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PETITIONER: BHARAT FORGE & PRESS INDUSTRIES (P) LTD.

       Vs.

RESPONDENT: COLLECTOR OF CENTRAL EXCISE, BARODA, GUJARAT

DATE OF JUDGMENT16/01/1990

BENCH: RANGNATHAN, S. BENCH: RANGNATHAN, S. OJHA, N.D. (J) VERMA, JAGDISH SARAN (J)

CITATION:  1990 AIR  616            1990 SCR  (1)  60  1990 SCC  (1) 532        JT 1990 (1)    34  1990 SCALE  (1)30

ACT:     Central   Excises  and  Salt Act,  1944: First  Schedule Item 26AA (iv)--’Pipe fittings’--Levy of excise duty--Wheth- er  could  be classified as ’pipes and  tubes  ’--Whether  a different commercial commodity.

HEADNOTE:     Steel  pipes and tubes (including blanks therefore)  all sorts, whether rolled, forged, spun, cast, drawn,  annealed, welded or extruded were dutiable under Item 26AA(iv) of  the First  Schedule to the Central Excises and Salt  Act,  1944. The Department, however, sought to classify ’pipe  fittings’ such  as  elbows, bends and reducers,  manufactured  by  the appellants,  from out of the steel pipes purchased from  the open  market on payment of excise duty, under Item 68  which was a residuary entry, on the ground that they were known in the market differently as pipe fittings, a totally different commercial commodity. The appellants’ claim that the process undertaken  by  them did not amount to  manufacture  as  the products  turned out were nothing but pipes and  tubes,  and that they were being virtually asked to pay duty twice  over on the same product, was rejected by the Appellate Tribunal. Allowing the appeal under s. 35L(B) of the Act, the Court,     HELD: 1. Unless the Department could establish that  the goods in question could by no conceivable process of reason- ing  be brought under any of the tariff items, resort  could not be had to the residuary item. This has not been done  in the instant case. [62F]     2.1  The use of the words ’all sorts of’ and the  refer- ence  to the various processes by which the excisable  items could be manufactured set out in Entry 26AA(iv) are  compre- hensive  enough to encompass all sorts of pipes  and  tubes. [64F]     2.2  The expression "pipe fittings" merely denotes  that it is a pipe or tube of a particular length, size or  shape. Pipe  fittings do not cease to be pipes and tubes; they  are only a species thereof. In order to achieve 61 fully the purpose for which the pipes and tubes are manufac- tured,  it  is necessary to manufacture  smaller  pieces  of

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pipes and tubes and also to manufacture them in such a shape that they may be able to conduct liquids and gases,  passing them through and across angles, turnings, corners and curves or  regulating  their flow in the manner required.  This  is done  by a process of forging, welding, hammering and so  on applied  to  the longer tubes. There is no change  in  their basic  physical properties and there is no change  in  their end use. They are merely intended as accessories or  supple- ments  to the larger pipes and tubes. It could  not,  there- fore,  be  said that pipe fittings, though they may  have  a distinctive  name or badge of identification in the  market, were not pipes and tubes. [63B-C, 62G-63A, 64E]     Indian  Aluminium Cables Ltd. v. Union of India &  Ors., [1985] 3 S.C.C. 284, referred to.     3.  No doubt "tubes and pipes" and "pipe fittings"  fall under different sub-items under the Harmonised Code as  well as under the Customs Cooperative Council Nomenclature  where two expressions are used in contrast and the sub-classifica- tion is more detailed. That dichotomy could not be  imported into the instant case where there was only one comprehensive and generic entry. [65B-C]

