evolution of central excise duties in india-1944 to 1985

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EVOLUTION

OF CENTRAL EXCISE DUTIES

IN INDIA

–

1944 to 1985

K. G. Kulkarni Supdt. Central Excise (Retd.)

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To my wife

Late Dr. Kalindi Kulkarni,

who inspired me

to undertake this passionate task.

Nothing can replace the loss,

No word can explain the pain,

But memories of you and

Your beautiful smile

Will be a treasure forever

Like a new minted coin

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Preface

This book contains the history of evolution of Central Excise Duties in India. This

evolution is only of historical importance. The period covered is from the 1944 to 1985 as

with effect from 01-03-1986, the Government of India adopted the internationally accepted

Harmonised System of Nomenclature (HSN). Under this system, everything under the Sun is

covered e.g. the previous tariff schedule contained only the commodity i.e. for example,

Cotton yarn (Tariff Item 18A) or Cotton Fabrics (Tariff Item 19). However, under HSN,

chapter 52 covers Cotton i.e. cotton raw, cotton carded, cotton slivers, cotton waste, cotton

fabrics etc. Under HSN, government has to choose which commodity is to be taxed and at

what rate and remaining items could be exempted in the tariff itself by indicating tariff rate as

„Nil‟.

The information contained in this book is a work of compilation of information from

various sources such as Notifications, Budget Speech, Trade Notices, Circulars, Tariff

Advices and other materials such as Court decisions, Tribunal decisions, decisions of Central

Government in Revision Application. I have also referred to the work of Kautilya,

“Arthashastra”.

I hope this work will be appreciated by all as this book contains a lot of information

relating to different commodities.

In completing this task, I shall not forget the important work of dictation and typing

done by my friend Mr. Deepak Dabade, who did it very sincerely. My thanks are also to Mr.

Solankar, Inspector of Central Excise, who helped me in getting some Circulars, Trade

notices etc. I am also thankful to my daughter-in-law Advocate Gauri Kulkarni, who helped

by reading my notes and rendering valuable suggestions from time to time. Last but not least,

thanks are also due to all my friends in Solapur, my home for last forty years.

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Prevalent currency during the period 1944 to 1985:

Upto 1958 (i.e. introduction of decimal system):

3 Pies = 1 Paisa

12 Pies or 4 Paisa = 1 Anna

16 Annas = 1 Rupee

From 1958 onwards (after adoption of decimal system):

100 Naye Paise = One Rupee

The nomenclature „Naye‟ was added to the currency after adopting decimal system to

indicate that it is the one hundredth part of Rupee (as old paisa was 64th

part of old one

rupee).

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CONTENTS

Chapter One Purpose and Scope of the Book

Chapter Two Introduction

Chapter Three Earlier Period

Chapter Four State Budget Control in Arthashastra

Chapter Five British Regime

Chapter Six Growth of Excise Duty in India

Chapter Seven Legislative History of Excise Duty in India

Chapter Eight Nature of Excise Duty in India

Chapter Nine Excise Duty – Taxable Event

Chapter Ten Types of Excise Duties

Chapter Eleven Administration of Excise Duties

Chapter Twelve Commodity Index

1 Sugar

1-A Confectionary

1-B Prepared or Preserved Foods

1-C Food Products

1-D Aerated Waters

1-E Glucose & Dextrose and Preparations thereof

1-F Maida)

2 Coffee

3 Tea

3-A Pan Massala

4-I Un-manufactured Tobacco

4-II (1) Cigars and Cheroots

4-II (2) Cigarettes

4-II (3) Biris

4-II (4) Smoking Mixtures

4-II (5) Chewing Tobacco

4-II (6) Snuff

4-II (7) Hookah Tobacco

5 Salt

6(i) Motor Spirit

6(ii) Power Alcohol

7 Kerosene

8 Refined Diesel Oil

9 Diesel Oil – Not otherwise specified

10 Furnace Oil

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11 Coal and Coke

11-A Petroleum products - Not Otherwise Specified

11-AA Petroleum Gases

11-B Omitted

11-C Omitted

11-D Omitted

11-E Electricity

12 Vegetable Non-Essential Oils

13 Vegetable Products

14 Paints and Varnishes

14-A Soda Ash

14-AA

Inorganic Chemicals, namely, Calcium, Carbide, Bleaching

Paste, etc.

14-AAA Organic Chemicals

14-B Caustic Soda

14-BB Sodium Silicate

14-C Glycerine

14-D Synthetic Organic Dyestuff

14-DD Synthetic Organic Products

14-E Patent or Proprietary Medicines

14-F Cosmetics and Toilet Preparations

14-FF Tooth Paste

14-G Acids

14-H Gases

14-HH Fertilizers

15 Soap

15-A Plastics

15-AA Organic Surface Active Agents

15-B Omitted

15-BB Omitted

15-C Starch

15-CC Molasses

15-D Polishes and Creams for Furniture, and Footwear

16 Tyres

16-A Rubber Products

16-AA Synthetic Rubber

16-B Wood and Articles of Wood

17 Paper and Paper Boards

18-I to III Man-made Fibres

18-IV Non-Cellulosic Waste, All sorts

18-A Cotton Yarn

18-B Woollen & Acrylic Spun Yarn

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18-C Silk Yarn

18-D Jute Yarn, All sorts

18-E Non-Cellulosic Spun Yarn

18-F Flax Yarn and Ramie Yarn

19 Cotton Fabrics

20 Silk Fabrics

21 Woollen Fabrics

22 Man-made Fabrics

22-A Jute Manufactures

22-AA Flax and Ramie Fabrics

22-B Coated Fabrics

22-C Linoleum

22-D Omitted

22-E Typewriter and Similar Ribbons

22-F Mineral Fibres and Yarn

22-G Floor Coverings

23 Cement

23-A Glass and Glassware

23-B Chinaware and Porcelainware

23-C Asbestos Cement Products

23-D Omitted

23-E Marble

24 Omitted

25 Iron and Steel Products thereof

25-A Omitted

26 Steel Ingots

26-A Copper and Copper Alloys

26-AA Iron or Steel, Products

26-B Zinc

27 Aluminium

27-A Lead

28 Tin Plates and Tinned sheets

28-A Electrical Stamping and Laminations

29 Internal Combustion Engines

29-A Refrigerating and Airconditioning Appliances

30 Electric Motors and Parts

30-A Power Driven Pumps

30-B Motor Starters

31 Electric Batteries

32 Electric Bulbs and Tube

33 Electric Fans and Regulators

33-A Wireless Receiving Sets

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33-AA Parts of Wireless Receiving Sets

33-B Electric Wires and Cables

33-C Domestic Electric Appliances

33-D Office Machines

33-DD Computer

33-E Electricity Supply Meters

33-F Musical System

34 Motor Vehicles, Tractors and Trailers

34-A Parts of Motor Vehicles, Tractors and Trailers

34-B Fork Lift Trucks and Platform Trucks

35 Cycles and parts of cycles other than motor cycles

36 Footwear

37-I Cinematograph Film Unexposed

37-II Cinematograph Film Exposed

37-A Gramophones and parts thereof

37-AA Tape Recorders

37-B Cinematograph Projectors

37-BB Television Images and Sound Recorders and Reproducers

37-C Photographic Apparatus and Goods

37-CC Television Cameras (including Video)

38 Matches

39 Lighters

40 Steel Furnitures

41 Crown Cork

42 Pilfer Proof Corks

43 Wooltops

44 Watches, Clocks and Timepieces

45 Safety Razor Blades / Weighing Machines

46 Metal containers, not elsewhere specified

47 Electronic Machines for games

48 Safe and Strong Boxes, etc.

48A Travel Goods

49 Rolling Bearings

50 Welding Electrodes

51 Coated Abrasives and Grinding Wheels

51A Hand tools and cutting tools

52 Bolts, nuts and screws

53 Zip or slide fasteners

54 Pressure Cookers

55 Vacuum Flasks

56 Playing Cards

57 Camphor

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58 Menthol

59 Sound and image recording articles

60 Adhesive Tapes

61 Electric Lighting Fittings

62 Tool Tips

63 Wire Ropes

64 Carbon Black

65 Rubber Processing Chemicals

66 Permanent Magnets

67 Graphide Electrodes and Anodes

68 All other goods, not elsewhere specified Chapter Thirteen Rules.

Chapter Fourteen Terminology.

Chapter Fifteen Formation of CEGAT, CBE&C

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CHAPER ONE - PURPOSE AND SCOPE OF THE BOOK

The scope and purpose of writing this book is, first, to give a general idea to the

common man – man in the street – who may not have any awareness of this taxation. This is

because Excise being an indirect tax, it was not visible to common man to that extent as that

of other direct taxes, like income tax, sales tax, etc, which have acquired public exposure.

Whereas it was the industrial community, like manufacturers, processors, etc, for whom this

tax has always been a topic of hot discussion.

Secondly, the present generation does not have any idea as to how, why and when the

duty of excise came into existence, its coverage, its implications and implementation, etc.

The system of excise, commodities brought into the excise net, the pattern of levy of the

excise duty and the laws and rules relating to excise duty, keep changing from time to time.

As readers will notice as they read through this book, these were set of rules framed by the

British with a chief motive to extract as much amount of taxation as possible from India so as

to enable them to transfer the revenue so generated to the British Government in London.

After independence, the set of rules have been amended keeping the assessee in view.

Especially, since the year 2000, the present system of granting exemptions to those

commodities, which do not generate assessable revenue, is the correct policy of tax

collection.

The principal intention of this book is to emphasize pre-1985 era, since from the year

1985 a system of internationally approved nomenclature, HSN was introduced by the

Government of India, thus giving the excise classification international standard.

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CHAPTER TWO - INTRODUCTION

It is my humble intention to give the history of excise and its evolution in India. This

book is a sincere effort to give an idea about the growth of excise duty in India, through the

colonial period and after the independence. This book is a compilation of the scanty record

now available and the author does not claim that the information contained in this book is

absolutely correct in as much as it is based on whatever record is available for use.

While dealing on this subject, I will elaborate more on the rules, that were framed

from time to time, than the Act of Excise. The Act merely gave the picture as to which

commodities were liable to excise duty, whereas it is the rules, which play an important role

in exploiting the idea of excise in generating revenue. In other words, Act was the objective

and the rules were the instrument to implement that objective. How the rules keep changing!

More industry-friendly the rules, more revenue they generate, even though, of late, their

number is reduced.

Readers will come across, against most of the consumer items, the words “tariff rate”

and “effective rate”. “Tariff rate” means the rate that has been fixed by the legislature

(Parliament) whereas the “effective rate” is the actual rate that is leviable for duty of excise.

These effective rates are fixed as per the Exemption Notification issued under Rule 8 of the

Central Excise Rules, 1944. The Government is empowered to issue such Exemption

Notifications fixing the rate not more than the tariff rate as prescribed by the Parliament, e.g.

when the tariff rate of any commodity is 20% ad valorem the Government can fix the duty

from 0 to 19.99% and under no circumstances the effective rate cannot be higher than the

tariff rate, which is illegal.

Of late, the use of computers has risen. Computer is a boon to mankind. Since

computer has got wide application and also it can be put to exhaustive use, their usage in

monitoring and collecting Excise Duty definitely a good source for the Government of

getting the manufacturing units within the excise net and to have proper control over them.

In the excise, there have been certain items which came under its purview much early,

like Salt (since the year1870), Sugar and Match sticks (both in the year1934), Tea and Coffee

(both in the year1944), which many generations have unwillingly paid taxes on these

commodities. The people of India were so accustomed to these taxes that they did not even

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feel the pinch of the burden of taxation. So dead were their feelings that Mahatma Gandhi,

the father of nation, aptly selected the item of Salt to instill the commotion of freedom into

their minds, which spread like a wild fire and dared to say „Quit India‟ to the British rulers

who ruled over India.

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CHAPTER THREE - EARLIER PERIOD

During the earlier period, the concept „protection‟ covered the entire social system,

which included education, health, transportation, communication, etc. For undertaking these

activities the state had to raise finance and, therefore, since long it has been the favourite

subject of all the rulers to raise finance. Taxes in the various forms, and on various

professions/jobs, were collected long before the British arrived in India.

The taxes were collected even before the Mughal period. During the Roman period

the taxes were collected though, however, the rate of tax was only about one per cent of the

value of the article involved.

Taxation in Ancient India:

(Manushyaanaam Vrittirarth

Manushyawatee Bhoomirityartha

Tasyaa Pruthivyaa Laabhpaalnopaaya

Shaastramarth Shaastramiti

(Adhikaran 15)

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(Man‘s livelihood depends on wealth. The land where man lives on earth is wealth.

The science, which deals with such acquisition of land and its maintenance, is the science of

wealth.)

In ancient India the taxation system was found in the treatise of the great thinker

Kautilya‟s “Arthashastra”. Kautiliya decided “artha” as vritti, i.e. livelihood manusya vrittir

arthah manusyavati bhumir ity artatah, tasyah prithivya lanhapalanosastram arthasastram

iti (15.1.1-2). Since very early times Artha has been regarded as one of the four purusarthas,

“goals of human life”, the other three being, Dharma, Kaama and Moksha.

In this connection, Artha is understood for the material well being as well as the

means of securing such well being, particularly, wealth.

According to Kautiliya, the definition of Arthashastra had a two-fold aim. First, it

sought to show how the ruler was expected to protect his territory. This protection (palana)

refers principally to the administration of the state. Secondly, it showed how a territory

should be acquired. This acquisition (labha) refers principally to the conquest of territory

from others that involved a consideration of a foreign policy of the state. These two, i.e.

protection and acquisition, covered the entire range of state activity. Arthashastra is thus the

science of statecraft and administration.

In order to do what is beneficial to the people, viz., Loksangraha, the state was

expressed to engage itself in various activities (karmas). The ruler was expected to undertake

works like settlement of virgin land (sunya nivesanam), building of dams (setubandha), tanks

and irrigational works, providing pastures for cattle (vraja), opening trade routes (vanik

patha) and many more similar activities which were specially prescribed in Chapter 2 of

Kautiliya‘s Arthashastra.

If rulers were righteous, people also were righteous, said Kautiliya. Even in

Mahabharata it was said yatha raja tatha praja. (As the ruler is, so are the ruled)

The effective administrative apparatus and enterprises depend on finance. Kautiliya

was keenly conscious of the fact that public finance was the backbone of the state. Evaluated

by the modern standards, Arthashastra is a unique authoritative text on public finance. While

Aristotle and Greeks condemned interest, trade and exchange, Kautiliya recognized their use

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and importance in the economy of national life. The principles on which the taxation system

was based were sound and reasonable. To use the language of modern economists, ability and

least sacrifice were the guiding principles of the framers of the financial regulations in the

ancient times.

The treasury had also its sources in revenue. Like a gardener, who plucks flowers

from the garden without cutting their roots, the ruler should collect revenue without

destroying the sources.

A proficient ruler was also expected to be a profound scholar. The reason is – “the

ruler is respected in his own country, but a scholar is respected everywhere – svadese pujyate

raja, vidvan sarvatra pujayate

In our times in India, the action oriented philosophy of Kautiliya had been restated by

Swami Vivekananda in his memorable words. ―Can anything be done unless everybody

exerts himself to the utmost? It is the man of action, the lion heart that the Goddess of

Wealth resorts to. No need of looking behind – forward. We want infinite energy, infinite

zeal, infinite courage and infinite patience. Then only will the great things be achieved.‖

Kautiliya is one of the greatest Indian thinkers, whose contribution deserves much

better study and understanding. His treatise Arthashastra means Economics. However,

Kautiliya did not use this word in the limited sense of Economics. He has defined

arthashastra as a science, which deals with sources of sustenance of mankind.

According to Kautiliya, the earth on which mankind lives is the true source of

sustenance and wealth of humanity. The science, which teaches one, the means to acquire,

i.e. to conquer as well, the means to protect, i.e. to maintain, the earth is called arthashastra.

Kautiliya‟s Arthashastra was primarily written as a guide for the king who was

expected to be able to rule with justice and equity to ensure protection and prosperity of his

subjects. Kautiliya‟s idea of arthashastra encompasses religion, statesmanship, international

relationships, espionage and counterespionage, wars, treatise, administration of law and

order, collection of revenue, rules of taxation, accounting of government revenue and

expenditure, detection of forty different types of frauds, punishment for concealed income,

administration of justice, disputes relating to property, crimes, regulation of industry, trade,

commerce, agriculture, mining, forestry, construction of palaces and forts and roads, etc.

There was hardly any area of human endeavour, which Kautiliya did not analyse in depth.

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He repeatedly stressed that the King must know all these subjects and be able to manage his

kingdom to ensure ever-increasing prosperity.

Mr. Earl Warren, the Chief Justice of the United States Supreme Court, while laying

the foundation stone of the American Embassy building in Chanakyapuri, New Delhi, on 1st

September of 1956, remarked on the great significance of the fact that the diplomatic enclave

was named after Chanakya. He described Chanakya, also known as Kautiliya, as ―India‘s

first and greatest diplomat‖ and added ―I am conscious of the fact that even three hundred

years before Christ, India had a diplomat who wrote that a ruler should do nothing to

displease the people.‖ ―It proved‖, Mr. Warren, added, ―that Indian diplomats, so long ago

were imbued with a high social conscience.‖ He added further that the ―Government of

India has done a great service to a mankind by bringing all diplomatic missions together in

an integrated colony for the purpose of improving relations among representative of various

nations. India paid a fitting tribute to the memory of Chanakya, the celebrated sage

diplomat, who was the minister of Emperor Chandragupta Maurya and author of

Arthashastra, a treatise on statecraft and diplomacy.‖

During the period of Chanakya, Kautiliya‟s taxation was as under.

01) 1/6th

of the price of salt that was imported,

02) 16%, 20% and 11% respectively for measuring, weighing and scaling of

the goods that were sold in the market,

03) 4 maash each for testing and certification of weights and measures,

04) 1 kakan for each examination/scrutiny of weights and measures,

05) Octroi for entry into the territory -

a) 1.00 pan for the goods loaded on one animal,

b) 1.25 pan for each bullock-cart,

c) 1.00 mash for the goods carried on head,

d) 1.00 against importing an animal each, but 25% against sheep and goat,

06) Octroi against imports and exports -

a) 20% common,

b) 16.2/3% on fruits, flowers, dried fish, meat, grocery, etc,

c) in the range of 6.2/3% to 10% on wool, silk, cloth, liquors, elephant

teeth, turmeric, leather (hartal, manshil), etc.

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d) 4& to 5% tax on jaggery, sugar, salt, wood, yarn, cotton, animals,

medicines, etc.

07) 1/5th

in addition to the common taxes on the goods imported into the

city limits from the outside,

08) Water tax to be paid in the form of goods in the range of 1/5th

to 1/3rd

of the income,

09) 5 pan being the permission fee for performing plays or stage shows

to be paid by the theatre group, singers, magicians, etc.,

10) Prostitutes were required to pay their two days income each month,

11) Fishermen were required to pay 6th

part of their income when they

catch fish,

12) Octroi at the rate of 1/5th

to 1/6th

was required to be paid by the

merchants/traders upon importing the goods from foreign countries by

sea route; however, the goods damaged by water were exempted from

such octroi fee,

13) Ferrying charges were as under-

a) 1 mash per head

b)1 mash for small animal,

c) 2 mash for cow, horse, bull

d) 4 mash for camel buffalo,

e) 5 mash for bullock-card driven by one bull,

f) 6 mash for bullock-card driven by two bulls,

g) 7 mash for big cart,

h) 5 mash per sher of commercial goods,

i) double the rate for ferrying big rivers

14) every year the milkmen had to give (i) 84 kudav ghee, (ii) skin of dead

animals and (iii) specified tax,

15) 25% of the proceeds of the sales revenue generated by way of animal sale

was required to be paid to the King,

16) 1 mash licence fee per head for going out and coming into the country,

17) Cattle feed (grassland)

a) 1/4th

pan for camel, buffalo,

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b) 1/8th

pan for cow, bull, horse, donkey,

c) 1/16th

pan for other animals,

d) there use to be double the charge if the cattle remain in the cattle field

after eating grass,

e) four times more that of the payable was required to be paid for those

animals who stayed in the grassland,

f) old ox, castrated bull, newly delivered cow were exempted from

grassland taxation,

18) As regards the underground wealth -

a) 1/6th

to 1/3rd

of the valuation was eligible to be kept by the owner and

rest of the amount was required to be given to the King,

b) Wealth over and above the value of 1,000 pan belonged to the King,

c) Diamonds of whatever value were to be returned to the King.

Excise on Liquor:

„Suradhyaksa‟ was the Superintendent of Excise department who oversaw the

manufacture and sale of liquors. The state had monopoly over manufacture and sale of

liquors. Liquor houses were built outside the villages and consumption of liquor during the

daytime was strictly prohibited. Drunken people were allowed to go out of the liquor house,

instead facilities were provided for them to rest in the liquor house. The owner of the liquor

house was made responsible for the loss of personal property, if any, of the drunken people.

Revenue on sale of liquor and penalties on violations were the earning of the treasury.

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CHAPTER FOUR - STATE BUDGET CONTROL IN THE ARTHASAASTRA

The term “Budget” signifies estimation and organization of revenue and expenditure

of the state. A state will be sound and stable, which is well established on the sound financial

foundation, and sound & strong financial foundation is possible only on the basis of perfect

budgeting. Therefore, the budget plays a prominent role in the financial development of a

county.

Many writers have discussed various measures to improve a financial position of the

state for financial administration. The general management is to see that the expenditure of

the state should not forerun the revenue. It is amazing to note that the details of the fiscal

management recommended by Kautiliya are strikingly similar to the channels of modern

fiscal management. Kautiliya said all the efforts of the King had to be based on the strength

of treasury. So first of all, he went on adding, the King must look into that part of the

treasury, which was possible on account of nine elements that contribute towards it, namely -

i) Increase in commerce and trade,

ii) Good wishes of people of exemplary character,

iii) Arresting crime, such as robbery, etc.

iv) Reduction in the establishment expenditure,

v) Plenty of crops,

vi) Plenty of marketable goods,

vii) Freedom from calamity,

viii) Moderate taxes,

ix) Increase in the deposits of gold

The elements which cause adversities to the treasury were also identified by

Kautiliya, viz.,

Lack of spirit of seizing the opportunity,

Lending the state money on interest,

Illegal transactions

Misappropriation of state‟s funds,

Diminution of revenue,

Misappropriation of the valuables,

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Illegal exchange of goods and articles, and

Deflation.

Kautiliya contemplated raising the revenue of the state through several ways. Some

of them are as under.

a) Taxation (income from taxation),

b) Mining,

c) Excise,

d) Contribution, and

e) Miscellaneous.

Almost all commodities were made taxable including salt, water, personal income,

flowers, fruits, etc. Kautiliya was very clear in stating that the taxation should not cause

hardship to the consumers. He also took into consideration the expenditure on transit by

roadways as well as by waterways before the merchandise was assessed for taxation. The

ideal taxation rate according to Kautiliya was, 16% for regular commodities, for luxurious

items 32% and for other commodities, the rate was 8%.

Expenditure:

Contemplation and regulation of State Expenditure is as important as collection of

State Revenue.

According to Kautilya, the money may be spent at an appropriate time with a view to

achieve „trivarga‟ (three heads) namely „dharma‟, „artha‟, and „karma‟. Since the State is

given the responsibility of maintaining Army & Navy, the police, law and justice, medical

relief, sanitation measures, industries & manufacture etc., to mention a few items of

expenditure, were very large and amount of expenditure for the State used to be high. There

existed a clear indication of dividing the expenditure under „nitya‟ (plan) and „anitya‟ (on-

plan). Nitya is everyday expenditure and maintenance of large numbers of department‟s

expenditure and Anitya is on account of natural or man made calamities such as earthquakes,

floods, wars etc. etc., provision for which was made in State Budget.

Indeed, it is very much interesting to note that the Ex Finance Minister of India, Mr.

Yashwant Sinha, has fixed the rates of excise at 8%, 16% and 32% ad valorem, which is in

accordance with the taxation system in ancient India.

Law & Justice:

During the period of Kautilya, there were different branches of judiciary e.g. Civil,

Criminal, Tort, Contract, Limitation, Transfer of Property, Specific Relief. Kautilya suggests

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that only one person should not preside over the bench, it should be preferably be three

judges or one judge assisted by two other persons. The importance of evidence is the prime

element in the matter of justice during the ancient period like the modern times. The

credibility of the witness, his cross-examination etc. are also envisaged by Kautilya.

Although the aspect of limitation was considered, but it was not like the present times. There

were no counsels or advocates as we find in the modern times. Deterrent punishment was

given to the lawbreaker to ensure that the same offence is not repeated. Kautilya also

believed that implementation of the law is equally or even more important than framing the

law.

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CHAPTER FIVE - BRITISH REGIME

In India, until 1857, the British were fighting for the supremacy. At different periods

of time, the British acquired one territory after another, which belonged to the Indians. The

more their empire grew, more they needed the revenue. Salt was one of the articles that the

East India Company‟s servants attempted with more or less success to monopolise. In the

year 1865-67 Lord Clive established in Bengal a monopoly of the manufacture and sale of

salt with the sole object of providing adequate emoluments from the profits for the principal

persons concerned in the Government and of securing a share of revenue. This monopoly

was later extended to the other areas which fell to the East India Company by conquest or

otherwise.

The goods in the areas under the control of the company were subjected to town

duties, the imports from other areas attracted import duty. The duties on such imports were

called Inland Custom Duties and these duties were in substitution for the native system of

saver or transit duties on a number of different articles of merchandise. Inland Customs

Lines were established. The frontiers of these lines were shifted as the British acquired new

territories. To this the reference is found in the Manual of the Northern India Salt Revenue

Department.

―The Inland Customs Department was at this time at its zenith.

The business of the Department was simply to collect duties on

salt imported into the country as a source of revenue and to

prevent smuggling and to suppress the manufacture of earth

salt in the United provinces of Agra and Oudh. The Salt

Revenue Department in Punjab was controlled by the Punjab

Government.‖

The internal branch establishments were on an enormous scale. On 01.04.1868 there

were seventeen circles in the United Provinces of Agra and Oudh with as many European and

Eurasian officers in charge and as many as 1,260 subordinate officers were employed upon

preventive duties. The Great Customs Line, 2,472 miles in length stretched from Torbela on

the Indus (now in Pakistan) to the Mahanadi in the Sambalpur district of the Central Province

(present Bihar state) and was guarded by a strong army of 13,000 officers and men.

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Consignments of salt and sugar were liable to be examined on entering the jurisdiction of the

line, which was a zone of 10 to 15 miles in width and were actually examined at the chowkies

open to trade. This line was, in many places, a thick horny hedge, which was impassable by

man or beast with a high road alongside it. On this road peons on guard duty were posted at

night at regular intervals and the distance between the guards in the upper and more

important portion of the line being about a quarter of a mile. Messages could be sent up and

down the line by human voice, the guards and guard posts were regularly inspected and

patrolled and plains and fields on either side of the hedge or barrier were examined every

morning for tracks of head load smugglers.

This system of communication was in existence which I myself had witnessed while I

was on duty at Goa border. It was mandatory for the subordinate officers and inspectors to

prevent, e.g. smuggling, along the Goa border, which was done where the khambooks were

placed for the routine signatures of every officer on guard duty on the border. A book used to

be attached on each khambook, duly sealed, and the guard officer on duty was required to

sign in this book by putting his time of inspection. This book could not be removed without

the sanction of the higher officers and without breaking the seal.

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CHAPTER SIX - GROWTH OF EXCISE IN INDIA

Central Excise duty now formed substantial part of the revenue of our country.

The beginning of levy of excise in India appears to have started from 1894 with the

levy of duty on Cotton Yarn of finer counts and its extension was found in the year 1896

when the finer cloth was brought into the excise net. These were, however, abolished in the

year 1924-25.

There have been certain items which came under the purview of excise much early,

like Salt (since the year 1870), Sugar and Match sticks (both in the year 1934) Tea, Tobacco

and Coffee (all in the year 1944), which for generations have attracted payment of taxes.

It was in the year 1934, when the first state rationalization of Excise levy was

undertaken and their coverage was extended also to Steel Ingots, Mechanical Lighters in

addition to the items mentioned supra. By the year 1943, thus products of the organized

industries were brought into the excise net. Further following years also witnessed inclusion

of additional commodities into the purview of excise duty, which have been dealt with in

detail under respective chapter heading.

The year 1961 saw a policy change and in order to generate more revenue the duty of

excise was levied both on the raw materials and the intermediates like Soda Ash, Caustic

Soda, Glycerine, Coal tar, Dyes and its derivatives, zinc glass and glassware, patent and

proprietory medicines, cosmetics and toilet preparations, cellophane, chinaware and

porcelain.

In the Budget in year1963 a new concept for collecting revenue was introduced, that

is, surcharge at the rate of 10%, 20% and 33.1/3% of the basic excise duty was levied due to

China war.

In the Budget in the year1975, a new entry “Residuary Entry” was added, that is to

say, “All other goods not elsewhere specified”.

By the Budget in the year 1985, tariff schedule was taken out of Central Excises and

Salt Act, 1944, and a separate enactment was made, which is in existence till today, known as

Central Excise Tariff Act, 1985 (Number 5 of 1986). This new tariff is based on the HSN

(Harmonised System of Nomenclature) system containing the item description that is

internationally present, that is to say, commodity in India having tariff description (say,

Cotton as chapter heading 52) will be having same chapter heading in rest of the countries.

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This unanimity is a result of Brussels Conference in which this system was adopted to which

numbers of nations are signatories. Under this standardized system first two digits indicate

chapter number, next two digits indicates heading and last two numbers represent sub

heading of the commodity in question, for example, 5205.11 means 52 is chapter heading, 05

is cotton yarn and 11 relates to single yarn

Under this Act, everything under the sun was subject to the duty of excise but also it

is true that it paved way for innumerable litigations.

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CHAPTER SEVEN - LEGISLATIVE HISTORY OF EXCISE DUTY IN INDIA

Till the year 1943, the system adopted in India was that whenever any new Excise

imposts were proposed, the bill introducing it prescribed separate rules and regulations for its

administration, which took into account the special requirement of its levy and gave its

commodities a treatment appropriate to it.

In this way, by the year 1944, in India, there were as many as 16 separate enactments

for levy and collection of the duty of excise. Out of these 16 enactments, 9 enactments, viz.,

7 enactments related to Salt and 2 enactments related to Silver and Mechanical Lighters were

unimportant.

It was remaining 7 enactments or statutes covering commodities like (1) Motor Spirit,

(2) Sugar, (3) Matches, (4) Steel Ingots, (5) Tyres, (6) Tobacco, and (7) Vegetable Products,

were major revenue generating items. These seven statutes were consolidated into one Act –

Central Excises and Salt Act, 1944. This is why the word “excises” is mentioned in plural in

the said Act. This newly constituted act provided for the levy of Central Excise duty from the

whole of India including designated area.

“Excise” is a word of wide import. According to the dictionary, it is an indirect tax

on commodities manufactured, produced, sold, used or transported within the country.

According to Corpus Juris Secundum, the word “excise” means every form of indirect

taxation which is not a burden laid directly on persons or property or every form of change

imposed by the public authority for the purpose of raising revenue on the performance of an

act, enjoyment of privilege or engaging in an occupation.

The wide definition takes in all kinds of indirect taxes. However, whatever may be the

ordinary, natural, grammatical meaning of “excise” or the legislative or judicial practice in

other countries in regard to it, the term has acquired a restricted connotation in India on

account of the precise decisions, legislative powers between the Centre and the State.

In the year 1939, the term “duty of excise” was wide enough to include a tax on sales

under the Government of India Act, 1935, where power was expressly given to another

authority to levy a tax on sales. “Duty of Excise” had to be understood in the more restricted

sense than the expression would otherwise bear. (1984-15-ELT-7 (KER) refers)

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The definition of “Excise” in Webster‟s New International Dictionary gives in precise

terms the present state of excise as it evolved over a period of years. In doing so, it also

indicates the growing importance of excise as a source of. It reads -

(1) any duty, toll or tax,

(2) inland duty or impost levied upon the manufacture, sale or

consumption of commodities within the country; also a tax

upon pursuit or following certain support, trade or occupation

usually taking in this state for exactions for licenses.‖

Dr. Johnson, at the imminent risk of being subjected to prosecution for libel, defined

the word “Excise” in his dictionary as a “hateful tax levied upon commodities and adjudged

not by the common judge of property but wretches hired by those to whom excise is paid, can

hardly be ever forgotten.”

Thus based on the concept for duty on Salt, the Excise Duty is imposed on the goods

produced or manufactured (Entry 48, List I, 7th

Schedule to the Government of India Act,

1935; and Entry 84, List I, 7th

Schedule of the Constitution of India and the Section 3 of the

Central Excises and Salt Act, 1944 refers).

The meaning of “excise” as given in the English dictionary is, of course, very

comprehensive, as the writer of the dictionary has to include all possible uses to which the

word is put. In common parlance, the duty of excise is, more or less, connected with the

home manufacture or production even though its collection may be delayed till a later stage.

Stephen in his Commentary (Volume II, Chapter 7) following Blackstone‟s old definition

(Commentary (Volume 1, Chapter 8) has stated that “Excise duties are those duties which are

imposed by the Parliament upon the commodities produced and consumed in the country.

They are directly opposite in their nature to the Customs duties, for they are the inland

imposition paid on the consumption of commodities frequently upon the retail sale. This was

apparently based on the fact that about the middle of the 17th

Century there were Excise

duties laid on the makers and vendors of sale, etc.

In the Encyclopedia Britannica (Volume 8, Page 955, 14th

Edition) it has been pointed

out that in modern times; however, the term generally connotes a tax on articles of home

manufacture in contrast to the Custom duties, which are levied on certain articles that are

imported.

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In Halsbury‟s Laws of England, Hailasham Edition, Volume 28, Page 330, Note (a),

dictionary meaning has been adopted and the excise duties are taken to be the duties payable

on goods produced at home, whereas customs duties are the duties on the goods imported

into this country from abroad. The Excise duties now, however, comprehend other duties as

the entertainment duties.

An attempt is being made in this book to trace the growth of different items, details of

which are incorporated under items of the First Schedule to the Central Excises and Salt Act,

1944. This is attempted on the basis of whatever records/instructions/circulars available now.

It is not claimed that the information is cent percent accurate but this is an honest and sincere

attempt to trace the history of growth of Excise duties in India, covering a span of about forty

years, right from 1944 to the year 1985.

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CHAPTER EIGHT - NATURE OF EXCISE DUTY IN INDIA

In our country, there is no definition of “excise duty”, neither in the constitution of

India nor under the Central Excises and Salt Act, 1944, and hence this term has to be

interpreted in the natural sense. In the absence of any statutory definition of the expression of

“Excise Duty”, the question of its correct interpretation has often been a subject matter for

consideration of the courts. In a series of judgments, the Supreme Court of India had held

that the Excise Duty is essentially a tax on the production or manufacture of excisable goods

produced or manufactured within the country and is unrelated to the sale of the goods.

In fact, the excise duty is a tax charged on the manufacture or production of goods

and is not a tax on the sale or purchase of goods like purchase or sales tax. (1998(8) ELT-11

(Del) refers). The excise duty is an indirect tax whose incidence generally falls on the

consumption of goods. Though the event of the excise duty occurs at the time of the

production or manufacture of the goods, strictly speaking, it is a tax on the consumption of

the goods within the country of production. This is the well-known and well-accepted

concept of excise duty as well as in the law in this country. The excise duty is not directly on

the goods but on the activity of production or the manufacture of the goods and it is an

indirect tax, which the manufacturer or the producer of the excisable goods passes on and the

ultimate incidence is always on the consumer. (1984(24) ELT-507 (KAR)(D.B.) refers)

The commodity or the goods on which the excise duty is to be charged has to be seen

that (a) the levy must be upon the goods and (b) the taxable event must be the manufacture or

the production of goods. Further, the levy need not be imposed at the stage of manufacture or

production but can be imposed later so long as the character of the impost, i.e., it is a duty on

the manufacture or production, is not lost. (AIR-1962-SC-1281; AIR-1967-SC-1512 and

1986(24) ELT-507 (D.B.) refers)

Although the excise duty is an indirect tax, yet, between the manufacturer and his

customer, it forms part of the price of the goods sold or purchased. (1977(1) ELT (J-

65)(CAL) refers). The duty of excise is distinguishable from the sales tax but the excise duty

can be passed on to the consumer and, therefore, the consumer is as much interested as the

manufacturer himself in seeing to it that the provisions of laws are carried so that he does not

stand to lose. (1982(10) ELT-155 (GUJ) refers)

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CHAPTER NINE - EXCISE DUTY – TAXABLE EVENT

The excise duty is attracted the moment the goods are manufactured or produced

though its actual collection can be postponed to a subsequent date. (AIR-1962-SC-1006;

AIR-1962-SC-1281; AIR-1963-SC-1760; AIR-1967-SC-1512; AIR-1973-SC-225 and AIR-

1977-SC-1006 refers)

The taxable event in respect of duty of excise is the manufacture of goods and not

their removal. It can be levied at any convenient stage so long as the essential character of

the impost, i.e. it is the duty on manufacture or production, is not lost. Therefore, the method

of collection does not affect the essence of Excise Duty but only relates to the machinery of

collection for administrative conveniences. This inference is further supported by Section 4

of the Central Excises and Salt Act, 1944, which deals with the determination of the value for

the purposes of Excise Duty. (AIR-1962-SC-1281 and 1983(12) ELT-326 (GUJ) refers).

The material point of time with reference to which the value is determined under that section

is the time of removal of the article chargeable with the excise duty from the factory and not

the time when it is manufactured or produced. Therefore, subject always to the legislative

competence of the taxing authority, the said tax can be levied at a convenient stage so long as

the character of the impost, i.e. it is the excise duty on the manufacture or production, is not

lost. (1985(19) ELT-329 (MP) refers).

Section 3 of the Central Excises and Salt Act, 1944, provides that there shall be levied

and collected the duties of excise, in such a manner as may be prescribed, on all excisable

goods, other than salt, which are produced or manufactured in India and at the rates set forth

in the Schedule. It is, therefore, clear that as soon as the goods in question are produced or

manufactured, they will be liable for the payment of excise duty. While Section 3 of the said

Act mentioned supra, lays down the taxable event, the rule 9 and rule 49 of the Central

Excise Rules, provide for the collection of duty. There is distinction between collection and

levy of duty. Moreover, there is, in theory, nothing to prevent the Central Legislature from

imposing a duty of excise on a commodity as soon as it comes into existence – no matter

what happens to it afterwards, whether it be sold, consumed or destroyed or given away. It is

for the convenience of the taxing authority that the duty of excise is collected at the time of

removal of the commodity that is manufactured or produced in India. (1987(32) ELT

234(S.C.) refers)

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Taxable event is not independent of liability to pay duty or from the levy of duty.

