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PETITIONER: COLLECTOR OF CENTRAL EXCISE, BOMBAY

       Vs.

RESPONDENT: M/S K.W.H. HELIPLASTICS LIMITED

DATE OF JUDGMENT:       12/01/1998

BENCH: J.S. VERMA, B.N. KIRPAL, V.N. KHARE

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T V.N.KHARE, J.      These two  appeals are directed against the order dated 12.8.92 passed  by the  Customs, Excise  and Gold  (Control) Appellate Tribunal,  New Delhi  (hereinafter referred  to as the  ‘tribunal’),   whereby   the   tribunal   allowed   the respondent’s  appeals   holding  that  the  tanks  and  vats manufactured by  the assessee would be classified under sub- heading 3926.90 of the schedule to the Central Excise Tariff Act, 1985  as "other  articles of  plastics" and  not  under heading 39.25  and sub-heading 3925.10 as "builders ware" of plastics.      The facts of the case, briefly sated, are these :      The  respondent   herein  is  engaged  in  business  of manufacture of  vessels, chemical  tanks, reaction  vessels, pipes and  gobar gas plants. On a surprise inspection of the respondent’s factory  by the  Central Preventive Unit of the Central Excise Department it was found that the respondent’s unit was  engaged in manufacture and sale of reservoir tanks etc. without payment of excise duty. Earlier, the respondent claimed exemption  from licensing  control by  declaring the goods manufactured  by them  being  goods  covered  by  sub- heading 3926.90 of the Central Excise Tariff Act. The Excise authorities being  of the opinion that there was suppression of material facts in the declaration given by the respondent with  the  purpose  of  evading  duty,  22  tanks/reservoirs manufactured by  the respondent were seized. Consequently, a show-cause  notice  dated  16.1.1989  was  served  upon  the respondent, whereby  the assessee was directed to show cause why duty amounting to Rs. 4,97,883 towards the goods cleared by them be not demanded and recovered under rule 9(2) of the Rules read  with proviso  to Section  11(A) of  the Act.  In response to  the said  show  cause  notice,  the  respondent submitted its  explanation wherein  it was  stated that  the goods manufactured  by them were exempt from payment of duty as  the  same  fall  under  sub-heading  3926.90  as  "other articles of  plastics". The  Additional Collector or Central Excise, Bombay  held that  heading  39.25  covers  not  only plastic tanks used in the construction of building, but also in the construction of industrial plants. The explanation of

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the respondent  that the  heading 39.25  should be given the restricted meaning  and confined  to the  reservoir used  in construction of  building was  rejected. On  the question of application of  extended period  of limitation  contained in proviso to  Section 11(A)  of the  Act for  the  purpose  of raising demand, the Additional Collector held that since the respondent had  misled the  department into  believing  that these were  articles of  plastics falling  under sub-heading 3926.90 and that, they had deliberately suppressed the facts that the  goods manufactured  by them  are actually  storage tanks, the  demand raised  by the  department deserved to be confirmed.      Being aggrieved,  the respondent  preferred  Appeal  No E/8153/88-C against  the order  confirming the demand raised by the Department and imposing penalty, besides confiscating 182 plastic reservoirs, inter alia, contending that the good manufactured by  them  are  classifiable  under  sub-heading 3926.90 as  against sub-heading  3925.10 and that the demand of duty  beyond the  period of six months is barred by time. The respondent also preferred Appeal No. 3104/90C before the Tribunal  against  the  order  of  the  Collector  (Appeals) setting aside the approval of the classification list by the Assistant Collector.  Since both  the appeals  raised common question of  facts and  law, they  were  heard  and  decided together by  the tribunal.  The tribunal  held that  for the goods  to   be  classified   under  sub-heading  3925.10  as "builders ware  of plastics"  not elsewhere  as specified of included, it  was necessary  for the department to establish that  the   reservoir/tanks,  Vats  and  similar  containers manufactured by  the respondent  were essentially  "builders ware". The  tribunal further held that since no evidence was produced by  the department  to  establish  that  the  goods manufactured by  the respondent  were essentially  "builders ware", their  classification under sub-heading 3925.90 would be appropriate.  Consequently, both the appeals were allowed by the impugned order. The foremost question that arises for consideration in these appeals is,  as to  whether the  goods manufactured  by  the respondent fall  under sub-heading  3925.10 of the Tariff or they fall  under sub-heading  3926.90, as "other articles of plastics" and were exempt from duty.      Before we  answer the  question,  it  is  necessary  to reproduce the  relevant heading, sub-heading and description of the  goods occurring  in classification list contained in Chapter 39 of the Act.                      Heading 39.25 Heading      Sub-heading       Description      Rate of No.          No.               of goods         duty 39.25                          Builders ware of                                plastics, not                                elsewhere speci-                                fied or include               325.10           Reservoirs, tanks                                vats and similar                                containers, of a                                capacity exceeding                                300 litres.          30%                 ‘Other articles of plastics’ Heading     Sub-heading     Description of goods    Rate No.         No.                                     of duty 29.26                       Other articles of plas-                             tics and articles of                             other materials of                             heading Nos.3901 to 39.14 ******            ******            *****            *******

