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TMI Blog1984 (5) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... r giving an opportunity of hearing to the parties afresh. Copies of the order and the judgment were forwarded to this Tribunal by the Deputy Registrar of the High Court on 6-10-1983. 2. At this Stage, and before setting out the questions referred to above, it will be useful to set out briefly the facts of the case. Devarsons are engaged in manufacturing oil and spirit soluble colours. These goods used to be classified in the Central Excise Tariff Schedule (CET) under item No. 14-1 (1)(5) ( Pigments, colours, paints and enamels, not otherwise specified ) and exempted from duty under Central Government s Notification No. 23/55, dated 29-4-1955 in terms of serial No. 6 thereof which read: Lake colours and pigment dye stuffs . By the Finance Act of 1961, a new item 14-D was inserted in the CET reading : 14D-Dyes derived from coal tar and coal tar derivatives used in any dyeing process, all sorts. This entry was substituted by the following one by the Finance Act, 1962, with effect from 24-4-1962 14D-Synthetic organic dyestuffs (including pigment dyestuffs) and synthetic organic derivatives used in any dyeing process. It appears that some time in 1963, the oil solub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering duty as the oil soluble colours manufactured by the petitioner under item No. 14-D, CET and directing the Department to refund the duty recovered under item 14-D on the oil soluble colours manufactured and cleared. 4. By its order dated 26-7-1983, the Hon ble High Court of Gujarat allowed the petition, quashed and set aside the impugned order dated 25-4-1977/4-8-1977 of the Government of India and remanded the matter back to this Tribunal. It is thus that this matter has come up before us. The Court, in its order, said that Devarson was paying duty under protest which it would continue to pay. Their Lordships further observed that they found it difficult in view of the paucity of the material on the record before them to conclude that the product in question was S.O. dyestuff. The Court identified the following as relevant questions in the dispute for determination by this Tribunal :- (a) What is the precise distinction between S.O. dyestuff and pigment dyestuff ? (b) Whether the product of the petitioner is S.O. dyestuff or pigment dyestuff or colours other than dyestuff or pigment ? (c) What is the possible use of the product of the petitioner ? (d) Whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n July, 1969, the classification list showing the goods under item 14(I)(5) was approved by the Supdt. (ii) On 24-12-1970, the Supdt. issued a show cause notice calling upon Devarsons to pay up the short levy of duty for the period 4-9-1970- 14-10-1970 on the basis that the goods were classifiable under item 14-D. Item 14-D was inserted in the Tariff in 1961 and amended in 1962. (iii) The phrase used in any dyeing process in item 14-D qualified S.O. dyestuffs , Pigment dyestuffs and S.O. derivatives . The Department s contention that it qualifies only S.O. derivatives is not correct. Even if it be correct, dyestuff means a substance used in any dyeing process. Dyestuffs are used in textiles and they have to be water-soluble for this purpose. Devarsons subject products are insoluble in water but soluble in selected natural or organic synthetic solvents. They are not capable of dyeing any fibre or substrate since they have no affinity for the same. They are used for colouring soap, petrol, plastics, etc. They are not, therefore, dyestuffs nor are they used in any dyeing process. Their correct classification is, therefore, under Item 14-1(5) and not 14-D. (iv) Item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emulsions, etc. This has been set out to show that such S.O. dyes are not classified as S.O. dyestuff (including pigment dyestuffs) under Heading 32.05. Many authorities have been cited to support the contention that dyeing is used almost exclusively with reference to textiles, paper and leather. According to the Encyclopaedia of Chemical Technology by Kirk-Othmer (Volume VII, page 506), The term is hard to define, but the proper sense of the word has a deeper meaning than just imparting colour to the fibre. The colour must be uniformly distributed throughout the fibre and not superficially applied as in painting; it must be more or less permanently fixed. Dyeing merges into standing when the colour is used temporarily for fibre identification and into painting when the colourant is superficially applied, and is held in place by a binding agent. In dyeing, the medium is almost invariably water because of its suitable properties, its availability and its economy. In painting, the medium used is a suitable thickener in which the dye is dissolved or dispersed. In Dyes and their Intermediates by E.N. Abrahart (page 30), it is stated that- Among the many uses for solve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing extract from Dyes and their Intermediates by Abrahart (page 30) : (a) In general, pigments are inert, stable, coloured substances, insoluble in water, which are used for imparting colour by incorporation within an article during manufacture e.g. mouldings from an evenly coloured mass of plastic material or by surface application in the form of paint. (b) Solvent dyes, as the name implies, are those soluble in organic solvents. The subject products are dyes but not dyestuffs since they are not used in dyeing. The meaning of dye and dyestuff in several dictionaries were referred to show that dyestuffs are used in dyeing while dye is only a colouring material. 