Thus there cannot be different taxable events for the different purposes. (1988(33) ELT

1813(T) refers)

The Madhya Pradesh High Court has taken the view that the crucial time for levy of

duty is the “time of removal” as envisaged by the rule 9A ibid and not the date of

manufacture or production of goods in the factory. (1982(10) ELT-97 (M.P.) refers)

When a marketable commodity is created, excisability follows, whether such a

commodity is sold or not, therefore, the sale or the ownership of the excisable goods is

absolutely irrelevant for the purpose of taxable event under the Central Excise law. (1985(20)

ELT 179(S.C.) refers). As such there is nothing wrong in collecting the excise duty at the

stage of removal. (1986(25) ELT 727(T) refers).

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CHAPTER TEN – TYPES OF EXCISE DUTY

There are different types of excise duties, i.e.

a) Basic Excise duty leviable under Central Excises and Salt Act, 1944;

b) Additional Duty of Excise, in lieu of Sales tax, leviable under the

Additional Duties of Excise (On Goods of Special Importance) Act,

1957;

c) Special Duty of Excise, leviable under the Finance Act, 1963; Special

Excise Duty, which is also known as Auxiliary Duty or the Regulatory

Duty was levied for the first time in the year 1963 as a surcharge on

selective commodities to raise the additional resources to meet out the

expenses of China War but has now been continued. These duties are

levied as per the Finance Act, 1963, where under the provisions of the

Central Excise Act and the Rules made there under have been made

applicable to the Special Excise Duties.

d) Additional duty leviable on the specific items under the Act,

Additional Duty of Excise on Textile and Textile Articles Act, 1978;

e) Additional duty on minerals and oils, leviable under the Mineral

Products (Additional Duties of Excise and Customs) Act, 1978

The above-mentioned additional duties were in addition to the duty of excise, special

excise duty or any other additional excise duty. The additional duties on the specific

commodities were leviable only with a view to either curb the demand or consumption of

those commodities or generate revenue sources from the commodities, which can for the time

being bear the extra load of taxation.

Cess:

Cess on excise duty was leviable on certain specified commodities under various acts.

Cess was a tax imposed for the specific purpose with reference to some goods. Therefore, it

caused obligation on the collecting agency to utilize the same only for the purpose for which

it was levied. However, because of this the Cess did not cease to be a tax. In fact, Cess was

of the nature of excise duty as it was with relation to the production of goods and the same

was collected at the stage of their removal from the factory, therefore, the Cess was not

distinguishable from the duty.

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At present, the Cess is leviable on various articles, such as Biris, Coal, Coke, Copra,

Cotton, Coffee, crude oil, iron, jute products, manganese, marine products, natural gas, lime

stone, oil extracted from oil seeds, rubber, sugar, tea, textile and textile machinery, tobacco

and the tobacco used for the manufacture of biris under various Acts.

Further, cess is leviable only when the manufactured goods are delivered at the place

of manufacture and at the time of removal from the factory and not before that, that is to say

the cess is leviable on such goods that are exchangeable and they do have marketability at the

time of their removal from the factory or the place of manufacture. Cess is not a tax on the

purchase or consumption of raw material but is on the manufacture and production of goods

from such raw material. Thus the Parliament is competent to levy Cess under Entry 84, List I

of the 7th

Schedule of the Constitution of India.

Today, the levy of excise duty under the Central Excises and Salt Act, 1944, is on the

manufacture or production of goods, while in relation to the Cess, the Cess is leviable only on

the removal or clearance of goods. Therefore, exemption from the excise duty under rule

8(1) of the Central Excise Rules, 1944, does not mean exemption from the cess, unless such

Exemption Notification also refers to the relevant Act levying the cess.

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CHAPTER ELEVEN - ADMINISTRATION OF EXCISE DUTY

Physical Control

This control system was made applicable to manufactured Tobacco products such as

Biris, Snuff, Chewing Tobacco and other manufactured products like Khandsari Sugar,

Matchboxes, etc. Control on the unmanufactured tobacco commenced from the stage of

growing and curing the produce and continued till the unmanufactured product was about to

be consumed. This system envisaged control over storage and transport of non-duty paid as

well as duty-paid unmanufactured tobacco. Assessment of the goods was done by the

departmental officer under whose supervision the goods manufactured were removed. This

removal of goods was based on the strength of the document known as Transportation

Certificate issued by the departmental officers. The departmental officer also used to control

the transportation of unmanufactured tobacco products from the place of curing to the place

of warehouse and also controls the annual returns covering weight of tobacco for

transportation from the place of storage to the place of private warehouses and used to issue

Transport Permits.

Prior to 01.04.1958 there used to be a Range Office that consisted of one Inspector

and one Sepoy. The excise control was exercised on the basis of “physical control” in which

the inspector was responsible for controlling the factory by looking into production and he

was also responsible for removal of the goods produced on payment of duty. The documents

for this system were required to be prepared by the manufacturer of the goods and the same

were required to be countersigned by the inspector. This system was in vogue till the year

1969.

Self Removal Procedure

From the year 1969 onwards “Self Removal Procedure” was introduced by the

then Finance Minister (Late) Mr. Morarjibhai Desai. Thus a confidence was reposed by the

Government in the Licensees. The Government also published a booklet in the name and

style as “A Handbook on Self Removal Procedure” (Chapter VII- A, Rules 173A to 173P

refers, later this was substituted by Ministry of Finance (Department of Revenue) by

Notification No.182/69-C.E. dated 14.07.1969). This was a bold step by the Government to

administer the duties, which were hitherto administered under the Physical Control system.

By way of this procedure a greater faith was shown and the whole idea behind this trust was

that the assessee was free to remove the goods at any time without waiting for the Inspector‟s

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presence. Response to this procedure from the manufacturing community was positive and

the excise revenue also showed an upward increase.

In this procedure the countersignature of the Range Officer was not required to be

taken and the manufacturer was free to remove the goods manufactured under his own

signature. Naturally the manufacturers accepted this procedure whole-heartedly, which still

continues.

Production Based Control System

In the year 1978 “Production Based Control System” was introduced, in which

case, more efforts were made on the aspect of production; however, the earlier system of Self

Removal Procedure was also prevailing in addition to the new system of Production Based

Control System. This type of control applied to those excisable goods, which were not

covered by the Record Based Control or the Compounded Levy Scheme.

Under Production Based Control System periodical and systematic checks were

exercised at various stages of production to ensure proper accounting of the goods produced

or manufactured by the manufacturer. Even receipts of the duty paid goods that were

received in the factory were also subjected to thorough checking. In this process the

manufacturer was required to submit the list of goods manufactured by him as also the rate of

duty applicable along with the applicable notification granting exemption to the product.

This list was known as Classification List and this list was a proof that the concerned

assessee was free to remove such goods manufactured by him on this basis as also on the

basis of price list. However, in case, the department did not agree with the rate of duty or the

variation in classification, invariably the concerned officer used to issue a show cause notice

to the assessee indicating the grounds of non-acceptance of classification or the variation in

the classification or the rate of duty, as the case may be. This was done with due respect to

the laws and with a view to give assessee the benefit of the principle of natural justice.

Record Based Control System

Under this system, the manufacturer was required to get the rate of duty approved

from the department similar to the system of Production Based Control. Thus the

manufacturer was in a position to assess his goods to the duty and was in a position to

remove the goods without any interference of the departmental officer but after the payment

of duty so assessable. For the purpose of payment of duty the assessee was required to

maintain an Account Current (Personal Ledger Account) in which he had to enter credit

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earned from time to time and debit the duty so paid at the time of removal of the goods. A

monthly return was required to be submitted (RT-12) giving therein the information relating

to the production and clearance of the goods manufactured, stock of excisable goods in

balance, extract of Account Current and the clearance documents, etc.

The Government had issued a Notification Number 24/86-C.E. dated 10.02.1986 in

this connection and about twenty items were covered under this system. This was a system

under which assessee‟s account books, invoices, dispatch advices, etc, were accepted and

more trust was reposed in the assessee.

Compounded Levy Scheme

The Government introduced this Scheme taking into consideration the Small Scale

or decentralized sector and covered the commodities like Cotton Fabrics manufactured by

Powerloom owners, Battery parts, Coarse Grains, Plywood, Khandsari Sugar, Embroidery,

etc. Intention of the Government behind introducing this scheme was to offer assistance to

the small-scale sector/decentralized sector to make them viable for their existence vis-à-vis

their growth.

Under this Scheme duty was fixed for a specified period on the basis of number and

types of machines installed. Further, assessee was absolved from day to day exercising

excise formalities regarding maintenance of accounts, removal of goods, etc.,

Multiple Officer Range

The Government made reorganization of the Central Excise department mainly to

overcome the following lacuna it experienced, specially when the commodity

Unmanufactured Tobacco was concerned, which was a major revenue source.

(1) Lack of elasticity – wastage of manpower during slack season as

also, on the contrary, inadequacy of manpower during busy season,

(2) Lack of intensive control over the densely growing areas owing to

dissipation of staff in (a) comparatively sparse growing area and

(b) control over transport, warehousing and wholesale dealer;

(3) Weakness in supervision arising out of remote control by Circle

Officers and

the Assistant Circle Officers through correspondence and

inspection including inspection of the office records;

(4) High cost of collection.

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The advantages of the Multiple Officer Range system were -

(1) Close range checking and supervision by the deputy superintendent

with consequent improvement in frequency, intensity and quality

of the supervision,

(2) A single set of Range records other than the Survey Book and such

other records required to be maintained by executive officers for

noting declarations, field checks, etc, was possible to be

maintained. Thus reducing the volume of the scriptory work that

was involved in proportion to the number of Single Inspector

Ranges constituted into the Multiple Office Range. Such records

were proposed to be maintained by a Lower Division clerk posted

in the Range, as a result relieving the executive officers of their

time for more extensive and intensive field checks;

(3) In view of the fact that a senior officer of the grade of Deputy

Superintendent was in-charge of the Range and work was proposed

to be done on a functional basis, it was possible to effect reduction

in the total number of Officers and Sepoys now employed in the

growing area. For example, in an area where, say, eight ranges

now exists with 8 inspectors, 8 supervisors and 8 Sepoys, it was

possible to create a Multiple Officer Range with, say, 1 Deputy

Superintendent, 4 Inspectors, 4 Supervisors, 4 Sepoys and 1 Lower

Division Clerk.

(4) Difficulties that were experienced in manning growing ranges

during leave vacancies were removed,

(5) On account of the fact that the Deputy Superintendent was able to

exert more proximate control over the Inspectors and Supervisors,

there were reductions in the opportunities for corruption,

(6) This scheme of Multiple Officer Range also enabled the

withdrawal of officers from out of the way places to a center where

better amenities for living existed;

(7) Officers were in a better position to consult each other on their

doubts and as the deputy superintendent was always available, they

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were able to get immediate instructions from him in various

matters on different occasions;

(8) Primary control became really effective and it was largely possible

to ultimately withdraw control, except statistical and preventive,

over the areas, which formed the periphery to the heavily growing

areas.

(Circular of Ministry of Finance (Department of Revenue) bearing

number 40/102/5-CX dated 23.08.1956 refers.)

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CHAPTER TWELVE - COMMODITY INDEX

01. The following commodities were subjected to duty of excise.

Tariff Item

No. Commodity

Date of

imposition

of Excise

Duty

FOODS

1 Sugar 01.04.1934

1A. Confectionary 01.03.1968

1B. Prepared or Preserved Foods 01.03.1969

1C. Food Products 01.03.1970

1D. Aerated Waters 01.03.1970

1E. Glucose & Dextrose and preparations thereof 01.03.1970

1F. Omitted

2 Coffee 01.03.1944

3 Tea 01.03.1944

3A. Pan Masala 17.03.1985

BEVERAGES AND TOBACCO

4-I. Unmanufactured Tobacco 01.04.1943

4-II (1) Cigars and Cheroots 01.04.1943

4-II (2) Cigarettes 29.02.1948

4-II (3) Biris 01.03.1975

4-II (4) Smoking Mixtures 01.03.1973

4-II (5) Chewing Tobacco 01.03.1975

4-II (6) Snuff 01.03.1975

4-II (7) Hookah Tobacco 01.03.1979

CRUDE MATERIALS EXCEPT FUELS

5 Salt 1870

MINERALS, FUELS, LUBRICANTS AND RELATED MATERIALS

6(i) Motor Spirit 01.04.1917

6(ii) Power Alcohol 30.09.1931

7 Kerosene 01.04.1922

8 Refined Diesel Oil 01.03.1956

9 Diesel Oil, N. O. S. 01.03.1956

10 Furnace Oil 01.03.1956

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11 Coal and Coke 01.07.1959

11A. Petroleum Products, N.O.S. 24.04.1962

11AA. Petroleum Gases. 28.02.1982

11B. Omitted

11C. Omitted

11D. Omitted

11E. Electricity. 01.03.1978

VEGETABLE OILS AND FATS

12 Vegetable Non-Essential Oils. 01.03.1956

13 Vegetable Products 01.04.1943

CHEMICALS

14 Paints and Varnishes 01.03.1955

14A. Soda Ash 01.03.1961

14AA.

Inorganic Chemicals, namely, Calcium Carbide, Bleaching Paste,

etc 01.03.1970

14AAA. Organic Chemicals 17.03.1985

14B. Caustic Soda 01.03.1961

14BB. Sodium Silicate 01.03.1964

14C. Glycerin 01.03.1961

14D. Synthetic Organic Dyestuffs. 01.03.1961

14DD. Synthetic Organic Products 01.03.1966

14E. Patent or Proprietary Medicines. 01.03.1961

14F. Cosmetics and Toilet Preparations 01.03.1961

14FF. Tooth Paste 01.03.1974

14G. Acids 24.04.1962

14H. Gases 24.04.1962

14HH. Fertilizers 01.03.1969

15 Soap 01.03.1954

15A. Plastics 01.03.1961

15AA. Organic Surface Active Agents 01.03.1966

15B. Omitted

15BB. Omitted

15C. Starch 16.03.1976

15CC. Molasses 19.06.1980

15D. Polishes and creams for footwear furniture, etc. 18.06.1977

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MANUFACTURED GOODS CLASSIFIED CHIEFLY BY MATERIALS

16 Tyres 01.04.1941

16A. Rubber Products. 24.04.1962

16AA. Synthetic Rubber 01.03.1970

16B. Wood and Articles of Wood. 24.04.1962

17 Paper and Paper Board 01.03.1955

18-I to III. Man made fibres 18.06.1977

18-IV. Non-cellulosic Wastes, all sorts. 01.03.1978

18A. Cotton Yarn. 01.03.1961

18B. Woollen and Acrylic Spun Yarn. 01.03.1961

18C. Silk Yarn 17.03.1972

18D. Jute Yarn – all sorts. 17.03.1972

18E. Non-Cellulosic Spun Yarn. 18.06.1977

18F. Flax Yarn and Ramie Yarn 18.06.1977

19 Cotton Fabrics 01.01.1949

20 Silk fabrics. 01.03.1968

21 Woollen Fabrics 01.03.1955

22 Man-made fabrics. 18.06.1977

22A. Jute Manufactures. 24.04.1962.

22AA. Flax and Ramie Fabrics 18.06.1977

22B. Coated fabrics. 01.03.1968.

22C. Linoleum 29.05.1971

22D. Omitted.

22E. Typewriter and similar Ribbons 29.05.1971.

22F. Mineral Fibres and Yarns 16.03.1976

22G. Floor Coverings. 01.03.1979.

23 Cement. 01.03.1954.

23A. Glass and Glassware. 01.03.1961

23B. Chinaware and Porcelain ware. 01.03.1961.

23C. Asbestos Cement Products. 24.04.1962.

23D. Omitted.

23E. Marble. 17.03.1985.

24 Omitted.

25 Iron and steel products thereof. 01.03.1960.

26 Omitted.

26A. Copper and Copper Alloys. 01.03.1961.

26AA. Omitted.

26B. Zinc. 01.03.1961.

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27 Aluminium. 01.03.1960.

27A. Lead. 20.08.1965.

28 Omitted.

28A. Electrical Stampings and Laminations. 01.03.1974.

MACHINERY AND TRANSPORT EQUIPMENT.

29 Internal Combustion Engines. 01.03.1960.

29A. Refrigerating and Airconditioning Appliances. 01.03.1961.

30 Electric Motors and Parts. 01.03.1960.

30A. Power Driven Pumps. 01.03.1969.

30B. Motor Starters. 29.05.1971.

31 Electric Batteries. 01.03.1955.

32 Electric bulbs and tubes. 01.03.1955.

33 Electric Fans and Regulators. 01.03.1955.

33A. Wireless receiving sets. 01.03.1961.

33AA. Parts of wireless receiving sets. 01.03.1968.

33B. Electric wires and cables. 24.04.1962.

33C. Domestic Electric Appliances. 01.03.1969.

33D. Office machines and apparatus. 01.03.1970.

33DD. Computers. 16.03.1976.

33E. Electricity Supply meters. 29.05.1971.

33F. Musical system. 18.06.1977.

34 Motor Vehicles, Tractors and Trailers. 01.12.1956.

34A. Parts of Motor Vehicles, Tractors and Trailers. 29.05.1971.

34B. Fork Lift Trucks and Platform Trucks. 29.05.1971.

35 Omitted.

MISCELLANEOUS MANUFACTURED ARTICLES.

36 Footwear. 01.03.1954.

37-I. Cinematograph Film Unexposed. 01.03.1969.

37-II. Cinematograph Film Exposed. 01.03.1960.

37A. Gramophones and Parts. 24.04.1974.

37AA. Tape Recorders. 01.03.1974.

37B. Cinematograph Projectors. 29.05.1971.

37BB. Television image and sound recorders and reproducers. 28.02.1962

37C. Photographic Apparatus and Goods. 29.05.1971.

37CC. Television Cameras (including Videos) 28.02.1982.

38 Matches. 01.04.1934.

39 Lighters. 01.04.1934.

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40 Steel furniture. 01.03.1968.

41 Crown corks. 01.03.1968.

42 Pilfer Proof Caps. 01.03.1969.

43 Wool Tops. 01.03.1969.

44 Watches, Clocks and Timepieces. 18.06.1977.

45 Weighing machines. 18.06.1977.

46 Metal containers, not elsewhere specified. 01.03.1970.

47 Electronic machines for games. 28.02.1982.

48 Safe and strong boxes, etc. 01.03.1970.

48A. Travel goods. 17.03.1985.

49 Rolling bearings. 29.05.1971.

50 Welding electrodes. 29.05.1971.

51 Coated Abrasives and grinding wheels. 29.05.1971.

51A. Hand tools and cutting tools. 01.03.1994.

52 Bolts, Nuts and Screws. 29.05.1971.

53 Zip or slide fasteners. 29.05.1971

54 Pressure Cookers. 29.05.1971.

55 Vacuum Flasks. 29.05.1971.

56 Playing Cards. 29.05.1971.

57 Camphor. 29.05.1971.

58 Menthol. 29.05.1971.

59 Articles of a kind used for sound or sound and image recording. 28.02.1982

60 Adhesive Tapes. 29.05.1971.

61 Electric Lighting Fittings. 18.06.1977.

62 Tool Tips 01.03.1973.

63 Wire Ropes. 01.03.1973.

64 Carbon Black. 01.03.1973

65 Rubber Processing Chemicals. 01.03.1973.

66 Permanent Magnets. 01.03.1974.

67 Graphite Electrodes and Anodes. 01.03.1975

68 All Other goods, not elsewhere specified. 01.03.1975

In the following pages, I will go into the details of each of the above mentioned

commodity in order of their introduction to the duty of excise. Thus their sequence of

coming within the Excise ambit is maintained.

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TARIFF ITEM 1 - SUGAR

The honey bearing reed was merely another souvenir of the fabulous east when

Alexander brought some specimens home from India in 325 B.C. But as a mankind's sweet

tooth developed through the centuries, sugar cane became a factor in the international politics

having shaped the course of history in many politics including many of the archipelagos.

Sugar passes through five stages before it reaches the consumer in the white

granulated form. Initially, juice is extracted by passing the cane through rollers pressed

together by powerful hydraulic rams. The juice is then clarified by heating and liming and the

clear liquid is subjected to vapourize to remove excess water from the resulting thick syrup,

raw sugar is crystallised and dried in centrifugal machines.

Sugar is universally important item in peace and war. Most of the nations

strive for self-sufficiency.

Sugar was subjected to the levy of Excise Duty with effect from 01.04.1934. For the

purpose of levy of the said duty of excise the Government issued “Sugar (Excise Duty)

Order, 1934”, which was later on merged with the Central Excises and Salt Act, 1944. The

rules 83 to 92 related to the excise duty on sugar.

Initially, the definition of Sugar in the Central Excise Tariff, upto 1960, read as

―Sugar means any form of Sugar containing more than ninety per cent of sucrose‖. This

definition, however, did not contain any provision regarding the gradation of Sugar at the

time of the assessment and in order to come over this lacuna the definition mentioned supra

was amended with effect from 23.02.1960 which read as ―Sugar means any form of sugar in

which the sucrose content expressed as a percentage of the material dried to constant weight

at 105 degree Centigrade is more than ninety‖

Sugar (V.P. Sugar and Khandsari:

Sugar produced by the process known as “Vacuum Pan Process” was known as “V. P.

Sugar” and in case of the Sugar manufactured without employing Vacuum pan or Vacuum

evaporator was known as “Khandsari” sugar.

Palmyra Sugar

Palmyra Sugar means the sugar manufactured from jaggery obtained by boiling the

juice of the Palmyra palm. This sugar was exempted from the payment of Central Excise

Duty.

Compounded Levy Scheme for Khandsari Sugar

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Under this Scheme, the manufacturer, under rule 92A of the Central Excise Rules,

1944, was required to make an application for discharging his duty liability and he was

required to pay certain sum. The compounded levy was prescribed as per height and diameter

of the centrifugal machine and accordingly the rates were levied for individual units with the

aid of power and the units without the aid of power. The rates for the units that worked with

the aid of power were normally more than 25% of the duty liability of the units that worked

without the aid of power.

The set procedure for this scheme was very simple and the manufacturer who availed

the Compounded Levy Scheme, which also was known as “Special Procedure Scheme” was

required to make an application in proper form indicating his desire of availing this scheme.

This application was required to be made for each Sugar manufacturing season, i.e. from 1st

0ctober till 30th

September of the following year. The manufacturer, on payment of certain

sum, was exempted from the provisions of various rules, like

01. Rule 45 – Alteration of the movement of the factory equipments;

02. Rule 47 – Provision for storing the goods in Bonded Store Rooms;

03. Rule 48 – Exemption from B-2 Bond;

04. Rule 49 – Duty chargeable only on the removal of goods from the

factory premises or from the approved place of store;

05. Rule 50 – Non-excisable products not to be removed without

permission;

06. Rule 51 – Packing and weighment of goods;

07. Rule 51A - Removal of goods after payment of duty;

08. Rule 52 - Clearance on payment of duty;

09. Rule 52A - Goods to be delivered on gate pass;

10. Rule 53 - Daily stock account;

11. Rule 55 – Return of materials used and of goods manufactured;

12. Rule 83 – Maintenance of accounts at producing place of sugar,

whether exclusively or not, other than Khandsari and Palmyra;

13. Rule 223 - Stocks of excisable goods to be stored in an orderly

manner;

14. Rule 223A - Account of stock of goods in a factory or a warehouse to

be taken and the balance to be struck down;

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15. Rule 224 - Restriction on removal of goods;

16. Rule 224A - Cancellation of Central Excise documents;

17. Rule 229 - Provision of accommodation at factory or warehouse.

Thus it was clear that once the manufacturer had paid the compounded levy, he was

not required to do anything except maintaining a file containing Application for Special

Procedure and TR-6 Challans indicating the payment of said compound levy.

With effect from 01.03.1984 the duty on Khandsari Sugar was completely exempted.

Sugar (other than Khandsari/Palmyra sugar):

This type of sugar was also known as White Sugar.

During the British era in India the production of sugar was not sufficient to meet the

domestic requirements and hence sugar was imported. The sugar manufactured in Mauritius

and imported into India was popularly known as Mauritius Sugar. However, after

independence the Government took active interest and in the first and second five year plan

encouraged installation of sugar factories in the cooperative sector and thus helped boost the

sugar manufacture and sugar importation was reduced as much as possible.

A little deviation I make here. Before independence, there were made some successful

efforts to install sugar factory in the private sector, few of the names I do remember even

now are Ravalgaon Sugar Factory Limited and Saswad Mali Sugar Factory Limited (both in

the Bombay State then, now the state of Maharashtra) and Ugar Khurd Sugar Factory Limited

(in Bombay State then, now the state of Karnataka). Pioneer of sugar factories in the

cooperative sector was late Shri Vasantdada Patil who brought the farmers together,

encouraged them to produce sugar and formed a sugar factory of which the sugarcane

growers were the members. To acknowledge his efforts in the sugar field, the Government

had instituted Vasantdada Sugar Development Center in Pune, which conducts research and

development of sugar.

Coming back to the subject of Sugar from excise point of view, it was a plain truth

that sugar was manufactured from the sugarcane, which was an agricultural produce and it

depended much on the monsoon. In case of shortfall in rains, the same resulted in draught

condition and during the Sugar Season 1961- 62 and 1962 - 63 there was no sugar production

and as a result there was severe surge in sugar prices. As a precautionary measure the

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Government imposed a full control on this commodity from April 1963, which was,

continued upto 1966 - 67. In the Sugar Season 1967- 68, the Government adopted a policy of

partial de-control so as to encourage production of sugarcane and thereby sugar itself.

Government offered high prices as incentive to the sugarcane growers. In the modified

policy, major part of production of sugar was procured by the Government at a fixed price

solely for the distribution of controlled sugar to the domestic consumers and a portion of

sugar production was retained with the related sugar factories for sale in the free market and

this is how the words “Levy Sugar” and “Free Sale Sugar” came into existence.

This balanced policy adopted by the Government ensured that while the domestic

consumers obtained their requirements at a reasonable price fixed by the Government and

made available to the consumers in the Ration shops through public distribution system,

whereas, the sugar factories, on the other hand, were able to get the highest price for their

sugar in the market in terms of their free sale sugar quota and thus, in turn, were able to give

higher price to their sugarcane growers. During the Sugar Seasons 1967 - 68 and 1968 - 69

the sugarcane prices were quite substantially higher than the statutory minimum sugar cane

prices. The production of sugar went upto thirty six lacs metric tons and forty two lacs

metric tons in the Sugar Seasons 1968 - 69 and 1969 - 70 respectively. Thus sugar was

available to the domestic consumers in adequate quantity through controlled distribution

channel at a price fixed by the Government.

It is interesting to note that while the sugar was under price control including its

distribution and movement, sugar deliveries from the sugar factories to the market for free

sale were continued to be regulated in order to maintain reasonable and stable prices in the

market and to ensure availability of adequate supplies of sugar throughout the year at all

places in the whole of the country. By this judicious release of sugar it was ensured that

reserve stocks of sugar were available in the country to meet with any contingency. In order

to protect the interest of the sugarcane growers the control over minimum price of sugarcane

was continued and accordingly minimum sugar price was fixed for sugar crop in each Sugar

Season.

The Essential Commodities Act, 1955 (Number 10 of 1955) was enacted by the

Government whereby it obtained the powers to control production, supply and distribution of

the essential commodities, which also included Sugar. Section 3(2)(f) of the said Act read as

under.

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―for requiring any person holding in stock any essential

commodity to sell the whole or a specified part of the stock to

the Central Government or a State Government or to an officer

or an agent of such Government or to such other person or

class of persons and in such circumstance and as may be

specified in the order.‖

However, the Government was forced to review the entire Sugar policy in the light of

the changed circumstances since substantial portion of sugar was obtained by the

Government the price for which paid by the Government to the sugar factories was not much

remunerative.

Therefore, in the month of May1971, the Government decided to remove all controls

on sugar prices and distribution thereof.

As per Section 3(c) of the said Essential Commodities Act, where any producer or the

manufacturer was required by an order made with reference to the clause (f) of the sub

section (2) of section 3 ibid to sell any kind of sugar, whether to the Central Government or

to a State Government or to an officer or an agent of such Government or to any other person

or class of persons, and either no Notification in respect of such sugar was issued under sub

section 3(a) or any such Notification having been issued, had ceased to remain in force, then

not withstanding anything contained in sub section 3(c) the producer or the manufacturer was

required to be paid

an amount therefore which was required to be calculated with reference to such price of sugar

as the Central Government, may, by order, determine having regard to -

i) the minimum price, if any, fixed for sugarcane by the

Central Government under this section,

ii) the manufacturing cost of sugar,

iii) the duty or tax, if any, paid or payable thereon; and

iv) the security of a reasonable return on the capital employed

in the business of manufacturing sugar, and difference

prices were determined from time to time for different areas

or for the different kinds of sugar.

The definition of producer or manufacturer was given by way of Explanation.

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During this period the Public Distribution System was in force. This system was

adopted in which case the Levy Sugar was cleared from the sugar factory under the Sugar

Control Order issued under the Essential Commodities Act, 1955, the Government of India,

Ministry of Food & Agriculture, use to issue a release order for a certain quantity of Levy

Sugar to be released from each factory to be sold to the State Government or its nominee.

Thereafter, the State Government and the district authority concerned use to issue allotment

letters or sale notes of the said levy quota to the allottee units in their area or places specified

therein. Essentially the sugar factory was not allowed to clear any sugar from its factory

except by the relevant release orders issued by the Food Ministry. So rigid this legal set up

was that even for the factory canteen, sugar required was required to be released as per the

release order issued by the Government. This was strictly enforced by the Government to

ensure that the essential commodity is properly distributed at reasonable rates to all the

citizens without any discrimination.

The definition of “Levy Sugar” was that the sugar requisitioned by the Central

Government under clause (f) of sub section (2) of section 3 of the Essential Commodities

Act, 1955, and, naturally, the “free sale sugar” was the sugar other than levy sugar. This

system is still in vogue.

Different rates of duties of excise were charged for the levy sugar, like Basic Excise

Duty, Additional Excise Duty (in lieu of Sales tax) which were on the lower side in case of

Levy Sugar but on the higher side for free sale sugar. Cess of fourteen rupees per quintal was

also charged. Thus practically the levy sugar faced a tax of fifty two rupees per quintal and

in case of the free sale this tax amount was eighty five rupees per quintal.

Sugar was decontrolled with effect from 16.08.1978 as can be seen from the

Notification Number 153/78-CE dated 16.08.1978, where no reference was made relating to

levy sugar and hence the concessional rate of duty that was made applicable to the levy sugar

was done away with. This fact of decontrol was also not referred either in the Notification

Number 193/78-CE dated 03.11.1978 or the Notification Number 205/78-CE dated

01.12.1978.

By Notification Number 8/80-CE and Notification Number 9/80-CE, both dated

29.02.1980, control was re-imposed.

However, in case of the Sugar factories manufacturing sugar with the Vacuum pan

process exemption was granted for Basic Excise Duty and Special Excise Duty of rupees

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eighteen and paise fifty per quintal and rupees forty three and sixty paise per quintal

respectively

by the Notification No.134/80-CE dated 29.08.1980 being incentive to them in respect of

Levy Sugar and Free Sale Sugar respectively for higher production, which in other words

means the control was again imposed with effect from 01.03.1980.

Levy Sugar Equalisation Fund Act, 1976 (Number 31 of 1976) was enacted effective

from 16.02.1976 with a view to provide for the establishment of the fund and in the interest

of general public to ensure that the price of levy sugar remain uniform throughout India and

for the matters connected therewith or incidental thereto.

Sugar Cess Act, 1982 (Number 3 of 1982) was also enacted with effect from

19.03.1982 with a view to provide for the imposition of cess on sugar to be utilized for the

development of the sugar industry and for the matters connected therewith or incidental

thereto. By this Act sale price of sugar was determined as fifteen rupees per quintal;

however, though the factory sale rate was rupees fourteen per quintal under the Central

Excise Tariff Act, 1985 (Number 5 of 1986)

Sugar Development Fund Act, 1982 (Number 4 of 1982) was enacted with effect

from 19.03.1982 with a view to provide for the advance activities for the development of

Sugar industry and for the matter connected therewith or incidental thereto.

Sugar Export Promotion Act, 1958 (Number 30 of 1958) was enacted with effect

from 16.09.1958 with a view to provide the exports opportunities for sugar in the public

interest and for the levy and collection under certain circumstances the additional duty of

excise on sugar produced in India. This act was enacted to ensure that the quantity which the

Government allocated for export was to be delivered to the export agency and in case of

failure to do so the additional penal duty of rupees forty five and paise fifty only was required

to be recovered from the defaulting sugar factory which was in addition to the Basic Excise

Duty and the Additional Excise Duty and the Cess, if any.

Vide the Central Excise Tariff Act, 1985 (Number 5 of 1986) this tariff item was

renumbered and was placed under Chapter Heading number 17, to which two new items were

also added with effect from 01.03.1986, which read as under.

(1) 1701.31 – Sugar required by the Central Government to be sold under

clause (f) of sub section (2) of section 3 of the Essential Commodities Act,

1955 (Number 10 of 1955); and

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(2) 1701.90 – in respect of other (Free Sale Sugar)

For the purpose of administering Excise Duty on sugar rules (rule 83 to 92) were

framed under the Central Excise Rues, 1944, the motive or the purpose of which was as

under.

Rule 83 - Daily account of cane received, crushed and sugar produced;

Rule 84 - Maintenance of separate accounts, returns for each kind of

sugar;

Rule 85 - Determination of distribution of sucrose content of sugar;

Rule 86 - Return of damaged sugar for refining, notice of removal,

etc;

Rule 87 - As above

Rule 88 - Provided that during the period -

(a) any sugar received in the factory for crushing only, shall,

both before and after crushing , be stored separately from

sugar which was produced in the factory;

(b) where sugar was received for crushing only, the

manufacturer was required to maintain correct and separate

daily account in the proper form in respect of all sugar to

which sub rule (2) applied. He was required to submit a

monthly abstract in the proper form to the collector within

five days of close of each month; and

(c) if any sugar, to which sub rule (2) applied was mixed,

before or after crushing, with sugar produced in a factory,

the entire quantity was subject to duty assessment as if it

was produced in that sugar factory;

Rule 89 - Declaring analytical particulars of intermediate or residual

products;

Rule 90 - Declaration regarding manufacture of sugar from Palmyra

products;

Rule 91 - Stock taking;

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Rule 92 - Drawing of samples for the purpose of excise being

representative of the whole content or vessel from which it was taken

out.

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TARIFF ITEM 1A - CONFECTIONARY

This item was brought within the Excise net in the year 1968, which consisted of

Confectionary and Chocolates, falling under Tariff Item 1A of the First Schedule to the

Central Excises and Salt Act 1944. An exemption Notification Number 88/68-C.E. dated

30.04.1968 to the Item “Confectionary and Chocolates” to an aggregate quantity of 20 MT

cleared in a financial year by or on behalf of one manufacturer or one or more factories for

whom exemption from the whole of the duty of excise thereon was granted. This Exemption

Notification was a conditional one, that is to say, the said exemption was not applicable to

those manufacturers whose clearances for the home consumption exceeded 40 MT.

By Notification Number 170/68-C.E. dated 07.09.1968, the Government granted full

exemption to the Indian confectionary, namely, Rewadi, Patasha, Batashi, Mishri, Talmashiri.

Certain clarifications of points of doubts regarding Confectionary and Chocolates

were raised by the trade when the Government clarified that under Item A “Confectionary

and Chocolates” only those items of confectionary and chocolates would be subjected to duty

which will clearly fall within the specified items mentioned in the tariff itself. It was further

clarified that duty paid chocolates used for coating of cakes, pastries and ice creams would

not come within the purview of item number 1A. Indian sweets like Rewadi, Mishri,

Talmashiri, though boiled sweets, in which case it was not the intention to tax such products

and other similar products like pedha, barfi, rasgulla, Patasha or Batashi, elaichi dana, etc,

were allowed to be cleared without payment of duty of excise. Further, it was also clarified

that compressed tablets and sticks, commonly known as peppermints, lozenges, sweetened

cigarettes, etc, falling within the category “Candies” were also not exigible to the duty of

excise.

As regards sub item (ii) of item 1A it was clarified that chocolate is composed

essentially of cocoa paste and sugar, usually with the addition of flavouring and cocoa butter,

milk, coffee, hazel nuts, almonds, orange peels, etc, were also sometimes added.

Provisions of proforma credit under rule 56A of the Central Excise Rules, 1944, were

also extended to this commodity. It was clarified that the term “Confectionary and

Chocolates” was excluded for the purpose of levy and collection of Central Excise duty and

this item was amended in the Budget for the year 1970, which read as under.

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―1A. Confectionary, Cocoa Powder and Chocolates in relation to the

manufacture of which any process is ordinarily carried on with the aid

of power, namely -

1. Boiled sweets, toffees, caramels, candies, nuts (including

almonds) and fruit kernels coated with, sweetening agent and

chewing gums

2. Cocoa Powder,

3. Drinking chocolates, chocolates in the form of granules or

powders,

4. Chocolates in the form of blocks, slabs, tablets, bars, pastilles

or croquettes or in any other form not elsewhere specified,

whether or not containing nuts, fruit kernels or fruits.‖

It was clarified that Chewing Gum Paste was something like cashew nut and almonds

when cooked with sugar becomes confectionary and, therefore, the Chewing Gum Paste was

not brought within the excise net and this was not considered as a confectionary item for the

purpose of the levy of excise duty.

Effective rate of duty in respect of this item was twenty per cent ad valorem in the

year 1979.

After the introduction of Central Excise Tariff Act, 1985 (Number 5 of 1986) this

tariff item was classified under Chapter Heading 17 and 18 of the First Schedule, that is to

say, Sugar Confectionary including white chocolate, not containing cocoa, fat and oil was

covered under Chapter 17 and cocoa butter, cocoa powder, chocolate ingredients, containing

cocoa were covered under Chapter 18.

At present the rate of duty of excise is sixteen per cent ad valorem.

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TARIFF ITEM 1B - PREPARED AND PRESERVED FOODS.

This item was brought under the Excise net on 01.03.1969, the description of which read

as under.

“1B. Prepared and Preserved Foods put up in unit containers and

ordinarily intended for sale, including preparation of vegetables, fruits,

milk, cereals, flour starch, birds‘ eggs, meat, meat offal‘s, animal blood,

fish, crustaceans or mollusk, not elsewhere specified and leviable to duty

at the rate of fifteen per cent ad valorem.