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            3926.90        Other                        30%      The case of the respondent before the Tribunal was that they are  supplying tanks  and vats to industrial plants and just because  of usage for industrial purpose, such tank and vats  cannot  be  classified  under  heading  39.25  of  the classification list.  The Tribunal, while accepting the case of the respondent, held that in the absence of any evidence, that tanks  and vats  manufactured  by  the  respondent  are purchased  and  used  by  the  builders  while  constructing building, they do not answer the description "builders ware" under the  main heading 39.25. This approach of the Tribunal was not legally correct. It was admitted before the tribunal by the respondent that they have been selling tanks and vats to the  government department  etc.  for  purpose  of  water storage and  supply. This  admission unambiguously indicates that these  tanks and  vats can  be used  and are capable of being  used   for  water  storage  either  plant.  The  term "building ware"  is not  defined anywhere  and  as  such,  a controversy arose  before the Tribunal whether the tanks and vats manufactured by the respondent would fall under heading 39.25,  as   "builders  ware   of  plastics,  not  elsewhere specified   of   included"   or,   plastics".   Under   such circumstances, it  would have  been more appropriate for the Tribunal to  have applied  Rules of  Interpretation  of  the Excise Tariff,  rule a whereof provides that the goods which cannot be  classified in  accordance with rules 1.2 and 3 of the  Rules,   they  shall   be  classified   under   heading appropriate to the goods to which they are most akin.      Apparently,  rules   1,2  and   3  not  applicable  for resolving the  dispute and, as such, what was required to be done by  the Tribunal  in the  present case was, to find out the relationship  of goods  manufactured by  the respondents with the description of goods under disputed headings of the classification  list,  as  contended  by  the  parties.  The relationship of  goods with  particular heading depends upon the description, purpose and use of the goods. Note 11(a) of Chapter 39  at the  Act, provides that heading 39.25 applies also to  reservoir, tanks,  including septic  tank, vats and similar containers. The purpose and use of these goods is to hold liquids  or something  in liquid  form  in  process  of manufacture as  in tanning  and dyeing etc., and thus can be used and  are capable  of being  used of  water  storage  in connection  with   raising   of   construction   or   mixing construction materials.  It is  not disputed  that the goods manufactured by  the respondent  are  tanks  and  vats.  The description and  usage of tanks and vats manufactured by the respondent tallies  with the  description of  goods given in Note 11(a)  of Chapter  39 at  the Act.  We, therefore, find relationship  between   the  goods   manufactured   by   the respondent with  the heading  39.25. Once  it is established that the  description  of  the  goods  manufactured  by  the respondent are  akin to  description of  goods  given  under heading  39.25   and  sub   heading  3925.10,  there  is  no difficulty in  holding that  the tanks and vats manufactured by the  respondent would  fall under  heading 39.25  of  the Tariff. We accordingly hold that tanks and vats manufactured by the  respondent are  classifiable as   "builders  ware of plastics" and  the view  taken  by  the  Tribunal  that  the classification of  goods, i.e.,  tanks  and  vats  would  be appropriate under  sub-heading 3926.90 of the classification list, and are exempt from excise duty, is erroneous.      It was  then contended on behalf of the respondent that these appeals  deserved to  be remanded  to the Tribunal for deciding the question as regards the application of extended period of limitation. It is true that since both the appeals

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of the respondent were allowed by the Tribunal on the ground that  the   goods  manufactured   by  the   respondent   are classifiable  under   sub-heading  3926.90,   there  was  no occasion for  the Tribunal  to deal  with  the  question  of extended period  of limitation. Under such circumstances, we feel that  this question  required to  be considered  by the Tribunal.      We accordingly set aside the orders of the Tribunal and remit the  appeals to the Tribunal for deciding the question relating to application of proviso to Section 11A of the Act in the  present case.  The appeals  are allowed accordingly. There shall be no order as to costs.