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TMI Blog1984 (1) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... coating composition' prepared for this purpose in the premises of the mills itself. Preparation of this coating composition is done in jacketed mixers which have hot water circulation for heating and top entry stirrers for agitation. The required volume of solvent is pumped into the mixer through a meter. The hot water in the jacket is opened and the stirrer started. When the requisite temperature is reached, the nitrocellulose is added and stirred till it dissolves. Plasticizers and resins are then added and stirred. To this solution melted paraffin wax and anti-block dispersion are added and the stirring is continued. This is then pumped through a coarse strainer to transfer tanks which are insulated to prevent heat loss and provided with stirrers. These stirrers in the transfer tanks are continuously worked to prevent setting out of anti-block. From the transfer tank it is continuously fed through a float valve to the intermediate tank near the coating machine. This intermediate tank is also jacketed and hot water is circulated through the jacket and temperature of the composition is automatically controlled by instrumentation. From the intermediate tank the composition is cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of duty in contravention of the provisions of Rule 9(1) of the Central Excise Rules, 1944, and directed the company to pay the duty thereupon amounting to ₹ 4,88,797.34. He, however, held that there was no fraudulent intention on the part of the company and consequently only a token penalty of ₹ 25/- was imposed for contravention of Rule 9(1). The company preferred an appeal against the said order before the Collector of Central Excise, Cochin. It was, however, dismissed by order dated August 5, 1964 (Annexure D). The revision petition filed by the company was rejected by order dated July 16, 1966 (Annexure E). The company then filed a petition for special leave to appeal under Article 136 of the Constitution of India before the Supreme Court. It was allowed by judgment dated October 28, 1969. The revisional order dated July 16, 1966 was set aside on the ground that it was not a speaking order and the case was remanded to the Central Government with the direction that it should be disposed of according to law after giving the petitioner an oral hearing. The matter was thereafter heard by the Revisional Authority, respondent No. 2. The revision was ultimately rejecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was not a lacquer. It was not clear and pigmented and that these were not goods which could ordinarily come to the market to be bought and sold and, therefore, this coating material was not subject to any excise duty. 9. Whether the surface coating composition is a nitrocellulose lacquer within the meaning of Tariff Item 14-III(i)? 10. 'Lacquer' has not been defined under the Act. In the various dictionaries it has been defined as follows :- (a) According to Chambers's Twentieth Century Dictionary, revised edition, it means : "a solution of film-forming substances in a volatile solvent, esp. a varnish of lac and alcohol; the juice of the lacquer-tree (Japan lacquer) or similar product : a covering of one of these : an article, or ware, so coated. v.t. to cover with lacquer : to varnish." (b) The Concise Oxford Dictionary defines 'lacquer' : "Gold-coloured varnish of shellac dissolved in alcohol used esp. as coating for brass; kinds of resinous varnish (esp. Japanese...) taking hard polish and used for wood etc., articles so coated." (c) The Shorter Oxford English Dictionary on historical principles defines it : "a kind of sealing-wax, a gold-coloured va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and intended to keep the hair smooth and in place : nail polish to coat with lacquer : varnish : to give a smooth finish or appearance to : to make glossy : polish wound up with a virtuosity that ..ed over any rough patches that had been laid bare in the White Paper......the phrase as did some of the accusers - Jerome Mellquist." 11. Mc Graw Hill, Encyclopaedia of Science and Technology-Vol. 7, page 376, defines 'lacquer' as under :- "A surface coating; the vehicle of which contains a substantial quantity of cellulose derivative. This derivative is most commonly nitrocellulose, but may be a cellulose butyrate, or a cellulose (other, such as ethyl cellulose). The term is sometimes used for other coatings which have properties and uses similar to those of lacquers, particularly clear metallic coatings. Originally, lacquers were coatings produced by the use of juice of a tree of the sumae family, but these materials often called Oriental or Chinese lacquers, are not widely used today. Lacquers are made by dissolving nitrocellulose and other modifying materials in a solvent, and pigmenting if desired. They dry by evaporation of the solvent. Because solvents with very high vola ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the above definitions I am of the opinion that nitrocellulose lacquer is a surface coating composition which dries up rapidly by evaporation of volatile constituents forming a film on the substance on which it was coated and contains a substantial quantity of nitrocellulose. In other words, nitrocellulose lacquer must be (1) a surface coating material; (2) it must dry up rapidly by evaporation of volatile constituents; (3) it must form a film on the substance on which it was coated and (4) it must contain a substantial quantity of nitrocellulose. 