The list of items exempted was as under

1. Sausages and the like of meat, meat offal or animal blood;

2. Other prepared or preserved meat or meat offal;

3. Meat extracts and meat juices, not leviable to duty;

4. Prepared or preserved fish, including caviar and caviar

substitutes,

5. Crustaceans and mollusks, prepared or preserved;

6. Soups and broths, in liquid, solid or powder form;

7. (a) Bottled or canned fruits (other than nuts) specified under

Part V of the Second schedule to the Fruit Products Order,

1955, issued by the Central Government under Section 3 of the

Essential Commodities Act, 1955 (Number 10 of 1955);

(aa) Bottled or canned vegetables specified under Part V of the

Second Schedule to the Fruit Products Order, 1955, issued by

the Central Government under Section 3 of the Essential

Commodities Act, 1955 (Number 10 of 1955);

(b) Sauces, ketch up and the like;

8. Jams being cooked preparations, whether or not containing

added, sugar, tomato puree and tomato paste;

9. Fruit syrups, crushes, squashes, cordials, fruit juice, mango

nectar, fruit juice concentrate, fruit pulp concentrate, vegetable

juice, ginger cocktail, ginger beer, ginger ale, synthetic syrups

and sherbets and ready to serve beverages (but excluding

aerated

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waters),

10. Corn flakes, wheat flakes, pearl barley, oats and beans,

11. Dehydrated peas, dehydrated vegetables,

12. Skimmed milk powder but excluding such powder specially

prepared for feeding the infants;

13. Condensed milk and condensed skimmed milk, in both cases

whether sweetened or not;

Preparations with a basis of flour of starch, of malt extract or

of malted barley and milk foods, which by simply mixing with

or boiling in milk or water, can be used for making beverages,

invalid foods and gruels, whether or not containing cocoa, but

excluding baby foods, that is to say, foods specially prepared

for feeding of infants;

14. Table jellies or jelly crystals, custard powders, ice-cream

powders.‖

However, as per Notification Number17/70-CE dated 01.03.1970, followed by other

amending notifications, the following products were not deemed to be prepared or preserved

foods falling under this Schedule, namely -

i) Meat edible meat offal, fish, crustaceans or mollusks which have

only been chilled, frozen, salted, preserved in brine, dried or

smoked;

ii) Crustaceans, in shell, simply boiled in water;

iii) Pickles,

iv) Chutney,

v) Nuts, including cashew nuts and ground nuts, in any form;

vi) Any article of “Prasad” or “Prasadam” (like palani panchamritam,

intended for offering in any place of worship;

vii) Sago, Vermicelli, Arrow root;

Following products were not liable to the duty of excise,

1. Pop Corn,

2. Masala powder, Rasam powder, Sambar powder, Curry

powder,

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3. Peanut Butter and Salad Oil,

4. Malt Extract, Preparation of Macaroni, Spaghetti and

Vermicelli;

5. Dehydrated Peas and Vegetables;

6. Ready Mixed Puri, Idli, Dosa, Wada, Gulab Jamun and Jilebi

7. Fried, roasted and salted potato chips and wafers, banana chips

and peas or other vegetables and dals and pulses, even though

so sold in unit containers they were not eligible under item 1B

as was stated in the Ministry of Finance (Department of

Revenue & Intelligence) letter Number B-5/1/69/CX-1 dated

03.04.1969. In this connection, the expression “unit

containers” used in tariff item 1B means a container in which

prepared or preserved food is intended to be sold by the

manufacturer. It may be a small container like tin, can, box,

jar, bottle or bag in which the product is sold by retail, or it

may be a large container like drum, barrel or container, in

which the product is packed for sale to other manufacturers of

dealers. In short, “unit containers” means a container, whether

large or small, designed to hold a predetermined quantity or

number which the manufacturer wishes to sell whether to a

whole or retail dealer or to another manufacturer.

8. Tamarind concentrates, etc.

Pineapple fruit, conversion of pineapple into slices, for sale in sealed cans did not amount

to manufacture.

With regard to the Cerelac© Instant Wheat Milk Cereal, it was considered that “Cerelac©

Instant What Milk Cereal” was not liable to the duty of excise under Serial Number 14 of the

Notification Number 17/70, mentioned supra, but it was liable to be included under the category

“Baby Foods” which was excluded from the purview of the said Serial Number 14.

It was also considered that Textured Soya Protein, though classifiable under Tariff Item

1B, the same was not liable to duty as it did not fit into any of the items mentioned under the

Notification Number 17/70-CE dated 01.03.1970 (As amended)

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The Indian multi purpose food is inexpensive and concentrated nutritious food in which

seventy per cent is oil seed flour was exempted as it was designed (prepared) particularly for the

children in low-income group among whom the incidence of protein deficiency was very high.

The conditions attached to the explanation were (1) the oil seed flour contents should not be less

than seventy per cent of the total weight; (2) the protein contents should not be less than thirty

nine per cent; and (3) the ex-factory price of such preparation was not to exceed rupees three per

kilogram.

Extract from the Indian Standards Specifications for Indian Multi purpose Flour Number

IS: 3137-1965 read as under.

―Indian multi purpose flour, as now developed by the Central Food

Technological Research Institute, Mysore, is a blend of edible ground nut

flour, Bengal gram flour and/or skimmed milk powder fortified adequately

with calcium salts and some essential vitamins. The product may be

suitably flavoured or spiced. This formulation has been used as the basis

for production in units currently in operation.‖

By a Notification Number 105/69-CE dated 03.04.1969 the following were exempted

upto a value of rupees fifty thousand in a financial year,

a) Fruits and Vegetables, prepared or preserved, with or without

sugar, salt, spices or mustard;

b) Jams, fruits, jellies, fruit puree and fruit pastes, being cooked

preparations and fruit juices and vegetable juices

This was the beginning of grant of clearance value based exemption. It was also clarified

that value means that value as arrived at under Section 4 of the Act.

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TARIFF ITEM 1C - FOOD PRODUCTS

Biscuits, Pasteurized Butter and Pasteurized or Processed Cheese were taken out from

item 1B and they were placed at item 1C of the First Schedule and the rate of duty leviable

was ten per cent ad valorem, the description of which read as under.

―Food products, in or in relation to the manufacturing of

which any process is ordinarily carried on with the aid of

power, the following, namely –

1) Biscuits,

2) Pasteurized/Mercerized Butter; and

3) Pasteurized or Processed Cheese‖

The crucial word “pasteurization” has not been defined in the Act or in Brussels

Tariff Nomenclature. However, the Prevention of Adulteration of Food Act, 1954, and

Prevention of Adulteration of Food Rules, 1955, gave definition and the standard or quality

under rule 5, which read as under.

―The term pasteurization, when used in association with

milk and milk products means heating milk and milk products

by a heat treatment as mentioned to sixty degree centigrade

below and boiling to a suitable temperature before distribution

of pasteurized milk or milk products shall show a negative

phosphate test. The term ―pasteurization‖ and similar terms

shall be taken to refer to the process of heating every particle

of milk or milk products to at least sixty degree centigrade and

holding at such temperature continuously for at least thirty

minutes or heating it to at least 71.5 degree centigrade and

holding at such temperature continuously for at least fifteen

minutes or at an approved temperature time combination that

would serve to give a negative phosphate test.

All pasteurised milk and milk products shall be cooled to

a temperature of ten degree centigrade or less and shall be

maintained there at until delivery.‖

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By the Notification Number 150/77-CE dated 10.05.1980, Butter cleared by Military

Dairy Farm was exempted as also the butter used for the manufacture of ghee.

There arose a question to the classification of rusks, that is, whether they were

biscuits, when under Tariff Advice Number 5/72-CX 1, it was clarified that rusks were

nothing but toasted bread, when small pieces of bread are defined so as to render them hard

and crisp quality and some times these were sweetened also. While rusks were made from

bread, the biscuits are made from wheat flour, fat and sugar. Biscuits contain high

percentage of fat and sugar as compared to the rusks. Rusks were not known as biscuits in

the market.

The goods, rusks, covered by erstwhile item 1C (1,2 AND 3) were now classified

under Chapter Heading 19, 4 and 4 respectively of the Schedule to the Central Excise Tariff

Act, 1985 (Number 5 of 1986)

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TARIFF ITEM 1D – AERATED WATERS

On 01.03.1970 this item was carved out from general 1B and was brought into the

Excise net as tariff item 1D, the description of which red as under.

―Aerated waters, whether or not flavoured or sweetened and whether

or not containing vegetable or fruit juice or fruit pulp‖

The account of the production of Aerated Waters was directed to be done after the

bottles were filled and capped.

As per Hyderabad Trade Notice dated 17.08.1977, Aerated waters not containing

carbon dioxide was not classified as “aerated waters” but it was, nevertheless a beverage and

was assessable to duty of excise under tariff item 1B of the First Schedule.

Aerated waters, only branded and produced with the aid of power alone, were leviable

to the excise duty, whereas unbranded and those produced without the aid of power were

exempted by a Notification Number 18/70-CE dated 01.03.1970. It was also explained that

“Aerated Waters” meant “beverages which have been charged with carbon dioxide gas under

pressure. They must be known as Soda Water or Carbonated drinks also. The tariff

definition is wide enough to cover all sorts of aerated water whether it be plain soda or a

beverage containing fruit juice or fruit essence or aromatic substance. However, by virtue of

an exemption notification, the levy has been confined to only those aerated waters, which

were produced with the aid of power and were sold under a brand name. Both these

conditions, viz., brand name and use of power were satisfied before aerated water actually

becomes liable to duty. If either of these conditions were not fulfilled, the aerated water

becomes entitled to the complete exemption. It was not necessary to extend any excise

control, including licensing, to non power operated units and to power operated units which

do not sale their aerated waters under a brand name.”

A loss of one half per cent was fixed in respect of beverages of bottles after the stage

of filling, occurring due to handling in case of movements from the place manufacturing to

the bonded store room and at the time of clearance.

This item further underwent change by the Budget for the year 1977 and the revised

description read as under.

―ID. Aerated waters, whether or not flavoured or sweetened and

whether or not containing vegetable or fruit juice or fruit pulp -

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1) Aerated waters which are only charged with carbon dioxide

gas under pressure and which contain no other added

ingredient,

2) All others.‖

The duty of excise that was made applicable effective from 18.06.1977 was twenty

five per cent and fifty five per cent ad valorem respectively for the item (1) and (2) above.

However, this tariff item 1D again was changed in the budget 1983 to read as under.

―1D. Aerated Waters, whether or not flavoured or sweetened and

whether or not containing vegetable or fruit juice or fruit pulp -

1) Aerated waters which are only charged with carbon

dioxide gas under pressure and which contain no other added

ingredient –

a. for each unit container containing 200 mm or less;

b. for each unit container containing more than 200 mm;

c. Others

This tariff item again was changed subsequently, which read as under.

―1D. Aerated waters, whether or not flavoured or sweetened and

whether or not containing vegetable or fruit juice or fruit pulp

1. Aerated waters which are only charged with carbon dioxide

gas under pressure and which contain no other added

ingredient -

a) for each unit container containing 200mm or less,

b) for each unit container containing more than 200mm;

c) Others,

2) aerated waters other than those falling under sub item (1) -

a) for each unit container containing 200mm or less,

b) for each unit container containing more than

200mm,

c) Others.

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TARIFF ITEM 1E - GLUCOSE AND DEXTROSE

Glucose and Dextrose came to be added to the list of First Schedule with effect from

01.03.1970.

However, with effect from 28.05.1971, the said tariff item 1E, Glucose and Dextrose,

was replaced by the following description, that is to say,

―1E. Glucose and Dextrose and preparations thereof -

1) Glucose in whatever form including Liquid Glucose,

Dextrose, mono hydrate and anhydrous dextrose,

2) Preparations of Glucose and Dextrose in which the

reducing sugar expressed anhydrous dextrose amount to

more than eighty per cent by weight.‖

Initially, this tariff item was leviable to the duty of excise at the rate of ten per cent ad

valorem.

By letter dated 24.07.1975, the Government clarified that if glucose and dextrose,

after repacking and labeling, answers the description of “Patent and Proprietary Medicines,”

it will attract the duty of excise as applicable under tariff item 14E in addition to the duty

already paid under tariff item 1E. However, on the contrary, if the product do not conform to

the description of tariff item 14E or if the product was marketed as nutrient item only then no

further duty was required to be paid as applicable to the tariff item 14E. Incidentally, this

view was set aside by the Hon‟ble Madhya Pradesh High Court as was seen in the decision

reported in 1980-ELT (598)(MP).

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TARIFF ITEM 1F - MAIDA

The tariff item 1F, Maida, product of wheat, known commercially as maida, obtained

by milling the cleaned, hard or soft wheat or lends thereof in a roller flour mill, came on the

tariff schedule on 28.05.1971, which entry read as under.

―1F. Maida – 10 paise per kilogram‖

The Government issued orders to the effect that consequent upon the issue of the

Notification Number124/71-CE dated 10.06.1971, exempting Maida, falling under tariff item

1F and further it was also clarified that no refund were to be granted as the Notification

mentioned supra had a prospective effect and hence no refund was to be granted in respect of

the duty collected between the period 29.05.1971 to 09.06.1971.

The excise duty on “Maida” was imposed under the Finance Bill Number 27 of 1971,

presented to the Parliament on 28.05.1971. On the same day, a declaration was made under

Section 3 of the Provisional Collection of Taxes Act, 1931, and on this basis duty was

collected between the period 29.05.1971 to 09.06.1971. The Act passed did not levy excise

duty on Maida as was proposed in the Finance Bill. The duty so collected was refunded

(1981 ELT 66 (MAD) refers)

However, this item was omitted from the tariff schedule with effect from 10.06.1971.

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TARIFF ITEM 2 - COFFEE

This tariff item was brought on the Tariff Schedule on 01.03.1944, the description of

which read as under.

―2. Coffee means commodity derived from the fruit of the rubiaceous

plant and includes raw coffee, cured coffee, uncured coffee, roasted

and prepared coffee.‖

Under Rule 15 of the Central Excise Rules, 1944, every year, every grower of an

excisable unmanufactured product was required to make a full declaration in respect of all the

land upon which he was to grow the product. The control on Coffee was exercised as was

exercised in respect of Unmanufactured Tobacco. It was decided to discontinue the annual

registration of Coffee plants in sparse growing areas and such registration was replaced by

every five years. Exemption from both declaration as well as obligations under rules 15 and

16 ibid respectively was granted. Coffee being a perennial crop, the number of parts

belonging to grower once brought in Survey Records was not like to alter materially for

several years and hence the registration was replaced every five years.

The expression “Coffee” includes “Coffee Powder”. There was no indication that the

legislature desired to exclude the coffee powder from the classification of “Coffee” (1962-13-

SRC-290(MAD) refers) The expression “Coffee” generally covered coffee beans or the

coffee seeds whether roasted or prepared whereas “French Coffee” was made by an

admixture of coffee powder and chicory powder and as such “French Coffee” was not coffee

as was held by the Deputy Commissioner of Commercial Taxes (1962-13-STC-457(Mad)

and (1975(35) STC 493(Bom) refers)

Coffee seeds intended for sowing were exempted from the purview of Excise Duty.

However, a condition was prescribed that Coffee seeds were got to be approved to the

satisfaction from the authority concerned.

Liberia and Excelsia coffee was assessed to duty at the concessional rate of duty of

rupees seventy five per quintal.

Coffee is not an article of food. On an integral reading of the tariff item 25 relating to

Coffee, tariff item 1B relating to Prepared and Preserved Foods, Tariff item 1C relating to

Food Products of particular type mentioned therein, the residuary tariff entry number 68 and

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exemption notification number 55/75-CE dated 01.03.1975, Coffee cannot be treated as an

article of food. (1984(15) ELT 32(AP) refers).

As per Section 2(f) and 3 of Central Excises and Salt Act, 1944, duty on mixture of

coffee and chicory was not a double taxation. An article was required to be taxed only once

as raw material and after it was manufactured and converted into the different taxable goods

and then again as another taxable item altogether. The two levies cannot be treated on the

same goods so long as they are two different commercial commodities. Since the mixture of

coffee and chicory was a distinct commercial commodity from „coffee‟, therefore, there was

no question of double taxation on the same commodity. (1984(15) ELT-32 (AP) refers)

Under the control of the union of the Coffee industry, in order to provide for the

Coffee development, the Central Government enacted Coffee Act, 1942 dated 02.03.1942

(Number 7 of 1942). This act authorized the Government to collect the duty of excise of

rupees eleven and paise eighty only per quintal, or as the Central Government was to decide,

from the registered coffee estate to be furnished by the internal sale quota allotted to it to

sale in the Indian market, whether such coffee was actually sold or not. Thus the relief

relating to coffee for sale in India by the Coffee Board was available to coffee growers. This

act is still on the statute book and the coffee producers are enjoying the reliefs.

At present this commodity attracts nil rate of duty.

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TARIFF ITEM 3 - TEA

Before embarking on the excisability of tariff item Tea I would like to put forth some

interesting facts. While I was hunting for the work material on this subject I came across a

book “East India Company”, published sometime in the year 1945. I found history of this

commodity in this book. So valuable was the information that I cannot resist but to give some

of the interesting facts here.

About 1650 a new commodity that was destined to prove not only of profound

commercial but also of far-reaching political significance, was brought into England in the

holds of the East India Company‟s ships from India. Although foreign to England, this new

importation – destined to become the national drink of Great Britain – had been known

through out the Far East for many centuries before the Christian era as sha, cha or te.

The earliest record of this oriental herb dates back to the year 2737 B.C., when its

virtues were first extolled by the great emperor Chin Nung and its merits as both a medicinal

and stimulating beverage praised. Significant of the popularity of tea throughout the Celestial

Empire in the centuries that followed Chin Nung‟s demise is the fact that in 793 A.D. tea was

placed on the list of commodities subject to tax in China.

From its Oriental birth place, tea migrated to the Japanese islands when followers of

the Buddhist faith crossed the Korean Straits in 588 A.D. and introduced the cultivation of tea

plants (together with Buddhist image and sutras) into Kyushu, the most southerly island of

what was then known, because of its situation east of China, as The Land of The Rising Sun.

That same century, tea was also carried by proselytizing Chinese monks across the snow

covered passes of the Himalayas into the venerable center of Buddhism, India, where a

flourishing trade had been carried on since Biblical days with Near Eastern lands bordering

the Persian Gulf and the blue waters of Mediterranean.

Apart from the interesting story of tea mentioned above, it is the basic thing every

Indian must know is that the important task of the East India Company was to import tea

from the areas where it grew and sell it in the world with a motive to earn money.

As to the excise Levy on Tea, came to be imposed on 01.03.1944. The tariff

definition underwent change by the Parliament Act, known as “Tea (Alteration in Duties of

Excises) Act, 1958 (Number 15 of 1958). Then this tariff item came to be known as tariff

item number 14.

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With effect from 27th

/28th

of September 1958, the tariff definition of Tea was

amended to read as under.

“14. ―Tea‖ includes all varieties of the product known commercially

as Tea and also includes Green Tea

I. Tea all varieties, except package tea, falling within sub item (2)

of this item,

II. Package Tea, that is to say, tea packed in any kind of container

containing not more than sixty pounds net of tea.‖

By the Notification mentioned supra the Central Government fixed the following rates

of duties on all varieties of Tea, except Package Tea,

i) Under item 14(2) of the new excise tariff, excise duty on

Package Tea was to be levied and collected at the rate of

twenty one naye paise per pound plus the duty for the time

being leviable on „Tea, all varieties‟ under item 14(1) of the

Central Excise tariff, if not already paid. The excise duty on

„Tea, all varieties except package tea‟ was to be fixed by the

Central Government by a notification at a rate not exceeding

nineteen naye paise per pound;

ii) These rates of excise duty were to come into force from the

midnight of 27rh/28th

of September 1958.

The Government also cleared in this regard as to how the tariff was to be actually

operated, namely,

a) „Tea, all varieties, except Package Tea‟ was assessable to duty at different rates,

according to the zones in which coffee was produced. Every care was

necessarily taken that the assessment of excise duty on tea was made correctly,

b) Unless there was any definite reason to believe to the contrary, loose tea utilized by

package tea factories other than the Garden factories in the manufacturing of

package tea was to be deemed to have paid the excise duty at the appropriate

rate applicable to it under the new tariff. Excise duty at the rate of twenty one

naye paise per pound only was, therefore, to be collected on all package teas

cleared from such factories after the midnight of 27th

/28th

September, 1958.

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c) Package Tea manufactured by the garden factory was subjected to the duty at the

rate of twenty one naye paise per pound plus the excise duty for the time being

leviable on „Tea, all varieties, except Package Tea,‟ if such duty was not

already paid.

Further, the duty on „Tea, all varieties, except Package Tea‟ was fixed by the Central

Government by its Notification Number 96/58-CE dated 28.09.1958. However, the aforesaid

Notification provided that the rate of duty leviable on tea manufactured in one zone from

green leaves grown in another shall be the rate applicable to the zone in which such leaves

were produced.

Under Customs Notification Number 242/58 and Number 243/58 effective export

duty on tea was fixed at twenty six naye paise per pound effective from 28.09.1958.

The Government, for the purpose of providing for the control by the union of Tea

industry, including the control in pursuance of the International Agreement known in force,

of the cultivation of tea, in and of the export of Tea from India and for that purpose to

establish Tea Board and to levy the duty of excise on Tea produced in India, passed “Tea Act,

1953 (Number 29 of 1953) and by this act the Government remained the authority to assess

and collect the cess on tea produced in India as it may decide.

The cess was to be collected at the rate not exceeding fifty paise per kg or as the

Central Government was to fix the different rates and the Government was authorized to levy

different rates for the teas of all varieties, different grades and different locations where the

tea was grown/produced.

The Government, as regards export, stated the following:

i) „Tea, all varieties except Package Tea‟. The new tariff was introduced in

order to help the “common teas” to compete in the world markets;

ii) While the rate of export duty for all kinds of teas was the same, the rates of

excise duty thereon were different. In view of the amendments made under

the MF (DR) Notification Number 98/58 and 99/58 dated 28.09.1958 no

rebate of excise duty was admissible on „Tea, all varieties, except Package

Tea‟ exported out of India on and from 28.09.1958. Consequently, there was

no adjustment, as hitherto, between the customs and excise heads of account

in so far as „Tea, all varieties, except Package Tea‟ was concerned;

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iii) Package Tea - In the case of exports of Package Tea, refund of excise duty

was admissible at the rate of twenty one naye paise per pound under the

Notification 98/58 and 99/58 dated 28.09.1958. The usual procedure of

adjustment of excise duty towards export duty was continued to be followed in

respect of Package Tea.

iv) Export under Bond - Export of tea under bond was not permissible under

MF(DR) Notification Number 97/58 dated 28.09.1958.

Prior to the introduction of Finance Bill, 1963, tea was not permitted to be exported

under Bond but only on payment of duty; however, by the Finance Bill, 1963, the export duty

on tea of all varieties was abolished and rebate on excise duty was restricted and the simple

procedure for export was made applicable thus the export of tea became more beneficial for

the Tea industry.

The Government had issued Tea Waste (Control) Amendment Order, 1961, and under

sub clause (f) of clause (2) „Tea Waste‟ was defined, which read as under.

―(f)‘tea waste‘ means tea sweepings, tea fluff, tea fibre and stalky tea

containing more than fifty per cent of stalks (other than tender stalks)

by weight, the weight of leaves and stalks being obtained after drying

100 degree centigrade and determined under identical conditions, but

does not include tea conforming to the specifications for tea laid down

under the Prevention of Food Adulteration Act, 1954, or green tea

stalks or tea seed.‖

In order to safeguard and promote the interest of small growers and encourage them

in organizing into co-operative societies, the Government allowed ten per cent exemption in

Basic Excise Duty (Notification Number 181/65-CE dated 27.11.1985 refers). Tea produced

by bought leaf factory was also exempted.

The expression “Bought Leaf Factory” means a tea factory, which has purchased

more than two thirds of the green leaf from the growers having land holding less than ten

acres.

By the Tea (Amendment) Bill, 1967, which was introduced in the Parliament on

09.06.1967, with a view to further amend the Tea Act, 1953. By this bill the Government

decided to replace the cess on teas exported by a cess on all teas produced in India. The cess

became leviable at the rate of four paise per kg on all teas produced in India. Later, with

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effect from 15.11.1978, this cess was raised to eight naye paise per kg. The cess was

collected in the same manner as Basic Excise Duty as leviable on Tea. However, the Cess on

tea waste, which was enjoying exemption from excise duty, was also exempted from the cess.

The Prime Minister, on 05.05.1970, announced in the Lok Sabha, the decision of the

Government to limit the excise duty on tea to seventy paisa per kg in the case of those tea

gardens whose average realization in the past three financial years on all their sales in the

approved auction centers was less than rupees five per kg. This was implemented by issuing

the Notification Number 131/70-CE dated 07.06.1970. This was further reduced to sixty

paisa per kg in the case of co-operative societies of the tea farmers under the Government‟s

letter dated 15.12.1970.

Tea produced in Zone III (Darjeeling) was exempted in excess of twenty paise per kg

under the Notification dated 31.12.1983. This reduction in duty was done in exercise of the

powers conferred under rule 96F of the Central Excise Rules, 1944. It was mainly done to

alleviate the sickness of the Tea industry and as per the recommendations of the Commerce

Ministry.

With effect from 01.04.1985, after the introduction of Central Excise Tariff Act, 1985

(Number 5 of 1986) this item was classified under Chapter Heading 9 of the Schedule to the

Central Excise Tariff Act, 1985.

At present the tariff rate is rupee one per kg.

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TARIFF ITEM 3A - PAAN MASSALA

The commodity, namely, Paan Massala, was introduced under the Excise Tariff with

effect from 17.03.1985, when it was placed at item number 3A, which also included both

branded and non-branded Paan Massala.

There was a built in definition of this commodity, which read as under.

―Paan Massala, that is to say, any preparation containing betel nuts

and any one or more of the ingredients such as lime, catcha,

cardamom, copra and menthol put up for sale in unit containers and

commonly known as ―Paan Massala‖.

As per the letter issued by the Ministry of Finance, bearing F No.B-4/3/75-TRU dated

12.09.1975 Paan Massala was not covered under the expression „chewing tobacco‟. The

mere fact that Paan Massala contained duty paid tobacco and could be chewed by itself

without betel leaves or nuts did not render it to duty liability as chewing tobacco.

By a Notification dated 17.03.1985, the Unbranded Paan Massala, was fully

exempted.

With effect from 01.03.1986, Paan Massala was classifiable under Chapter Heading

21.06 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986)

Initially the tariff rate of duty of excise was twenty per cent ad valorem. Tariff value

for Paan Massala was fixed on 02.06.1998 and further in the year 01.03.2002, said article

Paan Massala was made leviable to the duty of excise at the rate of fifty percent of its retail

sale price.

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TARIFF ITEM – 4 TOBACCO

Entire Unmanufactured Tobacco was brought under the excise net with effect from

01.04.1943 and for effective administration “Tobacco (Excise Duty) Rules, 1943, were

formulated, which, later on, were merged with the Central Excise Rules, 1944, of which Rule

15 to Rule 42 of Chapter IV of the Central Excise Rules, 1944, dealt with the

Unmanufactured Tobacco.

The definition was given and which read as Note 3 to Chapter 24 of the Central

Excise Tariff Act, 1985 (Number 5 of 1986), is reproduced below.

1) ―Tobacco‖ means any form of tobacco, whether cured or uncured

and whether manufactured or not and include the leaf, stalks and

stems of the tobacco plant but did not include any part of a tobacco

plant while still attached to the earth.

2) Manufacture include any process, incidental or ancillary, to the

completion of a manufactured product; and

3) In relation to tobacco include the preparation of cigarettes, cigars,

cheroots, biris, cigarette or pipe or hookah tobacco, chewing

tobacco or snuff.‖

The difference between the Unmanufactured Tobacco and the Unmanufactured

Tobacco Products was that the former was a tobacco where tobacco was produced or

manufactured and the latter was the products of tobacco, e.g. cheroot, biris, snuff, etc,

manufactured from out of the unmanufactured tobacco.

For effective administration of Unmanufactured Tobacco, the area under the tobacco

cultivation was divided into four categories, that is to say,

1) Red Area - having concentrated growing area,

2) Amber Area - having cultivation on commercial scale but not so

dense as in the red area,

3) Green Area - sparse growing areas where the average holding of

land is ten cents or less per grower but may include larger

individual holdings; and

4) White Area - having holding of less than ten cents generally and

inaccessible area with poor communication

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The colour scheme was introduced purely for the administrative convenience. The

pattern of control depended according to the classification of the growing areas. The full

normal control was exercised on all tobacco cultivation and trade areas. Neither exemptions

nor relaxations of any control in amber area were ordered but workload was less and such

areas had smaller personnel than in the red area. The colour scheme intended to emphasize

the relative importance of the work involved therein. There were four distinct stages of work

to be done by the Excise officers during crop season, namely -

a) Registration - recording of the area under cultivation in the

Survey Book,

b) Crop survey - recording condition of the crop after personal

visits to the land where the tobacco was cultivated,

c) Verification - verification of cured tobacco with curers after

crop was harvested and cured,

d) Disposal - account of disposal of cured tobacco by the

curers.

These four stages of work were planned by the senior officer meticulously to ensure

that entire tobacco cured was brought within the Excise net. In fact, the real control started

with the curers. In so far as the growers were concerned, the control was limited to the extent

necessarily with the gathering of the basic data regarding area under tobacco cultivation and

tobacco varieties grown. It was also necessary to ensure that all the grown tobacco (except

that allowed for personal consumption) found with the grower was invariably sent to the

curer‟s premises. Certain steps were also prescribed for senior officers like Assistant Circle

Officer, Circle Officer and Assistant Collector (now – Assistant Commissioner).

The responsibility for giving declaration under rule 15 and 16 was squarely on the

shoulders of both the grower and curer. Provisions with regard to the furnishing of this

declaration at the time of the visit of the Excise officer was withdrawn and instead of that

provision a new provision was made for filing such declaration either personally or by the

registered post.

The growers/curers in such of the areas, as were declared by the Collector as Sparse

areas, were exempted from the requirement of furnishing such declaration as prescribed

under rule 15 and 16 ibid. Thus in case of the sparse area only those growers/curers were

covered who cultivated or produced tobacco over and above the exemption limit. Certain

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quantity of tobacco which was for personal consumption of growers / curers was exempted

from the purview of taxation, which was popularly known as PC (personal consumption).

The quantity of PC was 60 pounds or 27 kgs per grower / curer. This exemption appears to be

in consonance with the principles of taxation prescribed by Kautilya, where salt produced by

self was exempted.

Simultaneously, a provision was made for the Summary Assessment to assess all the

growers/curers in all the tobacco growing areas. The Government also made it clear to the

Departmental officers in giving powers to make Summary Assessments under rule 37A ibid,

the Government did not contemplate that the exercise of such powers should not be

arbitrarily. It was emphasized that the Summary Assessments were required to be done only

under exceptional circumstances, that too after careful consideration of (1) area under

cultivation, (2) condition of crop, (3) average yield in the area in that year, (4) fertility of the

soil, (5) availability of the irrigation facility, and (6) other relevant factors. It was also

mandatory to issue a notice to the grower/curer before undertaking such an exercise. Also it

was directed that as far as possible the Summary Assessments be made only in such cases

where there was a sufficient evidence to prove that the grower/curer had surreptitiously

disposed of the tobacco crop and such a summary assessment was to be the best judgment

and be looked upon the same as a penal provision.

Frequency of the visits of the officers to the Amber areas was restricted to two instead of

usual four visits in all the remaining tobacco growing areas. Thus it was mandatory for the

grower/curer in all the four tobacco growing areas to declare the area under tobacco

cultivation.

Initially, the Tobacco Growing Range Office consisted of one inspector, one

Supervisor and one sepoy only. However, the Government felt that this system suffered from

(a) lack of elasticity,

(b) wastage of man power during the slack season,

(c) inadequacy of man power during the busy season;

(d) lack of intensive control over the densely growing areas owing to

dissipation of staff comparatively in spares growing areas,

(e) control over transport, warehousing and wholesale dealers;

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(f) weakness in supervision arising out of remote control by the Circle

Offices through correspondence and inspection including the

inspection of the office records, and

(g) high cost of revenue collection.

In order to remove above lacunas, it was decided to reorganize the Tobacco Growing

Ranges on the following lines, initially on an experimental basis in the year 1956, however, it

was made regular with effect from 01.04.1958.

1) In heavy tobacco growing areas in place of single inspector range the

same were as far as possible grouped into Multiple Office Range;

2) Such grouping meant concentrating some officers at certain selected

centers within the heavy growing areas. Each Multiple Office Range

had three or four inspectors and three or four supervisors and one

lower division clerk. The whole team was controlled by a Deputy

Superintendent who was the Range Officer of the Multiple Range

Office

3) The Deputy Superintendent was empowered to depute necessary staff

for different types of work and utilize them to the best advantages;

4) The actual field work was conduced through the parties consisting of

an inspector, supervisor and a sepoy. The entire jurisdiction of the

Multiple Office Range was divided into as many compact sectors as

were the parties available with the range and each sector was put in

charge of one such party;

Advantages of the above-mentioned Multiple Office Range System were as under.

1) Close range checking and supervision by the Deputy Superintendent with consequent

improvement in frequency, intensity and quality of the supervision;

2) A single set of range records other than the survey book and such other records

required to be maintained by the executive officers for noting declarations, field

checks, etc, were maintained, thus reducing the volume of the scriptory work now

involved in proportion to the number of Single Inspector Ranges constituted into the

Multiple Office Range, such records were maintained by the lower division clerk

posted in the range thus releasing the executive officer‟s time for more intensive and

extensive field checks;

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3) In view of the fact that a senior officer of the grade of the Deputy Superintendent was

in charge of the Range and the work was done on functional plan basis it was always

possible to effect reduction in the total number of officers and sepoys employed in the

tobacco growing areas, e.g. in an area where, say eight ranges existed with eight

inspectors, eight supervisors and eight sepoys, it was possible to create a Multiple

Office Range with, say, one Deputy Superintendent, four inspectors, four supervisors,

four sepoys and one lower division clerk;

4) The difficulties experienced in manning growing ranges in “Leave vacancies” was

also removed,

5) On account of the fact that the Deputy Superintendent was having proximate control

over the inspectors and supervisors, there was a reduction in opportunities of

corruption,

6) This scheme also facilitated the withdrawal of the officers from out of the way places

to a center where better amenities for living were existing;

7) Officers were better able to consult each other on their doubts and as the Deputy

Superintendent was always available the officers also were in a position to take

immediate instructions from him in different matters at different times when the need

arose;

8) If primary control became really effective, it was ultimately possible, largely due to

withdraw control, except statistical land preventive, over the areas, which forms the

periphery to the heavy tobacco growing areas.

In the scheme growers/curers were required to declare the area under tobacco

cultivation to the department. The Department took a note of this declaration and entered

these particulars in statutory record, namely, Survey Book, at the end when the tobacco was

ready for inspection for the office who visited the actual field and weighed the tobacco

(annual returns) and the tobacco was permitted to be transported to private bonded warehouse

under transport certificate, viz., TP3.

By this system, the Government ensured that the entire tobacco grown in the field was

effectively accounted for the purpose of the levy of excise.

In the gone days, for an officer working in the tobacco growing area maintaining of

records like diary, map of the jurisdiction, Survey Book, etc, was a cumbersome but a routine

job. However, among the documents, Survey Book was very vital one, it represented both -

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his performance and tobacco statistics. This book showed functioning of the department in as

much as it also encompassed both sides, that is to say, revenue collector and revenue payer

hence, I give hereunder, in a nutshell, little more information that the Survey Book contained.

SURVEY BOOK

There use to be two Survey Books, a small one intended for 200 growers and a large

one intended for 500 or more growers to be issued by the Range office. Survey Book was a

register of Declarations and Annual Returns to be maintained by the small growers and curers

and it was divided in four parts, i. e.

a. Land Entry (Part I),

b. Crop Entry (Part II),

c. Annual Returns (Part III), and

d. Accounting (Part IV).

Land Entry (Part I) of the said Survey Book contained the following -

a) In column (1) serial number, running serial numbers

were to be entered,

b) In column (2) name of the grower/curer was to be

entered

c) In column (3) survey number was to be entered

d) In column (4) to (9) visits of the officer, varieties

grown/cured, hectare-wise area specifying variety

grown/cured therein, estimated weight of the variety

grown/cured, number of licenses issued/renewed

and signature/thumb impression of the grower/curer

was required to be entered

Crop Entry (Part II) contained the following particulars -

a) In column (10) date of the visit of the officer,

b) In column (11) verification of the area/hectarage,

c) in column (12) estimated yield in kgs per hectare,

d) last column (13) was for the comments of the

visiting officer regarding crop condition,

Annual Return (Part III) related to the -

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a) In column (14) date of the visit of the officer,

b) In columns (15) to (18) information such as land

area in hectare actually used for each variety

grown/cured, variety-wise net quantity, yield per

hectare and signature/thumb impression of the

grower/curer was filled in,

Accounting (Part IV) dealt with consumption, assessment, clearances effected and

balance remained, i.e.,

a) Column (19) visit of the officer,

b) Column (20) meant for the quantity allowed for personal

consumption,

c) Column (21) assessment of Central Excise duty,

d) Column (22) covered clearances under TP2 or TP3,

e) Column (23) was for CBSR in kgs,

f) Column (24) was for the quantity used for agricultural

purpose/destroyed in kgs,

g) Column (25) total quantity accounted for in kgs,

h) Column (26) for the balance left unaccounted for in kgs,

and

i) Column (27) contained remarks of the visiting Excise

officer.

Unmanufactured Tobacco was decentralized in view of the fact that it was an

agricultural product and with a view to ensure that the entire produce was brought under the

books of accounts and the duty of excise was paid thereon hence the detailed scheme. In this

scheme, the growers/curers, private warehouses, wholesale and retail dealers, were also

covered. Numerous checks were prescribed to avoid evasion of the Central Excise duty.

As a first major effort of rationalization and simplification with a view to eliminate

excise control over tobacco growers/curers, warehouse licensees, small dealers, it was

proposed to withdraw the excise duty from unmanufactured tobacco (Tariff item 4-I, Notes

on Budget Changes, 1979-80, A39 (1979) ELT (Volume 3) refers). The short fall in revenue

was proposed to be made good partially by revising the existing rates of duties on

manufactured tobacco products. The rates of duty on cigarettes were stepped up as a revenue

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measure. Some relief was provided for specific period in respect of cigarettes, handmade

biris, dutiable chewing tobacco and snuff, when produced out of pre-budget duty paid

unmanufactured tobacco. Unbranded hookah tobacco also was proposed to be exempted

from the excise duty purview.

Extract of the speech of the then Hon‟ble Finance Minister was as under.

―I now turn to the proposal of far reaching significance. This

concerns unmanufactured tobacco excise on which dates back to the

year 1943. This levy brings the excise machinery into contact with a

large unmanufactured tobacco from excise duties, including additional

excise duties and thus, relieved at one stroke, nearly a million tobacco

growers, curers, small dealers and warehouse licensees from excise

control. I have no doubt that this bold decision to do away with a

vexatious levy – a legacy of the colonial era – will be widely welcomed

by the farmers in the tobacco growing tracts of our country. This

measure would involve loss of Central Excise revenue of the order of

Rs.121.20 crores. I, however, propose to recoup Rs.115.71 crores of

this loss through suitable upward adjustments in the rates of duties on

manufactured tobacco products‖

Thus, the Tobacco history of excise duty that started on 01.04.1943 came to an end on

01.03.1979 by way of abolition of excise duty on unmanufactured tobacco.

CHAPTER 4-II (1) – CIGARS AND CHEROOTS

The manufacturer of Cigars and Cheroots was required to take a licence for

manufacturing Cigars and Cheroots inasmuch as he was required to follow certain rules that

were framed under the Act. No cigars or cheroots or waste arising during the manufacture

thereof was allowed to be stored in a bonded warehouse and it was not to be stored along

with the unmanufactured tobacco. Packing was to be done only in the approved types of

packets and covering. Labels were subject to strict audit as to its utilization.

