M/S
Quinn India Ltd. Vs. Commissioner of Central Excise,Hyderabad [2006] Insc 299 (11 May 2006)
Ashok
Bhan & Lokeshwar Singh Panta Lokeshwar Singh Panta, J.
M/s.
Quinn India Limited the appellant-assessee has filed the present Statutory
appeal under Section 35L of the Central Excise Act, 1944 (for short "the
Act") against the Final Order No. 1860/2000 dated 22.12.2000 recorded by
the Customs, Excise, Gold (Control) Appellate Tribunal, South Zone Bench,
Chennai (hereinafter referred to as "the Tribunal") in Civil Appeal
Nos. E/1299/94-C and E/CO/366/94-C. By the impugned order, the Tribunal has
allowed the appeal filed by the Commissioner of Central Excise, Hyderabad
(hereinafter referred to as "the Revenue") and set aside the order -
Appeal No. 2/94(H)(D) CE dated 28.2.1994 of the Collector of Central Excise
(Appeals).
The assessee
was engaged in the manufacture of Penetrator -4893 falling under tariff item
No. 68 of the old tariff since 1980 to 1986. The assessee was paying the excise
duty on the product till the new tariff was introduced. After the new tariff,
the product was being cleared under sub- heading No. 3801.19 as finishing
agents, Dye Carriers to accelerate the dying or fixing of dyestuff and other
products and preparations of kind used in textile, paper, leather or like
newspapers not elsewhere specified or included. On 6.5.1986, the assessee filed
a new classification list under the Chapter sub-heading No. 3402.90 and
claimed that the earlier classification was under a wrong impression. The classification
list dated 6.5.1986 was approved by the Assistant Collector on the basis of the
note given by the Chemical Examiner in his Report dated 6.10.1981 which came to
the knowledge of the assessee in the year 1986. Therefore, the assessee changed
the classification to the appropriate tariff item.
A Show
Cause Notice (SCN) dated 4.6.1991 was issued by the Revenue directing the assessee
to pay a sum of Rs. 1,24,094.45p. as central excise duty for the period May,
1986 to September, 1990 invoking larger period under Section 11A of the Act.
During pendency of the proceedings, the Revenue drew another sample of the
product of the assessee and sent it to the Central Revenue Control Laboratory
(CRCL) at Delhi to the Chief Chemist for his
opinion. The Chief Chemist vide his Report dated 2.4.1992 opined that the
samples had surface active properties. The assessee filed its reply to the show
cause notice, inter alia, contending that prior to 28.2.1986 they were
classifying their product Penetrator 4893 under tariff item No. 68 and with the
introduction of new tariff it was classified under heading 3801.19. On
5.5.1986, the assessee filed a fresh classification list based on the Report of
the Chemical Analyst classifying the product under item No. 3402.90. They explained
the process of manufacture of the product clarifying that the product is a
wetting agent.
Further,
it was contended that the product was only an auxiliary aid for improving the
penetration process of dye solvent. The Adjudicating Authority vide order dated
4.6.1991 relying upon the opinion of the Chemical Examiner's Test Report came
to the conclusion that the classification of Penetrator manufactured by the assessee
would fall under heading 3402.90. The show cause notice was, accordingly,
discharged and the proceedings initiated in OR No. 74/91 Adjn. were dropped.
Being
aggrieved by the order of the Adjudicating Authority, the respondent-Revenue
filed an appeal before the Collector (Appeals), who vide his order dated
28.2.1994 rejected the said appeal relying upon the documentary evidence
produced by the assessee in its defence. The Revenue then filed an appeal
before the Tribunal challenging the correctness and validity of the order of
the Collector (Appeals). The Tribunal, however, allowed the appeal of the
Revenue and set aside the original order in appeal as also the
Order-in-Original holding that the goods manufactured by the assessee were not
commercially and popularly known as service active agents and they were
different products, commercially having different names, character and use than
the service active agents from which the goods were produced.
It was
observed that the service active agents were one of its raw materials and the
finished penetrator could not be considered for excise purpose as service
active agents.
In the
present appeal, it is contended by Mr. Tushar Rao, the learned counsel for the assessee
that the Tribunal has ignored the Reports of the Chemical Examiner dated
6.10.1981 and that of the Chief Chemist, CRCL dated 2.4.1992 without assigning
any cogent reason in the absence of any rebuttal evidence overriding the said
Reports. He next contended that the Tribunal has not appreciated the well-
settled law that the burden is laid upon the Revenue to prove by convincing evidence
that the product falls under a particular classification. The Tribunal has also
ignored Chapter Note 3 to the Chapter Heading 34 where under the products of
the assessee would fall and wrongly relied upon the dictionary meaning of the
product which had no relevance to the goods of the assessee. He also contended
that the Tribunal has ignored the fact that the assessee had also filed the
classification list of the other like industries which were considered by the
Collector in his Original Order as also by the Collector (Appeals).
