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TMI Blog1983 (11) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrifugal separator. The solution is then pumped into storage tank from which bottles of requisite sizes for sale or marketing are filled. 3. A great deal of argument has been presented on behalf of the two sides each canvassing their points of view. S.K. Industries represented by Shri K. Narasimhan, Advocate argued at the hearing on 24th, 25th and 26th October, 1983. He argued their product was registered under the Trade and Merchandise and Marks Act in December, 1969 as manufactures of leather dressings and not in class IV. Excise licences certified them to be manufacture of leather dressing. By virtue of this classification, they are exempt from payment of the State excise duty which the manufacturers of varnish would have had to pay. The Indian Customs Tariff Guide, 14th edition, gives a ruling by the Central Board of Revenue showing cremol leather dressing to fall under 87 of Custom Tariff of 1934, Indian Tariff Act, (this item covers goods not otherwise specified) even though that tariff also carried an item specifically for varnish, paints, etc. in Item 30. He pointed out that the Indian Trade Classification published by the Government of India gives a code number to pigm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate. He, therefore, held the opinion that the leather dressing manufactured by S.K. Industries was not a varnish but a leather dressing suitable to be applied on leather items. However, the Collector went largely by the report dated 17-10-1981 given by the Principal, Govt. Leather Institute, Agra in which the Principal of the Institute said that the dressing manufactured by the S.K. Industries contained rosin, shellac and maleic resin dissolved in alcohol and that the preparation was extensively used in leather/footwear industry for producing extra gloss on the surface of leather. He ended by declaring finally that it could safely be termed as varnish as it fulfilled all the technical requirements for the same. He also relied on a report dated 25th January, 1982 from the Chemical Examiner in the Central Revenues Control Laboratory, Govt. of India, New Delhi that the sample drawn from S.K. Industries factory was in the form of clear light brown coloured liquid, composed of natural resin and synthetic resin dissolved in organic solvent and it had the characteristics of varnish. But the chemist added that such compositions are known to be used as leather finishing/dressing. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... categories varnishes separately from leather dressings. 6. It was urged on behalf of the appellants that S.K. Industries have been manufacturing leather dressings from 1955 but until 1981 or thereabouts the Central Excise did nothing to point out that they were wrong in clearing the goods without registration with the Central Excise, obtaining a licence and following the excise regulations. They had always sold their products as leather dressings and never as varnish and that there were other people who produced similar dressing which were still being assessed as they were assessed previously and about which the Central Excise had done nothing. These producers are a small scale enterprise and they are unable to meet competition if duty is going to be placed on them. They certainly cannot bear the imposition placed by the Collector in his order referred to above. 7. The learned Counsel for the Central Excise Department argued that the two test reports show clearly that the product was a varnish assessable under Item 14 of the Central Excise Tariff. He quoted from the Book Outlines of Paint Technology by William Morgan on spirit varnishes. The book shows that shellac is a widel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nting out that William Morgan says in his Outlines of Paint Technology that rosin in often added although the practice was not recommended specially in knotting. The learned Counsel says that this must be understood to mean that it does not recommend rosin only in knotting while for the other 3 or 4 varnishes rosin is an ingredient. S.K. Industries products contain rosin and since rosin can be present in varnishes, he must take S.K. Industries leather dressing to be varnishes. The arguments were concluded on 26-10-1983. 11. Vast and voluminous evidence and arguments were presented on both sides and we have read the testimonies and pondered on the reasonings of the two learned Counsels with great care. The solution of the problem is to decide whether there can be leather dressings of the kind claimed by S.K. Industries which cannot be classed as varnish. The problem can also be viewed as one in which we have to decide whether S.K. Industries leather dressings are or are not varnishes, given their constituents and composition and the reports by the two laboratories. 12. The Collector had held that by evaporation of the solvent these impart to leather a soft glossy finish . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ish as a solution of resin or resinous gum in spirits or oil applied as an extra glossing coat on a painted surface which it serves to protect. According to the Concise Chemical and Technical Dictionary, varnish is a liquid composition of a resinous substance in a volatile solvent which is applied to a surface in a thin layer that hardens to a transparent or translucent film on exposure to air. Then he reproduces an extract from the Mcgraw Hills Encyclopaedia of Science and Technology on varnish which is defined as a transparent surface coating which is applied as a liquid and then changes to a hard solid. Varnishes are solutions of resinous materials in a solvent and dry by the evaporation of the solvent or by a chemical reaction either with oxygen from the air or by some other means including absorption of atmosphere moisture. Spirit varnishes are those in which the evaporation of solvent is the only drying process; the solvent is usually alcohol, although the term is used for similar coatings made with other solvents. Shellac varnish made by dissolving shellac in alcohol is the most common type. Varnishes are used to change the surface properties of a bulk material without signi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the butyl acetate. The synthetic resins were products specified in Heading 39.01/06 and, therefore, the leather dressing which contains 30% by weight of resin natural and synthetic in more than 50% by weight of denatured spirit was a product covered by S. No. 4 of the notes under Chapter 32. Therefore, according to B.T.N., S.K. Industries product was covered by Heading 32.09/3; and as there was no Heading 32.09/3 in the Indian Customs Tariff, the Collector 32 held that the products should be classified under 32.04/12(1) of the Customs Tariff. This heading covers paints and varnishes. Note No. 4 under Chapter runs thus : Heading No. 32.04/12 is also to be taken to include solutions (other than cellodions) consisting of any of the products specified in Heading 39.01/06 in volatile organic solvents, if and only if, the weight of the solvent exceeds 50% of the weight of the solution. The Collector rejected the arguments that the leather dressings should be covered under Chapter 38.02 of the B.T.N. because that heading required such preparations to have a basis of starchy substances such as wheat, starch, rice starch, maize starch, etc. vegetable gum resin and similar substa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies include under varnish, japans and enamels. Japans are rarely used now. The important difference between varnishes and paints enamels and pigmented lacquers is that varnishes lack pigments and are, therefore, less resistant to liquid. The coating effect is generally produced by drying through evaporation and oxidation; but some times polymerisation of portions of the varnish constituents also take place. Oleoresinous varnishes were once of major importance, but alkyd and urethane varnishes have largely replaced them because of greater durability, less yellowing, ease of application and beauty. In many countries pressure to reduce air polluting solvents in varnishes and paints have led to development of water-thinned varnishes. 20. In all spirit varnishes, shellac a natural resin is an important ingredient. Unlike most other natural resins, shellac or lac resin is a product of a parasitic female insect/coccus lacca which, in feeding upon certain trees in India, secretes a protective exudate which eventually coats the twig on which the insect perches, thus furnishing sticklac. Commercial shellac is obtained from this. Recently, many synthetic resins like alkyds, acrylics, epoxi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts strongly urged by the learned Counsel for the department to argue that the leather dressing was nothing but a varnish was the argument presented by the learned Counsel for the appellant when he said that rosin was present in the leather dressing, it was never used in a varnish. According to the learned Counsel for the department in Outlines of Paint Technology by William Morgans, rosin is often added to spirit varnishes but the practice was not recommended especially in knotting. This according to the learned Counsel refutes the appellants contention that rosin was not used in varnishes. The learned Counsel also strongly relied on Modern Practice in Leather Manufacture by John Arthur Wilson, which we have referred to earlier. He referred to articles on the problems of finding a suitable lacquer finishes for leather. The same book contains in Chapter 17, a Chapter on finishing a light leather from which we can read between pages 557 and 588 that shellac figures prominently in leather finishes. The presence of shellac in leather dressings/finishes is an old technology; shellac is known to consist largely of oxidised fatty acids. Great care is necessary, of course, in the prepara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oating are used for the preparation of patent leathers which are also sometimes called japanned leather or enamel leather and the coatings are known as varnish. This, therefore, does not help much in this problem because this process of varnishing and japaning is in the preparation of the raw leather and is more akin to lacquering than varnishing. But the so-called varnish coat is different from varnishing because it contains no resin, natural or artificial which will give the desired hard and brittle surface that is expected from varnishing. We have already observed that a varnish generally is an unpigmented collodial dispersion or solution of synthetic and/or natural resins in oil and/or thinners and is used as a protective and decorative coating. It leaves behind by evaporation a coating which is hard and glossy. A varnish even acts when properly prepared as a dielectric coat or insulation in electrical components, wirings, etc. etc. We have seen that shellac is extensively used in various stages of leather preparations and finishing but the finishing preparations are not referred to as varnishes. To be a varnish not only must shellac or one of the other alternative resins, whet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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