Under Notification 53/76-CE dated there was exemption granted to the unbranded

cigars and cheroots subject to certain conditions attached. Under the Notification No.56/76-

CE dated 16.03.1976 and Number 40/78-CE dated 01.03.1978 (as amended) no additional

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duty of excise was payable and concessional rate of duty was available respectively to the

unbranded cigars and cheroot sector.

Incidentally, since India was ruled by the British for over one hundred years, I cannot

resist temptation but to state that cheroots, for which Churchill was known for, were not

much popular among the British officers who stayed in India for some reason or the other.

CHAPTER 4-II (2) - CIGARETTES

As per the Notification Number 100/85-CE dated 01.03.1985, “Adjusted Sale Price,

in relation to each cigarette contained in a package of cigarettes, meant the unit price arrived

at by dividing the sale price of such package by the number of cigarettes in such package.

Provided that in the case of cigarettes having a sale price exceeding rupees

seventy per thousand, the adjusted sale price in relation to each cigarette contained in

a package of cigarettes was, where the sale price of such package was fixed after the

date of issue of this notification, and

a) such sale price was in excess of the sale price of a like package as sold

immediately before such date; or

b) such packages were packed for retail sale for the first time only after such

date,

meant the unit price arrived at -

a) in a case falling under clause (a), by reducing the sale price by an

amount equal to such excess or an amount calculated at the rate of

rupees ten per thousand, whichever was less and by dividing the

sale price of such package as so reduced by the number of

cigarettes in such package; and

b) in a case falling under clause (b), by reducing the sale price of such

package by an amount calculated at the rate of rupees ten per

thousand, and by dividing the sale price of such package as so

reduced by the number of cigarettes in such package

Provided further that where the cigarettes were packed in packages

(whether or not containing the same number of cigarettes) but the unit prices

of the cigarettes in different packages as arrived at in accordance with the

foregoing provisions of this Explanation were not the same, the adjusted sale

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price in relation to each cigarette in every such package was to be the highest

of such prices.

“Cigarettes packed in packages” meant the cigarettes which were packed for retail

sale, in packages which (a) contain ten or twenty cigarettes, and (b) boar a declaration

specifying the maximum sale price thereof as the amount specified in the declaration plus

local taxes only.

“Sale price” in relation to a package of cigarettes, meant the maximum price

(exclusive of local taxes only) at which such packages were sold in accordance with the

declaration made on such package.

With regard to the dutiability of “Oily Cigarettes” (that is to say, cut cigarettes rods

when they came in contact with the lubricating oil used for the machine in the process of

manufacture got contaminated) it was held that oily cigarettes may look like cigarettes but the

same were non-smokable and could not be bought and sold as cigarettes in the market as such

they were not liable to the duty of excise. (1981 ELT 847 (CBE&C) refers)

Duty was imposed on the cigarettes whatsoever was the brand, trade name or the

description. Therefore, by converting Viscount cigarettes into Cavendar cigarettes by re-

processing or re-manufacturing did not in any manner change the class of goods. Since

Tariff Item 4 did not distinguish between one brand of cigarettes from another, therefore, the

restriction of rule 173L(3) was inapplicable for refund of duty on returned cigarettes. (1982

ELT 495 (Government of India) refers)

CHAPTER 4-II (3) - BIRI

As regards the process of manufacture of biris at a factory it can be said that there

were two different ways of getting biris manufactured, i.e., some people were manufacturing

biris in the factory, whereas some people, especially female class, were manufacturing biris

at their homes. For the sake of workers manufacturing biris, that is to say, rolling tobacco into

biris, at home were provided tendu leaves, tobacco, labels and threads. Biris so prepared at

home were subject to scrutiny in the factory and damaged, improper and cut biris were

separated and were not counted, treating them as „chaat biris” payment of which was not

made to the workers who manufacture them at their homes. Thus quality or approved biris

were packed in a bundle that contained twenty five biris each, known as “katta”. Such 20

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kattas,s (one thousand in numbers), were further packed in a gunny bag to be delivered to the

market either for wholesale or for retail.

Under the Notification Number 33/82-CE dated 28.02.1982 exemption was available

to the first clearance of biris upto a quantity of twenty lacs. As also under the yet another

Notification Number 111/83-CE dated 01.03.1983, there was available a partial exemption to

biris if they were manufactured from out of the duty paid biris.

Central Excise duty was not at all leviable on non-branded biris irrespective of the

fact whether such non branded biris were manufactured by the licensed biri manufacturers or

others and cleared as such. However, non-branded biris manufactured by the manufacturers

who manufacture both labeled and non-branded biris were subject to proper accounting and

were to be cleared under nil duty AR-1/Gatepass giving therein full details of the consignee.

Manufacturers engaged exclusively in such biris were not required to take Central Excise

licence so long such biris from the whole remained exempted e of the duty of excise leviable

thereon.

CHAPTER 4-II (4) - SMOKING MIXTURE

Smoking Mixtures for pipes and cigarettes were enjoying partial exemption in the

duty of excise as per the Notification Number 33/79-CE dated 01.03.1979.

4-II (5) - CHEWING TOBACCO

The process of manufacture of Chewing Tobacco was very much interesting, that is to

say, Jaggery juice when sprinkled on raw tobacco and when cutting the same into strips by

shearing machine, the resulting tobacco was known as „Nice tobacco‟. This nice tobacco was

allowed to dry for few days further to which were added flavouring essences.

Chewing Tobacco was also known as “Khara Masala”, “Kimam”, “Dokta”, “Zarda”,

“Sukha”, “Surti”, etc.

Chuna katha supari hand mix:

Chewing Tobacco was mostly enjoyed by that class of people who, either could not

afford the branded Chewing Tobacco or were having hand to mouth living, by mixing chuna,

katha, cut pieces of betel nut (supari) with raw, cut into small particles tobacco in their hands

and thus got their kick assuaged.

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CHAPTER 4-II (6) - SNUFF

Notification Number 36/79-CE dated 01.93.1979 granted exemption to this

commodity.

CBEC Circular Number 22/75 dated 10.06.1975 clarified that (1) snuff, whether used

by inhaling or as a dentifrice was dutiable, and (2) tobacco powder, if cleared in the form of

snuff even though without flavouring and without adding any other ingredients like lime, etc,

were considered as fully manufactured snuff for the purpose of the levy of Central Excise

duty if the product was known commercially as „snuff‟.

Ipco Dental Creamy Snuff was generally applied for strengthening weak and spongy

gums, the main ingredient of which was snuff. Since its essential character was snuff and

other things were added to it to change its physical condition so as to make acceptable to the

customers, it continued to remain snuff and was taxed accordingly. (1968 22 STC 160

(Gujrat) refers)

CHAPTER 4-II (7) - HOOKAH TOBACCO

Hookah Tobacco enjoyed exemption under the Notification Number 37/79-CE dated

01.03.1979.

There were the items, (i.e. 4-II (1) to 4-II (7) which did not generate as much revenue

as was garnered by tobacco itself and there was a contrary position that the establishment

expenses were more than the revenue actually received.

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TARIFF ITEM 5 - SALT

Salt was the very first item that was excised as early as in the year 1870 by the

British. By that time, since the British Raj had expanded considerably equally it was

necessary to get revenue – both for their survival in India and to transfer part of the revenue

to their principals in London – and as such more and more articles came to be taxed by way

of excise duty.

It was interesting to note the definition of “Salt”, which was as under.

―Salt include swamp salt, spontaneous salt and salt or saline

substance from the earth.‖

“Dandi Yatra”, a historic march by Mahatma Gandhi compelled the then British

Government to abolish duty on salt.

For administering the duty of excise, certain rules, i.e. Rule 100 to Rule 138, were

framed but these are not on the statute book now.

Besides levy of excise duty on salt, a cess of 14 paisa per forty kgs was also leviable

under Salt Cess Act dated 26.12.1953, (Number 49 of 1953). The said Act provided for levy

and collection of a cess on salt for the purpose of raising funds to meet the expenses incurred

in the salt organization maintained by the Government and also as a measure in connection

with the manufacture, supply and distribution of salt.

By a Notification dated 18.02.1960, all salts manufactured in a private factory, the

area of which exceeded ten acres but did not exceed one hundred acres was exempted from

the payment of one half of the cess leviable thereon under Section 3 of the Salt Act, 1953.

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TARIFF ITEM 6 TO 10 – PETROLEUM PRODUCTS

The Government of India, by the Act Number 38/60 dated 20.09.1960, substituted the

entire First Schedule. Thus the items Motor Spirit, Kerosene, Refined Diesel Oil and

Vaporising Oil, Diesel Oil-Not Otherwise Specified, and Furnace Oil, were placed as Tariff

Item Numbers 6,7,8,9 and 10 respectively, the definitions of which read as under.

6-MOTOR SPIRIT:

Motor Spirit, that is to say,

i) any mineral oil (excluding crude mineral oil) which has its flashing

point below seventy-six degree of Fahrenheit‟s thermometer and which

either by itself or in admixture with any other substance, is suitable for

use as fuel for internal combustion engines; and

ii) power alcohol, that is to say, ethyl alcohol of any grade (including

such alcohol when denatured or otherwise treated), which, either by

itself or in admixture with any other substance, is suitable for being

used as aforesaid.

Explanation I: “Mineral Oil” means an oil consisting of a single liquid

Hydrocarbon or a liquid mixture of hydrocarbons (except for

associated impurities derived from petroleum, coal, shale, peat or any

other bituminous substance and includes any similar oil produced by

synthesis or otherwise;

Explanation II: “Flashing Point” shall be determined in accordance

with the tests specified in this behalf in the rules made under the

Petroleum Act, 1934 (Number 30 of 1934)

However, this item was amended by Finance Act with effect from 01.03.1982 that is

to say,

1) the flash point was reduced to 25 degree of Centigrade

thermometer, and

Explanation II was substituted as under –

2) ―Flash point shall be determined in accordance with

the tests specified in this behalf in the rules made under the

Petroleum Act, 1934 (Number 30 of 1934)‖

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7. KEROSENE:

Kerosene, that is to say, any mineral oil (excluding mineral colza and turpentine

substitute), which has a flame height of eighteen millimeters or more and is ordinarily used as

an illuminant in oil burning lamps.

Explanation I: The expression “mineral oil” has the meaning assigned

to it in Explanation I to item number 6.

Explanation II: “Flame Height” shall be determined in the apparatus

known as the smoke point lamp in the manner prescribed in this behalf

by the Central Government by Notification in the Official Gazette

This item was amended with effect from 01.03.1982 by the Finance Act, 1982, and

the following was substituted -

―7. Kerosene (which is ordinarily used as an illuminant in oil burning

lamps) and aviation turbine fuel, that is to say, any mineral oil

(excluding mineral colza oil and turpentine substitute), which has a

smoke point of eighteen millimeters or more and has a final boiling

point not exceeding three hundred degrees of Centigrade thermometer

-

i) Aviation Turbine Fuel,

ii) Others

Explanation I: The expression ―mineral oil‖ has the meaning assigned

to it in Explanation 1 to Item Number 6.

Explanation II: ―Smoke Point‖ shall be determined in the apparatus

known as the Smoke Point Lamp in the manner specified in this behalf

by the Central Government by Notification in the Official Gazette.

Explanation III: “Final Boiling Point” shall be determined in the

manner specified in this behalf by the Central Government by

Notification in the Official Gazette.

8. REFINED DIESEL OILS AND VEPORISING OIL.

Refined Diesel Oils and Vaporising Oil, that is to say, any mineral oil (excluding

mineral colza oil and turpentine substitute) which has its flashing point at or above seventy

six degrees of Fahrenheit‟s thermometer and satisfies either of the following requirements -

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I. the oil has a flame height of ten millimeters or more but less than eighteen

millimeters; or

II. the oil has a flame height of less than ten millimeters but has a viscosity of

less than one hundred seconds by Redwood I Viscometer at one hundred

degrees of Fahrenheit‟s thermometer, and contains less than one quarter of one

per cent by weight of any bituminous substance,

a) Refined Diesel Oil,

b) Vaporising Oil,

Explanation: The expressions “mineral oil”, “flashing point” and

“flame height” have the meanings respectively assigned to them in

Explanation I and II to item Number 6 and in Explanation II to Item

Number 7.

This item was amended by the Finance Act, 1982 with effect from 01.03.1982 and the

following was substituted, namely,

9. Refined Diesel Oil, that is to say any miracle oil

(excluding mineral colza oil and turpentine substitute), which

has its flash point at or above twenty five degrees of

Centigrade thermometer, and satisfies either of the following

requirements -

i) the oil has a smoke point of ten millimeters or

more

but less than twenty millimeters; or

ii) the oil has a smoke point of less than ten

millimeters but has a viscosity of less than fifty

seconds for Redwood I Viscometer at 37.8

degrees of Centigrade thermometer and

satisfies the following conditions -

a) the oil leaves carbon residue of less

than 25 percent by weight when tested

by Ramsbottom Carbon Residue

apparatus, and

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b) the oil is lighter in colour than 0.04

Normal Iodine solution when tested by

colour comparison test.

Explanation I: The expression ―mineral oil‖ and ―flash point‖ have

the meanings respectively assigned to them in Explanation I and II to

Item Number 6, and the expression ―smoke point‖ has the meaning

assigned to it in Explanation II to Item Number 7;

Explanation II: ―Carbon residue‖ and ―colour comparison test‖ shall

be determined or done in the manner specified in this behalf by the

Central Government by Notification in the Official Gazette;

Explanation III: This item does not include -

a) base mineral oils (suitable for use in the

manufacture of lubricating oils and

greases), including mineral oils commonly

known as ―Transformer Oil base stock‖ or

―Transformer Oil Feed Stocks; and

b) Lubricating Oils, including spindle oil,

flushing oil and jute batching oils.

9. DIESEL OIL (NOT OTHERWISE SPECIFIED):

Diesel Oil (Not Otherwise Specified), that is to say, any mineral oil, which

i) has a flame height of less than ten millimeters,

ii) contains one quarter of one per cent or ore by weight of any bituminous substance;

&

iii) possesses a viscosity of less than one hundred seconds by Redwood I Viscometer

at one hundred degrees of Fahrenheit‟s thermometer.

Explanation: The expressions “mineral oil” and “flame height” have

the meanings respectively assigned to them in Explanation I to Item

Number 6 and in Explanation II to Item Number 7.

This item was amended by the Finance Act, 1982 with effect from 01.03.1982 and

substituted as under.

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―9. Diesel Oil, Not Otherwise Specified, that is to say, any mineral oil

which –

i) has a smoke point of less than ten millimeters,

ii) possesses a viscosity of less than one hundred seconds by

Redwood I Viscometer at 37.8 degree of Centigrade

thermometer;

iii) leaves carbon residue of not less than 25 per cent by

weight when tested by Ramsbottom Carbon Residue Apparatus,

and is as dark as or darker than 0.04 Normal Iodine solution

when tested by colour comparison test.

Explanation I: The expression ―mineral oil‖ and ―smoke point‖ have


Number 6 and Explanation II to Item Number 7 and the expressions

―carbon residue‖ and ―colour comparison test‖ have the meanings

assigned to them in Explanation II to Item Number 8.

10. FURNACE OIL:

Furnace Oil, that is to say, any mineral oil, which -

i) has flame height of less than ten millimeters,

ii) contains one quarter of one per cent or more by

weight of any bituminous substance; and

iii) possesses a viscosity of one hundred seconds or more

Redwood I Viscometer at one hundred degrees of

Fahrenheit‟s thermometer.

Explanation: The expression “mineral oil” and “flame height” have the

meanings respectively assigned to them in Explanation I to Item

Number 6 and in Explanation Number 7.

However, by the Finance Act, 1982, with effect from 01.03.1982 this item was

amended and substituted to read as under.

―10. Furnace Oil, that is to say, any mineral oil which –

i) has a smoke point of less than ten millimeters;

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ii) possesses a viscosity of one hundred seconds or

more by Redwood I viscosity at 37.8 degrees of

Centigrade thermometer;

iii) leaves carbon residue of not less than 25 per

cent by weight when tested in Ramsbottom

Carbon Residue Apparatus, and

iv) is as dark as or darker than 0.04 Normal Iodine

solution when tested by colour comparison test.

Explanation I: The expression ―mineral oil‖ and ―smoke point‖ have


Number 6 and Explanation II in Item Number 7 and the expressions

―carbon residue‖ and ―colour combination test‖ have the meaning

assigned to them in Explanation II to Item Number 8.

Explanation II: This item does not include –

(a) base mineral oils suitable for use in the manufacture of

lubricating oils and greases; and

(b) lubricating oils including axle oil.‖

TARIFF ITEM NUMBER 11 - ASPHALT AND BITUMEN AND TAR

The Government, by the Petroleum Products ACT, 1960 (Act Number 38 of 1960)

dated 20.09.1960, also placed Asphalt and Bitumen (including Cut Back Bitumen and

Asphalt), natural or produced from petroleum or shale, as Item Number 11 of the said First

Schedule.

However, with effect from 01.03.1982,by the Finance Act, 1982,this item was

amended and substituted to read as under.

―11. Coal (excluding lignite) coke all sorts, including calcined

petroleum coke; asphalt bitumen and tar -

i) Coal and coke not elsewhere specified,

ii) Petroleum coke, other than calcined petroleum coke;

iii) Calcined Petroleum Coke; and

iv) Asphalt and bitumen (including Cutback Bitumen and

Asphalt), natural or produced from Petroleum or Shale,

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Tar, distilled from coal or lignite and other mineral

tars, including partially distilled tars and blends of

pitch with creosote oils or with other coal tar

distillation products.‖

By Finance Act, 1958 dated 28.04.1958 “Mineral Oil (Additional Duties of Excise

and Customs) Act, 1958, was enacted by which the Government was empowered to levy and

collect the excise duty in respect of Kerosene, Motor Spirit, Refined Diesel Oil and

Vaporising Oil, Diesel Oil (Not Otherwise Specified) and Furnace Oil at the effective rate of

six paisa per imperial gallon, fourteen paisa per imperial gallon, seven paisa per imperials

gallon, three paisa per imperial gallon, rupees eleven and paisa sixty four per ton and rupees

thirteen and paisa ninety one per ton respectively. The above rates were in addition to the

duties of excise chargeable on such goods under the Central Excises and Salt Act, 1944,

which were revised with effect from 27th

/28th

September 1961.

TARIFF ITEM NUMBER 11A - MINERAL FUELS, LUBRICANTS

By the Budget 1962, after Item 11, under the heading “Mineral Fuels, Lubricants and

related materials” the below mentioned item was added as Item Number 11A, that is to say,

―11A. All products derived from refining of crude petroleum or shale

(whether gaseous, liquid, semi-solid or solid in form), not otherwise

specified, including refinery gases, lubricating oil and greases, waxes

and coke‖

However, by the Finance Act, 1982, with effect from 01.03.1982, this item was

amended and the following was added, namely -

1) Mineral Turpentine Oil,

2) Waxes,

3) (a) Base material oils (suitable for use in the manufacture

of lubricating oils and greases) including mineral oils,

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commonly known as Transformer Oil Base Stock or

Transformer Oil Feed Stock,

(b) Lubricating Oils, (including Spindle Oils, Flushing

Oils, Jute Batching Oils and Axle Oils) and Lubricating

Greases,

4) Others.

TARIFF ITEM 11-AA - PETROLEUM GASES

By the Finance Act, 1982, the Government introduced and inserted therein

Petroleum Gases as the tariff item placed at number 11AA, the description of which read as

under.

―11A. Petroleum Gasses, that is to say,

1. Liquefied Petroleum Gasses, and

2. Other Petroleum Gasses and Gaseous Hydrocarbons

derived from refining of crude petroleum or shale.”

TARIFF ITEM 11B - LUBRICATING OIL

This item came on the Tariff Schedule for the first time by the Finance Act, 1972,

dated 16.03.1972 and was placed at number 11B of the First Schedule, the description of


―11B. Lubricating Oil, namely -

1) Lubricating Oils and greases obtained by straight blending of

mineral oils, and

2) Lubricating oils and greases obtained by compounding of

mineral oils with any other ingredients.‖

However, the Finance Act, 1984, later on deleted this item from the First Schedule. It

is interesting to note that even though this tariff item remained on statute book for a period of

two years it created controversies. In regard to the interpretation of this act, the Calcutta

High Court maintained that Mineral Oil had the meaning assigned to it in the Explanation to

the Item Number 6. (1984(15) ELT-365 (Cal) refers). Further, in yet another decision the

Madras High Court stated that Specialty Oil was not lubricating oil hence it was classifiable

under the tariff item number 68 and not under the tariff item 11B. (1992(57) ELT-227 (Mad)

Refers)

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TARIFF ITEM NUMBER 11C - CALCINED PETROLEUM COKE

This item was brought on the tariff schedule effective from 29.05.1971; however, the

same was deleted with effect from 31.03.1982.

TARIFF ITEM 1D - COAL / COKE BRIQUETTES

This item came on the tariff schedule by the Budget 1978 and was placed at number

11D but the same was stood deleted from the tariff schedule with effect from 01.03.1982.

TARIFF ITEM 11E - ELECTRICITY

By Notification Number 205/84-CE dated 01.101.1984, the duty of excise was for the

first time imposed on the Electricity. This was done under the First Schedule of the Central

Excises and Salt Act, 1944, and this commodity was placed as Tariff Item Number 11E.

The matter as to whether the electricity was goods was examined by the Hon‟ble

Supreme Court and deciding the electricity as goods the Supreme Court also stated that

merely because the electricity was not tangible, it would be movable property since it can be

transmitted, transferred, discovered, stored, processed, etc, in the same way as the movable

property. (AIR 1970 SC 732 refers).

The Notification Number 52/78-CE dated 01.03.1978 granted exemption to the

electricity on captive consumption subject to the condition that generating and consumption

of electricity was done at one and the same place. Scope of this Notification was considered

by the Hon‟ble Tribunal and it was maintained that for the purposes of the Notification

Number 52/78 ibid it was not necessary that the concerned activity was to be within the

boundary wall of the industrial unit, rather on a reasonable interpretation of the Notification,

any such facility, that was something which either physically or functionally or both was

considered as included within the scope of the „industrial unit‟. Considering this, the

township, including hospitals, estate office, schools, nursery, guest house, barracks of

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security forces and outside contractors doing testing work outside the boundary wall were

not eligible for the exemption as they were neither functionally not physically can be said to

be a part of the industrial unit.

The question arose whether the staff quarters were included with the purview of the

said Notification Number 52/78 ibid, it was decided that since there was no scope for

inclusion of the staff quarters of a factory as the term industrial unit was legitimately eligible

only the manufacturing premises and thus for that purpose the staff quarters were not

covered by the said Notification Number 52/78 ibid.

The benefit of exemption Notification Number 52/78-CE dated 01.03.1978 was

extended to the extent of the electricity used in the staff canteen, administrative office, etc,

which were situated in the premises of the industrial units generating there own electricity.

However, such an exemption was available only in respect of the electricity, which was

generated by a generating station and used in the said station, including its auxiliary plants.

Further, the said exemption covered the electricity supplied to only such staff as, by

compulsion or operation requirements that were housed in the premises of the said

generating station, such as fire brigade operational staff for powerhouse, etc.

The electricity used in the Water Treatment Plant situated within the premises of the

industrial unit for purification of water and portion of purified water that was supplied to its

workers colony located far off from the factory premises, was eligible to get exemption from

the duty of excise under the Notification mentioned supra (Bombay Collectorate Trade

Notice Number 13/83 dated 04.02.1983 refers)

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TARIFF ITEM 12 - VEGETABLE NON ESSENTIAL OILS

The Government, with effect from 01.03.1956, by Finance Act, 1956, imposed new

excise duty on Vegetable Non-Essential Oil (Item 1 to 3), for the first time, at the tariff rate

of rupees seventy per tone (i.e. six paisa per pound). This facility was applicable only in

respect of the Vegetable Non-Essential Oil, produced with the aid of power. Also there

provided the exemption under the Notification dated 01.03.1956 for the Vegetable Non

Essential Oil produced without the aid of power. Further, first one hundred and twenty five

tons of Vegetable Non-Essential Oil cleared by any manufacturer for the home consumption

in each financial year was exempted with effect from 01.04.1956. Besides, under the same

Notification Vegetable Non-Essential Oil first cleared by any manufacturer for home

consumption upto a maximum of ten tons during the month of March 1956, was also

exempted.

Initially, there were only two categories of the manufacturers under the excise control,

i.e. (1) the manufacturers who do not employ power in any of the processes of manufacture

and (2) the manufacturers employing power whose annual output was not more than one

hundred twenty five tons and they were not required to pay any Central Excise duty.

Only Non-Essential Vegetable Oils were made excisable, i.e.

(A) Ground nuts Oil,

(B) Sesamum Oil,

(C) Linseed Oil,

(D) Rape and Mustard Oil,

(E) Niger and Karadi Oil,

(F) Cotton Seeds Oil,

(G) Cocoanuts Oil, and

(H) Mahua Oil;

whereas the essential oils, which were also known as „Ethereal or Volatile Oils, such

as

(A) Sandalwood Oil,

(B) Gernium Oil,

(C) Eucalyptus Oil,

(D) Ginger Grass Oil,

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(E) Turpentine Oil,

(F) Thymol Oil,

(G) Cinnamon Oil,

(H) Ajowan Oil,

(I) Palma Rose Oil,

(J) Rose Oil,

(K) Lemon Grass Oil,

(L) Lanaloe Oil, and

(M) Khus Oil,

were not brought under the excise net.

Essential Oils that are sourced from or available with say, flowers, leaves, seeds or

stems of the plants, generally in minute quantity. One important feature of these oils is their

volatility and, therefore, they were often described as „volatile oils or „ethereal oils‟.

Examples of such oils are Lemon Oil, Lemongrass Oil, Turpentine Oil, Clove Oil, etc. These

oils are produced, generally, by distillation processes of solvent extraction, have a pleasant

fragrance and are largely used in the manufacture of medicines, perfumery and flavouring

essences.

All oils of vegetable origin which are not „essential oils, as described above, fall into

the category of „non-essential oils‟ which are generally obtained from fruits, seeds and

kernels of fruits from which they are separated mainly by applying mechanical pressure,

such as Coconut Oil, Linseed Oil, Caster Oil, Groundnut Oil, Sesamum Oil, Rape and

Mustard Oil, Cotton Seed Oil, Mahua Oil, Niger Oil and Karadi Seeds Oil,

Hereunder is a list of dutiable and non-dutiable oils.

(A) Essential (Non-Dutiable) Oils:

01. Oil of Bitter Almonds, 02. Ajama,

03. Aniseed, 04. Bergamot,

05. Cajeput or Kayaputi, 06. Cardamom,

07. Carraway, 08. Cassia,

09. Cinnamon, 10. Citron,

11. Citronella, 12. Cloves,

13. Eucalyptus, 14. Geranium,

15. Ginger Grass, 16. Lavender

17. Lemon, 18. Lemon Grass.

19. Mace, 20. Myrbane,

21. Nirole, 22. Nutmeg,

23. Orange, 24. Otto Rose,

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25. Palma Rose 26. Patchoule,

27. Peppermint, 28. Pimento,

29. Rosemay, 30. Russa Grass.

(B) Vegetable (Non-Essential) Oils (Dutiable Oils)

01. Almond (Expressed) 02. Arachis,

03. Castor, 04. Cocoanut,

05. Cotton Seeds. 06. Groundnuts,

07. Jinjili, 08. Til,

09. Sesamum 10. Linseed,

11. Mahua Fat, 12. Mustard or Rape Oil

13. Olive, 14. Palm,

15. Palm Kernel, 16. Pea Nut,

17. Poppy Seeds Oil, 18. Oil (usually refined groundnut oil)

19. Shea Butter 20. Poppy Seeds Oil,

21. Tung Oil, 22. China Wood,

23. Karadi Seeds Oil, 24. Tobacco Seed Oil,

By Finance Bill, 1957, the rate of excise duty leviable on the Vegetable Non-Essential

Oils was increased from rupees seventy per ton to rupees one hundred twelve per ton.

The “slab” exemption from Excise Duty of 125 tons cleared by any manufacturer in a

financial l year was reduced to 75 tons. Further, the excise duty on (a) Vegetable Non

Essential Oils (other than Cotton Seed Oil) and (b) Cotton Seeds Oil, similarly cleared by a

manufacturer in excess of seventy five tons but not in excess of one hundred and twenty five

tons was reduced to rupees seventy and rupees thirty five per ton respectively. However,

prior to this new slab exemption, where any quantity of seventy five tons was cleared under

the existing conditions (which was modified) no steps to recover duty on the quantity already

cleared in excess of the limit now fixed was not taken.

Where the raw oil, in which case proof of payment of duty is not available, is

purchased by a factory either for refining or for using it in the manufacture of vegetable

products, the rate that was charged on the refined oil in such case was nil on clearances not

exceeding seventy five tons but on clearances exceeding the limit of seventy five tons but

not exceeding one hundred twenty five tons the said rate was rupees seventy per ton and for

the clearances in excess of one hundred twenty five tons the rate of excise duty was rupees

one hundred and twelve per ton in a year.

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In refining raw vegetable oils (for production of refined oils or for further

manufacture into vegetable product) the acidity is neutralized with alkali. The „soap stock‟

produced in these operations was decomposed by a few factories with mineral acids for

recovering what is known as „acid oil‟. The acid oil thus obtained was a mixture of neutral

oil and free fatty acids, the latter varying from thirty five per cent to eighty per cent, usually

round about fifty per cent. After the careful consideration the Central Board of Excise and

Customs decided that the above said „acid oil‟ should not be considered as liable to duty as

Vegetable Non Essential Oil and that „acid oil‟ was to be construed as a recovered product

consisting of a mixture of neutral oil and free fatty acids the fatty acid oil content being not

less than thirty five per cent.

In case of Vegetable Non Essential Oil the equipment meant for weighment of seeds,

separated hulls and the oil cakes were very essential so as to make out the proper co-relation

of the quantity of oil seeds taken for crushing with the quantities of oil and oil cakes

produced therefrom and as such the Board by its letter dated 15.10.1957 made it mandatory

to install such equipments.

Proforma Credit as contemplated under rule 56A of the Central Excise Rules, 1944,

was introduced with effect from 01.03.1963. The effect of this ruling was to extend the

Proforma Credit Procedure (Rule 56A) to vegetable products and soaps. The procedure was

already made applicable to the commodities like Paints and Varnishes, Textiles, etc.

A manufacturer of Vegetable products, soaps, Paints and Varnishes, was in a position

to obtain duty paid processed oil from an oil mill and was a in a position to get proforma

credit for the amount of the duty of excise so paid. However, this Proforma Credit was

permissible only in respect of the duty paid for the period on or after 01.03.1963 and not in

respect of the duty paid prior to this date of 01.03.1963. Similarly, no credit was given for

the duty on oil purchased otherwise than from a manufacturer of processed Vegetables Non

Essential Oil.

In case of solvent extracted oil issued at concessional rate the credit admissible was

the actual amount paid and not the amount calculated on the full rate of duty.

In-Bond movement of non-duty paid processed oil was not allowed.

Thus the manufacturer of vegetable products of Paints and Varnishes or soap were

eligible to obtain duty paid processed oil, crude oil, measle and were in a position to get the

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proforma credit/modvat credit for the amount of the duty paid. The facility of exporting the

excess goods was also extended to the Soap Manufacturers.

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TARIFF ITEM NUMBER 13 - VEGETABLE PRODUCTS

“Vegetable Products” means any vegetable oil or fat which, whether by itself or in

admixture with any other substance, had, by hydrogenation or by any other process, been

hardened for human consumption and attracted the duty of excise at the rate of ten per cent ad

valorem.

However, the vegetable product which was having a melting point above forty five

degree Centigrade was not assessable under the Tariff Item 13 as it was extra hard and was

not fit for human consumption which was made clear by the Board under its letter dated

21.05.1977.

As regards the scope of this tariff item to be eligible as the vegetable product the

department had maintained that only such oils which have been hardened but not hardened

too high to be unable to consume by the human being was a well known practice and the

same was based on the tariff definition. (1984(18) ELT 331 refers).

Hardening has a very limited purpose of, among other things, improving the colour,

taste, preservation and raising the melting and could not render edible an inedible oil was

proved by the fact that it was employed to render many oils more suitable for industries like

soap making and other industrial uses. All the oils “hardened for human consumption” were

themselves edible and did not require hardening, by hydrogenation or any other process to

make them edible. (1984(18) ELT 331 refers)

The definition of the expression “Vegetable Product, given below tariff item 13 of the

Central Excise Tariff made it clear beyond any doubt that it contemplated vegetable product

which was fit for human consumption. Since the super hardened Groundnut Oil and super

hardened Palm Oil were not fit for human consumption and hence could not be used for the

edible purposes since they were having a melting point above forty four degree centigrade,

therefore, they were not classifiable under tariff item 13. Further, it was also decided that

because there was no other specific tariff item under which duty was leviable on these

products hence these products were liable to duty under the Residuary Item 68 of the Central

Excise Tariff.

Incentive Scheme for increased use of Cotton Seed Oil and Soybean Oil was first

introduced in the month of July 1960. Thereafter, it was reviewed from time to time.

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The rice bran oil of edible grade, Mahua oil, Watermelon Seed oil, Sal Seed Oil and

Mayo Kernel Oil were, when used in the manufacture of vegetable products, were eligible for

concessional rate of duty.

With effect 01.03.1986, Vegetable Products, falling under Chapter Heading 15.04

were excisable to duty at the rate of eight per cent ad valorem. Under SSI exemption

Notification the goods falling under Chapter 15 of the Central Excise Tariff Act, 1985

(Number 5 of 1986) were eligible for exemption upto the First slab of rupees one hundred

lacs.

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TARIFF ITEM 14 – PAINTS AND VARNISHES

This item was re-numbered as item number 14 by the Act Number 38 of 1960 dated

20.09.1960.

The definition of “Roller Coating Composition” was revised vide the MF (DR&I)

letter dated 17.01.1968

“Special types of composition including enamels and varnishes,

pigmented as well as un-pigmented, designed for application by a

coating machine, which consists of a series of cylindrical rollers. The

composition is picked up by one of the first rollers, rotating in a trough

containing the said composition, and is evenly distributed over the last

roller and thence to the flat surface of mild steel, tinned iron or other

suitable sheets.

Among other properties, roller coating compositions are required to

possess sufficient adhesion and flexibility to permit ―drawing‖ by a

stamping machine, without serious cracking or flaking.‖

Interestingly, the department experienced difficulties in determining weight-volume

relationship in respect of certain varieties of paints/varnishes that were assessable under this

item on the basis of volume but which were cleared on weight basis. Central Board of Excise

and Customs, therefore, considered that, until further instructions, the Collector may accept

weight volume ratio of different varieties of products furnished in writing by the

manufacturers concerned subject to occasional test checks, wherever necessary samples in

airtight containers were required to be sent to the Chief Chemist for surprise checks of the

declarations of weight volume relationship.

Following is the list of articles liable to the duty of excise.

01. Aircraft Dopes,

02. Chrome colours,

03. Iron blues (other than soluble Prussian blue which has been

exempted from duty),

04. Lacquers for pencils,

05. Plastic Lacquers, and

06. Chlorinated Rubber Paints.

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Following is the list of items that were not liable to the duty of excise.

1. Treated Oils,

2. Lithographic Varnish,

3. Varnish Foots,

4. Stand Oils,

5. Linseed Oils,

6. Solvents and Thinners,

7. Liquid Stenciling Ink,

8. Printing Ink, Other than Roller Coating Composition,

9. Etching chemical compositions,

10. Pickling solutions,

11. Polishes in paste, semi solid or solid like floor polish, car

polish, boot polish, metal polish, etc.

12. Paint and Rust removers,

13. Wood Preservatives,

14. Adhesives, Other than those based on nitro cellulose,

15. Sealing Wax,

16. Disinfectants,

17. Insecticides,

18. Seaming solutions,

19. Natural and synthetic resin and gums,

20. Compounds solid or semi solid used for lagging, roofing of

Insulation

21. Enamelware, namely, articles made by coating low melting

glass into metal by a process of fusion,

22. Litharge.

By Notification No. 23/55-CE dated 29.04.1955, the following items were exempted

from the whole of the duty of excise leviable thereon under Section 2 of the Central Excises

and Salt Act, 1944, namely –

1. Minerals employed either as extenders, suspending agents

or fillers or as diluents, namely -

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Barytes, Bauxite, Bentonite, China Clay, Celestite,

Limestone and Chalk (including precipitated chalk),

Fuller‟s earth, Gypsum, Mica, Silica, Asbestine, Talc, Slate,

2. Natural black minerals, namely –

Graphite, Limentite black and Manganese dioxide,

3. Carbon black,

4. Oxide of iron pigments – all colours, natural and synthetic,

5. Soluble Prussian Blue (Washing Blue),

6. Lake colours and Pigment Dye Stuffs, and

7. Anti-fouling Toxics, namely – Arsenic Oxide, Oxide of

Mercury, Sub Oxide of Copper.

Red Lead, White Lead, Zinc Oxide and Leaded Zinc Oxide were exempted from duty

under the Notification Number 21/55-CE dated 28.04.1955, subject to the condition that the

concerned items were used in the manufacture of rubber, glass, pottery and other ceramic

goods and the procedure prescribed under Chapter X was to be observed.

Nitro Cellulose Lacquers, falling under tariff item number 22(III)(i) were exempted

under the Notification Number 38/55-CE dated 01.08.1955 produced by a manufacturer

whose output of such lacquers did not exceed 1,000 imperial gallons per year.

Putty was considered as falling under the tariff item number 22 of the Central Excise

Tariff Act, 1985 (Number 5 of 1986).

Zinc Oxide used in the manufacture of rubber soles for footwears was exempted from

the duty of excise, whereas the same, i.e. Zink Oxide, was considered as liable to the duty of

excise irrespective of its purity and use.

The following products were treated as non-excisable.

1. Tar Plastic,

2. Shalitex Sealing Compound,

3. Shalitex Premier,

4. Shalibond BS,

5. Shalibond CS‟

6. Shalibond S,

7. B.O.C. Hot Meal Grease,

8. Shell Cardimum Compound,

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9. B.O.C.V.T.S., and

10. Hot Power Expansion Joining Compound.

The question regarding classification of “Gasket Shellac Compound” was raised when

the Board, as per their Tariff Advice Number 4/1974 opined that the Gasket Shellac

Compound which was used as sealing compound in fixing Engine Head Gasket not

classifiable under tariff item number14 of the Central Excise Tariff as the said item number

covers only such products which commercially known and sold or ultimately used as

“pigments, colours, paints, enamels, varnishes, blacks and cellulose lacquers.”

As per Board‟s letter dated 14.01.1974,Titanium dioxide conforming to the chemical

formula TiO2, that is to say, a minimum of 96% TiO2 in the case of Anatase grade and a

minimum of 94% TiO2 in the case of Rutile grade were assessable to the duty of Central

Excise under tariff item 14(I)(i) (now 14(i)(ii)) of the Central Excise Tariff Act.