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 1057  of 1987.     From  the Order dated 29.12.1986 of the  Customs  Excise and  Gold (Control) Appellate Tribunal, New Delhi in  Appeal No. ED/SB/ 7 A No. 186/82-BI in Order No. 826/86-BI.     D.N.  Mehta,  R.C. Misra and Dr. Meera Agarwal  for  the Appellants. V.C. Mahajan and R.P. Srivastava for the Respondent. The Judgment of the Court was delivered by      RANGANATHAN,  J.  Item 26AA(iv) of the  Central  Excise Tariff reads as follows: "Pipes  and  tubes (including blanks therefore)  all  sorts, whether rolled, forged, spun, cast, drawn, annealed,  welded or extruded" 62     The  appellants are engaged in the manufacture  of  pipe fittings  such as elbows, bends and reducers. They  purchase steel  pipes on payment of excise duty prom indigenous  pro- ducers from the open market and they also get steel tubes by way  of import. The appellants cut the pipes and tubes  into different  sizes,  give them shape and turn them  into  pipe fittings  in their factories by heating in a furnace  (at  a temperature between 66 degrees C and 900 degrees C)  hammer- ing  and  pressing.  The short question in  this  appeal  is whether  the  pipe fittings so produced by  the  petitioners also  fall  under Item 26AA(iv) or whether  they  should  be classified  under  tariff  item 68 which  is  the  residuary entry.     The case of the appellants is that the products manufac- tured by them are also nothing but pipes and tubes and  that they are being virtually asked to pay duty twice over on the same product. According to them the processes undertaken  by them  do  not amount to manufacture and no new  product  has come into existence as a result of the processes employed in their  factories. They say that the pipes and  tubes  retain their  material and original character and use and they  can also  be had only from dealers dealing in pipes  and  tubes. This  claim of the appellants has not been accepted  by  the Central Customs Excise and Gold Appellate Tribunal and hence the  present  appeal  under section 35L(b)  of  the  Central

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Excises and Salt Act, 1944.     The  question  before us is whether  the  Department  is right  in claiming that the items in question  are  dutiable under tariff entry No. 68 This, as mentioned already, is the residuary  entry  and only such goods as cannot  be  brought under  the various specific entries in the tariff should  be attempted to be brought under the residuary entry. In  other words, unless the department can establish that the goods in question  can  by  no conceivable process  of  reasoning  be brought under any of the tariff items, resort cannot be  had to  the residuary item. We do not think this has been  done. Looking at Tariff item 26AA(iv), it encompasses all sorts of pipes  and tubes. It is also clear that it is of  no  conse- quence  whether  the  pipes and tubes  are  manufactured  by rolling,  forging,  spinning, casting,  drawing,  annealing, welding  or extruding. It is true that initially  pipes  and tubes  may be obtained from sheets, billets or bars by  var- ious processes, but the process of manufacture of pipes  and tubes  does  not end there. In order to  achieve  fully  the purpose  for which the pipes and tubes are manufactured,  it is  necessary  to manufacture smaller pieces  of  pipes  and tubes and also to manufacture them in such a shape that they may  be  able  to conduct liquids and  gases,  passing  them through and across angles, turnings, 63 corners  and curves or regulating their flow in  the  manner required.  Smaller  pieces of pipes  and  tubes  differently shaped  are manufactured for this purpose. They  are  merely intended  as accessories or supplements to the larger  pipes and  tubes. They are pipes and tubes made out of  pipes  and tubes. There is no change in their basic physical properties and there is no change in their end use. There is no  reason why these smaller articles cannot also be described as pipes and tubes.     But, it is said, they are known in the market different- ly as pipe fittings, a totally different commercial commodi- ty. The expression "pipe fittings" merely denotes that it is a pipe or tube of a particular length, size or shape.  "Pipe fittings" do not cease to be pipes and tubes; they are  only a  species thereof. This aspect of the matter can be  illus- trated  by  the decision of this Court in  Indian  Aluminium Cables  Ltd. v. Union of India and others, [1985]  3  S.C.C. 284.  In that case the question was whether "Properzi  Rods" manufactured  and cleared by the assessee fell within  Entry 27(a)(ii)  of the First Schedule to the Central Excises  and Salt Act, I of 1944. That entry read as follows: Aluminium (a) wire bars, wire rods and castings, not otherwise  speci- fied. It  was contended, on behalf of the appellant,  inter  alia, that, commercially, Properzi Rods are not known as wire rods in the trade and that a person wanting to purchase  Properzi Rods  asks specifically for Properzi Rods and not  for  wire rods.  Reliance  was also placed on the view taken  by  this Court that words and expressions describing an article in  a tariff  schedule should be construed in the sense  in  which they  are  understood  in the trade by the  dealer  and  the consumer.  The  Court held that Properzi Rods  were  only  a species of wire rods. It pointed out: "To sum up the true position, the process of manufacture  of a product and the end use to which it is put, cannot  neces- sarily  be  determinative  of  the  classification  of  that product  under  a fiscal schedule like  the  Central  Excise Tariff. What is more important is whether the broad descrip- tion of the article fits in with the expression used in  the

