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PETITIONER: INDIAN ALUMINIUM CABLES LTD.

       Vs.

RESPONDENT: UNION OF INDIA & ORS.

DATE OF JUDGMENT27/05/1985

BENCH: CHANDRACHUD, Y.V. ((CJ) BENCH: CHANDRACHUD, Y.V. ((CJ) PATHAK, R.S. MUKHARJI, SABYASACHI (J)

CITATION:  1985 AIR 1201            1985 SCR  Supl. (1) 731  1985 SCC  (3) 284        1985 SCALE  (1)976  CITATOR INFO :  RF         1986 SC1730  (8)  R          1990 SC 616  (5)  RF         1991 SC 999  (14)  RF         1991 SC1028  (13)

ACT:      Central Excise and Salt Act. 1944:      First  Schedule   Entry  27  (a)  (ii)  and  Entry  No. 68.‘Properzi Rods’-Classification of-Explained.      Interpretation of Statutes:      Central Excise Tariff-Fiscal Schedule-Classification of product-Process  of   manufacture  and  use  of  product-Not necessarily determinative of classification.      Words & Phrases:      Properzi Road’-Meaning  of-Central Excise  &  Salt  Act 1944, First Schedule Entry 27 (a) (ii).

HEADNOTE:      The  appellant-Company   carries  on  the  business  of manufacture and  sale of  aluminium conductors  used for the purpose of  transmission of  high voltage  electric current. There were three different manufacturing techniques by which rods were  obtained: by  extrusion, by  conventional rolling and by  the Properzi  method. The  rods prepared by the last method was known as Properzi Rod.      The Superintendent  of Central  Excise called  upon the appellant-Company to clear the Properzi Rods manufactured by it after  payment of duty under Entry No. 27 (a) (ii) of the Central Excise  Tariff on  the basis that Properzi Rods were aluminium wire  rods. Aggrieved by that order, the appellant filed an  appeal under  s. 35 of the Central Excise and Salt Act, 1944  which was  dismissed by the Deputy Collector. The appellant thereafter  filed a  revision against  that  order under s.  36 to the Central Government, and the order of the Deputy Collector  was set aside, and the matter was remanded to the  Appellate Authority  for deciding the appeal afresh. In view of the order of remand the 732 appellant  withdrew   the  writ   petition  which   it   had simultaneously filed,  challenging the  order of  the Deputy Collector. After  the remand  the appeal  was heard  by  the

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appellate  Collector,   and  the  appellant  relied  on  the affidavits and  opinions of  experts in  support of its case that Properzi  Rods fall  under the  residuary entry and not under Entry No. 27 (a) (ii). The Appellate Collector however dismissed the  appeal. The revision application and the writ petition to  the High Court against the aforesaid order were also dismissed.      In the  appeal to this Court it was contended on behalf of the appellant, that Properzi Rods are not wire within the meaning of Entry No 27 (a) (ii) of the First Schedule to the Act for  the following  reasons: (1)  Commercially, Properzi Rods are  not known as wire rods in the trade person wanting to purchase  Properzi Rods  asks specifically  for  Properzi Rods and  not for  wire rods.  (2) Properzi  Rods are mainly used for the manufacture of aluminium conductors and cables, while wire  rods are  used mainly for making nuts, bolts and rivettes (3)  A wire  rod is  limited by  its length,  while Properzi Rods  are only  available in  coils. (4)  Aluminium wire rods are available not in continuous length but only in short length.  (5) Aluminium  wire rods are neither accepted nor commercially  required for  the purpose of manufacturing aluminium conductors  and cables.  (6) The  manufacturers of aluminium wire  rods do not have the capacity to manufacture Properzi Rods.  (7) The  Indian Standards  Institution which prescribes specifications for various commercial commodities has prescribed separate specifications for Properzi Rods and aluminium wire  rods  (8)  In  the  Cost  Accounting  Record (Aluminium) Rules  1972, Properzi  Rods are shown separately from aluminium  wire rods  the latter  being shown under the description  ‘other   rolled  products’.  (9)  The  Properzi process is  a specialised  process evolved only in the field of aluminium for the manufacture of aluminium rods which are suitable for  being used as aluminium cables and conductors. The Properzi  process is  wholly unknown  in  the  field  of manufacture of iron and steel rods.      Dismissing the Appeal, ^      HELD: 1.  From the  description of  ‘Properzi  Rod’  as contained in  the various  affidavits filed on behalf of the appellant itself,  it is  clear that  Properzi Rod is a wire rod. Entry  No 27 (a) (ii) comprehends "wire bars, wire rods and castings,  not otherwise  specified". The last clause of this entry,  "not otherwise  specified" must govern not only the expression  ‘castings’ but  the expressions  ‘wire bars’ and ‘wire  rods’ also.  Since Properzi  Rods,  which  are  a species of  wire rods,  are not  otherwise  specified,  they would fall under Entry No. 27(a) (ii). [738F-G]      2. In  determining the  meaning or connotation of words and expressions  describing an article in a tariff schedule, one principle  which is  fairly well  settled is  that those words and  expressions should  be construed  in the sense in which they  are understood  in the  trade, by the dealer and the consumer.  The  reason  is  that  it  is  that  who  are concerned with  it and,  it  is  the  sense  in  which  they understood it  which constitutes the definitive index of the legislative intention. [739 A-B] 733      Commissioner of  Salt Tax,  Madhya Pradesh  v.  Jaswant Singh Charan  Singh [1967  2 SCR  720. 723 Minerals & Metals Trading Corporation of India Ltd. v. Union of India; [1973]1 SCR 997, 1002, Dunlop India Ltd. v. Union of India; [1976] 2 SCR 98,  113., State  of U.P.  v. M/s.  Kores (India)  Ltd.; [1977]1 SCR  837, 839.,  Delhi Cloth  and General  Mills Co. Ltd. v. State of Rajasthan [1980] 3 SCR 1119, 1115, referred to.