The exemption was granted under the Notification Number 117/64-CE dated

30.05.1964 to Nitro Cellulose Lacquers, clear and pigmented, falling under the tariff item

number 14 provided (i) the lacquer was used exclusively in the manufacture of jari, (ii) the

manufacturer did not undertake manufacture of any other product liable to duty under this

item, and (iii) the total quantity of the lacquer produced by the manufacturer during the

financial year did not exceed 110 kilo litres.

Exemption was also granted under the Notification Number 262/76-CE dated

16.10.1976 to Nitro Cellulose Lacquers actually consumed in the process of coating

cellophane with such Nitro Cellulose Lacquers so as to make such cellophane moisture proof

from the appropriate duty of excise leviable on such Nitro Cellulose Lacquers as is equivalent

to the duty of excise on that quantity of such Nitro Cellulose Lacquers as are equal to the

quantity of the residue (that is to say the solvent) left over after such coating subject to the

condition that such residue is used in the manufacture of such Nitro Cellulose Lacquers.

Nitro Cellulose Lacquers, if produced in Ordinance Factories belonging to the Central

Government and if produced with an intention for consumption for Defence purposes or for

the supply to the Central Government departments, was also exempted under the Notification

Number 35/85-CE dated 17.03.1985.

The Government of India gave a somewhat liberal exemption to the „gilding solution‟

since the persons making this solution were small manufacturers of artificial jari. It was

directed to be considered and applied only to the micro lacquer manufactured by jari makers

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for their captive consumption, that is to say, by dissolving the gilding solution for

manufacture of exclusive jari only and not in the manufacture of any other paints and

varnishes.

Emulsion and Paste made by the Textile mills for printing fabrics from the duty paid

dyes was considered to be non excisable.

Paints and Varnishes produced by a non-power operated unit was also exempted

under the Notification dated 01.03.1970. Further, Paints and Varnishes falling under Chapter

Heading 14 were exempted from the duty of excise leviable thereon subject to certain

conditions attached.

Cement, Marble powder and Bitumen used for making Mosaic floor/Tiles, these

terrazzo and mosaic tiles did not attract excise duty under the tariff item number 14(3)(i).

With effect from 01.03.1963, the Proforma/Modvat Credit facility was extended to

this commodity under rule 56-A of the Central Excise Rules, 1944. However, this facility

was available only in respect of duty paid on or after 01.03.1963 and not in respect of duty

paid before that date.

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TARIFF ITEM 14A - SODA ASH

This item was placed on the Tariff Schedule with effect from 01.03.1961 attracting

thereto the duty of excise at the rate of rupees two per quintal.

Soda Ash in liquid form was not liable to the duty of excise since the term Soda Ash

applied only to solid product obtained after the wet bicarbonate of soda was passed through

calciners and as the liquid form was not marketable commodity but the same was meant only

for captive use. (Circular letter Number 2(Soda Ash)/61 dated 09.06.1961)

Soda Ash if used for purification of brine within the factory of production was

exempted upto three per cent of Sodium Chloride contents of the common salt put into

process of purification of brine from the whole of the duty of Central Excise leviable thereon.

The cost of packing material and charges for branding, packing and stitching of

various kinds of Soda Ash varieties falling under item 14A was includible in the assessable

value under Section 4 of the Central Excises and Salt Act, 1944 (1983-ELT 776(Guj) refers).

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TARIFF ITEM 14AA - INORGANIC CHEMICALS

This item came on the Tariff Schedule for the first time with effect from 01.03.1970.

Inorganic Chemicals, namely, (1) Calcium Carbide, (2) Bleaching Paste and

Bleaching Powder, (3) Sodium Hyposulphite, (4) Bicarbonate of Soda, (5) Bichromates of

Potassium or Sodium Hydrogen Peroxide and (6) Potassium Permanganate, were subjected to

the duty of excise at the rate of fifteen per cent ad valorem.

As per Budget Circular Number 14/70 dated 29.05.1970 “Bleach Liquor” being

solution and not a powder or paste was not liable to excise duty under the Central Excise

Tariff.

Existing definition of Hydrogen Peroxide under tariff item 14AA of the Central

Excise Tariff was to cover Hydrogen Peroxide in all forms including that in liquid form

whether concentrated or diluted. (Bangalore Trade Notice Number 138/17 dated 24.07.1971

refers)

As per Budget Circular Number 24/71 dated 18.09.1971, Bichromate of Sodium,

whether in concentrate of liquid form even when the percentage of water content in the

solution was more than fifty per cent, came within the mischief of tariff item number 14AA.

As regards Potassium Permanganate, both, the Budget Circular Number 9/71 and MF

(DR&I) Circular Number B-9/1/71-CX II dated 22.07.1991, stated that subsequent

refinement and/or change in the physical form of Potassium Permanganate which had earlier

been cleared on payment of duty were not to be subjected to any further duty of excise under

tariff item 14AA of Central Excise Tariff.

As per Tariff Advice Number 33/82 dated 28.06.1982, „impure‟ Calcium Carbide

used in the manufacture of Acetylene Gas was classified under tariff item 14AA of the

Central Excise Tariff.

With regard to Caprolactum recovered from wash water, the Board‟s letter Number

102/2/74-CX dated 01.08.1975, mentioned that Central Excise duty was not attracted where

the Caprolactum was recovered from duty paid caprolactum contained in the wash water.

As regards Caprolactum from nylon waste, the MF (DR&I) letter Number 107/4/76

CX-3 dated 26.02.1977 had stated that the recovery of caprolactum from waste nylon yarn

products was a process of „manufacture‟ and hence the recovered caprolactum was liable to

the duty of Central Excise.

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Calcium Carbide – In naked form and used in the generation of acetylene gas within

the factory of manufacture was not „goods‟ because it did not attain the material form and

purity as was required by the Carbide of Calcium Rules, 1937, hence it was not liable for

Central Excise duty under Tariff Item 14AA. (Delhi High Court decision, 1978 ELT 9J-121)

refers)

With effect from 01.03.1986 the Inorganic Chemicals have been classified under

Chapter Heading 28 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of

1986) and currently the duty of excise is at the rate of sixteen per cent ad valorem. Besides

SSI exemption for clearance value upto a slab of first rupees one hundred lacs is also

available to this industry.

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TARIFF ITEM 14AAA - ORGANIC CHEMICALS

This item came on the tariff schedule for the first time with effect from 17.03.1985.

The chemicals, namely

(1) Acetic Acid;

(2) Acetic Anhydride;

(3) Acetone

(4) Phenol, and

(5) Methanol

were leviable to the excise duty at the rate of fifteen per cent ad valorem; whereas fifty per

cent ad valorem duty of excise was leviable on the chemicals, namely Caprolactum, and

Dimethyl Terephthalate.

However, by a Notification, the effective rate of duty for chemical, caprolactum,

cleared was fifteen per cent ad valorem and if such Caprolactum and Dimethyl Terephthalate

was produced out of nylon polymer waste by the process of recycling was exempted.

With effect from 01.03.1986, the classification of these chemicals was changed to

read as under.

Name of the Chemical Revised Classification Number

1. Acetic Acid 2915.10

2. Acetic Anhydride 2915.20

3. Acetone 2914.10

4. Phenol 2907

5. Methanol 2905.10

6. Caprolactum 2933

7. Dimethyl Terephthalate 2917

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TARIFF ITEM 14B - CAUSTIC SODA

This item came on the Tariff Schedule with effect from 01.03.1961.

Caustic Soda and Caustic Potash, whether in solid form or in lye, both these

commodities were assessed to the duty of excise at the rate of fifteen per cent ad valorem.

Procedure for accounting of production and issues of Caustic Soda was that the

Caustic Soda was first produced in the form of lye. This lye was either cleared as such for

use in the producing factory or outside of the factory of production or part of it was cleared

and part used in the manufacture of caustic soda flakes or solid caustic soda. Obviously,

therefore, the method of maintenance of RG-1 and EB-4 accounts will depend upon the

nature and type of caustic soda produced and the nature of clearances.

In practice, the caustic soda initially in the form of lye was pumped to “receiving” or

“service” tanks. One or two tanks were set apart as storage tanks where were fed from the

service or receiving tanks. All these tanks must be calibrated. Clearance of lye took place

from the storage tanks. For the purposes of RG-1, the dip measurement of each tank was to

be taken at a fixed time each day. From the volume so ascertained and the strength of the lye

the weight of one hundred per cent caustic soda was to be calculated. The day‟s production

was represented by the difference between this quantity and the opening balance of the

previous day plus the quantity issued, if any, during this period. The exit valves of the tanks

need not be sealed.

Clearances of lye were either by pipeline for use in the factory or by tank trucks and

tank wagons. In the case of pipeline and tank wagon clearances, the quantity was to be

computed with reference to the dip readings of the discharging tank and the density of the

lye. For tank truck clearances, the quantity was ascertained by weighment and density. In

such cases, the need for maintaining a separate EB-4 did not arise and RG-1 was the

sufficient record. Quantities of lye cleared for use within the factory for manufacture of flake

or solid caustic soda was to figure as clearances in RG-1 with a suitable remark that they

were taken for the purpose of captive consumption within the factory itself.

As regards drawal of sample for the purposes of assessment instructions as contained

in the Board‟s Circular letter bearing F. No.4/2/61 CX-VI dated 05.05.1961 were required to

be followed.

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Once a week, and by surprise, a sample from each tank containing lye was required to

be drawn immediately after the production was ascertained by the manufacturer and sent to

the Chemical Examiner for report on the strength of the lye. On receipt of the test report, the

accuracy of the manufacturer‟s accounts in the RG-1 was required to be verified and if there

were differences found in the strength, necessary investigations were required to be initiated.

Caustic Soda Lye was concentrated and then fused to produce solid caustic soda or fused and

chilled to produce flakes. These were filled in drums of containers of pre-determined tare. As

the product came out of the plant at a very high temperature, it was not always possible to

weigh the containers immediately. Wherever possible, the weight ascertained on the day of

production was entered into the RG-1 and the quantity deposited in the approved storeroom

was shown in EB-4. Where such weighment was only done after the drums became cool,

there was no alternative but to indicate in the RG-1 only the number of drums filled each day

and to enter the quantity when these drums were cooled and weighed. After weighment and

marking, the containers sent to the storerooms were required to be shown in EB-4.

All containers for caustic soda were required to be marked, as far as practicable, with

the particulars, in addition to any other marking the manufacturer may have in use, namely,

(1) number or letter denoting the series, (2) serial number of the package, (3) trade name, if

any, (4) gross weight, and (5) net weight.

It was decided that the factories using Soda Ash and/or Caustic Soda for the

purification of brine was allowed duty free Soda Ash powder or Caustic Soda upto a

maximum of three per cent and the method of calculation was that on the Common Salt (e.g.

the equivalent one hundred per cent common salt in the brine solidation) and not on the total

production of Caustic Soda in the factories.

Caustic Soda recovered from spent caustic soda lye obtained during the

manufacturing of rayon and spent caustic soda lye or black liquor obtained during the

manufacture of paper and mercerizing of textiles in the factory was exempted by a

Notification dated 09.11.1968.

In so far as dutiability of this item was concerned Board‟s letter dated 05.05.1961 was

very specific which stated that caustic soda in lye form used for making solid caustic soda in

the same factory was not to be taxed at the lye stage but duty of excise was to be charged

when it was converted into solid form.

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With regard to the Caustic Soda Solution - recovery of „Caustic Soda‟ - through

physical process (i.e. filtration, evaporation or concentration, which were all the processes of

purification) or chemical processes (involving chemical or electro-chemical reaction) from

spent caustic soda lye or black liquor obtained during the manufacturing and/or processing of

either excisable or non-excisable goods, in the same integrated factory in which the caustic

soda initially taken for use during the said manufacturing and/or processing operation was

already paid the appropriate duty of excise or the additional duty leviable under Section 2A

of the Indian Tariff Act, 1934 (Number 32 of 1934), as the case may be, did not legally

constitute “manufacture” of a new commodity within the definition of Section 2(f) of the

Central Excises and Salt Act, 1944, and hence no further excise duty was leviable on such

Caustic Soda so recovered under the same item number 14B of the Central Excise Tariff

Schedule. As such the existing Notification number 191/68-CE dated 09.11.1968 was

redundant, as it had no effect. However, to avoid the confusion, it was not considered

necessary to rescind the said Notification Number 191/68-CE dated 09.11.1968

With effect from 01.03.1986, this tariff item was classified under sub heading number

2815.00 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986).

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TARIFF ITEM NUMBER 14BB - SODIUM SILICATE

This tariff item came on the statute book on 01.03.1964 and the rate of the duty of

excise was rupees eight per quintal but the effective rate of duty was only rupees four per

quintal.

This tariff item was included in the tariff to counteract the effect of the total

exemption granted to the non-power operated Soap industry. As the Sodium Silicate was

mainly used as a builder and filler in the manufacture of household and laundry soap, mostly

by the non-power operated sector. Thus, in effect, this was a levy on the non-power operated

sector.

The waste material in the form of sludge was distinct and easily distinguishable from

Sodium Silicate and hence no permission was required for such destruction of waste. No

accounting of such was also required to be made in RG-1.

Mere dilution with water of duty paid Sodium Silicate did not amount to manufacture

since no new substance known for the market was brought into existence and hence no duty

was leviable on this activity.

With effect from 01.03.1969 the duty was shifted from specific rates to ad valorem

rates and the tariff rate for this commodity was fixed at twenty five per cent ad valorem with

effect from 01.03.1969.

Notification Number 154/70-CE dated 01.08.1970 exempted the Sodium Ortho

Silicate, Powder and refined liquid Sodium Silicate in excess of five per cent ad valorem

subject to the observance of Chapter X procedure and the Assistant Collector was satisfied

that the subject sodium silicate was also an industry other than the soap industry.

As per Tariff Advice Number 18/78 dated 23.03.1978, Sodium Silicate Glass Lump

were classifiable under the item number 14BB as the description of the said item was no

restricted to sodium silicate in any particular form.

Colloidal Sodium Silicate was exempted under the Notification Number 154/70.

Colloid is a reference to the dimension of the particles of the substance and not a factor of its

state of purity or the nature of material which was made clear by the Tribunal in their

decision reported in 1984(16) ELT 365.

Caustic Soda in Lye form used for making solid caustic soda in the same factory was

not liable to the duty of excise at the lye stage but the duty was to be charged when it was

converted into solid form.

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Recovery of „Caustic Soda‟ through physical process (i.e. through filtration,

evaporation or concentration which were all the processes of purification) or chemical

processes (involving chemical or electro-chemical reaction) from spent caustic soda lye or

black liquor obtained during the manufacturing and/or processing of either excisable or non-

excisable goods, in the same integral factory in which the caustic soda initially taken for use

during the said manufacturing and/or processing operations was already paid the appropriate

duty of excise or the additional duty of excise leviable under Section 2A of the Indian Tariff

Act, 1934 (Number 32 of 1934), as the case may be, did not legally constitute “manufacture”

of a new commodity within the definition of Section 2(f) of the Central Excises and Salt Act,

1944, and hence no further duty of excise was leviable on such caustic soda so recovered

under the same item number 14B of the Central Excise Tariff Schedule. As such the existing

Notification Number 191/68-CE dated 09.11.1968 was redundant, as it had no effect.

However, to avoid confusion, it was not considered necessary to rescind this Exemption

Notification Number 191/68-CE dated 09.11.1968.

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TARIFF ITEM 14C - GLYCERINE

Glycerine came on the tariff schedule on 01.03.1961 and the tariff rate was rupees

seventeen per quintal.

Crude Glycerine obtained from the Glycerine plant was stored in tanks for further

distillation and production refined Glycerine, like dynamite glycerine, etc. (half refined

Glycerine) was supplied to other refiners or was exported as such. This was a stage of

manufacture and the duty liability accrued thereon. For the purpose of accounting in RG-1,

however, the packed quantity was taken as manufactured and the duty collected at the time of

removal of the same. If and when Crude Glycerine was either exported or delivered to other

refineries or cleared on payment of duty in such case, the quantity so exported or delivered or

cleared was shown as the quantity „manufactured‟ and removed as such.

With effect from 18.06.1977 the tariff rate was changed from specific to ad valorem

and as such the revised rate of duty was fixed at sixteen per cent ad valorem.

As per Chandigarh Collectorate Trade Notice Number 80/77 dated 22.09.1977, if

Glycerine was removed from the factory of its production in crude form the duty of excise

was required to be paid at the stage only and no further duty of excise was attracted even if

Crude Glycerine so cleared was later on refined elsewhere. However, if the Crude Glycerine

was refined in its factory of production this activity attracted the duty of excise at the time of

its clearance being refined glycerine.

Board‟s letter Number 6/1/64-CX dated 05.02.1966 made it clear that in respect of

losses in storage and in transit of crude Glycerine an allowance not exceeding 0.5% on either

side was allowable depending upon the various factors involved. Variation upto 0.1 already

available under the Board‟s letter dated 17.10.1963 was applicable to only pure glycerine.

Delhi Collectorate Trade Notice Number 59/CE-76 dated 29.04.1976 stated that soap

of glycerine which was obtained in the process of manufacture of shampoo, dettol or greases

and was in a marketable condition and commercially so recognized (notwithstanding that the

same was actually not marketed) before the manufacture of shampoo, dettol or grease was

excisable under tariff item number 15 or 14C as the case may be.

Hyderabad Trade Notice Number 131/66 dated 16.01.1967 described that Glycerine

and Castor Oil of IP or BP standard was to be assessed to the duty of excise under tariff item

14C and 12 respectively of the Central Excise Tariff. In cases, where a manufacturer of

Patent and Proprietary Medicines had brought duty paid Glycerine or Castor Oil from

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outside and cleared them in smaller packs intended for use, no further duty was required to

be paid in respect of such Glycerine or Castor Oil

With effect from 01.03.1986, Glycerine was classified under the Chapter Heading

15.06 of the First Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986)

SSI exemption was granted to this industry, as also the exemption in clearance value

of first slab of rupees one hundred lacs was also made available to this industry.

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TARIFF ITEM 14D-

DYES DERIVED FROM COAL TAR & COAL TAR DERIVATIVES USED IN ANY

DYEING PROCESS-ALL SORTS

This item came to be excised on 01.03.1961 and the rate of duty of excise was fifteen

per cent ad valorem.

As per the Board‟s letter dated 04.11.1961, Lake colours and Pigment dyestuffs were

used like pigments and did not fall within the scope of the tariff item 14D of the First

Schedule to the Central Excises and Salt Act, 1944.

As to the scope of this item it was stated in the Board‟s letter dated 13.04.1976 that

levy under this item was sustainable only when such products (other than Pigment

Dyestuffs) were commercially recognized and used in India in dyeing.

Synthetic food colours were exigible to the duty of excise under this tariff item but the

natural food colours, which were not synthetic food colours, were not liable to Central

Excise duty.

According to the Tariff Advice Number 4/1965-CX dated 23.02.1965, Benzidine was

not assessable to duty under item 14D because it was not a dye but an intermediate product

forming a base in the manufacture of dye and it was not used directly for dyeing purposes.

Board‟s letter dated 08.04.1965 also made it clear that artist‟s colours in pastel form

were chargeable to the duty of excise under tariff item 14 (Paints and Varnishes) and not

under the tariff item 14D.

The Board, by its yet another letter dated 22.04.1965 in connection with the subject

item stated that Pastel colours, Pastel Crayons, Oil Crayons, School Chalks, Tailor Chalks,

Textile Crayons and Lead Strips were neither assessable to the Excise duty under tariff item

14 nor under tariff item 14D as these were generally now known as „pigments‟, „colours‟,

„paints‟ or „synthetic dyestuffs‟ and these were manufactured clay, colouring matter, a small

quantity of pigment and binding agent like wax and Plaster of Paris.

The Board under its letter dated 13.09.1968 specified that the dyes were considered as

fully manufactured for accounting in RG-1 when they were packed in container for

consumer sale.

Board‟s letter dated 11.08.1970 made it clear that Oil or Spirit soluble colours were

classifiable as Synthetic Organic Dyestuffs under tariff item 14D.

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By Budget 1972, the Tariff Entry 14D was replaced to read as under -

―14D. Synthetic Organic Dyestuffs (including Pigment Dyestuffs) and

Synthetic Organic Derivatives used in any dyeing process‖

Dyes, namely, Solubilised Vats, Rapid Fast Colours, Rapidogens and Fast colours

salts, manufactured from any other dye on which the duty of excise or countervailing customs

duty was already paid (Notification Number 180/61 dated 23.11.1961 refers)

The Board under its letter dated 03.09.1981 stated that both Alpha Napthol and Alpha

Naphthylamine were not liable to Central Excise duty under tariff item 14D of the Central

Excise Tariff but it was liable to be classified under Residuary Item Number 68 ibid. The

Board under its another letter dated 19.12.1981 applied the above justification also to the

tariff item Ortho Toludine Base or Toludine Dihydro Chloride base and decided that this item

was outside the purview of item 14D and was liable to be classified under Residuary Item 68.

Para Amino Phenol and Meta Phenylene did not merit classification under this tariff

entry. Also Beta Picolines and Gamma Picolines were held to be not liable to duty either

under tariff item number 68 (Rubber Processing Chemicals) or under tariff item 14D

(Synthetic Organic Dyes).

Phthalocyanine Blue Aqueous Paste was classifiable under the Tariff Item 14D as per

Board‟s letter dated 24.10.1979.

As per the Tariff Advice of the Board dated 26.09.1979 Meta Nitro Para Toludine

was assessable to duty under tariff item 14D.

The Board under its letter dated 25.05.1978 categorically had stated that Resorcinol

Organic Chemical was not classifiable under item 14D but under Residuary Item 68.

Phthalogin Brilliant Blue including other similar base products and Copper Complex

was treated under tariff item 14D.

Vats Paste was produced by blending vats powder with glycerine, etc, on which the

appropriate duty of excise was required to be paid - vats paste was not chargeable to duty.

As to the distinction between synthetic organic dyestuff and pigment dyestuff, the

Hon‟ble Tribunal decided that the CCCN and its notes did not, in terms, spell out the

distinction between the “S.O. Dyestuffs” and “Pigment dyestuffs”. However, based on the

definition of pigments in standard works of reference, it could be said that SO dyestuffs were

substances which were soluble in water or in other solvents and in the dissolved condition

are used to dye or colour other materials. On the other hand, pigment dye was said to be

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pigment based dyes, pigments being inert, stable, insoluble in water and substantially

insoluble in any medium but which can be mechanically dispersed in medium. Therefore, in

conclusion, the pigment dyestuffs included in tariff item 14D were those which in the first

place were synthetic organic substances and did not fall in the categories of pigments

specified in tariff item 14 while synthetic organic substances and inorganic pigments were

outside the purview of tariff item 14D. (1984(17) ELT-135 refers)

This item applied either to a synthetic organic dyestuff or to a synthetic organic

derivative used in a dyeing process and Beta Napthol was neither a synthetic organic nor the

same was used in dyeing process. It was used as an intermediate for manufacture of „other

dyes‟, rubber, chemicals and as such it falls outside the ambit of tariff item 14D and,

therefore, Beta Naphthol were not classifiable under tariff item 14D. The same was also not

liable for the countervailing duty.

The word „used‟ under tariff item 14D of the Central Excise Tariff means

predominantly used or commonly used and not rarely used or occasionally or capable of

being used.

According to the Commissioner of Sales Tax, “neel”, that is to say, “ultramarine

blue” was sold under different trade names such as Skylark, Robin, etc. It was a pigment got

from Pais Lazuli Artificial (made by mixing clay, carbonate of soda, sulphur and resin). It

cannot be used to impregnate tissues when the material was in a raw state to yield more

permanent results and was not capable of being fixed to the fabric. As and when it was used

on the fabric it was fugitive, not fast to light, not resistant to action of water and was not

capable of diluting acids or alkalis. It was used after the clothes were washed usually at the

first rinsing and that with each rinsing it got washed away. It could not resist or withstand the

use of detergents or washing soda, which was alkaline in nature. Nor did it fall under any of

the various categories of dyes. Thus “ultramarine blue” (i.e. “neel”) was neither a direct dye

nor a mordent.

SSI Exemption was extended to this commodity for the first time on 01.03.1978 by

the Notification Number 71/78-CE dated 01.03.1978 and in respect of First clearance of

rupees five lacs cleared from 01.04.1978 was exempted from the whole of the duty of excise

leviable thereon. Later on this limit of rupees five lacs was increased to rupees fifteen lacs in

the year 1982 and thereafter SSI exemption is still continued to this commodity.

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With effect from 01.03.1986 this tariff item was classified under the Chapter Heading

29 and 32 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986). This

commodity was already enjoying SSI exemption and so also exemption from the whole of

the duty of excise leviable thereon for clearance value upto first rupees one hundred lacs was

available

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TARIFF ITEM 14DD - SYNTHETIC ORGANIC PRODUCTS

This item was brought into the Excise net for the first time on 01.03.1966 and was

placed at tariff entry number 14DD, the description of which read as under.

―14DD. Synthetic Organic product of a kind used as organic

Luminophores products of the kind known as Optical Bleaching

Agents, substantive to the fibre.‖

As to the scope of this product, the Board under their letter dated 17.06.1966 clarified

that as regards the Optical Bleaching Agents; the same was not restricted only to the pure (or

commercially pure) chemical compound, which was responsible for the effect, which it

imparted to the fibres. The expression “products of a kind known…” used in the tariff

description was significant and covered the chemical compound, standardized preparations

known to be ordinarily used for the purpose and the further diluted preparations known to be

used for the same purpose. Also the pure chemical compound had such a high strength that

unless it was standardized by mixing with glauber salt, etc, it could not be used on the

fabrics, as a whitener, the fabric got tinted.

With regard to the Optical Bleaching Agent, the Board, in its letter dated 04.01.1967,

had stated that mere repacking of duty paid Optical Bleaching Agents with or without a

change in the band name did not amount to manufacture within the meaning of Section 2(f)

of the Central Excises and Salt Act, 1944. Where, however, the article has undergone further

processing such as formulation or dilution with other ingredients, such process was treated as

„manufacture‟ and the finished goods were liable to the duty of excise under tariff item 14DD

of the Central Excise Tariff, provided the final product was sold as a new article, e.g. under a

different brand name.

Neroglo being Synthetic Organic product having fluorescent properties was

classifiable under the tariff item 14DD of the Central Excise Tariff. (1982 ELT

527(Government of India) refers.

With effect from 01.03.1986, the Synthetic Organic Products were classified under

the Chapter Heading 32.04 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5

of 1986).

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SSI exemption was also available to this commodity and the industry enjoyed

exemption in the clearance value upto the first rupees one hundred lacs for the whole of the

duty of excise leviable thereon.

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TARIFF ITEM 14E - PATENT AND PROPRIETARY MEDICINES.

Patent and Proprietary Medicines, defined under clause (d) of the Section 3 of the

Drugs Act, 1940 (Number 33 of 1940), not containing alcohol. This tariff item was

introduced for the first time by Finance Bill, 1961, with effect from 01.03.1961, and was

placed at tariff entry number 14E and the rate of duty of excise applicable was ten per cent ad

valorem.

In respect of tariff item 14E, preparations containing alcohol were specifically

excluded so that duty on such preparations was able to be collected by the State Government

under the provisions of Medical and Toilet Preparations (Excise Duty) Act, since in the

Central Excise Act the duty of excise was leviable only in respect of the proprietary

medicines not containing alcohol.

The term “Patent and Proprietary Medicines” as defined in Clause (d) of the Section 3

of the Drugs Act, 1940 (Number 33 of 1940) means “a drug which is a remedy or

prescription prepared for internal or external use of human being or animals and which is not

for the time being, recognized by the Permanent Commission on Biological Standardization

of the World Health Organisation or in the latest edition of the British Pharmacopoeia or the

British Pharmaceutical Codex or any other pharmacopoeia authorized in this behalf by the

Central Government after consultation with the Drugs Technical Advisory Board.

For the sake of practical convenience a Patent and Proprietary Medicine was said to

be one, which was in the official list in the latest edition of any of the following seven

pharmacopoeias recognized under the Drugs Act.

1. Indian Pharmacopoeia;

2. International Pharmacopoeia;

3. British Pharmacopoeia;

4. British Pharmaceutical Codex;

5. United States Pharmacopoeia;

6. National Formulary of the United States of America; and

7. State Pharmacopoeia of the Union of Soviet States of

Russia

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The Government, vide Finance (2) Act, 1962 (Number 2 of 1962) dated 22.06.1962,

substituted the Tariff Entry and also added the Explanation, which read as under.

―14E. Patent or Proprietary Medicines not containing alcohol, opium,

Indian Hemp or other narcotic drugs or other narcotics other than

those medicines which are exclusively Ayurvedic, Unani, Sidha or

Homeopathic‖

Explanation: ‗Patent or Proprietary Medicines‘ means any

drug or Medicinal preparation in whatever form, for use in the

internal or external treatment of or for the prevention of

ailments, in human beings or animals, which bears either on

itself or on its container or both, a name which is not specified

in a monograph in a Pharmacopoeia, Formulary or other

publications notified in this behalf by the Central Government

in the Official Gazette or which is a brand name, that is, a

name or a registered trade mark under the Trade and

Merchandise Marks Act, 1958 (Number 43 of 1958) or any

other mark such as a symbol, monogram, label, signature or

invented words or any writing which is used in relation to that

medicine for the purpose of indicating or so as to indicate a

connection in the course of trade between the medicine and

some person the right as a proprietor or otherwise to use the

name or mark with or without indication of the identity of that

person.‘

In pursuance of the above Explanation, the Government issued a Notification Number

32/62-CE dated 24.04.1962, which read as under -

―In pursuance of Explanation 1 to the Item Number 14E of the First

Schedule to the Central Excises and Salt Act, 1944 (Number 1 of 1944)

and of Explanation 1 to Item 28(37) of the First Schedule to the Indian

Tariff Act, 1934 (Number32 of 1934), Central Government hereby

notifies all editions of the following Pharmacopoeia, Formularies and

other publications for the purposes of the said Explanation, namely-

1. The British Pharmacopoeia;

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2. The British Pharmaceutical Codex;

3. The Indian Pharmacopoeia;

4. The United States Pharmacopoeia;

5. The International Pharmacopoeia;

6. The State Pharmacopoeia of the USSR;

7. The National Formulary of the USA;

8. The National Formulary of India;

9. The Dental Formulary of USA; and

10. The British Veterinary Codex.‖

The Hon‟ble Madras High Court had observed that item 14E referred to Patent and

Proprietary Medicines other than those which were exclusively Ayurvedic, Unani, Sidha or

Homoeopathic. The connection between the medicine and the manufacturer for falling under

this item should be such so as to indicate that the manufacturer has a propriety interest in the

medicine. (1978 ELT (J-478)(MAD) refers)

Madhya Pradesh High Court had decided that the “Patent or Proprietary Medicines”

in tariff item 14E must be a drug or medicinal preparations. Although there was no definition

of drugs contained in the Central Excises and Salt Act, 1944, yet the definition of drugs in

Section 3(d) of the Drugs and Cosmetics Act, 1940, inter alia, showed that drugs included

other than food intended to affect the structure of function of any human body. The

expression of any drug or medicinal preparations as used in the Explanation to Item14E

defining Patent or Proprietary Medicines indicated that the words medicinal preparations

were used in the same sense as drugs. Therefore, the scope of Patent and Proprietary

Medicines in the Tariff Entry14E must be understood in accordance with the provisions of

the Drugs and Cosmetics Act, 1940”. (1980 ELT-598 (MP) refers)

Distilled Water: Important decision was taken by the Central Board of Excises and

Customs, under their letter Number 24/20/63-CX-1 dated 07.02.1963 in regard to the

Distilled Water when used for injection, was considered as a drug under the Drugs and

Cosmetics Act, 1940, and hence it was liable to the duty of excise under Tariff Heading 14E.

Essence of Chicken: It was held that Essence of Chicken, which did not contain any

other ingredient of therapeutic or prophylactic, did not come under the definition of Patent

and Proprietary Medicines. It was not a medicine since neither it was used for curative

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purposes nor it was so prescribed. It was under Serial Number 6 of the Schedule to the

Notification Number

17/20-CE dated 01.03.1970 since it was a broth. (1978 ELT (J-21)(Andhra Pradesh) refers)

Zinc Oxide Adhesive Plaster PVC Tapes: This item was not liable to the Central

Excise duty under tariff entry number 14E as it had no therapeutic properties and it was used

essentially as a supportive to hold dressings.

Plaster of Paris Powder: This powder was not liable to the duty of excise as a Patent

or Proprietary Medicines. As also Plaster of Paris was not subjected to the Central Excise

duty as it was not considered.

Oxygen Gas: Oxygen Gas used for medicinal purposes, even if it satisfied, otherwise,

the definition of Patent or Proprietary Medicines under the tariff entry 14E was not subjected

to the Central Excise duty as per the directives of the Board.

Injections: Injections were medicines for „internal use‟ and hence they came under

the definition of Patent and Proprietary Medicines and as such were liable to the Central

Excise duty.

Ayurvedic Injections: Ayurvedic Medicines, in the form of injections, were treated as

Patent and Proprietary Medicines and the same were exigible to the duty of Central Excise.

Gammexane: Gammexane, which was the trademark of Benzene Hexachloride

manufactured by M/s. Imperial Chemical Industries, was primarily used as an ingredient in

various concentrations in insecticidal preparations such as dusting powders, sprays,

emulsions, for destruction of flies, insets, bugs, mosquitoes, etc. It was also used for the

manufacture of veterinary dips and sprays for destruction of tick, flea, louse on cattles.

Ointments and emulsions containing about one per cent of Gammexane had also been

mentioned as a good cure for scabies and head lice of human beings. Gammexane was not a

product liable for the duty of excise under tariff entry 14E. Gammexane, when intended for

use as an insecticide, was not liable for Central Excise duty under tariff item 14E as per letter

bearing number 24/61/64/CX-1 dated 31.10.1964 issued by the Central Board of Excise and

Customs.

Saccharine: Saccharine being a sweetening agent having no therapeutical value and

therefore, did not qualify for inclusion into the tariff entry number 14E – Patent and

Proprietary Medicines.

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Surgical Dressings: Surgical Dressings, comprising bandages, gauge, lints, plasters,

etc, were considered as “drugs” for the purposes of Drugs and Cosmetics Act, 1940, and the

manufacturers of surgical dressings were required to take the Excise licence for manufacture

of the same from the State Drugs Controller. These dressings were either medicated or non-

medicated. Medicated dressings having therapeutic property, were considered as medicinal

property for the purpose of Central Excise duty as per the Trade Notice dated 23.11.1974.

Pharmacopoeial Preparations: As per the Explanation given below the Tariff Entry

14E of the Central Excise Tariff, any drug or medicinal preparation, which bore on itself or

on its containers a name which was specified in a monograph in a pharmacopoeia, formulary

or other publications as notified in that behalf by the Central Government in the Official

Gazette, were to be treated as non excisable. The Government of India, for that purpose,

notified vide their Notification Number 32/62 all editions of ten pharmacopoeias, formularies

and other publications. It, therefore, follows that any medicinal preparation appearing in any

of the editions of the publications appearing in the foregoing notifications will not attract the

Central Excise duty unless marketed under a brand name or trade name.

Life Saving Drugs: Government, with a view to take good care of its citizens,

conducted broad survey of the life saving drugs and under the Notification Number 160/66-

CE dated 08.10.1966 and Number 116/69-CE dated 03.05.1969 exempted the following -

1. Quinine and its salts, Tota Quina and Cinchona Febrifuge;

2. Dapsone;

3. Isoniazid, Para amino salicylic Acid and its salts

(Note: Granules of para amino salicylic acid were eligible for

exemption under tariff item number 4 only if they conform to

the standards of the National Formulary of India, 1966)

4. Insulin - All types;

5. Iodochlorohydroxy quinoline, Di iodohydroxyquinoline and

salts of Emetine,

6. Ethionamide;

7. Cycloserine and Cycloserine Tartrate,

8. Pyrazinamide;

9. Thiacetazone;

10. Chlorohydroxyquinoline;

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11. Morphazinamide Hydrochloride;

12. Dihydroemetine Dihydrochloride;

13. Chloramphenicol and its esters for oral and parenteral use.

14. Penicillin and Streptomycine including Dihydrostreptomycin in

their pure form or as salts or as derivatives and intended for

oral or parenteral use;

15. Ethambutol Hydrochloride (Tibutol);

16. Chlorequine Phosphate;

17. Amodiaquine Hydrochloride;

18. Clofazimine;

19. Tolbutamide (oral antidiabetic);

20. Metrondazole;

21. Diethyl Carbamazine citrate;

22. Piperazine and its salts;

23. Refampicin;

24. Tetracycline Hydrochloride;

25. Chloroquine Sulphate;

26. Primaquine Phosphate;

27. Pyrimethamine;

28. Mepacrine Hydrochloride;

29. Chloroquine Diphosphate;

30. Doxycycline (with its salts and esters);

31. Erythromycin (with its salts and esters); and

32. Mebendazol.

It was observed that the expression “derivative” was wide in its scope and Ampicillin

Sodium Salt of a derivative did not cease to be a derivative of Penicillin as such and,

accordingly, the exemption was ordered to be made available as was explained by the

Board‟s letter dated 30.05.1984.

Under Notification Number 105/61-CE dated 20.04.1961, Clinical samples were

exempted subject to the conditions that (a) such clearances of clinical samples were limited to

a quantity not exceeding five per cent by value of the total duty paid on clearances during the

preceding month of all types of Patent and Proprietary Medicines; (b) samples were intended

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for free supply to hospitals or for a test in a laboratory, and (c) such samples were packed in

forms distinctly different from the regular packs of the said medicines and each clinical

sample was marked clearly and conspicuously “Samples, Not for sale”.

This Notification was replaced by the Notification Number 48/77-CE dated

01.04.1977 and the only change made therein was that the clearances in a month were limited

to four per cent and further it was also laid down that in respect of Patent and Proprietary

Medicines the exemption under the Notifications was available only for the period of three

years from the date of the first clearance of the said medicine from any factory of

manufacture.

By Finance Act, 1976, the Medicinal and Toilet Preparations (Excise Duty) Act,

1955, was amended by which the definition of “Narcotic Drugs” or “Narcotics” was deleted

consequent upon this amendment, the medical preparations containing barbiturates,

chloroform, chloral hydrate, ether and other anesthetics or tranquillisers outside the scope of

Medicinal and Toilet Preparations (Excise Duty) Act, 1955. These medicinal preparations

were liable to be assessed to the duty of excise under tariff item 14E with effect from

16.03.1976.

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102

TARIFF ITEM 14F – COSMETICS AND TOILET PREPARTIONS

The goods covered by the item „Cosmetics and Toilet Preparations‟ were, for the first

time, brought on the Tariff Schedule with effect from 01.03.1961, attracting the duty of

excise at the rate of twenty five per cent ad valorem and the description of which read as

under.

―14F. Cosmetics and Toilet Preparations, not containing Alcohol or

Opium, Indian Hemp or other Narcotic Drugs or Narcotics, namely -

i. Face Cream and Snow,

ii. Face Powder,

iii. Talcum Powder,

iv. Hair Lotion, Cream and Powder

The powders wholly intended for therapeutic purpose will qualify for assessment

under Patent and Proprietary Medicines under tariff item number 14E, attracting a duty of

excise at the rate of ten per cent ad valorem and not under the Cosmetics and Toilet

Preparations, attracting a duty of excise at the rate of twenty five per cent ad valorem.

