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TMI Blog1990 (9) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... otice dated 8-1-1982 was issued alleging that - (i) the appellants had manufactured and cleared/consumed heating elements falling under Tariff Item No. 22F(iv) of the First Schedule to the Central Excises Salt Act, 1944 as it stood at the relevant time (hereinafter referred to as the 'Act' only) without a Central Excise licence; without payment of duty; and without observing the other Central Excise formalities by suppressing facts of production and clearance of goods with deliberate intention to evade payment of duty. The appellants were required to show cause as to why penalty should not be imposed and why duty on the heating elements cleared from the factory and also captively consumed within the factory from 16-3-1976 onwards should not be demanded. Duty of Rs. 3292.58 was demanded on heating elements captively consumed in 118 numbers of heating mantles that were found in the factory at the time of the visit and an amount of Rs. 7038.08 was demanded on the heating elements captively consumed in the 244 numbers of heating mantles that were kept under the custody of the Indian Bank at the time of the visit. The appellants were also asked to show cause why 525 numbers of hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion "jute manufactures" in Tariff Item 22A, CET, held that the said expression was designed to cover, apart from manufactures wholly comprising jute fibres or yarn also manufactures comprised not merely of jute fibre or yarn but also of other fibres or yarn. The item would not appear to cover a manufacture which comprises of jute manufacture as defined in Item 22A and any other article not falling under Item 22A as, in that case, laminated jute bags or articles made out of hessian fabric and plastic film or sheet laminated with the fabric. It was held that such a composite article would not fall under Item 22A since it would no longer be a mere jute manufacture. In view of the Bench, this view seemed to be in accord with the conclusion of I.P.G. Engineers (P) Ltd. (supra). So the Bench felt that the decision in the case of Raga Industries (supra) required reconsideration as, in view of the Bench, there is direct conflict between the decisions in the case of I.P.G. Engineers (P) Ltd. and Mahindra Engineering Chemical Products Ltd. (supra). So, the Bench decided to place the matter before the President for considering setting up a 5 Member Bench to hear this appeal. As a consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Hon'ble Supreme Court on 3-12-1984). In his view the decision of the Tribunal in Mahindra Engineering Chemical Products Ltd. (supra) was in direct contrast with the decision of the Hon'ble Supreme Court in Atul Glass Industries Ltd. case (supra). On interpretation of the words "manufactured from" used in the relevant Tariff Item, the Learned Consultant submitted that the decision of this Tribunal in I.P. G. Engineers (P) Ltd. case (supra) is correct. He also cited the case of M/s. Dalmia Laminators (Order No. 902/87-D dated 16th November, 1987). So in the view of the Learned Consultant the decision in M/s. Raga Industries v. Collector of Central Excise, Madras (Tribunal's Order No. 455/87-D dated 27-5-1987) is not correct and the interpretation and classification suggested in the case of I.P.G. Engineers (P) Ltd. (supra) should be accepted and the classification accordingly should be under Tariff Item 68. On limitation he submitted that there was no wilful suppression on the part of the appellants and there was no necessity to invoke longer period of limitation. Moreover, the Collector has gone beyond five years which is per se illegal. The Collector was not competent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... several authorities on the point as to how relevant entry should be interpreted. On limitation she submitted that it was the legal duty cast upon the appellants to file declaration to prove the bona fides which they had failed to do and so there was suppression of facts and thus longer period was-properly and rightly invoked. 7. In reply, Shri Daya Sagar reiterated his arguments and submitted that mere allegation in the show cause notice would not be sufficient and there is no evidence that there was any wilful suppression on the part of the appellants. 8. We have considered the arguments and perused the records. 