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    In the  instant case,  however the  contention  of  the appellant itself  in the  earlier revision application which was filed  by it  before the  Government of  India, was that Properzi Rods  had no  commercial market  as such.  That  is clear from the Remand Order. After the remand, the appellant contended once  again  before  the  Appellate  Collector  of Central Excise  and Customs,  New Delhi,  that Properzi Rods are not "goods" within the meaning of the Central Excise Act since they  are neither marketed as such nor are marketable. Commercial  parlance   assumes  importance  when  goods  are marketable. It  is therefore  not possible  to hold that the goods in question are not wire rods. There is preponderating evidence on  record to  show that  they are  nothing  but  a species of  wire rods  despite the  special method  of their manufacture and the use to which they are put. [739 C-F]      3.  The  genus  is  ‘aluminium  wire  rods’  while  the Properzi Rod  is a  species belonging  to that genus. Though the Central  Excise Tariff  does not  give the definition of wire rods,  the expression ‘wire rod’ has been defined n the Indian Customs  Tariff Guide,  Wire Rods are synonymous with wire bars.[737 E;  738 E]      4. The  process of manufacture of a product and the end use to  which it is put, cannot necessarily 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 description  of the article fits  in  with  the  expression  used  in  the  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 manufacture is bound to  undergo transformation  with  the  advancement  in science and  technology. The name of 17 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.[740 A-C]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION; Civil  Appeal Nos.  2729 and 2730 of 1982.      From the Judgment and order dated 7.5.1982 of the Delhi High Court  in Civil Writ No. 934 of 1972 & Order No. 162/82 passed by  Sh. D.N.  Mehta, Addl.  Secretary to the Govt. of India.      KK. Venugopal,  Krishna Kumar,  Ms. Bina Gupta, and Ms. Laxmi Venugopal for the Appellant. 734      M.M. Abdual Khader, N.C. Talukdar, Girish Chandra, C.V. Subba Rao and Ms. A. Subhashini for the Respondents.      The Judgment of the Court was delivered by      CHANDRACHUD, CJ: These two appeals involve the question as to  whether ‘Properzi  Rods’ manufactured  and cleared by the appellant, the Indian Aluminium Cables Ltd., fall within Entry No.  27 (a)  (ii) of the First Schedule to the Central Excises and  Salt Act,  1 of  1944 and,  if so,  under which category of  the articles  mentioned therein. The Government of India  contends for  the application of that Entry while, according to  the appellant,  ‘Properzi Rods’ fall under the residuary Entry 68. Civil Appeal No. 2729 of 1982 arises out of a  judgment dated  May 7, 1982 of the High Court of Delhi in Civil  Writ Petition  No. 934  of 1972.  Civil Appeal No. 2730 of  1982 is  directed against  Order No.  162  of  1982 passed by  the Government of India in a revision application against the  order dated  September 7,  1982 passed  by  the