For the period from 01.03.1961 to 28.02.1974, Tooth Paste, whether medicinal or

otherwise, was not subjected to Excise duty.

Shampoos were also not assessable to under tariff item 14F.

In case, where a puff was added to the container and form an element of cost of the

Cosmetics and Toilet Preparations, its price was to be added for the purpose of computation

of excise duty thereon.

„Dusting Powder‟ or „Cutting Powder‟, which generally contain more than ninety per

cent of talc and free from starch, were classified under tariff item 14 of the First Schedule.

With effect from 01.03.1964, the entire tariff definition was changed and the amended

definition read as under.

―14F. Cosmetics and Toilet Preparations, not containing Alcohol or

Opium, Indian Hemp or other Narcotic Drugs or Narcotics, namely -

i) Preparations for the care of the skin, beauty or make-up

preparations and manicure or pedicure preparations

such as beauty creams, vanishing creams, cold creams,

make-up creams, cleansing creams, skin foods and skin

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tonics, face powders, baby powders, toilet powders,

talcum powders and grease paints, lipsticks, eye

shadow and eye brow pencils, nail polishes and

varnishes, cuticle removers and other preparations for

use in manicure or chiropody, sun burn preventive

preparations and sun tan preparations, barrier creams

to give protection against skin irritants, personal(body)

deodorants, depilatories.

ii) Preparations for the care of the hair, such as

brilliantine, perfumed hair oils, hair lotions, pomades

and creams, hair dyes, shampoos whether or not

containing soap or organic surface active agents,

iii) Shaving Creams, whether or not containing soap or

organic surface active agents.

Explanation I: ―Alcohol‖, ―Opium,‖ ―Indian Hemp,‖

―Narcotic Drugs‖ and ―Narcotics‖ have the meanings

respectively assigned to them in Section 2 of the Medicinal and

Toilet Preparations (Excise Duties) Act, 1955.

Explanation II: This item includes Cosmetics and Toilet

Preparations whether or not they contain subsidiary

pharmaceutical or antiseptic constituents or are held out as

having subsidiary curative or prophylactic value.

Explanation III: This item includes unmixed products, only

when they are in packing of a kind sold to the consumer and

put up with labels, literature or other indications that they are

for use as the cosmetics or toilet preparations or put up in a

form clearly specialized to such use.‖

The rate of duty was revised upwards to one hundred and five per cent ad valorem;

however, the effective rates for Perfumed Hair Oil put up in a unit container was assessed to

the duty of excise at the rate of twenty per cent and other Perfumed Oil was fully exempted..

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The above cited revised definition of this commodity did not bring within its ambit

preparations like lipstick, nail polishes, hair removers and such other products, which were

not preparations for the care of skin.

Olive Oil, Lanolin Petroleum Jelly or Kaolin were considered as outside the scope of

this item.

The Hon‟ble Tribunal, as regards the scope of this item, decided that unlike tariff item

15A, not an entry, riddled with scientific and technical expressions; therefore, the sense of

these expressions, as ordinarily understood by trade and consumers, will have to be given a

precedence over their technical sense. (1985(19) ELT 562(T) refers).

As per the Tariff Advice Number 36/82 dated 13.07.1982 of the Central Board of

Excise and Customs, Vaseline falls under Tariff Item 14F as “Cosmetics”.

Eye Shadow, Eye Shadow Four-In-One, Hi-Fi Fluid Liner, Shadow play, Erace

Sparkling Eyes, Gardex (both dry and wet), Roll-On-Deodorant and Mascara were

classifiable under tariff item 14F(i) of the Central Excise Tariff as per Tariff Advice of the

Board bearing Number 96/81 dated 03.09.1981.

The ingredients of Lip Salve did not have any therapeutic properties, further the

preparation was for chapped lips and as such the same did not classify under Drugs but under

Cosmetics under the tariff item 14F as per Board‟s letter number 103/1/76-CX 3 dated

26.10.1977.

As regards Puffs, in cases where Puff was added to the container and formed an

element of cost of the Cosmetic product, its price was liable to be assessed for the sake of

duty of excise at the appropriate rate prevalent at that time.

Different kinds of rouges in the form of cream or powder or in any other form fall

within the category of preparations for the care of skin and the duty of excise was attracted

under the tariff item number 14F(i) of the Central Excise Tariff.

Further, with regard to the Hair Conditioner, the Hon‟ble Tribunal has decided that as

per the manufacturer‟s literature on carton container of the Sun Silk Hair Conditioner read

with the expert‟s affidavit in support of the evidence, the Sun Silk Hair Conditioner was not

classifiable under tariff item number 14F(ii) at the material time but was classifiable under

item 68, Residuary Item, from the date of its insertion in the tariff. Though it satisfied the

criteria of being termed as a hair lotion that it is in the form of an emulsion and that it is

capable of being poured and used on the hair, yet these read with the technical books cited by

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the department, which refers hair conditioner as cream or lotion, did not add upto an effective

rebuttal of evidence produced by the Appellants as to how the traders, users, dealers and

experts in our country understood this term. (1985 (19) ELT 562 (T) refers).

Hair dye was classifiable as Hair Lotion. “Esola Cone” contains, apart from ninety

per cent water and perfumery material, ingredients like Lead Acetate and Sodium

Thiosulphate, the ingredients, which have the properties of giving colour to the hair and was

advertised as Hair Darkener. In other words, the product was intended to be used solely for

darkening the hair or blackening grey hair. From the point of view of composition and the

ingredients of the product it was not possible to say that the hair dye was not to be regarded

as hair lotion. The use of the product as hair darkener though relevant factor was not

determinative of the matter. (Bombay High Court Appeal Number 12 of 1967 in

Miscellaneous Number 465 of 1965 refers).

Nycil Medicated Powder was an article of medicine and not the toilet product since

„Nycil powder‟ by its very nature and composition had the property of curing or preventing

skin and other ailments or acting as a remedial agent in various diseases. It was advertised as

an article containing medical properties.

Consequent on the test of the articles, that is to say, Royal Series Musk and Cobra

Brand Jasmine, it was found that a sweet and pleasant smell was emerging from these

articles. These articles did not require sufficient time to the odoriferous element to evaporate

and, therefore, they were covered under the category of „perfumes‟. (1976 Tax Law Reporter

2018 (Madras) refers)

SSI exemption was first extended to this industry by the Notification Number 71/78-

CE dated 01.03.1978. Later this exemption was extended to the clearance value of first one

hundred lacs.

With effect from 01.03.1986, the goods under this category were classified under

Chapter Heading 33.03 to 33.07 of the Schedule to the Central Excise Tariff Act, 1985

(Number 5 of 1986)

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TARIFF ITEM 14FF - TOOTH PASTE (INCLUDING DENTAL CREAM)

This was a totally new item added by the Finance Bill, 1974 to the excise coverage.

As to the scope of this item, it is pertinent to note that this item was specific and

related to the toothpaste whether medicated or otherwise. Thus the toothpaste even if

contained Ayurvedic ingredients it was eligible for the duty of excise.

Toothpaste (including dental cream) was exempted from so much of the duty of

excise leviable thereon as was in excess of ten per cent ad valorem by the Notification

Number 118/79-CE dated 16.03.1979 as amended by the Notification Number 106/80-CE

dated 19.06.1980.

Gudakhu contained tobacco, dust, molasses, lime powder and red ochre in various

proportions was essentially a tobacco product and did not specify the specifications published

by the Indian Standards Institution (Vide IS: 6356 OF 1971) for toothpaste and hence was not

covered within the purview of this item.

With effect from 01.03.1986, toothpaste was classifiable under Chapter Heading

33.06 of the First Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986) and

attracted the duty of excise at the rate of sixteen per cent ad valorem.

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TARIFF ITEM 14G - ACIDS

This item, Acids, namely, Nitric Acid, Hydrochloric Acid and Sulphuric Acid,

(including fuming acids and anhydrides thereof) was brought on the statute for the first time

on 24.04.1962.

If Sulphuric Acid was used for producing Nitric or Hydrochloric Acid within the

same factory, the duty of excise was required to be paid only on Nitric or Hydrochloric Acid,

finally manufactured and not on Sulphuric Acid used in their manufacture.

Where duty paid Sulphuric acid was used in the manufacture of Nitric or

Hydrochloric acid by another manufacturer or in another factory, a set off of the duty paid on

the Sulphuric Acid was given provided proof of payment of duty on that acid was clearly

established. This system was to apply mutates mutandis to other acids and gases as well, for

example, Chlorine converted to Hydrochloric Acid.

No rebate of adjustment of duty paid on acids used in the manufacture of other

excisable goods, even if in the same factory, was admissible. Thus Sulphuric acid used in the

manufacture of Rayon will be liable to the full duty of excise.

Where spent acids were reutilized buy concentration or regeneration to produce

commercial acids, the regenerated product was liable to the Excise duty. Collector was

required to study concrete cases and intimate whether in their view it was desirable in such

cases to give a set-off in respect of the duty initially paid on the acid returned for re-

concentration as spent. The basis on which this was to be worked was also simultaneously

suggested.

Under the authority of Section 3(2) of the Central Excises and Salt Act, 1944, the

Government by a Notification Number 100/62-CE dated 25.05.1962 fixed the tariff value

with effect from 24.04.1962 as under.

Description Tariff Value / MT

1. Nitric Acid of strength not exceeding 72% Rs.650/- ad valorem

2. Hydrochloric Acid of strength no exceeding 35% Rs.180/- ad valorem

3. Sulphuric Acid

a) strength exceeding 95% but not exceeding 98% Rs.140/- ad valorem

b) strength exceeding 98% Rs.160/- ad valorem

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However, the above tariff was superceded by the Notification Number 189/62-CE

dated 10.11.1962. A provision was made for changing lower tariff value for the reduced

strength.

Acids, namely, Nitric Acid, Hydrochloric Acid and Sulphuric Acid, manufactured in

Ordnance Factories belonging to the Central Government were exempted from the purview

of the duty of excise with effect from 24.04.1962.

Quantitative exemption of SSI unit was provided to this commodity by the

Notification Number 203/62-CE.

Sulphuric Acid used for -

a) drying air in the air tower;

b) demineralization of water (deionisation of water), and

c) generation of oxides of Nitrogen for use as catalyst was exempted

from the Central excise duty

d) used for the manufacture of Fertilizers was exempted in full.

Effective from 01.03.1979 full exemption was granted to Nitric Acid.

As per Tariff Advice dated 03.09.1981, Sulphur Trioxide produced for captive

consumption in the manufacture of Chloro-sulphonic Acid was eligible for duty under Tariff

Item 14G of the Central Excise Tariff.

Madras Collectorate Trade Notice dated 23.09.1981 clarified that Oleum (Fuming

Sulphuric Acid) was classifiable under tariff item 14G of the Central Excise Tariff but was

not entitled for the benefits of Notification Number 81/75-CE dated 22.03.1975 when used in

the manufacture of Caprolactum.

By letter dated 18.09.1965, relating to the duty liability, it was brought to the notice of

the Government of India that the duty paid Oleum (Fuming Concentrated Sulphuric Acid

over 104% strength) was used as a dehydrating agent in the process of manufacture of DDT.

In the dehydration process the highly concentrated acid got diluted and its strength was

reduced to 60-65% and some impurities also got mixed with it. This impure diluted acid was

thereafter hydrolysed with the aid of super heated steam which help increase the strength of

the acid to 70% and reduces the impurities to some extent. The resultant diluted acid with

less impurity was then used in the manufacture of fertilizers like Superphosphates in the same

or other premises. A doubt was raised whether such a diluted acid used in the manufacture of

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fertilizers was liable to duty. Since the acid obtained after dehydration and hydrolysis

remained the same on which duty was assessed and recovered it was not liable to duty again

under item 14G of the Central Excise Tariff.

The question of charging excise duty on Sulphuric Acid, which was not consumed or

issued out of the factory but was in cyclic operations, did not arise in view of the following

facts and reasons.

(A) Sulphuric acid that had gone into integrated or cyclic process of

absorption of moisture and consequent dilution thereof initially was duty paid. It was

difficult to hold it to be a manufacture of Sulphuric Acid since no new product

emerged in the aforesaid cyclic process. Mere dilution did not amount to

manufacture.

(B) Similarly, no new product emerged when diluted sulphuric acid regained

its strength, in this very cyclic process when mixed up with absorbing acids carrying

sulphur trioxide.

(C) Throughout the cyclic process it remained to be sulphuric acid only, which

has undergone a mere process of dilution and regaining its strength.

(D) The sulphuric acid in the cyclic process was not consumed or used so as to

become any other newly manufactured product. (MF (DR) letter Number 104/1/77

CX dated 23.09.1977 refers).

With effect from 01.03.1986, the three commodities mentioned supra were classified

under the Chapter Heading 28.06 (Hydrochloric Acid), 28.07 Sulphuric Acid, and 28.08

Nitric Acid of the Central Excise Tariff Act, 1985 (Number 5 of 1986).

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TARIFF ITEM 14H - GASES

This item was brought on the Tariff Schedule for the first time on 24.04.1962.

The description of which read as under.

“14H. Compressed, liquefied or solidified gases, namely,

1. Oxygen,

2. Chlorine,

3. Ammonia,

4. Carbon dioxide (Carbonic acid),

5. Refrigerator Gas, not otherwise specified, such as

Sulphur dioxide and Freon.

As to the duty structure, there was a duty of Excise leviable at the rate of ten per cent

ad valorem for Oxygen, Chlorine and Ammonia and for Carbon dioxide (Carbonic Acid) and

for Refrigerator Gas the same was fifty per cent ad valorem and twenty per cent ad valorem

respectively.

As per the Notification Number 101/62-CE dated 25.05.1962, Ammonia and Carbon

dioxide used in the manufacture of Fertilizers was exempted when used within the factory of

production.

Ammonia was also exempted from the duty of excise if it was supplied to Heavy

Water Plants at Baroda and Tuticorin and this exemption was effective from April, 1972.

The following were also exempted but conditionally, that is to say -

1. Oxygen (a) if used in the manufacture of heavy water within the

factory of production

(b) if used in the manufacture of Medicinal Grade

Oxygen,

(c) if used in the manufacture of fertilizers

2. Chlorine (a) if used in the manufacture of chlorate calcium or

bleach liquor of Soda.

(b) Bleach liquor of Sodium Hypochlorite solution

within the factory of production of such chlorine

3. Ammonia (a) if consumed within the factory of production of such

ammonia in refrigeration plant,

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(b) if used in the purification of gases in synthesis,

(c) in maintenance of pressure in the plant of

manufacture of ammonia itself,

(d) if used in the manufacture of fertilizer

4. Carbonic Acid (a) if intended for the bonafide use of

(i) hospital (Carbon dioxide),

(ii) research laboratories,

(iii) universities and

(iv) fire services;

(b) if used for the defence establishments,

(c) if used for industrial purposes.

5. Acetylene (a) exempted if procured in portable generator by the

reaction of water dripping slowly on calcium carbide,

b) if used in undissolved condition within the factory of production of

acetylene in the manufacture of PVC Resin factory under Tariff

C) gases allowed to escape in the atmosphere by flare system

or otherwise, and

d) if manufactured by laboratories for its own use

As per the Tariff Advice Number 109/81 dated 23.09.1983, „Burnt Sulphur‟ obtained

as waste after manufacture of Hydrogen Sulphide Gas falls outside the purview of levy of the

duty of excise.

According to yet another Tariff Advice Number 83/81 dated 24.08.1981, Carbon

dioxide gas produced in distilleries and fertilizer factories or in any other factory was not

treated as eligible for covering under tariff item 14H of the Central Excise Tariff so long as

the gas did not conform to the marketable grade as prescribed in the specifications by the

Indian Standards Institution and such gas was properly classifiable under tariff item 68, i.e.

Residuary Items.

As per Tariff Advice Number 68/81 dated 22.06.1981, Acetylene gas (or for that

matter any gas) falling under tariff item 14H produced in a continuous and uninterrupted

process of manufacture and used captively, was not to be classifiable under tariff item 14H if

it was impure and did not conform to the relevant ISI standard/specifications or trade

nomenclature of the commodity

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In view of the Tariff Advice Number 60/81 dated 26.02.1981 the Sulphur dioxide

produced in a Sugar factory which was not of a refrigerant quality was not to be classified

under tariff item 14H of the Central Excise Tariff.

Oxygen Gas of ninety nine per cent purity and above, produced as a by-product in the

process of hydrogenation was properly classifiable under the tariff item 14H of the Central

Excise Tariff as per Tariff Advice Number 129/81 dated 24.11.1981.

Ammonia Gas used for „start up‟ activities of the Ammonia Plant for manufacture of

fertilizers was eligible for exemption under the Notification Number 145/71-CE dated

26.06.1971.

The question of excisability of Wet Chlorine Gas under tariff item 14H of the Central

Excise Tariff was re-examined and the relevant tariff advice number 45/78 dated 21.08.1978

specified that as per the observations (i) the gas was not compressed chlorine as understood

in technology and (ii) on the test of marketability this Wet Chlorine Gas was not sold as

chlorine gas and also the ISI specifications did not recognize it as chlorine gas.

According to Madras Collectorate Trade Notice Number 154/82 dated 02.08.1982,

Carbon dioxide for food preservation in transit or prior to export in trucks/railway wagons

could not be considered as industrial use and was not to qualify for the exemption as

contemplated in the Notification Number 7/65-CE dated 30.01.1965.

According to MF (DR) letter number 114/26/72/CX-3 dated 05.07.1994 the Oxygen

Gas used for cracking raw naphtha in the manufacture of fertilizers qualified for the

exemption from the duty as embodied in the Notification Number 145/71-CE dated

26.07.1971.

Sniff Gas (also known as Waste Gas) in an affluent produced during the manufacture

of liquid chlorine and it contained non condensable gaseous impurities was not to be

classified as compressed, liquefied or solidified chlorine gas under tariff item number 14H,

notwithstanding the fact that it contained certain percentage of chlorine. (Tariff Advice 6/73

dated 28.04.1973 refers)

According to the Central Board of Revenue letter number 7/4/62-CX dated

24.11.1963, in regard to the storage and pilferage losses, in the case of Liquid Petroleum Gas

a cumulative allowance upto a maximum of 0.5% was allowed for loss due to „natural cases‟

in storage, handling, etc, at the refinery site; however, loss due to pilferage, whatever small

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the quantity, there was no set off against the aforesaid allowance and the duty was to be

charged on all such losses arising out of proved pilferage.

Kiln Gas was neither Carbon dioxide nor Compressed Carbon dioxide. The gas

produced through the kiln was a mixture known both to the trade and service as kiln gas, one

of the constituents of which was, no doubt, Carbon dioxide. The gas, which was generated in

these cases was neither liquefied nor solidified and was therefore neither liquefied nor

solidified Carbon dioxide assuming that it could be termed as Carbon dioxide. It could not be

called Compressed Carbon dioxide as understood in the market among those who deal in

compressed Carbon dioxide. Compressed Carbon dioxide was generally understood as

Carbon dioxide compressed in cylinders with pressure ranging from 1,000 to 1,800 pounds

per square inch. The mere fact that at one stage or the kiln gas was pressed at 40 to 45

pounds per square inch by a pump or otherwise could not mean that it was compressed

Carbon dioxide. Therefore, the Kiln Gas was not Carbon dioxide nor compressed Carbon

dioxide so as to attract the levy under tariff item number 14H of the First Schedule to the

Central Excise Tariff Act, (Number 5 of 1986) (1978 ELT J-336 refers)

„Compression‟ as contemplated under item number 14H was „compression‟ as was

generally understood in the trade. Since it did not satisfy the specifications prescribed by the

ISI the gas in question could not be treated as Compressed Gas – Chlorine or otherwise.

(1978 ELT J-713 (Government of India) refers)

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TARIFF ITEM 14HH - FERTILIZERS

This item came for the first time on the tariff schedule with effect from 01.03.1969.

Packing and repacking could not be regarded as process of manufacture in the case of

commodities, which did not find mention under section 2(f) of the Central Excises and Salt

Act, 1944.

Pressmud and Oilcakes were not fertilizers.

Agricultural filtered trace elements or micronutrients or soil stabilizers were not

dutiable. Behind this policy, the intention of the Government was to charge duty of excise

only on main fertilizers, which supply nitrogen potash or phosphorus to the plants. Products,

which were included in the Schedule to the Fertilizer (Control) Order, 1957, were along

liable to the duty of excise under tariff item 14HH.

Rock phosphate satisfying the fineness specified in the Fertilizer Control Order, 1957,

that is to say, the material was required to pass through completely 6.3mm IS sieve and not

less than twenty per cent of the material was required to pass through 150 micron IS Sieve

only was eligible to be treated as fertilizers for the purpose of duty of excise under tariff item

14HH.

The crushed basic slag, which was used in India as a soil conditioner for acidic soils

was considered as falling outside the scope of tariff item 14HH of the First Schedule.

It was considered that the product decalcinised and degelatinised bones obtained, as

waste residue, was classifiable as Fertilizers under tariff item 14HH.

The Board, under their letter dated 28.08.1972, had clarified that technical or

chemical grade of products whether specifically mentioned in the Fertilizer (Control) Order

or not was outside the purview of the tariff item 14HH, if they were not marketed, bought and

sold or known in the market as „fertilizers.‟

By the Tariff Advice Number 25/74 dated 31.10.1974 it was stated that the expression

“Mixed Fertilizers” was to cover only “mixtures of fertilizers” which were produced by

blending, mixing of granulating duty paid fertilizers (two or more processes) with only

substance wherein such mixtures were produced by physical actions and without chemical

reactions.

Non-power operated mixed fertilizers were not liable to any further duty of excise,

even if after packing, stenciling, printing of the gunny bags, showing the name of the

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manufacture, descriptions of fertilizers, quantity contained in the bags, etc, was done with the

aid of power. (MF) (DR) Circular bearing Number B-6/5/69-CX 1 dated 20.03.1969 refers)

With effect from 01.03.1986, the goods covered under this tariff item were covered

under the Chapter Heading 31.01 to 31.05 of the Schedule to the Central Excise Tariff Act,

1985 (Number 5 of 1986)

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TARIFF ITEM 15 - SOAP

By Finance Act, 1955 (Number15 of 1955) dated 27.04.1955, Soap was brought

within the excise net for the first time and was placed at tariff item number 16, however, the

same renumbered as tariff item number 15 with effect from 20.05.1962. The definition of

Soap read as under.

―15. Soap, that is to say, all varieties of the product known

commercially as Soap, in or in relation to manufacturing of which any

process was ordinarily carried on with the aid of power including

steam for heating.‖

There were three categories of soap as under.

1. Soap, household and laundry manufactured in any factory whose

output of such soaps exceeded one hundred twenty five tons a year.

a. in plain bars of not less than one hundred pound

weight,

b. Other sorts

2. Soap, toilet manufactured in any factory whose output of such soap

exceeded fifty tons per year,

3. Soaps, other house hold and laundry or Toilet

As regards the scope of the tariff item number 15, the High Court of Bombay, had

clarified that for the purpose of classification of a product under tariff item number 15, what

was important was not whether such a product was used or conventionally understood to be

used as soap but what was important was whether the said article was commercially known

as „soap.‟ (1980 ELT 298(Bom) refers)

With regard to the scope and coverage of the tariff entry and sub entries of tariff item

number 15, the Hon‟ble Tribunal has also decided that it was not only permissible to look at

contemporary documents in order to ascertain the intent and meaning of words in the statute

but they could be used as aids in arriving at a proper understanding of the statute. The

legislative history of tariff item number 15 and the relevant documents concerning this tariff

item in Explanatory memorandum were relevant for the interpretation of this tariff item on

the basis of the rule of contemporenea expositio because these documents did not do any

violence to the language of this tariff item. (1984(18) ELT 431 refers)

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According to book, “History of Unilever”, published in the year 1954, for the purpose

of soap making, Caustic Soda and Salt, Nut Oils like palm kernel and coconut, hard fats like

tallow, palm oil and bone grease, soft oils like groundnut, soybean, whale, olive, cotton seed,

castor and maize were all utilized With these materials what was called „soap base‟ was

prepared and with the additions of the different materials like silica, builders like sodium

silicates, sodium phosphates, sodium carbonates, etc, or with the addition of perfumes and

colours different types of soaps meant for different purposes were prepared.

1st clearance of 125 tons and 50 tons for household and laundry soaps respectively

were exempted in respect of the clearances effected between the period 01.08.1955 to

31.03.1956. However, the exemption limit was reduced to fifty and twenty five tons in

respect of the clearances of household and laundry soaps respectively with effect from

24.04.1962.

With effect from 01.03.1986 items hitherto falling under the Chapter 3 of the First

Schedule to the Central Excises and Salt Act, 1944, were classified under the Chapter 34 of

the First Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986)

A question was raised whether pumping the raw material with the aid of power into

the elevated storage tank and cutting the soap into soap chips was a process of manufacture

done with the aid of power or not and it was decided that this was the process of manufacture

done with the aid of power and accordingly relevant exemption was not available.

As per the Notification Number 28/64-CE dated 01.03.1964 (as amended by the

Notification Number 27/33-CE dated 01.03.1973, the Central Government exempted the soap

in or in relation to the manufacture of which no process was carried on with the aid of power

or with the aid of steam for heating and falling under tariff item number 15 of the First

Schedule to the Central Excises and Salt ct, 1944 (Number 1 of 1944) from the whole of the

duty of excise leviable thereon.

In exercise of the powers conferred by sub rule (1) of Rule 8 of the Central Excise

Rules, 1944, the Central Government exempted each variety of -

i) soap, household and laundry, falling under sub item (1) of item

15 of the First Schedule to the Central Excises and Salt Act,

1944 (Number 1 of 1944), and

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ii) soap, other sorts, falling under sub item (2) of the item 15 of

the First Schedule to the Central Excises and Salt Act, 1944

(Number 1 of 1944)

from so much of the duty of excise leviable thereon, as was equivalent to the amount of duty

calculated at the rate of twenty two rupees and fifty paise per metric tonne of such soap

subject to the condition that the percentage of neem, karanj, kusum and sal oils or a

combination thereof was not less than three in the total oil used in the manufacture of such

soap.

Provided that in the case of use of such oils in excess of three per cent, the aforesaid

exemption shall be increased further by seven rupees and fifty paise per metric tonne of soap

for each such percentage point increase and where the percentage point increase was in

fraction, the increase shall, in respect of such fraction, be calculated accordingly.

Provided further that the exemption available under this notification in relation to

each variety of soap falling under sub item (1) of the tariff item 15 or, as the case may be, sub

item (2) of the item 15 shall be calculated separately and the exemption available in relation

to one variety of soap under sub item (1) or sub item (2), as the case may be, shall be adjusted

only against the duty leviable on that variety of soap,

Provided also that where the amount of duty calculated under this notification was in

excess of the duty leviable for the time being on soap but for the exemption then, no part of

the amount so in excess was to be refunded to the manufacturer of adjusted against the duty

leviable on such soap.

Explanation I: The expression „total oil‟ included saponifiable materials such

as all oils and fats of vegetable origin, all oils and fats of animal and of fish origin,

tallow, hydrogenated vegetable oils and products, acid oils, fatty acids, rosin and such

oils, fats and saponifiable matters as contained in the soap stocks and soap scraps.

Explanation II: In this notification, the amount of exemption was to be

calculated at the option of the manufacturer, either on the basis of individual charge or

on monthly basis;

Provided that where the manufacturer opts for the exemption on monthly

basis, the individual charges in which the percentage of neem, karanj, kusum and sal oils or a

combination thereof was less than three, was to be excluded fro the eligibility of concession

on such monthly basis.

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Provided further that where a manufacturer exercises such option, he was

eligible to vary the same during the financial year only once after giving one calendar

month‟s notice in writing to the proper officer.

Central Government exempted each variety of (i) soap, household and laundry, and

(ii) soap, other sorts – both the items falling under sub item (1) and (2) respectively of item

15 of the First Schedule to the Central Excises and Salt Act, 1944 (Number 1 of 1944) –

made from indigenous rice bran oil or from a mixture of such oil with any other oils, from so

much of the duty of excise leviable thereon as was equivalent to the amount of duty

calculated at the rate of three rupees and fifty paise per metric tonne of such soap for each

additional percentage point increase and where the percentage point increase was in fraction,

the increase, in respect of such fraction, was to be calculated accordingly in the use of such

rice bran oil which was in excess of twenty five per cent of the total oils used in the

manufacture of such soap:

Provided that the exemption available under this notification in relation to

each variety of soap, falling under sub item (1) of item 15, or as the case may be, sub item (2)

of item 15, was to be calculated separately and the exemption available in relation to one

variety of soap under sub item (1) or sub item (2), as the case may be, was to be adjusted

only against the duty leviable on that variety of soap,

Provided also that where the amount of duty calculated under this notification

was in excess of the duty leviable for the time being on soap but for the exemption, then no

part of the amount so in excess was to be refunded to the manufacturer or adjusted against the

duty leviable on such soap.

Explanation I: The expression „total oil‟, included saponifiable

materials, such as all oils and fats of vegetable origin all oils and fats of

animal and of fish origin, tallow, hydrogenated vegetable oils and

products, acid oils, fatty acids, rosin and such oils, fats and saponifiable

matters as contained in the soap stocks and soap scraps.

Explanation II: In this notification, the amount of exemption was, at

the option of the manufacturer, to be calculated, either on the basis of

individual charge or on monthly basis.

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Provided that where the manufacturer exercises such option, he was eligible to

vary the same during the financial year only once after giving one calendar month‟s notice in

writing to the proper officer.

Under Notification Number 83/83-CE dated 01.03.1983 exemption was granted to the

Small Scale Units with effect from 01.03.1983.

Set off of duty on the use of duty paid goods fallings under tariff item number 68 was

allowed to this commodity under the Notification Number 201/79-CE dated 04.06.1979.

From the speech of the Finance Minister, while piloting the Finance Bill for the year

1979-1980,it was apparent that the Legislature never intended that toilet soap was to come

within the ambit of household and laundry soap. Household and laundry soap was always

considered as a distinct and different product from toilet soap.

Under the Notification Number 19/84-CE dated 01.03.1984, the exemption to laundry

soap produced by the units owned by Khadi and Village Industries Commission or any

organization approved by the said Khadi and Village Industries Commission was granted.

According to the Central Board of Revenue‟s letter bearing number 38/14/61-CX 3

dated 03.07.1961, though a licence was required to be obtained from the Drugs Controller for

the manufacture of certain Medicated Soaps, but, keeping in view that these were

commercially known as soaps, the correct classification was under the tariff item number 15.

Soap or Glycerine which was obtained in the process of manufacture of shampoo,

dettol or crease and was in a marketable condition and commercially so recognized

(notwithstanding that they were not actually marketed) before the manufacture of shampoo,

dettol or grease were excisable under the tariff item number15 of 14C, as the case may be, as

per the Tariff Advice Number 17/76 and confirmatory letter of the Board dated 15.05.1978.

Mere repacking of duty paid Optical Bleaching Agents, with or without a change in

the brand name did not amount to manufacture within the meaning of the Section 2(f) of the

Central Excises and Salt Act, 1944. Where, however, the article underwent further

processing such as formulation of dilution with other ingredients, such process was treated to

be the process of manufacture and the finished goods thereof were liable to the duty of excise

under item 14DD of the tariff schedule provided the final product was sold as a new article,

for example, under a different brand name. The Board, however, allowed set off to such

manufactures of the duty already paid on the unprocessed Optical Bleaching Agents against

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the duty leviable on the manufactured goods. (Board‟s letter bearing F, Number 27/3/66 CX

VI dated 04.01.1967 refers)

With effect from 01.03.1986, the goods covered under this category were classified

under the Chapter Heading 34 of the Central Excise Tariff Act, 1985 (Number 5 of 1986)

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TARIFF ITEM 15A - PLASTIC

This commodity was brought into the Excise net for the first time by Finance Bill,

1961 and the same was made effective from 01.03.1961 and was placed at Tariff Entry

Number 15A, the description of which read as sunder.

―15A. Plastic, all sorts, namely -

i) Moulding powders, granules and flakes (thermo setting

and thermo plastic)

ii) Polyethylene films, lay flat, tubings and PVC Sheets,

that is to say, Polyvinyl chloride sheets.‖

By their letter dated 14.03.1961, the Government clarified that the Central Excise

duty on Plastic was leviable at one stage only. The levy was to be made at the first stage

when the raw materials attract duty for the first time. The polyethylene films, lay flat tubings

and PVC sheets made exclusively out of moulding powder, granules and flakes (mentioned in

tariff item 15A(i) which had already been paid of excise or countervailing Customs duty at

the stage of granule shape was not liable to the duty of excise at a second stage.

By Finance Bill, 1962, the following entry was inserted with effect from 22.06.1961,

namely -

iii) Not otherwise specified

With effect from 29.04.1964, this tariff item 15A was substituted to read as under.

―15A. Artificial or Synthetic Resin and Plastic

materials and the articles thereof -

1) Artificial or Synthetic Resin and Plastic Materials, in any form,

whether solid, liquid or pasty or as powder, granules or flakes or in

the form of moulding powder, the following namely -

i) Condensation, poly-condensation and polyaddition

products, whether or not modified or polymerized, including

phenoplast, Aminoplast, Alkyds, Polyurathane, Polyallyl Esters

and other Unsaturated Polyesters;

ii) Polymerisation and copolymerisation products

including polyethylene and polytetrahaloethylene,

polyisobutylene, polystyrene, polyvinyl chloride, polyvinyl

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acetate, polyvinyl chloroacetate and other polyvinyl

derivatives, polyamides, polyacrylic and polymethacrylic

derivatives and coumarone indene resins, and

iii) Cellulose acetate (including di or tri acetate), cellulose

acetate butyrate and cellulose propionate, cellulose acetate

propionate, Ethyl cellulose and Benzyl cellulose, whether

plasticised or not, and plasticised cellulose nitrate.

2) Articles made of plastics, all sorts, including tubes, rods, sheets, foils,

sticks, other rectangular or profile shapes whether laminated or not,

and whether rigid or flexible, including lay flat tubings and polyvinyl

chloride sheets.

Explanation: For the purpose of sub item (2) ‗Plastics‘ means

the various artificial or synthetic resins or plastic material

included in sub item (1)

Process of manufacture of Polyethylene:

1. The main raw material for the manufacture of polyethylene is

ethylene alcohol produced from Molasses by distillation

process. The alcohol is dehydrated in a converter to produce

ethylene.

2. Ethylene is purified before being compressed and polymerised.

3. Then Polyethylene is separated, cut into granules, which are

tested and blended before packing.

The provision of Rule 191A and 191B of the Central Excise Rules, 1944, apply to

plastic manufacturer by which the manufacturer can export under claim for rebate of duty of

excise on the excisable goods used in the manufacture of plastic and the manufacturer was

permitted to export plastic under bond in terms of the rule 191B ibid.

The facility of Audit type of control was extended to this commodity with effect from

April, 1963. The advantage of this facility was that the physical presence of the Central

Excise officer was eliminated and the manufacturer was eligible to clear the goods under his

signature and without the countersignature of the Central Excise officer. However, certain

conditions were attached to this procedure. This procedure could be withdrawn by the

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Collector at any time and without assigning any reason whatsoever (This appears to be

arbitrary and capricious – Authors comments)

Silicones were excisable under this tariff item as per the Tariff ruling number 10/65-

CX.

Ester Gums which were obtained by modification of natural resin or Resinic Acid

were not covered under this tariff item as per the letter dated 31.03.1965 issued by the Board.

By Finance Bill, 1982, this item was once again amended which read as under.

“15A. Artificial or Synthetic Resins and Plastic and other materials,

articles specified below, that is to say,

1. Condensation, polycondensation and polyaddition

products, whether or not modified or polymerized, and

whether or not linear (for example – phenoplasts,

aminoplasts, alkyds, Polyallyl esters and other

unsaturated polyester, silicones); polymerization and

co-polymerisation products (for example –

polyethylene, polytetrahaloethylene, polyisobutylene,

polystyrene, polyvinyl chloroacetate and other

polyvinyl derivatives, polyacrylic and polymethacrylic

derivatives, coumarone indene resins), regenerate

cellulose, cellulose nitrate, cellulose acetate and other

cellulose esters, cellulose ethers and other chemical

derivatives of cellulose, plasticised or not (for example,

collodions, celluloid);

vulcanized fibre; hardened proteins (for example,

hardened casein and hardened gelatin) natural resins

modified by fusion (run gums), artificial resins,

obtained by esterifications of natural resins or of resinic

acids (ester gums); chemical derivatives of natural

rubber (for example – chlorinated rubber, rubber

hydrochloride, oxidized rubber, cyclised rubber); other

high polymers, artificial resins and artificial plastic

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material, including alginic acid, its salts and esters,

linoxyn

2. Articles of material described in sub item (1), the

following, namely -

Boards, sheeting, sheets and films, whether

lacquered or metallised or laminated or not, lay

flat tubings not containing any textile material,

3. Polyurethane foam,

4. Articles made of polyurethane foam.

Explanation I: Sub items (1) did not include

a) polyurethane foam,

b) artificial waxes,

c) starches, including dextrin and other

forms of modified starches.

Explanation II : In sub item (1) “condensation, polycondensation,

polyaddition, polymerization and co-polymerisation products” are to

be taken to apply only to the goods of a kind produced by chemical

synthesis answering to one of the following descriptions –

i. artificial plastics, including artificial resin,

ii. silicones,

iii. resols, liquid polyisobutylene and similar artificial

polycondensation or polymerisation products.

Explanation III: Sub item (1) was to be taken to apply to materials in

the following forms only -

a) liquid or pasty including emulsions, dispersions and

solutions;

b) blocks, lumps, powders (including moulding powders),

granules, flakes and similar bulk forms;

c) waste and scrap

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TARIFF ITEM 15AA - ORGANIC SURFACE ACTIVE AGENTS

This item was brought on the Tariff Schedule for the first time on 01.03.1966 by the

Finance Bill, 1966 and was placed at Tariff Item Number 15A and there was levy of Excise

Duty at the rate of twenty per cent ad valorem.

By the Notification Number 101/66-CE dated 17.06.1966, full exemption was granted

to the following attaching thereto certain conditions, that is to say,

Sr. No. Description Condition attached

1. (a) Sulphonated Castor Oil, commonly known Nil

as Turkey Red Oil

(b) Sulphonated Fish Oil

(c) Sulphonated Sperm Oil

2. Orange Surface Active agents (other than If in or in relation to the manufacture

soap); surface active preparations and and packing of such surface active

and washing preparations, whether or not agents, surface-active preparations

containing soap. and washing preparations no process

was ordinarily carried on with the aid

of power or of steam for heating;

3. Surface-active preparations and washing If in respect of surface-active agents

washing preparations containing less than or surface-active preparations used in

five per cent by weight of the principal active the manufacture of such surface-

ingredients active preparations and washing

preparations the appropriate amount

of excise or the additional duty under

Section 2A of the Indian Tariff Act,

1934 (Number 32 of 1934) had

already been paid or where such

surface active agents or surface

active preparations are purchased

from the open market on or after

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the 20th

day of January, 1968.