9. The process of manufacture of "heating elements" and their composition are described thus - The glass fibre yarn is knitted into fabric in a hand operated knitting machine. Simultaneously, Nichrome wire is wound on strands of asbestos yarn and the same is insulated with glass fibre yarns (filament yarn) in a winding machine which is operated with the aid of power. Then the insulated Nichrome wire so manufactured is stitched with knitted glass fabric mentioned above and a thin M.S. Ring is placed inside the glass fabric net for giving final shape so that the hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly logical that it should be so. When a consumer buys an article, he buys it because it performs a specific function for him. There is a mental association in the mind of the consumer between an article and the need it supplies in his life. It is the functional character of the article which identifies it in his mind." So, considering from this angle, the product in question could not be described as a product manufactured from mineral fibres and yarn only even though these materials are used in the manufacture thereof and, in that case, the product would not be covered by the entry in question which we reproduce hereunder. Item 22F(iv) "Mineral fibres and yarn, and manufactures therefrom, in or in relation to the manufacture of which, any process is ordinarily carried on with the aid of power": Explanation I - "Mineral fibres and yarn and manufactures therefrom shall be deemed to include - x x x x (iv) manufactures in which mineral fibres or yarn or both predominate or predominates in weight." A bare reading of the above entry would suggest that only those items or products would be covered whose main function or attendant function has something to do with mineral fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 84 (18) E.L.T. 680 (Tribunal) is not proper. In para 5 of that order, it has been stated that - "Bread made from wheat flour, and not directly from wheat, still remains wheat bread. A shirt stitched from cotton cloth continues to be considered as a cotton shirt although it is well known that cotton fibre cannot be turned into a shirt directly……" But, then, the fact remains that the product in question is not directly manufactured from the materials referred to; and a cotton shirt is known as cotton shirt to distinguish it from silk shirt or artificial fibre shirt and 'wheat' breads can be distinguished from any other foodgrain like 'Rye'. This agreement is advanced by Shri Daya Sagar, learned Consultant and we are fully in agreement with that. We have noted the contention of Mrs. Vijay Zutshi that tariff entry should be interpreted as it is and no words can be read or interpolated into it. But then on perusal of the order in IPG Engineers (P) Ltd. (supra) we are convinced that what the Tribunal has done is not adding or interpolating any words but they have put a particular construction which appears to be more relevant, logical and correct and in doing so, to explain the correct p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported. 15. As far as the question of limitation is concerned, it is alleged that it was the duty of the appellants to have filed declaration under Notification No. 111/78 for the manufacture of heating mantles and by not doing so they have suppressed the fact of manufacture of heating elements also which are manufactured by the appellants and consumed by them captively in production of heating mantles. Shri Toshniwal, Administrative Officer of the appellants' company whose statement was recorded submitted that they had not filed the declaration in respect of manufacture of heating mantles as their turnover was about Rs. 3½ lakhs per year and was well within the limit of Rs. 30 lakhs; that they were not aware that heating element was classifiable under Tariff Item 22F(iv) and that is why they did not obtain manufacturing licence or filed declaration. But, in view of the above position, if the item would be classifiable under Tariff Item 68 then it would not attract central excise duty under Tariff Entry 22F(iv). There is no evidence to suggest that the appellants knew about the excisability of the product and had the intention to evade payment of duty. Mere allegation in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Tariff Item No. 22F(iv), but under Item 68 of the Central Excise Tariff. He also relied on this Tribunal's order No. 902/87-D dated 16th November, 1987 in Appeal No. E/307/83-D in the case of M/s Dalmia Laminates v. Collector of Central Excise, Calcutta. In that case the classification of laminated jute bags was in dispute. Following a judgment of Calcutta High Court, the Tribunal held that those bags were not classifiable under Central Excise Tariff Item 22A. The above contention of the learned counsel has been accepted in the order written by Shri Vasavada and the same has been concurred by the learned brothers Shri Harish Chander and Shri Rao. The process of manufacture has been described in Paragraph 9 (supra). Heating elements produced by the same process of manufacture were in dispute for Central Excise classification in Appeal No. ED/SB/315/1983-D in the case of M/s. Raga Industries v. Collector of Central Excise, Madras, and this Tribunal, vide Order No. 455/1987-D dated 27-5-1987, held that the heating elements manufactured by the said appellants were correctly classifiable under Item No. 22F(iv) of the Central Excise Tariff. This order has been relied on by the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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