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Appellate Collector  of Central Excise, New Delhi. Order No. 162 of  1982 of  the Government  of India  was passed by the Additional Secretary  and the Joint Secretary, Government of India, in its Ministry of Finance, Department of Revenue.      The  appellant  Company  carries  on  the  business  of manufacture and  sale of  aluminium conductors  used for the purpose of  transmission of  high voltage  electric current. One of  its factories is situated at Faridabad, in the State of Haryana.  The affidavits filed by the appellant show that there are  three different manufacturing techniques by which rods are obtained: by extrusion, by conventional rolling and by the  Properzi method.  In the extrusion process, rods are manufactured by  forcing the  metal through  a sized die. In the conventional rolling process, billets of definite weight are first  cast. Thereafter,  they are pre-heated well above the recrystallization  temperature in a loop mill, where the rods  are   coiled  in  between  two  passes  to  compensate exothermic heat produced by rolling. In the Properzi method, aluminium ingots are charged in melting furnace, each charge consisting of  2500 pounds  which takes about 30 minutes for melting. After  the ingots  are  subjected  to  the  melting process,  the   aluminium  is  transferred  to  the  holding furnaces, from  where it  is taken  to the  holding pot. The metal which it poured is cooled by water sprays, as a result of which  it is  solidified and  emerges in  the form  of  a continuous bar.  The bar is rolled and comes out in the form of a  hot rolled  rod of  9.5  mm.  diameter  in  continuous length. This rod is known as Properzi Rod. 735      The First  Schedule to  the Act  of  1944  contains  68 entries, the last of which, Entry No. 68 is, broadly, in the nature of  a residuary  entry. It will be necessary to go to that entry  only if  the Properzi  Rods with  which  we  are concerned in  these appeals,  do not fall under Enter No. 27 (a) (ii),  as is contended on behalf of the Government. That entry reads as follows:      "Aluminium-           (a) (ii)  wire bars,  wire rods  and castings, not           otherwise specified."      By an order dated September 1, 1970, the Superintendent of Central  Excise, Faridabad,  called upon the appellant to clear the Properzi Rods manufactured by it, after payment of duty under  Entry No.  27 (a)  (ii) of  the  Central  Excise Tariff on  the basis  that Properzi  Rods are aluminium wire rods. Aggrieved by that order, the appellant filed an appeal under section  35 of  the Act  which was  dismissed  by  the Deputy Collector  of Central Excise. Chandigarh, on February 7, 1972.  The appellant  filed a revision against that order under section  36 of  the Act  to  the  Central  Government. Simultaneously, the  appellant also filed Civil Writ No. 310 of 1972 in the High Court of Delhi, challenging the order of the Deputy Collector. The High Court directed the Government to dispose  of the revision application within one month and kept the  writ petition  pending for admission. The order of the Deputy  Collector was  set aside  by the  Government  in revision and  the  matter  was  remanded  to  the  Appellate Authority for  deciding the  appeal afresh.  In view  of the order of remand, the appellant withdrew the writ petition on May 18,  1972. After the remand, the appeal was heard by the Appellate Collector  on July  22, 1972. The appellant relied on the  affidavits and opinions of experts in support of its case that  Properzi Rods  fall under the residuary entry and not under  Entry No.  27(a)  (ii).  However,  the  Appellate Collector dismissed  the appeal  on September  7, 1972.  The appellant filed a revision application against the appellate