4. Emulsifiers, wetting out agents, softeners If in respect of surface active

and other like preparations intended for agents used in the manufacture of

use in any industrial process. such emulsifiers, wetting out agents,

softeners and other like preparations

the appropriate amount of duty of

excise or the additional duty.

The above Notification was made effective from 1st day of March, 1963.

As per the Notification Number 208/69-CE dated 27.08.1969, exemption to Organic

Surface-Active Agents (other than soap) and Surface-Active Preparations, whether or not

containing soap, falling under tariff item number 15AA of the First Schedule to the Central

Excises and Salt Act, 1944 (Number 1 of 1944) was granted from the whole of the duty of

excise leviable thereon provided such organic Surface-Active Agents or Surface-Active

Preparations, as the case may be, satisfied the condition that the difference between the

surface tension value of distilled water and the surface tension value as determined by

stalagmometer of the liquid obtained by treating one gram of the Organic Surface-Active

Agent or the Surface- Active Preparations, as the case may be, with 100 milliliters of distilled

water was not to be more than twenty dynes per centimeter at the same temperature.

With regard to the scope of this item, the Tariff Advice Number 20/82 dated

21.04.1982 had made it clear that the Tariff Item Number 15AA of the Central Excise Tariff,

need not necessarily be wholly water soluble but will qualify to be classified under the

abovesaid item if it satisfied any of the properties listed hereunder.

1. Solubility: A substance must be soluble at least in one phase of a liquid

system.

2. Amphipathic Structure,

3. Orientation at interface,

4. Absorption at interface,

5. Miscelle formations

6. Functional properties -

i) detergency,

ii) foaming,

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iii) wetting,

iv) emulsifying,

v) solubilising,

vi) dispersing

As per the Tariff Advice Number 91/81 dated 03.09.1981, Synthetic Tanning Agents

(Syntans) were classifiable under the Tariff Item Number 15AA or the Tariff Item Number

68 of the Central Excise Tariff Act, depending upon the results of chemical analysis, use of

the goods, trade parlance, etc. It was also considered that Syntans could be categorized into

five broad groups with their classification as under.

Category Classification

a) Phenol and/or Naphthalene Sulphonic Acid Condensates Tariff Item 68

b) Mixtures of Synthetic tanning agents with inorganic salts Tariff Item 68

and/or natural tanning material

c) Products based on Synthetic Resin Tariff Item 15AA

d) Dispersing Agents Tariff Item 15AA

e) Fat Liquorising Agents Tariff Item 15AA

Tariff Ruling Number 6/69 dated 26.08.1969 made it clear that Cationic products

formed by the interaction of formaldehyde and dicyandiamide and used as die fixing agents

for improving wash-fastness of the dye on the fabric are surface active agents falling under

tariff item number 15AA.

D.W.A. was classifiable under tariff item number 15AA of the Central Excise Tariff.

The product was not qualified for the complete exemption under the Notification Number

208/69-CE dated 27.08.1969, but it was eligible for the exemption under Serial Number 4 of

the Notification Number 101/66-CE dated 17.06.1966 if the Surface-Active Agents used in

its manufacture were duty paid.

Cochin Trade Notice Number 1/73 dated 29.01.1973 made it clear that Scouring

Powder conforming to IS Specifications 6047:1970 was outside the purview of the Tariff

Item Number 15AA whereas Scouring Powders containing O.S.S.A. in excess of 4.5% and

water soluble ingredients less than eighty (like Biz, etc) which did not satisfy the ISI

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Standards relating to scouring powders but have a high percentage of water insoluble

ingredients and perform essentially the same functions of Scouring Powders as per IS

Specifications were still “Scouring Powders” and hence the same were not liable to excise

duty under Tariff Item 15AA of the Central Excise Tariff.

According to the letter issued by the Board bearing number 24/26/68 CX-3 dated

23.11.1968, Amine, an aqueous solution of Synthetic Resin (a condensation product of

formaldehyde and amide) and known in the market as a “Surface-Active Agents” was

classifiable under the Tariff Item Number 15AA of the Central Excise Tariff.

As regards Shampoos containing Surface-Active Agents, the MF (DR) letter Number

B-2/9/66-CX 1 dated 17.06.1966, stated that „Shampoos‟ not containing soap but Surface

Active Agents, duty on Surface Active Agents was liable to be collected under the Tariff

Item Number 15AA of the Central Excise Tariff if they did not enjoy exemption and have not

already borne the appropriate duty of excise.

MF(DR) letter Number 14/7/67/CX 3 dated17.02.1968, clarified that Celex Powder or

Celex Lye, did not come within the scope of the Central Excise Tariff Item 15AA.

“Disposal A.C.” AND “Agral II Cone” in powder form so long as these were obtained

out of “Disposal A.C.” and “Agral II Cone” in liquid form which had already paid the duty of

excise under Tariff Item 15AA of the Central Excise Tariff were not liable to the duty of

excise again under that tariff item. (MF (DR) letter Number 14/3/68 CX 3 dated 16.02.1972

refers)

As regards Washing Preparation, the MF (DR&I) letter dated 17.06.1966 made it

sufficiently clear that merely because a calcium compound. Instead of a sodium compound,

was used in a preparation which was ordinarily used for washing cleaning purposes of the

kind indicated in Brussels Tariff Nomenclature could not be taken it out of the scope of the

Tariff Item Number 15AA of the Central Excise Tariff.

Insecticides, Pesticides, Disinfectants, Pharmaceutical emulsions and Fire

extinguishing preparations did not fall within the scope of the Tariff Item Number 15AA,

even though some quantity of surface active agent or preparation was used in their

manufacture. However, the duty of excise was leviable on surface active agents or the

preparations so use, unless otherwise exempted. This was clarified by the letter dated

17.06.1966 issued by the MF (DR&I)

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As per the Board‟s Tariff Advice dated 10.01.1980, Diethylaminoethanol (“Diethol”)

was not eligible for the classification under the Tariff Item 15AA of the Central Excise

Tariff.

As per the Notification Number 101/66, mere use of the power in transferring the raw

material from the motor tank to the storage tank could not be said to be the use of power in

the process of manufacture of the final produce because it was not a process of manufacture

(1981 ELT 617 (Guj) refers)

With effect from 01.03.1986, this commodity was classified under the Chapter

Heading 34 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986) and

was exigible to the duty of Excise at the rate of sixteen per cent ad valorem though the

exemption from the duty of excise leviable thereon was granted in the clearance value upto

the slab of rupees first one hundred lacs

This commodity also enjoyed SSI exemption with effect from 01.03.1986.

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TARIFF ITEM 15B - CELLOPHANE

Cellophane, that is to say, any film or sheet of Regenerated Cellulose, came on the

Tariff Schedule, for the first time, with effect from 01.03.1961 and was placed at Tariff Item

Number 15B of the First Schedule to the Central Excises and Salt Act, 1944, attracting the

duty of excise at the rate of twenty per cent ad valorem.

The special procedure by which the countersignature of the inspector was not required

for removal of goods on payment of duty under a cover of gate pass was extended to this

commodity attaching therewith certain conditions, such as approval of prices, payment of

duty, etc, was continued and there was no relaxation. This was imposed with effect from

01.03.1982.

By Finance Bill, 1982, this tariff item was omitted.

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TARIFF ITEM 15BB - POLYESTER FILM

With effect from 01.03.1981, a new item was carved out from the tariff item 15A and

was numbered as tariff item number 15BB, describing it as “Polyester Film” which attracted

the duty of excise at the rate of fifty per cent ad valorem.

By the Finance Bill, 1981, Explanation II was substituted as under, that is to say,

―Explanation II: This item did not include -

(a) Polyester films, and

(b) Electrical insulating fittings or parts of such insulators or

insulating fittings

However, this item was omitted by the Finance Bill, 1982.

With effect from 01.03.1986, the goods covered under this tariff item were classified

under the Chapter Heading 39 of the First Schedule to the Central Excise Tariff Act, 1985

(Number 5 of 1986)

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TARIFF ITEM 15C - STARCH

This tariff item was brought within the Excise net with effect from 16.03.1976 and

was placed at Tariff Item Number 15C, attracting the duty of excise at the rate of sixteen per

cent ad valorem, the description of which read as under.

―15C. Starch (including Dextrin and other forms of modified

starches) All Sorts, in or in relation to the manufacture of which any

process is ordinarily carried on with the aid of power.‖

Under the Notification dated 16.03.1976, Starch consumed within the factory of

production was exempted if it was used in the manufacture of Sago (Tapioca Globules).

Starch used in the manufacture of modified starch was also exempted from the duty of

excise leviable thereon when used captively.

Starch was also exempted from the duty of excise leviable thereon if it was used

captively in the manufacture of Glucose and Dextrin in the factory of production.

Exemption was also available to the following under this tariff item.

1. Tamarind Seed Powder (Tamarind Kernel Powder)

2. Guar Gum,

3. Sago, being essentially a food product which did not fall in

the category of starches or modified starches, falling under the

tariff item number 15C; and

4. Tapioca Flour – This was a product distinct from the Tapioca

Starch and this was not liable to the duty of excise under the

tariff item number 15C.

SSI exemption was also granted to this commodity by the Notification Number 83/83-

CE dated 01.03.1983.

With effect from 01.03.1986, the goods covered under this item were classified under

the Chapter Heading 11.03 of the First Schedule to the Central Excise Tariff Act, 1985

(Number 5 of 1986).

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CHAPTER 15CC - MOLASSES

Prior to 19.06.1980, Molasses was leviable to the duty of excise under Residuary item

Number 68 of the First Schedule. However, with effect from 19.06.1980, a separate tariff

item, namely, Item Number 15CC, was created but with effect from 01.03.1986 the Central

Excise Tariff Act, 1985 (Number 5 of 1986) was implemented and thus with effect from

01.03.1986, Molasses was classified finally under the Chapter Heading 17.03 of the Schedule

to the Central Excise Tariff Act, 1985 (Number 5 of 1986).

Initially, Molasses was subjected to the duty of excise at the rate of thirty rupees per

MT. This rate of duty was continued upto the year 1988, when it was doubled, i.e. sixty

rupees per MT. Further, however, this rate of duty of excise was doubled, i.e. one hundred

twenty rupees per MT with effect from 01.03.1989 and with effect from 01.03.1991 it was

again increased to rupees one hundred fifty per MT. This rate was further increased to rupees

two hundred per MT with effect from 01.03.1993.

By the Finance Bill, 1994, the Specific rate of duty was changed to Ad valorem and

this change from specific to ad valorem led to a number of litigations. It is pertinent to note

here that some factories have distilleries and many others do not have the facility of

distillation of molasses for converting molasses into ethyl alcohol. There was a good deal of

sale of molasses in the open market by the factories that do not have distillation facility in

their sugar factory. Thus the comparable prices of molasses under rule 6(b)(i) of the Central

Excise (Valuation) Rules, 1975, were very much available. As per the provisions contained in

the said rules of Central Excise (Valuation) Rules, 1975, if the comparable prices are

available the same were to be applied for captive consumption also. The department adopted

the provisions of rule 6(b)(ii) ibid and issued number of demands, which were declared as

unsustainable under the law by the Hon‟ble Tribunal and based on this decision the

department switched over to specific rate of duty of rupees five hundred per MT. But, it is a

sad thing that till this decision came the sugar factories were unnecessarily harassed which is

bad in law.

By a Notification Number 86/80-CE dated 19.06.1980, the Molasses produced with

the process other than Vacuum Pan Process was exempted from the duty of excise.

Specific rate of five hundred rupees per MT was also prescribed on Khandsari

Molasses, falling under the sub heading number 1703.90 of the Schedule to the Central

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Excise Tariff Act, 1985 (Number 5 of 1986). In so far the Khandsari Molasses was

concerned; the duty was required to be paid on such molasses, which was used in the

manufacture of alcohol. Khandsari Molasses used for the manufacture of goods other than

alcohol was fully exempted. In the case of Khandsari Molasses the collection of duty was at

a consumption point in contrast to the collection of duty at the point of clearance. The

burden of tax was cast on the procurer of Khandsari Molasses and as a sequel to these

changes the Central Excise Law was also amended.

Molasses used in the manufacture of Animal Feed was fully exempted; however, a

condition was fixed that the movement of the goods was to be made in keeping with the

procedure as laid down in Chapter X under the Central Excise Rules, 1944.

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TARIFF ITEM 15D - POLISHES AND CREAMS

This tariff item was brought into the Excise net for the first time by Finance Bill,

1977, with effect from 18.06.1977, and was placed at Tariff Entry Number 15D, attracting

the duty of excise at the rate of fifteen per cent ad valorem, the description of which was as

under.

―15D. Polishes and Creams for footwear, furnitures, floor, leather,

metals, motor vehicles and glass scouring powder and paste.‖

Under this tariff item the duty of excise was leviable on polishes and creams for

footwears, furnitures, floor, leather, motor vehicles, metals and glass scouring powders and

pastes but therein the French Polish was not included because French Polish was covered

under the tariff item 14 – Paints and Varnishes.

As per Bombay Trade Notice Number 14/77 dated 04.07.1977, this tariff item also

did not include abrasive powders (when not mixed), whitening for footwear, dyes for

chamois leather footwear, oils and greases for leather dressing (including degras and artificial

degras), dry cleaning fluids and stain removers.

By its letter the Ministry of Finance (Department of Revenue) bearing number

38/1/77-TRU dated 20.07.1977 it was clarified that Mahua de-oiled cake powder and soap

nut powder, without having any added ingredient, was not included in the scope of tariff item

number 15D of the Central Excise Tariff.

The goods covered by this item, when manufactured not with the aid of power, were

fully exempted from the whole of the duty of excise leviable thereon as per the Notification

dated 15.07.1977.

This commodity also enjoyed SSI exemption that was extended by the Notification

83/1985 dated 17.03.1985.


the Chapter Heading 34.05 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5

of 1986).

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TARIFF ITEM 16 - TYRES

This commodity was brought on tariff schedule on 01.04.1941.

By budget circular 2/73 dated 16.04.1973, the term “ Tyres” in the Central Excise

Tariff was defined to cover inner tubes also.

With effect from 01.03.1981, the description of this Tariff Item was substituted to

read as under.

“16. Tyres.

Tyres means a pneumatic tyre in the manufacture of which

rubber is used and includes the inner tube, the tyre flap and the

outer cover of such a tyre -

(A) 1) Tyres for motor vehicle and tyres for vehicles or

equipments designed for use off the road,

2) Tyres for tractors, including agricultural tractors,

3) Tyres for trailers.

(B) Tyres for cycles and cycle-rickshaws,

i) Tyres,

ii) Tubes,

iii) All other tyres.

Explanation I: ―Motor Vehicle‖ means all mechanically propelled

vehicles, other than tractors, designed for use upon roads,

Explanation II: ―Motor Vehicles‖, ―tractors, including agricultural

tractors‖ and ―trailers‖ shall include a chassis but shall not include a

vehicle running upon fixed rails.‖

With effect from 01.03.1983, sub item (1) of tariff item number 16 was substituted to

read as under.

―I. (1) Tyres for motor vehicles and tyres for vehicles or equipments,

designed for use off the road -

(a) Tyres for two wheeled motor vehicles, namely, scooters,

motor cycles, mopeds and auto-cycles,

(b) Others.

(2) Tyres for tractors, including agricultural tractors,

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(3) Tyres for trailers -

(a) Of sizes, namely, 7.50-16 and 9.00-16,

(b) Others‖

A revised tariff item of existing item number 16 was substituted which read as under.

Sr. No. Sub Item No. Description of Tyres

_____ __________ ___________________________________________________________

1 I(1) Tyres for two wheeled and three wheeled motor vehicles, falling under sub

item (1) of the Item 34 of the said First Schedule.

2. -- --

3. I(1) Tyres for powered cycles and powered cycle rickshaws, falling under sub

item I(1) of Item No.34 of the said First Schedule.

4. I(1) Tyres for saloon cars, falling under sub item I(2) of Item No.34 of the said

First Schedule.

5. I(2) Tyres (excluding flaps) for agricultural tractors, falling under sub item 11

of the Item No.34 of the said First Schedule.

6. -- --

7. -- --

8. II Tyres for cycles and cycle rickshaws, falling under Item No.68 of the said

First Schedule.

9. IV Tyres specifically designed for use of animal drawn vehicles or handcarts

Explanation: For the purposes of this Notification -

(a) “agricultural tractor” means -

(i) a tractor of Draw Bar Horse Power 50 and below,

(ii) a tractor of Draw Bar Horse Power exceeding 50

if an officer not below the rank of an Assistant

Collector of Central Excise is satisfied that such tractor

is used solely for agricultural purposes,

(b) “powered cycle” or “powered cycle rickshaw” means a

mechanically propelled cycle or, as the case may be, mechanically

propelled cycle rickshaw, which may also be pedaled, if any

necessity arises for so doing.

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Original Equipments Manufacturers of tyres of tractors, trailers, cycles and cycle

rickshaw tyres and the tyres designed for use of animal drawn vehicles or handcarts were

exempted from the whole of the duty of excise leviable thereon.

With effect from 01.03.1981, tariff description of this item again underwent a change

and the amendment that was effected read as under.

Sr. No. Sub Item No. Description

_____ ________________________________________________________________________

1. I(1)(a)(i) Tyres for two wheeled motor vehicles

2. I(1)(b)(i) Tyres for three wheeled motor vehicles of sizes 4.00-8,4.50-8 and

4.50-10

3. I(1)(b)(i) Tyres for Saloon cars of rim sizes

(i) 14 inches and below, and

(ii) 15 inches and above but not exceeding 17 inches

4. I(1)(b)(i) Tyres for motor vehicles other than Sr. No.3 and 4 above of sizes,

(A) (i) 9.00-13, 7.00-17, 6.00-20, 6.50-20, 7.00-20, 7.50-20

(a) Rayon Tyres

(b) Nylon Tyres

(ii) 8.25-20 and 8.25-15

(a) Rayon Tyres

(b) Nylon Tyres

(iii) 9.00-2

(a) Rayon Tyres

(b) Nylon Tyres

(iv) 10.50-16, 10.00-20, 11.00.20 and 10.00-22

(a) Rayon Tyres

(b) Nylon Tyres

(v) 12.00-20, 14.00-20,10.00-24, 11.00-24 and 12.00-24

(a) Rayon Tyres

(b) Nylon Tyres

(B) (i) 6.70-15 and 7.00-15, 6.50-16 and 7.00-16

(a) Rayon Tyres,

(b) Nylon Tyres,

(c) Radial Tyres

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(ii) 6.00-16

(a) Rayon Tyres

(b) Nylon Tyres

(iii) 7.50-16

(iv) 7.00-16

5. I(1)(2) (a) Front Tractors Tyres

6. I(1)(2) (a) Rear Tractor Tyres of Rim sizes, namely,

(i) 28 inches and below

(a) Rayon Tyres

(b) Nylon Tyres

(ii) Above 28 inches

7. I(1) (b) (i) Tyres for trailers of Rim sizes, namely,

(a) 7.50-16

(b) 9.00-16

TUBES

8. I(1) (a) (i) Tubes for tyres of two wheeled motor vehicles

9 I(1) (b) (ii) Tubes for tyres of three wheeled motor vehicles of

sizes, namely -

(a) 4.00-8,

(b) 4.50-8, and

(c) 4.50-10

10. I(1) (b) (ii) Tubes for tyres of Saloon Cars of Rim sizes,

namely,

(a) Not exceeding 15 inches,

(b) Exceeding 15 inches but not exceeding 17

inches

11. I(1) (b) (ii) Tubes for tyres of other Motor Vehicles of Rim

sizes, namely

(a) Below 20 inches,

(i) 6.00-16 and 5.50-16

(ii) Others

(b) 2O inches

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(c) Above 20 inches

12. III(2) Tubes for tyres of vehicles or equipment designed for use off the

road of rim sizes not exceeding 25 inches

13. II(2) (b) Tubes for front tractor tyres,

14. III(2) (b) Tubes for rear tractor tyres

15. I(1) (b) (ii) Tubes for tyres of trailers of sizes 7.50-16 and 9.00-16.

16 IV(2) All other tubes

17 I(1)(a)(iii) or

I(1)(b)(iii) or

I(2)(c) or Flaps, All Sorts

III(3) or

IV(3)

Explanation: For the purpose of this notification –

(a) Tyres and Tubes for Saloon cars of Rim sizes 12 inches

shall include tyres and tubes for vans of size 4.50-12;

and

(b) Tyres and Tubes for Saloon cars of Rim sizes 15 inches

shall include tyres and tubes for vans of size 6.40-15.

As per the Cochin Trade Notice Number 221/67-CE dated 29.08.1967, the Tyres for

tractor trailers were correctly classifiable as “As Other Tyres” under sub item (3) of tariff

item 16 of the Central Excise Tariff.

As per Board‟s Budget Circular Number 2/73 dated 16.04.1973, the term “Tyres” in

the Central Excise Tariff was defined to cover inner tubes also. Any reference to “Tyres” in

a Notification issued under the Central Excise Tariff, thus automatically covered the inner

tubes also unless otherwise specifically excluded. In view of the above position, the rubber

products made either wholly or partly of the rubber and used for repairing of inner tubes was

liable to the duty of excise leviable thereon.

As regards tyres for the dumpers, coal haulers, bulldozers, scrappers, draglines and

excavators, tyres and tubes, which are designed as such to be fitted to such equipments, were

liable to be classified within the meaning of the term “Motor Vehicles” and were assessable

to the duty of excise under the sub item (i) of the Item Number 16 of the Central Excise

Tariff. Tyres and tubes meant for other equipments not classifiable under sub items (1) and

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(2) of Item 16 were liable to the duty of excise as for “All Others” under sub item (3) of the

said item.

Tyre flaps cleared with or without inner tubes and outer tubes were classifiable under

tariff item number 16. (1984 ECR 1183(CEGAT) refers)

Retreading of old tyres was not a process of manufacture since it did not bring into

existence a commercially distinct or different entity as the old tyre retains its original

character or identity as a tyre though it increases the performance or serviceability as a tyre.

(1979 ELT (J-593)(S.C.) refers)

Fork Lift Tyres were classifiable under sub item (3) of tariff item 16 of the Central

Excise Tariff and not as “Motor Vehicles” under sub item (I) of tariff 16 ibid. (1980 ELT

563(Bom) refers)

With effect from 01.03.1986, the goods covered under this item were reclassified

under the Chapter Heading 40.02 of the Schedule to the Central Excise Tariff Act, 1985

(Number 5 of 1986)

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TARIFF ITEM 16A - RUBBER

This item was brought within the Excise net by the Finance Bill, 1962, with effect

from 24.04.1962 and was placed at Tariff Entry Number 16A of the Central Excise Tariff, the

description of which read as under.

―16A. Rubber products, namely,

i) Latex foam sponge,

Plates, sheets and strips unhardened, whether

vulcanized or not and whether combined with any

textile material or otherwise,

ii) Piping and tubing of unhardened vulcanized rubber,

iii) Transmission, conveyor or elevator belts or belting of

vulcanized rubber.‖

By the Notification Number 197/67-CE dated 29.08.1967, the Government exempted

Piping and Tubing of Unhardened Vulcanized Rubber, falling under sub item (3) of tariff

item number 16A from the whole of the duty of excise leviable thereon, which read as under.

―1. Piping and Tubing designed for use as component parts of

medical or surgical instruments or of sports goods;

2. Piping and tubing designed for use in laboratories provided each

piece of such piping and tubing was manufactured in length not

exceeding three metres and has a bore of a diameter not

exceeding 1.27 centimeters,

3. Piping and Tubing designed to be or converted in the factory of its

production into component parts of machinery articles

(including typewriters), provided such component parts did not

perform the function off conveying air, gas or liquid,

4. Piping and tubing designed for use –

(a) as handle grip for perambulators,

(b) as hydraulic or air brake hose in motor vehicles,

(c) as bicycle pump or motor pump connection but having

inner diameter not exceeding 5mm and outer diameter not

exceeding 12mm and bicycle valve, and

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(d) in the manufacture of bushes, washers and rings.‖

Rubber Cess was leviable as per the provisions contained in the Rubber Act, 1947

(Number 24 of 1947) dated 18.04.1947. This cess provided for the development under the

control of the union of Rubber industry. The tariff rate was fifty paise per kg and the

effective rate of duty was Rupees three and paise fifty per tonne.

By Notification Number 71/68-CE dated 01.04.1968, exemption to plates, sheets and

strips unhardened was granted from the whole of the duty of excise leviable thereon.

By the Notification Number 208/72-CE dated 14.10.1972 exemption to cushion

compound used within the factory of production for further production of rubber products,

falling under the said sub item and which were used for resoling, retreading or repairing of

the tyres, including the products commonly known as tread rubber, camel back, cushion gum,

tread gum and tread packing strips, was granted from the whole of the duty of excise leviable

thereon.

Exemption to rubber products if the rubber compound content was less than twenty

five per cent by weight from the whole of the duty of excise leviable thereon was under the


Under the Notification Number 83/83-CE dated 01.03.1983 small units were

exempted from the purview of Central Excise duty.

As per Pune Collectorate Trade Notice Number 36/82 dated 15.03.1982, exemption

was not available to the Aprons and Cots, if cleared as accessories, which Notification, i.e.

Notification Number 197/67-CE dated 29.08.1967, was otherwise available for rubber piping

and rubber tubing used for the manufacture of component part of machinery.

Board‟s Tariff Advice Number 59/81 dated 23.06.1981 specified that raw rubber

preserved latex, latex concentrate, smoked rubber sheets, crepe rubber, crump rubber, etc,

was outside the purview of Central Excise Duty. However, Masticated Rubber in sheet form

made out of raw rubber treated with Carbon Black before and after it was masticated in a

sheet form, was within the ambit of tariff item number 16A(2) attracting the duty of excise

leviable thereon.

Sanforizing Belts were classified as conveyor belt, which used to be flat or which had

troughed edges that prevent the material being carried from spilling over, under tariff item

16A(4) since conveying of cloth was an essential function of the said Sanforizing belt.

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According to the Board‟s letter number 8/1/62-CE 8 dated 09.05.1962, „Sponge

Rubber‟ which was commonly used in rubber chappals or rubber footwear, if made from

rubber in any form other than latex, by using the mical expanders (as opposed to air in the

case of rubber made out of latex,) the said Sponge Rubber was not covered by the definition

of the product „Rubber‟.

As regards Trimmings, which were collected before the product was cured, Central

Board of Revenue‟s letter Number 8/5/62-CX 7 dated 03.04.1963, made it clear that, the

same were not treated as manufactured rubber product and as such no duty was charged but

cured trimmings and scrap were treated as products liable to the duty of excise under the

tariff item 16A.

Vaculag was classifiable under tariff item 16A(2) (1982 ELT 508 (Government of

India) refers)

MF (DR) Circular letter No. Rubber 2/68 dated 02.04.1968, with regard to the

Hydraulics or Brake Hose, made it clear that where a unit produces a hose assembly out of

duty paid rubber tubing, the same was not to be assessed to the duty of excise again under the

tariff item 16A(3); however, where the rubber piping or tubing was not presented for

assessment as such but was converted directly into wire covered piping or tubing or fitted

with nozzles, etc, in an integrated factory, such piping or tubing was exigible to the duty of

excise leviable thereon under tariff item 16A where the value of the wiring or other fitments

did not exceed fifty per cent of the value of the product.

With effect from 01.03.1986, the goods covered under this tariff were classified under

the Chapter Heading 40 of the First Schedule to the Central Excise Tariff Act, 1985 (Number

5 of 1986)

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TARIFF ITEM 16AA - SYNTHETIC RUBBER

By the Finance Bill, 1970, a new item was brought under the Excise cover with effect

from 01.03.1970 and was placed at Tariff Entry Number 16AA, the description of which read as

under.

“16AA. Synthetic Rubber, including Butadiene Acrylonitrile Rubber,

Styrene Butadiene Rubber and Butyl Rubber, Synthetic Rubber Latex,

including pre-vulcanised synthetic Rubber Latex.”

Further, by the Finance Bill, 1981, for the tariff item number 16AA, the following was

substituted, that is to say -

“16AA. Synthetic Rubber, including Synthetic Rubber Latex and pre-

vulcanised Synthetic Rubber Latex.

Explanation: In this item, the expression “Synthetic Rubber” is to

be taken to apply to -

(a) unsaturated synthetic substances which can be irreversibly

transformed into non-thermoplastic substances by

vulcanization with sulphur and which, when so vulcanized as

well as may be (as well as without the addition of any

substance such as plasticizers, filters or reinforcing agents not

necessary for the cross linking) can produce substances

which, at a temperature between 18 degree and 29 degree

centigrade, will not break on being extended to three times

their original length and will return, after being extended to

twice their original length, within a period of five minutes, to

a length not greater than one and a half times their original

length.

Such substances include CIS Polyisoprene (IR),

polybutadiene (BR), polychlorobutadiene (CR),

polybutadienestyrene (SBR), polychlorobutadiene-

acrylonitrile (NCR), polybutadiene acrylonitrile (NBR) and

butyl rubber (IIR),

(b) thioplasts(TM), and

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(c) natural rubber modified by grafting or mixing with artificial

plastic material, de-polymerised natural rubber and mixtures

of unsaturated synthetic substances with saturated synthetic

high polymers, provided that all the above mentioned product

comply with the requirements concerning vulcanization,

elongation and recovery in (a) above.

Rubber compounding which did not involve grafting or mixing the natural rubber with

artificial plastic material or depolymerising of natural rubber or mixing of unsaturated synthetic

substances with saturated high polymers and hence such rubber compounds was not covered

within the scope of the tariff item number 16AA. (Chandigarh Collectorate Trade Notice

Number 61/81 dated 15.04.1981 refers)

The Supreme Court of India had delivered its verdict that as regards the item Vinyl

Pyridine Latex was classifiable under rubber raw in view of its chemical composition and the

physical properties. (A.I.R. 1977 S.C. refers)

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TARIFF I TEM 16B - WOOD AND ARTICLES OF WOOD.

This item was brought under the Tariff Schedule by the Finance Bill, 1962, and was

placed at Tariff Item Number 16B with effect from 24.06.1962, the description of which read as

under.

“16B. Plywood, Block Board, Lamin Board, Batten Board, Hard or Soft

Wall Boards or Insulating Board and Veneered Panels, whether or not

containing any material other than wood, cellular wood panels, building

boards of wood pulp or of vegetable fibre, whether or not bonded with

natural or artificial resins or with similar binders, and artificial or

reconstituted wood being wood shavings, wood chips, saw dust, wood

flour or other ligneous waste agglomerated with natural or artificial

resins or other organic binding substances in sheets, blocks, boards or the

like -

(i) Plywood for Tea chests when cut to size panels or sheets and

packed in sets; and

(ii) All Others.‖

By Finance Bill, 1982, the effective rates of duty of excise on plywood and boards were

substituted, that is to say -

Sr. No. Item Effective rate of duty

1 Commercial Plywood 20%

2 Batten Boards and block boards (including flush doors) having both 20%

faces of commercial plywood and veneered sheets and panels made

up of strips of wood glued between two outer veneers.

3. Insulation boards and hard boards 10%

4. Marine plywood and aircraft plywood. 10%

5. Veneered particle boards excluding particle boards with decorative 20%

veneers on one or both faces,

6. Plain Particle Boards, Nil

7. Decorative plywood made from commercial plywood on which the Nil

appropriate amount of duty has been paid in the process of manufacture

of radio cabinets, meter boxes or components of furniture,

8. Improved wood, all sorts, whether in sheets, blocs or any blocks or any 20%

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other form, including articles of improved wood.

Explanation: In this notification “commercial plywood” means all

varieties of plywood other than

(i) Decorative plywood;

(ii) Fireproof plywood,

(iii) Flameproof plywood,

(iv) Structural plywood,

(v) Marine plywood,

(vi) Aircraft plywood and

(vii) Plywood for tea chests when cut to size in panels or sheets and

packed in sets which conforms to the relevant IS Standards of the

Indian Standards Institution;

(viii) Plywood for tea chests when cut to size in panel or sheets and

packed in sets and supplied by the manufacturer thereof directly to

the tea factory.

The Hon‟ble Tribunal has decided that in regard to the scope of this item, the words „or

the like‟ in tariff item 16B qualify the last category of plywood and did not qualify the preceding

category mentioned in that item which was separated from the category by the word‟ and‟.

Therefore, the „flush door‟ has nothing to do with words „or the like‟.(1980 ELT 684 (Del)

refers)

Wood shuttles made mainly of wood to which other fixtures like washers, tips, jaw, rings,

bolts, etc, were fixed and which were used in powerlooms were classifiable as improved wood

under tariff item 16B or as item not elsewhere specified under tariff item number 68 (Thane

Collectorate Trade Notice dated 07.01.1985 refers)

Board‟s Tariff Advice Number 45/79 dated 28.09.1979 stated that “structural plywood”

was to cover “concrete shuttering plywood” also.

With regard to the insulation and unveneered particle boards, the boards having the

characteristics attributed to „Sitatex‟ and „Sitawall‟ varieties of the board was classifiable as

insulation boards under the tariff item number 16B and those having the characteristics attributed

to „Sitapack‟ was classifiable as unveneered particle board (Tariff Advice dated 25/78 dated

16.05.1978 refers)

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Wipcheck and Wiptread Floor Boards and Chequered plywood are classifiable under

tariff item number 16B as per Tariff Advice Number 62/78 dated 16.10.1978.

As per the Board‟s Circular Number 1/Plywood/67 dated 07.08.1967, Commercial

plywood, particle boards, hard boards, etc, affixed with laminated plastic sheets, that is to say,

melamine glossy films are not classifiable as decorative since the very essential requirement of

decorative plywood or decorative boards that they should be veneered was not fulfilled.

Plywood was to be treated as „decorative plywood‟ if either all the veneers were matched

at the joints for figures and colour and the grains and colour characteristics systematically

arranged or at least the decorative veneers were matched at the joint for colour. (Central Board of

Revenue‟s letter bearing number 9/25/63/CX-7 dated 15.03.1964 refers)

Veneers sheets/panels made up of strips of wood glued between two outer veneers falling

under tariff item number 16B was classifiable as „Batten Board‟ as per the advice of he Board

bearing Number 30/76 dated 30.11.1976.

As per Central Board of Revenue‟s letter bearing Number 22/10/60 CX-7 dated

15.09.1962, Vulcanised Fireboard could not be treated either as plastic laminated board under

tariff item number 15A or as Board falling under tariff item 16B of the Central Excise Tariff.

Compreg was not covered by any type of board, specified under tariff item number 16B

and therefore the same was not excisable (Board‟s letter Number 62/3/73 CX 2 dated 03.12.1973

refers)

According to MF (DR) Tariff Advice Number 1/72 dated 22.01.1973, two sheets of wood

glued and pressed together with grains of right angles and known in the trade parlance as „two

layered plywood‟ was excisable under the tariff item number 16B of the Central Excise Tariff.

Vide its letter bearing number 9/30/62 CX-8 dated 06.01.1994, the Board made it clear

that the „Bobbin Ends‟ should be considered as „Lamin Boards‟ for the purpose of tariff item

number 16B. Therefore, it was necessary to ensure that only such „Laminated Wood‟,

which was meant for conversion into Bobbin Ends was treated as not liable to duty, wooden tiles

made out of the taxable varieties of „plywood‟, ‟lamin boards,‟ etc, were not to be cleared duty

free.

As per Tariff Advice Number 21/75 dated 17.06.1975, it was clarified that the Bamboo

Faced Plywoods are more akin to plywood than board and, therefore, they were to be treated as

plywood and accordingly duty was to be charged at the plywood stage as commercial plywood

and subsequent alterations were to be ignored.

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With regard to the excisability of tennis and badminton bends, the letter, issued by the

Board bearing Number 9/8/62 CX-7 dated 28.06.1962, had made it clear that strips of wood used

in the manufacture of rackets take the shape of compete bends even before these were bonded

and since these bends themselves as such can hardly be termed as boards, such bends, which

were not bounded into lamin boards prior to bending were not assessable to the duty of excise

under the tariff item number 16B.

With effect from 01.03.1986, the goods covered by this item were classified under the

Chapter Heading 44 of the schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986)

and at present the rate of the duty of excise is at the rate of sixteen per cent ad valorem. This

commodity has also been granted SSI exemption upto the first clearance of rupees one hundred

lacs from the whole of the excise duty leviable thereon.

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TARIFF ITEM 17 - PAPER

This commodity was brought into the Excise net for the first time by the Finance Act,

1955 (Number 15 of 1955) and was placed at Tariff Entry Number 21, which, however, was

renumbered as tariff item number 17 with effect from 20.09.1960, the definition was as

under.

“17. Papers, All Sorts, including Pasteboard and Millboard and

Cardboard, but excluding Strawboard, in or in relation to the

manufacture of which any process was ordinarily carried on with the

aid of power -

1. Printing and Writing Paper,

2. Wrapping Paper

a. Kraft Paper and

b. Brown paper.

3. Paper Special Varieties –

a. Blotting Paper, Toilet Paper, Target

Paper, Tissue Paper (Other than Cigarette

tissue), Teleprinter Paper, Typewriting

Paper, Manifold Paper, Bank Paper and

Bond Paper,

b. Cigarette Tissue,

4. Paper - Not otherwise specified including Art

Paper, Chrome Paper, Tubsized Paper, Cheque

Paper, Stamp Paper, Cartridge Paper,

5. Paper Board,

a. Duplex and Triplex Paper,

b. Pulp Board,

c. Other Board,

i. Coated Board, (Art, Chrome and

Board for playing cards)

ii. Mill Board,

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d. Board, not otherwise specified, including

Manila and Corrugated Board.‖

As per Board‟s letter bearing number 36/21/55-CXM dated 20.05.1955, “strawboard”

means the board manufactured out of straw, grass and bagasse.

First 1,000 tons of Mill Board papers of all kinds, falling under the tariff item number

21(5)(c)(ii) of the First Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986)

were exempted from the whole of the duty of excise leviable thereon under the Notification

Number 37/55-CE dated 01.08.1955.number

Commercially recognized Handmade Paper was also exempted from purview of the

excise duty as from the licensing controls.

Cream Wove and Maplitho varieties of papers, weighing below eighty five grams per

sq meter were classifiable as Printing and Writing paper, covered by the tariff item number

17(3) of the Central Excise Tariff. The heavier varieties of these papers were not

distinguishable from Offset and Cartridge paper of higher weights per sq meter which were

considered as drawing papers according to the definition given by the Tariff Commissioner.

In view of this the Board decided that Creanwove and Maplitho paper varieties of papers

weighing Eighty five gms per sq. mtrs and above not to be classified as Printing and Writing

Paper but as Cartridge paper under tariff item 17(1) of the Central Excise Tariff.

Unbleached Printing Paper was classified under tariff item number 17(3) of the


A question of classification of Bleached Embedded Paper came up for consideration

when the Director General of Technical Development advised that the expression “Bleached

Embedded Paper” generally meant machine dried and machine finished Bleached paper

which was used for wrapping of match boxes. The classification of machine dried paper was

made as Wrapping Paper, falling under the Tariff Item number 3 of the Chapter Heading 17

of the First Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986)

Carbon Paper and Stencil Papers were considered as Stationary items not coming

within the purview of tariff item 17 of the First Schedule.