9.3. Question No. 3. - What is the possible use of the product of the petitioner ? Devarsons contention is that - (i) their oil soluble colours are used for colouring of soap, oils, hair oils, plastics, waxes, petroleum products and producing coloured smoke for defence. These uses are the ones described in Dyes and their Intermediates by Abrahart as also Colour Chemistry by R.L.M. Alien and Chemistry of Synthetic Dyes and Pigments by LUBS; (ii) the sale bills as also purchase orders at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yestuffs , and dyestuffs , according to renowned dictionaries connote dyes or colours for dyeing of fibrous materials textiles - by solution or dispersion in water. In common parlance also, dyeing refers to only dyeing of fibrous materials. On the other hand, colouring of petrol, plastic, soap, etc. with the help of oil soluble colours is not called dyeing but colouring . If all S.O. dyestuffs are covered by item 14-D, there would be considerable overlapping between 14-D and 14-1(1) (ii), 14-1(2) (iii) and 14-1 (4). 10. The points put forth in the learned SDR s submissions may be summarised thus - (i) The issue for consideration is whether Devarsons products fall under item 14 as contended by them or 14-D as contended by the Department. Both sides agreed that the Tribunal is not required to go into the question of applicability of Notification No. 23/55 to the products. (ii) The disputed products are not soluble in water and they are not generally used for dyeing of textile fabrics. (iii) The words used in any dyeing process in item 14-D do not connote dyeing of textiles fabrics only. The use of the word any gives the phrase a wide and unrestric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment is demanding duty only for the period prescribed by limitation. 11. In his reply, the learned Council for Devarsons made the following points - (i) In 1978 E.L.T. 275, what the Court said was the goods must be predominantly or commonly used and not rarely or occasionally used in dyeing process to justify classification under item 14-D. (ii) Dyestuff means dye for textiles. 12. We have given careful consideration to the contentions of both sides and have also perused the record. 13. In the background against which the present matter has come to be heared by us, it would be useful and expedient to go by the questions identified by the Hon ble High Court for determination by us. But before we do so, it will be advantageous to discuss some aspects of the matter after which it may be relatively easier to answer the questions. 14. Item 14-D reads : Synthetic organic dyestuffs (including pigment dyestuffs) and synthetic organic derivatives used in any dyeing process. It is urged by Shri Parekh that phrase used in any dyeing process qualifies all the three commodity groupings preceding it, viz. (i) S.O. dyestuff (ii) Pigment dyestuff and (iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, dispersed organic pigments, ordinarily used for the printing of textiles (whether in the form of powder, paste or in emulsion) etc. While no material has been placed before us to arrive at a clear-cut answer to the question, we would say that the pigment dyestuffs included in item 14-D are those which, in the first place, are synthetic organic substances and do not fall in the categories of pigments specified in item 14. The whole of item 14-D, as the terminology clearly indicates, deals with only synthetic organic substances. Inorganic pigments would be outside the purview of item 14-D. So, pigments (essentially insoluble in solvents) which are synthetic organic substances and which find use in dyeing may be said to be the pigment dyestuffs in item 14-D. S.O. dyestuffs, on the other hand, are applied for dyeing or colouring purposes in the dissolved condition. 16. Having said this, we would like to mention that, for the present case, the precise scope of pigment dyestuffs does not appear to us to be of significance because, as we shall show later, the products under dispute are appropriately described as synthetic organic dyestuffs . And, this is what we shall now att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (tannin, barium chloride, etc.), or by co-precipitation of the colouring matter and the base. (2) Dyeing the base with a solution of the colouring matter. (3) Intimate mechanical mixing of an insoluble colouring matter with the inert base. 32.09 CCCN : Varnishes and Lacquers; Distempers; Prepared water pigments of the kind used for finishing leather; Paints and enamels; pigments dispersed in linseed oil, white spirit, spirits of turpentine or other media of a kind used in the manufacture of paints or enamels; stamping foils; dyes or other colouring matter in forms or packings of a kind sold by retail; solutions as defined by note 4 of this chapter, 32.10 CCCN : Artists , Students and Signboard painters colours, modifying tints, amusement colours and the like, in tablets, tubes, jars, bottles, pans or in similar forms or packings, including such colours in sets or outfits, with or without brushes, palettes or other accessories. 