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TMI Blog1987 (3) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) Miscellaneous (antistatic agents, tackifiers, antiblocking agents, foaming agent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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 addition of pigment in the PVC has not changed the character of the PVC inasmuch as the PVC compo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of Tariff Advice that the practice of assessment was changed. The demand was raised for November, 1978 till May, 1979 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely :- (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 it was not known so in the trade but is known as a commodity different from glass and glassware on account of its nature and use as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stablished 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 different character and use had emerged namely, mirror from a glass sheet. In the instant case, he pleaded, masterbatches continued to have the prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellants 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 that under item 15A(1)(ii) polyvinyl chloride and polyvinyl derivative are covered. The appellants themselves have stated and as seen from the record the product under reference cannot be treated as a straight polyvinyl chloride resin. The only possible item under which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en 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 on the technical nomenclature as in this item, framers of the Tariff have chosen to use highly technical terminology for describing the items covered therein. This has been held so even by the Courts and also by the Tribunal. The Tribunal in the case of M/s Bakelite Hylam Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility 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 under 15A(l)(ii). It is seen the product has master-batches formed with the dispersion of pigment in PVC has neither remained as pigment as know in the trade nor PVC. The definition of the pigment as stated by the Revenue also does not help them. In the masterbatches the PVC cannot be considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 in this background is as to whether the first show cause notice can be taken to have subsisted for the purpose of action or was it the second show cause notice which alone was relevant for the purpose of proceeding before the Assistant Collector. It is seen that it is in respect of this show cause notice that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act, 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 68. As for time bar, it is observed that the subsequent show cause notice dated 29.9.1980 superseded the earlier notice dated 7-5-1979. The use of the word superseding clearly shows that the earlier show cause notice was given up. Therefore, I would agree with Brother Gulati that the claim on the strength of the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as PVC compounds and cleared under T.I. 15A I(ii) without payment of whole of Central Excise duty leviable thereon under the aforesaid T.I. by wrongly claiming exemption under Not. No. 206/77 CE dated 29.6.1977. By virtue of the above-stated misdecla ration of the PVC Master Batch being PVC compounds as such are not eligible for such exemption. The said M/s NOCIL are hereby required to show cause to the A.C. C. Ex., Thane, Div. II why C. Ex. duty of Rs. Twelve lakhs forty three thousand four hundred twenty-nine and paise ninety-five only (Basic Rs. 12,05,151.00 + S.E.D. Rs. 38,278.95) for the quantity cleared during the period from November, 1978 to April, 1979 should not be recovered under Rule 10 of C. Ex. Rules 1944. 2. M/s NOCIL, Thane, are further directed to produce at the time of showing cause all the evidence upon which they intend to rely in support of their defence. 3. M/s NOCIL, Thane should also indicate in the writing whether they wish to be heard in-person before the case is adjudicated. 4. If no cause is shown against the action proposed to be taken within thirty days of the receipt of this Notice or they do not appear before the Adjudicating Officer, when t ..... 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