On the
other hand, the learned senior counsel for the Revenue sought to support the
order of the Tribunal to contend that the classification of excisable goods
under different excise items involved a question of highly technical nature
requiring scrutiny of the chemical characteristics of the goods, therefore, the
order of the Tribunal cannot be lightly interfered with unless the findings are
perverse or otherwise erroneous in law or based on no evidence. In support of
this submission, reliance is placed on the decision of this Court in Reliance
Silicon (I) Pvt. Ltd. v. Collector, Central Excise, Chennai [(1977) 1 SCC 215].
We
have gone through the ratio of the said decision. In our opinion, this judgment
can be of little assistance to the Revenue. As noticed in the earlier part of
the judgment, the assessee has classified the goods in question, under tariff
item No. 68 of the old tariff from 1980 to 1986 attracting 15 per cent ad valorem
duty being regularly paid by it. With the introduction of new tariff in 1986,
the assessee started clearing Penetrator 4893 under heading 3801.19, as
finishing agents, Dye Carriers to accelerate the dying or fixing of dye stuff
and other products and preparation of a kind used in textile, paper, leather or
like industries not elsewhere specified or included. The assessee on 5.5.1986
sent an intimation to the Revenue regarding the new classification list filed
by it under the heading 3402.90 attracting nil rate of duty on the basis of the
Exemption Notification No. 101/66 dated 17.6.66 w.e.f. 1980 and amended by the
Notification No. 78/76-CE dated 10.2.1986. The classification lists dated
6.5.1986 and 10.4.1987 submitted by the assessee were supported by the Chemical
Examiner's Report dated 6.10.1981 opining that the goods possessed surface
active properties under Chapter Heading No. 3402.90 attracting nil rate of duty
on the basis of the above-said notifications. The classification lists were
approved by the Assistant Collector with effect from 28.2.1986. The Assistant
Collector, Hyderabad VIII Division drew the sample of Penetrator
4893 manufactured by the assessee and sent the sample to the Chief Examiner,
CRCL, New Delhi for his opinion. In relation to the
classification of the goods, the Collector vide Order in Original No. 191/91
dated 26.12.1991, on the basis of the Report of the Chemical Examiner and Chief
Chemist and other material on record came to the conclusion that the goods have
rightly been classified under tariff item 3402.90 and declined to invoke the
larger period under Section 11A stating that there has been no suppression of
material facts by the assessee in filing the classification lists. On careful
consideration of the Order-in- Original of the Collector as well as the
Order-in-Appeal recorded by the Collector (Appeals), it is clear that the Chief
Chemist, CRCL vide his letter dated 2.4.1992 had given clear and positive
opinion that the Penetrator 4893 manufactured by the assessee and forwarded to
the Laboratory by Assistant Collector, Hyderabad, vide letter dated 20.7.1991
was "composed of organic solvent, non-volatile residue having surface
active properties and water". From the said opinion of the Chief Chemist,
it cannot be disputed that the goods manufactured by the assessee possessing
surface-active properties are classifiable under tariff item No. 3402.90. The
Collector (Appeals) in his order observed that no evidence has been led by the
Revenue to show that Penetrator 4893 manufactured by the assessee acts as a
finishing agent to be classified under Chapter heading 38.09 and the contention
of the Revenue that the product is not wetting agent was not found supported by
any evidence. The Tribunal has completely ignored the Report of the Chemical
Examiner dated 6.10.1981 and the Final Opinion of the Chief Chemist dated
2.4.1992 coupled with the classification issued by the Department regarding use
of wetting agents in the textile industries falling under tariff item No.
3402.02. Test Report of the Chemical Examiner and Chief Chemist of the Revenue
unless demonstrated to be erroneous, cannot be lightly brushed aside. The
Revenue has not made any attempt to discredit or to rebut the genuineness and
correctness of the Reports of the Government, Chemical Examiner and Chief
Chemist. Thus, the Reports are to be accepted along with other documentary
evidence in the form of classification issued by the Department regarding use
of wetting agents in the textile industries to hold that the product Penetrator
4893 possessed surface active properties and, therefore, is covered by
Exemption Notification No. 101/66 dated 17.6.66 as amended from time to time.
The assessee
has adduced cogent and convincing evidence to show that the expression
occurring in tariff item No. 3402.90 of the Act should be understood in the
sense in which the persons who deal in such goods understand it normally. The
Revenue has failed to adduce contrary evidence in support of its claim that the
classification of the penetrator manufactured by the assessee is not covered
under tariff item No. 3402.90. It is also settled law that the onus or burden
to show that the product falls within a particular tariff item is always on the
Revenue. [See: Commissioner of Central Excise, Calcutta v. Sharma Chemical Works [(2003) 5 SCC 60] and Commissioner
of Central Excise, Nagpur v. Vicco Laboratories [(2005) 4 SCC
17].
In our
view, the impugned judgment of the Tribunal is clearly erroneous and
unsustainable. In the circumstances, we find merit in the contentions urged on
behalf of the appellant-assessee. We are also of the view that the Tribunal has
erred in interfering with the Order-in-Appeal No. 2/94(H)(D) CE of the
Collector (Appeals) dated 28.2.1994 and Order-in-Original No. 191/91 of the
Assistant Collector dated 26.12.1991 In the result, we allow this appeal and
set aside the impugned judgment of the Tribunal. Parties shall bear their own
costs.
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