13. According to the affidavit filed by Shri P.S. Hariharakrishnan, the composition in question contains the following volatile and non-volatile materials :- Name Volatile Non-volatile Nitrocellulose 50.0 Kgs. Dutyl alcohol 21.4 Kgs. Acronol 4F 5.0 Kgs. Uresin B 3.0 Kgs. Palatinol 17.5 Kgs. Cyclohexanophthalate 22.5 Kgs. Resin 3.0 Kgs. Butyl acetate (100 litres) 87.0 Kgs. Ethylacetate (350 litres) 311.5 Kgs. Toluene (200 litres) 172.0 Kgs. Paraffin wax 2.0 Kgs. 591.9 Kgs 103.0 Kgs. 14. It is admittedly a surface coating composition and is used for coating cellulose film to make it moisture free and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulose lacquer', a surface coating composition which dries up rapidly and on drying forms a film by evaporation of volatile constituents and contains a substantial quantity of nitrocellulose. (I say so because of the definition of the term 'lacquer' given in various dictionaries noted earlier). They generally do not know the exact materials used in preparing the composition. They are not supposed to know whether volatile matter is 70 per cent or less or more and whether it contained paraffin wax or not. 19. The percentage of volatile matters depends on the evaporation rate required. If for achieving a particular result more volatile matters are required to prepare a composition it would not cease to be nitrocellulose lacquer if the basic requirements exist. For the same reason presence of paraffin-wax for obtaining the particular result, namely, making the cellulose film, on which the composition is to be coated, moisture proof, would not make any difference. Paraffin-wax is only 2 Kgs. out of 103 Kgs. while nitrocellulose is 50 Kgs. out of 103 Kgs. of non-volatile material. 20. Learned counsel for the petitioner in support of his contention placed reliance on the standa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... description of the said formula as lacquer was an error cannot be accepted. No reason has been given in support of this contention. 23. The fact that the formula containing paraffin wax was a new invention or had been patented in the U.S.A. as a surface coating composition for application to cellulose film also does not improve the case of the petitioner. At the most it is a new variety of nitrocellulose lacquer. A new variety of nitrocellulose lacquer would fall within the term nitrocellulose lacquer used in Item 14-III(1). 24. Dr. Patel in his affidavit has stated that volatile matter in nitrocellulose lacquer shall not be more than 70 per cent and he relied on the various available specifications of this product. As seen earlier, volatile matter depends on the evaporation rate required. The basic character of the product would not change by the increase in volatile matter. 25. For all these reasons, in my view, the surface coating composition in dispute was nitrocellulose lacquer. 26. Whether the composition in question is 'clear and pigmented' within the meaning of Tariff Item 14-III(i) ? 27. The word 'and' according to Stroud's Judicial Dictionar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the word 'clear' used in Item l4-III(ii). 33. Murky appearance, as stated by the Chemical Examiner, Customs House, Cochin, is probably due to small amounts of resins present in the composition. In case this murky appearance takes the composition out of the definition of the word 'clear', then it would be covered by the word 'pigmented'. Such a composition has to be either clear or pigmented. It is not possible that it is neither clear nor pigmented. The composition in suit is, therefore, covered by the term 'clear and pigmented'. 34. Whether the surface coating composition is 'goods' ? 35. Under Section 3 of the Act the duty is on manufacture of goods. The word 'goods' has not been defined in the Act. In Union of India and another v. Delhi Cloth and General Mills Co. Ltd. and others [AIR 1963 S.C. 791 = 1977 (1) E.L.T. (J 199)] the Supreme Court after examining the meanings of the word 'goods' in Webster's Dictionary and taking into consideration a passage in the Words and Phrases, Permanent Edition Vol. 18, held that to become 'goods' an article must be something which can ordinarily come to the market to be bought and sold. Similar view was taken by the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... May 13, 1963 which was followed by a show cause notice dated August 16, 1963 and in the circumstances the duty levied was barred by time by virtue of the provisions contained in Rule 10(1) of the Central Excise Rules, 1944 (for short 'the Rules'). On the other hand, learned counsel for the respondents contended that the present levy was governed by Rule 9(2) read with Rule 9(1) of the Rules and Rule 10(1) had no application. 41. Relevant portion of Rule 9(1), 9(2) and Rule 10(1) of the Rules, as in force prior to August 6, 1977, reads as under :- "Rule 9. Time and manner of payment of duty. - (1) No excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, which may be specified by the Collector in this behalf, whether for consumption, export or manufacture of any other commodity in or outside such place, until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in these Rules or as the Collector may require and except on presentation of an application in the proper form and on obtaining the permission of the proper officer on the form : * * * *" Rule 9 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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