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order and it also filed a writ petition in the High Court of Delhi, being  Civil Writ  Petition No.  934 of  1972. Having failed in  the revision  application as  also  in  the  writ petition, the appellant has filed these two appeals.      Shri Venugopal, who appears on behalf of the appellant, contends that  Properzi Rods  are not  wire rods  within the meaning of 736 Entry No.  27 (a) (ii) of the First Schedule to the Act, for the following  reasons: (1)  Commercially, Properzi Rods are not known  as wire  rods in  the trade.  A person wanting to purchase Properzi  Rods asks  specifically for Properzi Rods and not for wire rods. (2) Properzi Rods are mainly used for the manufacture  of aluminium  conductors and  cables, while wire rods  are  used  mainly  for  making  nuts,  bolts  and rivettes. (3)  A wire  rod is  limited by  its length, while Properzi Rods  are only  available in  coils weighing 500 to 2000 kg.  of continuous  length ranging  from 2625 meters to 10500 meters,  with a uniform standard thickness of 9.50 mm. diameter. (4)  Aluminium wire  rods  are  available  not  in continuous length  but only in short length ranging from 150 meters to  400 meters.  (5) Aluminium  wire rods are neither accepted  nor  commercially  required  for  the  purpose  of manufacturing  aluminium  conductors  and  cables.  (6)  The manufacturers  of  aluminium  wire  rods  do  not  have  the capacity  to  manufacture  Properzi  Rods.  (7)  The  Indian Standards Institution  which prescribes  specifications  for various  commercial  commodities,  has  prescribed  separate specifications for  Properzi Rods  and aluminium  wire rods. (8) In  the Cost  Accounting Record  (Aluminium) Rules, 1972 prescribed by the Government of India, Department of Company Affairs, Properzi  Rods are  shown separately from aluminium wire rods,  the latter  being shown  under  the  description ‘other rolled  products’. (9)  The  Properzi  process  is  a specialised process  evolved only  in the field of aluminium for the manufacture of aluminium rods which are suitable for being used  as aluminium cables and conductors. The Properzi process is  wholly unknown  in the  field of  manufacture of iron and steel rods.      In support  of these  points, reliance is placed by the appellant upon  the expert  opinions of  Shri  V.A.  Gadgil, Associate Professor  of Metallurgy,  College of Engineering, Poona, Dr.  K.R. Satyanarayan,  Professor and  Head  of  the Department of Metallurgy, College of Engineering, Poona, Dr. R.D.  Chaudhari,   Professor  of   Metallurgy,  College   of Engineering, Poona and Dr P.R. Khangaonkar, Senior Professor and Head  of the  Department of Metallurgy, Regional College of Engineering,  Nagpur. Reliance  is  also  placed  by  the appellant on  the separate specifications made by the Indian Standards Institution for Aluminium Properzi Rods on the one hand and  wire rods  on the  other. Finally,  the  appellant draws sustenance  to its  case from  the affidavits filed by Jashwantrai Gangadas  Mehta and  Shamseer Singh  Parmar, the former being  a partner  in a  concern dealing with the sale and distribution of nonferrous metals and 737 aluminium products  and the  latter being a managing partner of a  concern which  deals with  the sale and manufacture of aluminium products. In their affidavits, they have described the qualitative  difference between  Properzi Rods  and wire rods and  have stated  that, in commercial parlance, the two are considered as distinct items.      Turning first  to the affidavits of the academics, they lay accent  on the  basic difference  between the process of manufacturing Properzi  Rods and  the  wire  rods.  That  is

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demonstrated in the affidavits of Shri V.A. Gadgil, Dr. K.R. Satyanarayan and  Dr. R.D.  Chaudhari. Dr.  P.R. Khangaonkar has described  with particularity the Properzi process which is  adopted  by  the  appellant’s  plant  at  Faridabad  for manufacturing  Properzi   Rods.  Contrasting   the  Properzi Process with  the extrusion  process, Dr. Khangaonkar states in his  affidavit that the raw material used in the Properzi process is  aluminium ingots whereas it is aluminium billets in the  other processes. He concludes that, from an expert’s point of  view, the  Properzi Rods cannot be put in the same category as  conventionally rolled aluminium rods. Though we have no doubt that the data contained in these affidavits is based on  true facts,  we find  it difficult  to accept that Properzi Rods  cannot  be  described  as  wire  rods  merely because the  process of  manufacturing the  two articles  is different. It  is  significant  that  the  appellant  itself obtained a  licence in  L-4 form  to manufacture  "aluminium wire rods".  It is only because of the particular process to which the wire rods are subjected, namely, the process, that the end product is called Properzi Rods. In other words, the genus is  ‘aluminium wire  rods’ while the Properzi Rod is a species belonging  to that genus. Not only did the appellant obtain a licence to manufacture ‘aluminium wire rods’ on the strength of  which it  manufactures Properzi  Rods, but  the classification list in From No. 1 submitted by it on October 10, 1969  also declared  that the  goods manufactured  by it were to  be warehoused  as "aluminium  wire rods 3/8". It is somewhat interesting  that  though  the  contention  of  the appellant was  that Properzi  Rods fall under residuary Item No. 68, the appellant expressed its willingness before us to accept the view of the Additional Secretary in revision that Properzi Rods  can fall  under the description "castings not otherwise specified"  in Entry  No. 27(a)  (ii) of the First Schedule to  the Act.  The reason why the appellant has come to the  Court appears to be that previously, it was enjoying an exemption  from payment  of  excise  duty  by  virtue  of Notification No.  46/70  dated  March  1,  1970,  which  was rescinded by Notification No. 74/70 dated March 26, 1970 738      It may be mentioned that in the Aluminium Control Order issued by  Government of India, Ministry of Steel and Mines, Properzi Rods are mentioned as "Wire Rods". In the Circulars issued by  Cable and Conductors Manufacturers Association of India  also,   such  rods  are  described  as  "Wire  Rods". Undoubtedly, these considerations are not conclusive but, it cannot be  denied that  they are  relevant. They  show  that Properzi Rods are but a species of wire rods.      The  specifications  issued  by  the  Indian  Standards Institution  are  for  ensuring  quality  control  and  have nothing to  do with the class to which the goods belong in a tariff schedule.  Considering the  use to which the Properzi Rods are  put, they  may have to meet a different and higher quality control  than the ordinary wire rods. But, that does not mean  that Proparzi Rods are not comprehended within the expression ‘wire rods’.      The very  affidavits on which the appellant relies show that Properzi  Rods are  obtained, in  the first place, by a process of  casting as  cast bars, which ultimately come out in the  form of  rods having  a 9.5  mm diameter. Though the Central Excise  Tariff does  not give the definition of wire bars or  wire rods,  the  expression  ‘wire  rod’  has  been defined in  the Indian  Customs Tariff Guide thus: "Wire rod is of  any shape  generally round and between 5 mm and 14 mm diameter and  is intended  for conversion  into wire".  Wire rods are synonymous with wire bars.