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Tariff.  The  aluminium wire rods, whether obtained  by  the extrusion  process, the conventional process or by  Properzi process,, are still aluminium wire rods. The process of 64 manufacture  is  bound to undergo  transformation  with  the advancement in science and technology. The name of the  end- product  may,  by  reason of  new  technological  processes, change but, the basic nature and quality of the article  may still  answer  the  same description. On the  basis  of  the material before us, it is not possible to record a  positive finding  that  Properzi Rods and wire rods  are  treated  as distinct  items  in commercial parlance. Properzi Rod  is  a wire  rod subjected to the Properzi process and is used  for transmission of high voltage electric current." The  position  is somewhat similar in the present  case.  As explained above, the goods described in the tariff,  namely, pipes  and tubes are designed to meet various types  of  re- quirements.  Normally pipes and tubes are produced  as  long and  straight pieces. But by themselves they  cannot  fulfil all the needs or the end use for which they are intended. To get the maximum use out of the pipes and tubes, it is neces- sary  not only to produce long and straight pipes and  tubes but  also to turn out pipes and tubes of smaller  dimensions and  of different shapes and curves such as  bends,  elbows, ’T’  pieces, ’Y’ pieces, plugs, caps, flanges,  joints,  un- ions, collars and so on. This is done by a process of  forg- ing,  welding,  hammering and so on applied  to  the  longer tubes  but basically the items remain the same and  the  use also  remains the same. The tariff entry calls for  no  dis- tinction between pipes and tubes manufactured out of sheets, rods,  bars,  plates or billets and those  turned  out  from larger pipes and tubes. In these circumstances it is  diffi- cult  to  say  that pipe fittings, though they  may  have  a distinctive  name or badge of identification in the  market, are not pipes and tubes. It is true that all pipes and tubes cannot  be described as pipe fittings. But it would  not  be correct  to say that pipe fittings are not pipes and  tubes. They  are only a species of pipes and tubes. The use of  the words "all sorts" and the reference to the various processes by which the excisable item could be manufactured set out in the  tariff entry are comprehensive enough to  sweep  within their fold the goods presently under consideration.     A certain amount of reliance has been placed on  entries in the Harmonised Code as well as in the Customs Cooperative Council  Nomenclature  (CCCN). We do not  think  that  these entries  and specifications are very helpful. The CCCN  con- tains  a  number of entries in Section XV,  namely,  heading Nos. 73.17 to 73.20. While heading Nos. 73.17 to 73.19  talk of  pipes, tubes and conduits, heading No. 73.20  speaks  of "tube and pipe fittings (for example, joints, elbows, unions 65 and flanges) of iron and steel". Section XVI also deals with some types of pipes and tubes. The position is similar under the  Harmonised  Code. In Section XV, there  is  an  equally meticulous sub-division. Heading Nos. 73.02 to 06 deal  with various  types  of  pipes  and  tubes.  Then  comes  heading No.73.07 which specifically talks of "tube or pipe  fittings (for example, couplings, elbows, sleeves) of iron and  steel (including stainless steel)" and proceeds to set out various subdivisions  of  these  items one of which  is  (7307.23  & 7307.93) "butt welding fittings" which is the item of  manu- facture  in  the present case. It is true  that  "tubes  and pipes"  and  "pipe fittings" fall under  different  subitems under the above Codes where the two expressions are used  in contrast  and the sub-classification is more detailed.  That

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dichotomy cannot be imported into the present context  where there  is only one comprehensive and generic entry. We  can- not, therefore, derive any assistance from those entries.     For  the  above reasons we are of the opinion  that  the view  taken  by  the Tribunal is not correct  and  that  the assessee’s contention that the goods in question fall  under item  26AA(iv) should be accepted. We, therefore, set  aside the order of the Tribunal and direct the modification of the assessments  accordingly. In the circumstances, however,  we make no order as to costs. P.S.S.                                                Appeal allowed. 66