revise the Classification:
The petitioners argued that the Assistant Collector had no authority to review or revise the classification once it had been approved. The court did not delve deeply into this issue, as it found that the petitioners had a strong case based on the interpretation of the tariff entries alone. However, the court noted that the Assistant Collector's decision was influenced by internal departmental communications (Tariff Advices), which should not have any binding effect on quasi-judicial functions.

Conclusion:
The court allowed the petition, quashed the orders at Annexures H and I, and declared that the products in question were covered under Tariff Item 22F and entitled to exemption under Notification 87/76. The respondents were restrained from recovering excise duty on these items. The court also refused the request for a certificate under Article 133 of the Constitution of India, stating that there was no substantial question of law needing decision by the Supreme Court.