32.12 CCCN : Writing ink, printing ink and other inks. 16.3. Two things emerge from the above. First, SO. dyestuffs need not be necessarily water-soluble. They may be insoluble in water, as in the present case. Second, S.O. dyest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 16.6. We shall also refer to two more authorities : Condensed Chemical Dictionary by Gessner G. Hawley say at page 399 (10th edition)- dye, solvent. Any of several organosoluble dyes used in plastics, printing inks, cosmetics etc., as well as for polyester and other synthetic fibres. They are chemically related to disperse dyes. The solvents used are such chlorinated hydrocarbons as 1, 1, 1-trichloroethylene, trichloroethylene, and perchloroethylene. Use of solvent dyes avoids the necessity of fine-grinding and gives ideal dispersion. (The term solvent dye is somewhat misleading, as it would apply equally well to dyes that are soluble in water). McGraw-Hill Encyclopaedia of Science Technology (pages 420-429, volume 4) inter alia has classified dyes based on the materials to which they are applied. Oils, lubricating oils, gasoline, waxes, candles, plastics, rubber, soaps, cosmetics, coloured smokes for military application (as in the present case) are some of the listed applications of dyes. 16.7. From the foregoing discussion, it is clear that goods of the type we are concerned with in the present case are recognised and described in technical books as d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to heat or evaporate perchlorethylene, for example, than is needed for water. At page 1104, there is a detailed write up of non-textile applications of synthetic colourants. It is stated that oils are coloured by dyes that dissolve in solvents rather than those dissolved in water. In respect of soaps, it is stated that selected pigments and a few acid and basic dyes are used. It is further stated that hair dyes are chiefly in the class of substituted amines known as oxidation colours. A number of relatively simple dyes are made from anthraquinone sublime on heating to give strongly coloured smokes and are used for military signalling and other purposes. In respect of photography, it is stated that 4 main types of dyes are used together with a nomenclature of the types. At page 1105, it is stated that technically dyestuffs are soluble in the medium in which they are applied whereas pigments are insoluble. At this stage, we may also note, as we have already stated, that the present goods are described by the appellants themselves in the purchase orders/sale bills as dyes . 16.8. At one stage, it was contended that the present solvent dyes are pigments. Now, acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ady shown that dyes used not only in textile dyeing but also those used in colouring petroleum products, soap, plastics, etc. fall within the expression S.O. dyestuffs and, therefore, they fall under item 14-D. It is not necessary that a product should be capable of being used for dyeing of textile in order to be within the purview of item 14-D, CET. 20. Now we shall deal with the case law cited before us by both sides. Shri Parekh has relied upon a number of decisions in support of the proposition that if there is any ambiguity in a fiscal statute, the benefit should go to the assessee. In 1980 E.L.T. 3 (Bom.) in the case of Deepak Co., the Bombay High Court held that if two views are possible regarding classification of a product, the benefit must go to the tax payer. The Court also observed that mere change of opinion of an officer without any basis is not sufficient to conclude that the earlier orders were incorrect. Reliance was placed on AIR 1960 S.C. 1175 (C1T Ahmedabad v. Karam Chand Prem Chand Ltd., Ahmedabad) in which the Court held that if there is any ambiguity of language of a provision, the benefit of that ambiguity must be given to the assessee. In 1982 ECR 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not synthetic organic derivatives and we do not think that the decision cited has any relevance. The decision of the Delhi High Court in the Hindustan Aluminium Corporation Ltd. v. Supdt. Central Excise, Mirzapur and Others - 1981 E.L.T. 642 (Del.) was also cited. In this judgment, the Court held that it is only when there is some equivocation or ambiguity about a word or a provision that the rule of strict construction or narrow construction in favour of a subject in fiscal matters is to be applied. The Court further held that it would not be correct to equate the principle of strict construction applicable to penal statutes imposing punishment and imprisonment with statute imposing taxes and duties. As we have stated elsewhere, we do not see any ambiguity in item No. 14 D. What the Department sought to do was only to correct an erroneous practice of assessment and this they did after giving opportunity to the appellants. It is, therefore, not a case where the theory of the benefit of ambiguity in the taxing provision goes in favour of the assessee. 22. Shri Parekh also urged before us that in accordance with Central Board of Excise Custom s Circular F. No. 100/4/75-C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be separated from the dyed soap, textile fibres, aluminium, paper etc. 29. A pigment is a substance that imparts 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 scraping and other coating/paint can be applied to give the surface a new or different coat of paint or colour. 30. Pigments insoluble in any solvents e.g. ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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