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    From the  description of ‘Properzi Rod’ as contained in the various  affidavits filed  on behalf  of  the  appellant itself, it is clear that Properzi Rod is wire rod. Entry No. 27 (a)  (ii) comprehends "wire bars, wire rods and castings, not otherwise  specified". The  last clause  of this  entry, "not  otherwise   specified"  must   govern  not   only  the expression ‘castings’  but the  expressions ‘wire  bars’ and ‘wire rods’  also. Since  Properzi Rods, which are a species of rods,  are not otherwise specified, they would fall under Entry No. 27 (a) (ii).      The  affidavits  to  which  we  have  referred  assert, particularly those  of the  two dealers,  that in commercial parlance Properzi  Rods are not called wire rods and the two are treated  as distinct  species of  goods. Shri  Venugopal places strong reliance upon these affi- 739 davits and argues that whether a particular item falls under a particular  entry must be determined with reference to its description  in   commercial  parlance.   This   Court   has consistently taken the view that, in determining the meaning or  connotation  of  words  and  expressions  describing  an article in  a tariff schedule, one principle which is fairly well-settled is  that those  words and expressions should be construed in  the sense  in which they are understood in the trade, by the dealer and the consumer. The reason is that it is they  who are  concerned with  it and, it is the sense in which they  understand it  which constitutes  the definitive index of  the legislative  intention. (See  Commissioner  of Sales Tax,  Madhya Pradesh  v. Jaswant  Singh Charan  Singh; Minerals &  Metals Trading Corporation of India Ltd v. Union of India; Dunlop India Ltd. v. Union of India; State of U.P. v. M/s.  Kores (India)  Ltd.; and,  Delhi Cloth  and General Mills Co.  Ltd. v.  State of  Rajasthan. The  difficulty  in applying the  principle of  these decisions  to the  instant case is  that the  contention of the appellant itself in the earlier revision  application which  was filed  by it before the Government  of India,  was that  Properzi  Rods  had  no commercial market  as such.  That is  clear from  the Remand Order No. 764 of 1972 dated May 16, 1972 passed by the Joint Secretary to  the Government of India. After the remand, the appellant  contended   once  again   before  the   Appellate Collector of  Central Excise  and Customs,  New Delhi,  that Properzi Rods  are not  "goods" within  the meaning  of  the Central Excise  Act since  they are neither marketed as such nor marketable.  Commercial parlance assumes importance when goods are  marketable. It  is therefore not possible to hold that the  goods in  question are  not wire  rods.  There  is preponderating evidence  on records  to show  that they  are nothing but  a species  of wire  rods  despite  the  special method of  their manufacture  and the  use to which they are put. We  may also  add that  the statements contained in the affidavits of  Jashwantrao Gangadas Mehta and Shamseer Singh Parmar cannot  be accepted at their face value. Both of them appear to be dealers in sales and distribution of wire rods. Their affidavits  do not  show any familiarity with dealings in Properzi  Rods. The  knowledge claimed  by them  does not stem from  their personal experience but is in the nature of hearsay. 740      To sum up the true position, the process of manufacture of a  product and  the  use  to  which  it  is  put,  cannot necessarily 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 description of  the article fits in with the expression used

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in the  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 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 are treated as distinct items in commercial parlance.  Properzi Rod  is a wire rod subject to the properzy  process and  is used  for transmission of high voltage electric current.      For these  reasons, we confirm the judgment of the High Court and the order passed by the Government of India in its Finance Department  dated March  15, 1982  and dismiss these appeals with costs. N.V.K.       Appeals dismissed. 741