Bituminised Waterproof Paper was leviable to the duty of excise, falling under sub

item (2) of tariff item 17 of the Central Excise Tariff.

The duty paid on Kraft Paper was eligible for set off/proforma credit.

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Impregnated Paper which was reported to be marketable was classified under tariff

item number 17(2) of the Central Excise Tariff Act, 1985 (Number 5 of 1986).

In view of the definition of the Tissue Paper in various dictionaries of paper and also

as per Indian Standards Institute publications, the Tissue Paper was decided as other than

Cigarette Tissue Paper and to be taken to mean that the paper, white or coloured, machine

finished or machine glazed or other finish of a substance not exceeding 25 gms per sq mtrs.

This commodity was covered under the Chapter Heading 48 of the First Schedule to

the Central Excise Tariff Act, 1985 (Number 5 of 1986) and subjected to the duty of excise at

the rate of sixteen per cent ad valorem.

This commodity also enjoys exemption from the whole of the duty of excise leviable

thereon in clearance value upto the first slab of rupees one hundred lacs.

SSI exemption has also been granted to this commodity

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TARIFF ITEM NUMBER 18 (I to IV)

Rayon and Cellulosic Fibres and Yarns, was brought into the revenue net with effect

from 21.12.1956 by Finance (2) Act, 1956 when the tariff rate was one rupee and eight annas

and was placed at item number 26..

With effect from 22.09.1960 this item was renumbered as tariff item number 18.

By Finance Bill, 1962, the following explanation was added

“Explanation: „Rayon and Synthetic Fibres and Yarns‟ shall be

deemed to include man-made fibres and yarn made out of man-made

fibres.”

By Finance Bill, 1975, this item was substituted by the following

―18. Rayon and Synthetic Fibre and Yarn including textured yarn in or in relation to the

manufacture of which any process is ordinarily carried on with the aid of power –

i. Fibres and Yarns, other then textured yarn,

ii. Textured Yarn

Explanation I: Fibres and Yarn, other than textured yarn, shall be

deemed to include –

i. man made fibre;

ii. spun (discontinuous) yarn containing not less than

ninety per cent by weight of man-made fibres

calculated on the total fibre content;

iii. man-made filament (continuous) yarn into which

coils, crimps or loops are not set, and

iv. man-made metallic yarn.

Explanation II: ―Textured Yarn‖ shall be deemed to include man-

made filament yarn, into which are set coils, crimps or loops.

Explanation III: ―Base Yarn‖ means yarn falling under sub item (i) of

this item from which the Textured Yarn has been produced.‖

Prior to its inclusion into the tariff schedule, this item related to Rayon and Synthetic

Fibres and Yarns and by the Finance Bill, 1977, with effect from 18.06.1977 the following

entry was substituted.

―18-I. Man Made fibres, other than mineral fibres -

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(i) Non Cellulosic,

(ii) Cellulosic.

18-II. Man Made Filament and Yarns,

(i) Non Cellulosic

(a) Other than textured,

(b) Textures,

Explanation: ―Textured yarn‖ means yarn that has been processed to

introduce crimps, coils, loops or curls along the length of the filaments

and shall include bulked yarn and stretch yarn

(ii) Cellulosic,

(iii) Metallised

18-III Cellulosic Spun Yarn, that is to say, yarn in which man made

fibre of cellulosic origin predominates in weight and, in or in

relation to the manufacture of which any process is ordinarily

carried on with the aid of power –

(i) not containing, any man made fibres of

non cellulosic origin,

(ii) containing man made fibres of non cellulosic origin.

Explanation I: ―Count‖ means the size of grey yarn (excluding any

sizing material) expressed in English count.

Explanation II: For multiple fold yarn, ―count‖ means the count of

basic single yarn.

Explanation III: Where two or more of the following fibres, that is to

say,

a) man-made fibre of cellulosic origin,

b) cotton,

c) wool or acrylic fibre, or both,

d) silk (including silk noil)

e) jute (including Bimlipatam Jute or Mesta fibre),

f) man-made fibre of non-cellulosic origin, other than

acrylic fibre;

g) flax,

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h) ramie

in any yarn are equal in weight, then, such one

of those fibres, the predominance of which

would render such yarn fall under that sub

item or item (hereafter in this explanation

referred to as the applicable sub item or item)

among the sub items and item numbers 18-III,

18-A, 18-B, 18-C, 18-D, 18-E, 18F-I and 18F-

II, which , read with the relevant notification,

if any, for the time being in force issued under

the Central Excise Rules, 1944, involves the

highest amount of duty, shall be deemed to be

predominant in such yarn and accordingly

such yarn shall be deemed to fall under the

applicable sub item or item, as the case may

be‖.

By Finance Bill, 1978, the following sub item was added:

IV. Non-Cellulosic waste, all sorts.

Explanation: This item includes only wastes arising in,

or in relation to, the manufacture of man-made fibres

(other than mineral fibres) and man-made filament

yarns.

The scope of item 18 of the Central Excise Tariff has necessarily to be confined to

only what is known to the market as yarn such as spun yarn, filament yarn or mono filament

yarn with or without twist and is distinguishable from twine having different name, physical

characteristics and different uses. (1980 ELT 185(Government of India) refers.

The Commissioner of Sales Tax, in order to answer the description of Yarn held that

in the ordinary commercial sense must have two characteristics, first, it should be a spun

strand, and, second, such strand should be primarily meant for use in weaving, knitting or

rope making. (1975 35 STC 634 (S.C.) refers).

As understood in dictionary and commercial sense, (1) the word „yarn‟ is neither

defined in the Central Excise Act nor in the Rules. The dictionary meaning of „Yarn‟ is fibre,

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as of cotton, wool, silk, flax, spun and the fibre in order to answer the description of the yarn

must have two characteristics, firstly, it should be a yarn and secondly, such strand should be

primarily meant for use in weaving, knitting and rope making, and (2) the dictionary meaning

of „Yarn‟ is fibre, as of cotton, wool, silk, flax, spun and prepared for use in weaving,

knitting, etc. (1985(19) ELT 35(Madhya Pradesh) and 1985(19) ELT 329(Madhya Pradesh)

respectively refers.

Nylon waste imported for the purpose of recovery of caprolactum by

depolymerisation process was exempted from countervailing duty under Notification Number

26B/72 dated 18.02.1972 (1984 ECR 267 (CEGAT) refers)

There is distinction between yarn and strand, that is to say, yarn is different from

„strand‟ inasmuch as the „strand‟ is given a definite twist measured in turns per metre or per

inch in order to make a yarn. (1982 ELT 191 (Government of India) refers.

Tariff item 18-ii covers and imposes duty on the textured yarn produced out of base

yarn; therefore, there is no question of double levy of duty. (1982 ELT 296(Government of

India) refers.

While commenting on the point that process of sizing was not manufacture it has been

held that the sizing was nothing but the dipping of the yarn into a solution, which imparts

strength and facilitates the process of weaving. In fact, merely it is physical process. If the

effect of the process is reversed after the process of weaving is incomplete, the sizing

compound is completely washed off and the fabric is desized. Therefore, the process of

sizing of the yarn would not amount to manufacture as envisaged by section 2(f) and make it

a different excisable commodity. (1981 ELT 887 (Del) (D.B.) refers).

In cases where the yarn is used for captive consumption and is not cleared in sized

form from the spindle point, there is no question of including the weight of sizing material for

the purpose of levy of duty and, therefore, it is the weight of the unsized yarn, which should

properly form the basis of levy of duty. (1982 ELT 705 (Government of India) refers.

It is only the weight of the unsized yarn as it emerges at the spindle stage that has to

be taken into consideration for the purpose of levy of duty on the yarn. (1983 ELT 326 (Guj)

refers.

The expression „predominance in weight‟ can have two different meanings. One is

that the fibre should be the major constituent of the fabric, that is, it should comprise more

than fifty per cent of the weight of the fabric and the other is that it should be the single

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largest constituent of the fabric. The normal and logic approach in deciding such question

would be to consider whether a particular fibre constitutes the bulk of the fabric not whether

it happens to be the single largest constituent irrespective of its quantum. (1984(19) ELT 35

(MP).

While maintaining polypropylene tow and polypropylene staple fibre were not

identical, it was held that the tow was an entangled mass of fibre while staple fibre was not

entangled but was obtained in a subsequent process and, therefore, tow was not the same

thing as fibre. (1982 ELT 752 (Government of India) refers.

Slagwool is a man-made fibre. The expression “man-made fibre” construed in plain

terms, it means – “Fibers which do not occur naturally but which are made by man, that is to

say, other than natural fibres. Examples of natural fibres are cotton, jute, wool, etc, which are

either grown as commercial crop or occur on the skin of animals.” Slagwool cannot be

called a natural fibre in that sense. No doubt it is a mineral fibre, but mineral fibres can be

both natural as well as man-made. Asbestos is a natural mineral fibre as it occurs naturally

and is simply to be mined or extracted. On the other hand, slagwool and glasswool are man-

made mineral fibres because they do not occur naturally and they have to be manufactured by

man in factories. There is no doubt that it is a man-made fibre and not a natural fibre. Since

there is no stipulation in the tariff item as to the use to which man-made fibres should be

capable of being put, the fact that slagwool is usable only for thermal insulation and not for

spinning of yarn will not stand in its way of being classified under tariff entry 18 of the

Central Excise Tariff. (1983 ELT 1866 (T) refers).

Yarn cleared for captive consumption should be assessed at the spindle stage. Instead

of selling yarn the same is consumed internally for the purpose of weaving the fabrics and the

sizing is done only in respect of the yarn used as warp after the yarn is taken from the

spinning to the weaving department. Therefore, the yarn is to be assessed on its form and

weight in which it is cleared – meant for captive consumption at the spindle stage. (1982 ELT

636 (Government of India)

For application of the provisions of rule 9 allegations has to be established beyond

doubt, that is to say, allegations of clandestine manufacture and the removal of yarn was not

established beyond doubt, the provisions of rule 9 were not applicable. (1981 ELT 851

(CBE&C) refers)

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As regard the distinction between „yarn‟ and „twine‟, it has been held that the „yarn‟

must have two characteristics. First, it should be spun strand and, second, such strand should

primarily meant for use in weaving, knitting or rope making. The twine yarn satisfies both

the conditions. (1980 ELT 249 (Bom) refers)

There was no change in the description of this item till 01.03.1986 and with effect

from 01.03.1986 this item was covered by the Chapters 54 and 55 of the Schedule to the

Central Excise Tariff Act, 1985 (Number 5 of 1986).

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TARIFF ITEM 18A - COTTON YARN

This item was brought into the excise net for the first time by the Finance Act, 1961

and was placed at tariff item number 18A of the Central Excise Tariff with effect from

01.03.1961, the item description of which read as under.

“18A. Cotton Twist, Yarn and Threads, all sorts, in or in relation to

the manufacture of which any process was ordinarily carried on with

the aid of power -

1) of 35 or more counts - Fifteen naye paise per kg

2) of less than 35 counts – Ten naye paise per kg

Explanation: For multiple fold yarn, the count means the count

of the basic single yarn”.

10 British counts = 8.5 New French Counts

The above description was, however, replaced by the Finance Bill, 1964, which read

as under.

“18A. Cotton Twist, Yarn and Threads, all sorts, sized or unsized, in

all forms including skeins, hanks, cops, cones, bobbins, pirns, spools,

reels, cheeses, balls or on warp beams, in or in relation to the

manufacture of which any process was ordinarily carried on with the

aid of power -

1) of counts 29 or more - One rupee per kg

2) of counts less than 29 - 50 naye paise per kg

Explanation: 1) “Count” means the size of grey yarn expressed

as the number of 1,000 meter hanks per one half kilogram,

2) For multiple fold yarn, “Count” means the count of the

basic single yarn.”

By the Finance Bill, 1972, the description of this tariff item again underwent a change

when the following was substituted, that is to say -

“18A. Cotton Twist, Yarn and Thread, all sorts, containing not less

than ninety per cent by weight of cotton calculated on the total fibre

content, whether sized or unsized, in all forms including skeins, hanks,

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cops, cones, bobbins, pirns, spools, cheese, reels, balls or on warp

beams, in or in relation to the manufacture of which any process was

ordinarily carried on with the aid of power -

1) of counts 29 or more - Five rupees per kg

2) of counts less than 29 - One rupee per kg

Explanation: 1) “Count” means the size of grey yarn

(excluding any sizing materials) expressed as the number of

1000 metre hanks per one half kilogram,

2) For multiple fold yarn, “Count” means the count of the

basic single yarn.”

By the Finance Bill, 1982, the Tariff Item 18A was again changed and substituted as

under.

“(xviii) In Item No.18A, in the second column, for entries (i) and (ii),

the following entries shall be substituted, namely -

i) not containing any man-made fibre of non-cellulosic origin,

ii) containing man-made fibres of non-cellulosic origin”

As regards the effective rate of duty of excise for Cotton Yarn, other than Hanks

(plain reels)(that is to say, all others), shown in column (4) of the table in the Notification

Number 45/64-CE dated 01.03.1964, the effective rates were made applicable also to Cotton

Twist or Threads. With effect from the date of issue of the amending notification, therefore,

the following changes were made in the manner of assessment of “Cotton Twist” or

“Thread”, namely -

i) When “Cotton Twist” or “Thread” cleared out of a manufacturer‟s

factory for sale it was exigible to duty at the appropriate rates as

shown in column (4) of the said Notification,

ii) When “Cotton Twist” or “Thread” used for weaving in a

composite textile mill, the same attracted the duty at the standard tariff

rate or the compounded rate, as the case may be,

iii) When “Cotton Twist” or “Thread” manufactured with the aid of

power out of cotton yarn on which appropriate amount of duty was

paid at the rates prescribed in column (3) of the Notification Number

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45/64-CE dated 01.03.1964, the differential duty between column (4)

and column (3) was required to be paid by the said manufacturer.

The rates of duty applicable to “Cotton Twist” or “Thread” were determined with

reference to the count of the basic single grey yarn from which such Cotton Twist of Threads

were made.

Appropriate Special Excise Duty of Excise was leviable if the Cotton Yarn used in the

manufacture of Cotton Twist or Threads was unsized and subsequently sized with the aid of

power.

As per the Board‟s letter bearing F. No.9/27/61 CX II dated 19.06.1964, irrespective

of the fact whether or not spoolers, rewinders of Cotton Yarn were required to pay

differential Central Excise Duty and have to take Central Excise Licence as the process of

rewinding, etc, done with the aid of power, was process of manufacture in terms of Section

2(f)(iv) of the Central Excises and Salt Act, 1944.

As regards the dutiability of Cotton Yarn cleared on payment of Central Excise duty

prescribed in column (3) of the table to the Notification Number 45/64-CE dated 01.03.1964

which was further subjected to the processes like bleaching, dyeing, mercerizing, etc, MF

(DR & Company Law) Circular No.9/39/64 CX II dated 02.07.1964, made it clear that so

long as the hank form of the Cotton Yarn was not converted into some other form by any one

of the manufacturing processes specified in sub section (f)(iv) of Section 2 of the Central

Excises and Salt Act, 1944, the question of any further duty to be leviable did not arise.

Processes like bleaching, dyeing, mercerizing, etc, not being one of the specified

manufacturing process this alone did not, therefore, entail any further duty. However,

subsequent to bleaching, dyeing, etc, the yarn is subjected to warping, beaming, winding,

reeling, such yarn was liable for the duty of excise. The above however, did not affect the

position of bleached/dyed/mercerized yarn cleared in the form of hanks from a spinning mill,

which in terms of the above referred notification attracts the duty as prescribed in column (4)

of the table thereto.

With the adoption of French Count System in respect of Cotton Yarn under the 1964

Budget, Cotton Yarn of NF 33.9 to be rounded off to NF 34 French Count for the purpose of

the Notification No.45/64-CE dated 01.03.1964 did not arise, which, in other words, means

that Cotton Yarn of these counts was assessable to the appropriate rate of duty with reference

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to the entries against Sr. Nos. 3 and 3A of the table to the abovesaid Notification respectively.

(MF(DR & Company Law) letter bearing F. No.9/33/64 CX-II dated 10.09.1964 refers)

A question came up for the duty liability in respect of Cotton Yarn purchased by

Composite Textile Mills from the open market and used for weaving of Cotton fabrics. In

this connection, it was observed that a distinction was required to be made between (a) those

manufacturers of Cotton fabrics who pay Cotton Yarn duty at the full tariff rates and (b)

those manufacturers of Cotton fabrics who opted to pay the Cotton Yarn duty at compounded

rates.

As regards category (a) it was possible to treat them as manufacturer of Cotton Yarn

for the reason that the yarn purchased by them from the open market was no doubt was

subjected by them to one or more of the dutiable processes, namely, beaming, reeling,

warping, etc, before its use for weaving. This being so, such yarn purchased from the open

market had borne the rates of duty as prescribed in column (3) or column (4) of the table to

the Notification No.45/64-CE dated 01.03.1964, as the case may be, the difference between

the effective rates already realized and the full tariff rates of duty be recovered. This position

was in conformity with the duty liability at the tariff rates in respect of Cotton Yarn spun and

used for weaving of Cotton fabrics in the same Composite Textile Mill.

As regards category (b), there was no objection to Proforma Credit allowed for

adjustment against the ultimate duty liability, on the fabric manufactured (including the

compounded rates for the yarn contents) subject to the production of documentary evidence

in support of the amount of duty that the cotton yarn purchased from the open market.

However, where there was no documentary evidence the duty was collected on the fabrics

manufactured out of such yarn at the compounded rates without giving any credit for the yarn

purchased from the open market.

Benefit of exemption of duty on Cotton Yarn used for tying hanks was given on the

ground that no differentiation was to be made between coloured or grey or bleached or

doubled yarn for the purpose of granting exemption from payment of duty so long as the yarn

manufactured in the factory and the same was used for tying hanks within the factory.

However, such a benefit was not available for tying end of pieces of fabrics.

As regards manufacturer‟s liability towards payment of duty of excise on Fancy Yarn,

the Board under its Circular letter No.CY/14/64, invited the attention to sub clause (iv) of the

clause (f) of section 2 of the Central Excises and Salt Act, 1944, as inserted by sub section (1)

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of Section 60 of the Finance Act, 1964, according to which sizing, beaming, warping,

winding or reeling or any one or more of these processes or the conversion of any form of

cotton yarn into any other form was declared to be a process of manufacture for the purposes

of the duty of excise leviable thereon. Since the manufacturer of fancy yarn has underwent

the process of manufacture and so was liable to pay the appropriate duty of excise on the

resultant yarn irrespective of the further processes to which such yarn may be subjected to or

the form in which the same may converted.

Cotton Yarn of counts 15 to 105, if cleared in hank form, was fully exempted from

17th

/18th

March, 1961, as per the Notification Number 76/61-CE.

A compounded duty at the rate of 1.2 paise per sq. mtrs. was leviable in respect of the

yarn used in the Composite Textile Mill and this duty was payable along with the fabric duty

at the fabric clearance stage.

The accounting of yarn in production register was required to be kept when the yarn

was converted into hank or cone or bobbin or pirn.

With regard to the assessment of duty, the Board, by its letter dated 18.06.1962

clearly stated that the Cotton Yarn was to be assessed to the duty on the weight of the yarn

before sizing.

The yarn in standard hank was 840 yards or 768 mtrs in length with the tolerance

limit plus/minus one per cent. Later on this was increase to three per cent or 23 mtrs.

There were varieties of yarn, one of which was Gassed or Singed Yarn. The term

gassing refers to a “process of burning off protruding fibres from the surface of yarn or cloth

to obtain smooth surface. Thus the Gassed or Singed Yarn was one and the same.

“Waste Cotton Yarn” was considered to refer to tangled mass of short length not

capable of being disentangled without considerable labour. Yarn spun from the cotton waste

was exempted.

“Yellow Pickings” were mixed with Cotton Waste and Yarn of 6s was produced. The

Tribunal decided that Yellow Pickings are Cotton Waste and hence exemption was available.

As regards the assessment of Cotton Yarn the department hold that the Count of yarn

was to be determined on the basis of the actual count of yarn and not on the basis of average

count of different hanks. (1070 ELT (J-555)(Bom – Nagpur Bench) refers.

Yarn manufacture was a process prepared by a continuous strand of twist fibres of

Cotton, and, therefore, so known as “Cotton Twist”. Yarn having multiple fold did not cease

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to be a yarn. If a basic single yarn was known as yarn and double yarn was also known as

yarn then one was not able to understand how a multiple fold yarn would cease to be a yarn

and would be considered as Cotton Twist. Therefore, a multiple yarn of cotton was also a

yarn. (1973 Tax LR 2488 (Raj) refers)

“Bobbins” includes “spools” as was understood quite often in interchangeable terms.

At any rate, bobbin was generic term within the scope of which the term spool was also to be

comprehended. (1974 Tax LR 2203 (Ker) refers)

Cotton Ropes, which consists of rope yarns twisted into strands and in turn twisted

together so as to form a thick cord, are not braided cord although they may come under the

word “cord”. (1973) 31 STC 205 (Mad HC) refers)

Cotton Yarn and Cotton Sewing Thread were two distinct and well known

commodities. They were separate things in ordinary parlance. It cannot be said that they

were the same thing. Even their uses are different, distinct and separate. Thus in the

commercial world when one asks for Cotton Yarn one would not be given Cotton Sewing

Thread.

Because of the expression „such goods‟ as appearing under the Section 4(4)(d)(ii) of

the Central Excises and Salt Act, 1944,the duty of excise paid on the yarn under

Compounded Levy Scheme was necessarily to be included in the assessable value of the

fabrics manufactured out of such yarn, even if the duty on the yarn and fabric was collected

at one stage. This was more so because the concession under the Compounded Levy Scheme

was not an exemption from the payment of duty but the same was a purely matter of

convenience and facility to the Composite Textile Mills and did not amount to the double

taxation. (1983 ELT 1784(T) refers).

Where firstly the Cotton Yarn was charged to the duty under tariff item 18A of the

Central Excise Tariff at the specific rates and later Cotton fabrics are charged to the duty of

excise under the tariff item 19 of the Central Excise Tariff at ad valorem rates, there was no

double taxation on the same article, the tariff items being different and the rates of duty

chargeable are also different. (1983 ELT 1784(T) refers)

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TARIFF ITEM 18B - WOOLLEN YARN

This item was included in the Tariff Schedule with effect from 01.03.1961 and was

placed at tariff item number 18B, attracting the tariff rate of ten per cent and five per cent in

respect of 18B(1) and 18B(2), that is to say, “Worsted Yarn” and “Others” respectively, the


“Woollen Yarn, All Sorts, including Knitting Wool, in or in relation to

the manufacture of which any process was ordinarily carried on with

the aid or power”

Tariff Item 18B(1), Worsted Yarn meant a type of yarn spun on machines of fine

precision from high class, imported wool tops. The spinning was done on worsted system,

which consisted of Gill Boxes and reducing frame set. There were three varieties of Worsted

Yarn, that is to say (a) Worsted Weaving Yarn, (b) Worsted Hosiery Yarn, and (c) Worsted

Knitting Wool (or Yarn), which used to be in two ply, three ply or four ply. Two ply Knitting

Wool was also known as Crepe.

As regards the use of Metric and English system in determining the counts of the

Worsted Yarn, the Board, by their letter bearing F. No.32/38/61 CX-II dated 11.12.1961,

informed that Metric System was only to be adopted for this purpose and accordingly the

industry was advised to switch over to this system, namely, Metric System. This instruction

was issued because it was brought to the notice of the Board that for determining the count of

worsted yarn for the purpose of assessment, both the English and Metric systems were in

force in the industry. According to the English System, one count was equal to 560 yards of

yarn to a pound whereas according to the Metric system one count was equal to 1000 metres

of yarn to a kilogram. This position did not seem to be satisfactory from the revenue point of

view as it was necessary that only one system be adopted uniformly in all the collectorates.

Shoddy Yarn meant the yarn spun from shoddy wool, that is to say, the wool retrieved

from woolen rags, cuttings, etc. Wool contents in shoddy wool was generally eighty per cent

and above. This was reduced to sixty per cent in the year 1969 by the letter dated

13.11.1969.

By the Budget in the year 1964, tariff item 18B(1) was amended to read as under.

“(1) Worsted Yarn

(a) of 48s and more, and

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(b) of less than 48s

Explanation: Count means the size of the single yarn

expressed as the number of 560 yards hanks per

pound”.

(Note: The Board, by its letter dated 11.12.1961, mentioned

supra expressed that the metric system was required to be

adopted for uniformity but by this amendment again it went

back to English System.)

By Budget 1972, the tariff description was amended as under.

“18B. Woollen Yarn, all sorts, including Knitting Wool,

containing not less than ninety per cent by weight of wool, calculated

on the total fibre content, in or in relation to the manufacture of which

any process is ordinarily carried with the aid of power -

(i) Worsted Yarn

a) of 48s counts and more

b) of less than 48s counts,

(ii) Others

Explanation: “Count” means the size of single yarn expressed

as the number of 560 yards hanks per pound”

By Finance Bill, 1977, this tariff item 18B again underwent a change when the

following was substituted, that is to say,

“18B. Woollen and Acrylic Spun Yarn -Yarn, in which wool or

acrylic fibre or both together predominates or predominates in

weight and, in or in relation to the manufacture of which, any

process was ordinarily carried on with the aid of power -

i) not containing or containing not more than one sixth by weight

of non cellulosic fibre (other than acrylic fibre) calculated on the

total fibre content,

ii) containing more than one sixth by weight of non cellulosic fibre

(other than acrylic fibre) calculated on the total fibre content.

Explanation I: Woollen and acrylic spun yarn shall be

deemed to include woolen and acrylic knitting yarn.

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Explanation II: Explanation III under sub item III of item

number 18 shall, so far as may be, apply in relation to this

item as they apply in relation to that item.”

Woollen Carpet Yarn (“Kati”) was neither yarn nor woolen goods as the woolen

carpet “kati” was unspun fibre. It takes the characteristic of yarn. The woolen carpet “kati”

was only a raw material for which the woolen goods are prepared. It could never be the

intention that mere component of raw material used in the manufacture of woolen goods was

to be taxed by treating the same finished woolen goods. ((1975) 35 STC 634 (SC) refers)

Once the woolen yarn had paid duty at its grey stage as worsted woolen yarn under

tariff item 18B and had been cleared from the factory, there was no scope for levying on the

said yarn any duty of excise again under the same tariff item on processing of the same by a

processor. In other words, the yarn manufactured by the manufacturer, whether grey or dyed,

had to discharge duty only once, and not twice, depending on the form in which the yarn was

cleared from the factory of its manufacture. (1982 ELT (Government of India) refers).

Merely because the Assistant Collector had approved a general classification list prior

to the production of the relevant documents was snot to lead to the inference that he, the

Assistant Collector, was satisfied about the duty paid nature of the fibre, in question, and,

therefore, it cannot be said that the clearances at nil rate of duty were with the knowledge of

the department. (1982 ELT 741 (Government of India) refers)

With effect from 01.03.1986, the said Woollen Yarns were made classifiable under

the Chapter Heading 51 and Acrylic Spun Yarn under the Chapter Heading 55.04

respectively under the First Schedule to the Central Excise Tariff Act, 1985 (Number 5 of

1986)

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TARIFF ITEM 18C - SILK YARN

By the Finance Bill, 1972, this commodity was, for the first time, brought under the

Excise umbrella, and was placed at Tariff Item Number 18C, which was effective from

17.03.1972 and the rate of duty of excise was twenty per cent ad valorem. The description of

this item read as under.

“18C. Silk Yarn, All Sorts, containing not less than ninety per

cent by weight of silk (including Silk Noil) calculated on the total

fibre content, in or in relation to the manufacture of which any

process was ordinarily carried on with the aid of power.”

The above tariff description was amended by the Finance Bill, 1977, and the amended

description of this tariff item read as under.

“18C. Silk Yarn, All Sorts Yarn, in which Silk (including Silk

Noil) predominates in weight, and, in or in relation to the

manufacture of which, any process was ordinarily carried on with

the aid of power -

i) not containing or containing not more than one sixth by

weight of non cellulosic fibre calculated on the total fibre

content,

ii) containing more than one sixth by weight of non cellulosic

fibre calculated on the total fibre content

Explanation: Explanation III under sub item III of item

number 18 shall, so far as may be, apply in relation to

this item as they apply in relation to that item.”

Silk Yarn, falling under tariff item number 18C(i) was exempted from the whole of

the duty of excise leviable thereon under the Notification Number 55/72-CE dated

17.03.1972.

It was clarified by the Board vide its letter bearing F. No.52/1/77 CX 2 dated

16.02.1978 that raw silk, which was also known as Filature Silk” was to be treated as silk

yarn and was classifiable under the tariff item number 18c of the Central Excise Tariff and

not under the Tariff Item Number 68 – “Residuary Items.”

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TARIFF ITEM 18D - JUTE YARN

This item came on the Tariff Schedule which was introduced under the Finance Bill,

1972 for the first time and was placed at the Tariff Item Number 18D, attracting the duty of

excise at the rate of twenty per cent ad valorem, the description of which read as under.

“18D. Jute Twist, Yarn, Thread, Rope and Twine, All Sorts,

containing not less than ninety per cent by weight of jute

(including Bimlipatam Jute or Mesta fibre) calculated on the total

fibre content, in or in relation to the manufacture of which any

process was ordinarily carried on with the aid of power.”

The description of this tariff item was again amended in the year 1977 by Finance

Bill, which read as under.

“18D. Jute Yarn, All Sorts Yarn, in which jute (including

Bimlipatam Jute or Mesta fibre) predominated in weight, and in or

in relation to the manufacture of which any process was ordinarily

carried on with the aid of power -

Explanation I: “Jute Yarn” was to include jute twist, thread, rope

and twine.

Explanation II: Explanation III under sub item III of item number

18 was, so far as may be, to apply in relation to this item as it

applied in relation to that item.”

The levy of Cess under Section 9(1) of Industries (Development and Regulation) Act

was not restricted only to the Textile industry which was a scheduled industry. This being so,

it cannot be said that in pursuance to the powers conferred under Section 9(1) ibid, the

Central Government was not competent to impose cess on Jute Twine and Rope. (1979 ELT

(J-23)(CAL) refers)

The provisions of the Central Excises and Salt Act, 1944 and Central Excise Rules,

1944, with regard to the levy of excise duty were different from the provisions of the Section

9(1) ibid with regard to the levy of cess on the goods manufactured or produced by a

scheduled industry. Therefore, the principles, laid down with regard to the levy of excise duty

under the Central Excises and Salt Act and the rules made thereunder inapplicable to the levy

of cess under section 9(1) ibid. Hence it cannot be said that Jute Cess could be levied only on

the end produce when they were removed from the factory.(1984(16) ELT 100 (AP) refers)

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Since the manufacturing process of Jute Yarn was essentially designed to separate the

individual fibre filaments to blend them for uniformity of colour, strength and quality and

jute yarn exists as a separate and distinct article or goods it cannot be said that it was not

marketable and saleable and hence the levy of cess was not justifiable. Thus jute yarn was

marketable and saleable separately and distinctly and therefore the cess was rightly leviable.

(1984(16) ELT 100 (AP) refers).

The mere fact that the Explanation to Section 9(1) made reference to value, the same

did not necessarily limit or curtail the power of the Central Government to impose cess only

according to the value of specified goods produced or manufactured by the scheduled

industry. (1984(15) ELT 337(CAL) refers)

With effect from 01.03.1986, the said goods were classified under the Chapter

Heading 53 and 56 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of

1986) respectively.

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TARIFF ITEM 18E - NON CELLULOSIC SPUN YARN

By the Finance Bill, 1972, this tariff item was first brought under the excise control

with effect from 01.03.1972 and was placed at number 18E, the description of which read as

under.

“18E. Non Cellulosic Spun Yarn -Spun (discontinuous) yarn, in

which man-made fibres of non-cellulosic origin, other than acrylic

fibre, predominated in weight and, in or in relation to the

manufacture of which any process was ordinarily carried on with

the aid of power.”

Explanation: Explanation III under sub item III of item number 18

was, so far as may be, applied in relation to this item as it applied

in relation to that item.

A process carried out on any article was with the intention or desire to have a better

effect or use of the original article, therefore, the mere fact that the blending of cotton yarn

and nylon yarn was done with a desire to give a twinkling effect to the fabric, it cannot be

said that the yarn manufactured by intermixing had distinct use and utility and so as to bring

into existence a new product falling under Section 2(f) of the Central Excises and Salt Act,

1944. Thus blending or twisting of yarn so as to give it a twinkling effect was not a

manufacture. (1982 ELT 145 (BOM) refers)

Merely because the Blended Yarn was known as “Fancy Yarn” in the market it was

not a different product classifiable under tariff item 18E of the Central Excise Tariff. So also

merely by intertwining strings of cotton Yarn and Nylon Yarn , no new product came into

existence so as to fall under Section 2(f) of the Central Excises and Salt Act, 1944.

If yarn was cleared in unsized form from the place of manufacture or the production

for further use in weaving of fabrics and not for marketing it in a sized form, the question of

duty of excise did arise and the duty of excise was leviable on the unsized weight of the yarn.

Sizing means merely dipping of the yarn into a solution which imparts the yarn a

strength and help facilitate the process of weaving. Thus this was only a physical process and

therefore the process of sizing of the yarn was not a process of manufacture as envisaged

under Section 2(f) ibid as no new or different commodity emerges. If the effect of process

was reversed after the process of weaving was completed, the sizing compound was

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completely washed out and the fabric was desized. In other words, sizing has a temporary

effect, which did not last long.

Yarn, before sizing and after sizing was nothing but yarn, therefore, it cannot be said

that the sized yarn in commercial parlance was different from the unsized yarn. Since neither

the cones of yarn nor the sized yarn was removed from the factory within the meaning of

Rule 9 read with Rule 49 of the Central Excise Rules, 1944, therefore, it was not liable to

duty.

Since he manufacture of yarn was complete at the spindle stage or the spindle point

when it emerge from the ring frame, its dutiability was to be determined at that stage under

tariff item 18E of the Central Excise Tariff.

If the yarn wound up on cones was removed for sale or for consumption it would

attract the duty of excise but if the cones are not removed from the pipe line and continue to

wound on cones and to transfer further to warp beam for the process of weaving then it

cannot be said that there was removal of goods within the meaning of Rule 9 read with Rule

49 of the Central Excise Rules, 1944.

It was true that the waste yarn arising in the course of spinning, reeling, wrapping, etc,

on pre-assessment processes, was entitled for the exemption from the duty of excise but the

waste arising during the weaving process, after the assessment, was not so eligible. Since the

substantive part of the Notification Number 172/72-CE dated 01.03.1972 applied to all waste

yarn falling under tariff item 18E of the tariff irrespective of the fact whether the content

thereof was more than forty per cent or less than forty per cent, therefore, the complaint of

discrimination vis-à-vis the mils working under the Compounded Levy Scheme was not

valid.

There was no provision of law under which the waste arising in the course of

consumption of duty paid yarn was entitled to refund of duty. Although the Notification

Number 172/72-CE dated 01.03.1972 could, in the case of the Appellants apply only if they

presented waste yarn (hard waste) for assessment and removal in terms of the rule 9 and rule

9A of the Central Excise Rules, 1944, yet in the instant case, what the Appellants presented

for assessment and removal was yarn in the form of warp beams and, therefore, lap waste

arising thereafter in their factory was not entitle for the refund of the duty of excise under the

abovesaid Notification. (1983 ELT 245 (T) refers)

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Cotton Yarn and Staple Fibre Yarn were classifiable on the basis of their

compositions.

Cotton Yarn and Staple Fibre yarn when twisted and doubled together forms „spun

yarn‟. The expression „spun‟, which was used as synonymous with „discontinuous‟, was

used in contrast to the description „filament yarn‟ or „continuous yarn‟. The yarn, which was

made by doubling, two constituent spun yarns certainly cannot be called „filament yarn‟ or

„continuous yarn‟. Therefore, there was no incongruity involved in considering it as „spun

yarn‟. Since it basically consisted of two spun yarns, therefore, it cannot be said that yarn

made by twisting or doubling two spun yarns would cease to be a spun yarn classifiable

under tariff item 18E of the Central Excise Tariff.

In case of clearance of fabrics manufactured out of such yarn had no relevance for the

purpose of determining the rate of duty on yarn which has to be determined at the

compounded rates prevalent at the time when the yarn was permitted to be cleared for captive

consumption because Compounded Levy Scheme under Section E-VI of the Central Excises

and Salt Act, 1944, was a complete self contained code and the provisions of normal rules,

like rule 9 and rule 9A, would not be applicable.

Since Notification Number 168/72-CE was not retrospective in operation, therefore,

the rates prescribed in this Notification were not applicable to the yarn, which was already

removed before the commencement of the aforesaid notification.


the Chapter 54 and 55 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of

1986).

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TARIFF ITEM 18F(i) FLAX YARN,

AND 18F(ii) RAMIE YARN

For the first time, by the Finance Bill, 1977, this tariff item was brought within the

Excise ambit with effect from 18.06.1977 and was placed at Tariff Item Number 18F(i) and

18F(ii), that is to say, Flax Yarn and Ramie Yarn respectively, which attracted the duty of

excise at the rate of twenty per cent ad valorem. The description of which read as under.

“18F (i) Flax Yarn - Yarn, in which flax predominated in weight

and, in or in relation to the manufacture of which any process was

ordinarily carried on with the aid of power -

a) not containing or containing nor more than one sixth by

weight of non-cellulosic fibre calculated on the total fibre content,

b) containing more than one sixth by weight of non-

cellulosic fibre calculated on the total fibre content.

(ii) Ramie Yarn - Yarn in which ramie predominated in weight,

and in or in relation to the manufacture of which any process was

ordinarily carried on with the aid of power.

Explanation: Explanation I, II and III under the sub item III

of item number 18, was, so far as may be, applied in relation

to this item as they apply in relation to that item.

By the Notification Number 30/84-CE dated 01.03.1984, exemption was granted to

Ramie Yarn from so much of the duty of excise leviable thereon under the Central Excises

and Salt Act, 1944, at the rate specified in the First Schedule as is in excess of the amount

calculated at the rate of rupees eight per kilogram subject to the condition that the said Ramie

yarn did not contain any fibre other than Ramie and Polyester.

By a yet another Notification Number 229/83-CE dated 19.08.1983, exemption was

granted to Ramie Yarn , not containing any man-made fibre of non-cellulosic origin from so

much of the duty of excise leviable thereon under the Central Excises and Salt Act, 1944, at

the rate specified in the First Schedule as is in excess of the amount calculated at the rate of

rupee one per kilogram subject to the condition that nothing contained in this Notification

was to apply to the goods which were produced or manufactured in a Free Trade Zone and

brought to any other place in India. (Notification Number 81/83-CE dated 01.03.2983 refers)

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Ramie Yarn containing man-made fibre of non cellulosic origin was exempted under

the Notification Number 230/83-CE dated 19.08.1983 from so much of the duty of excise

leviable thereon under the said Act at the rate specified in the said First Schedule as was in

excess of the amount calculated at the rate of rupees ten per kilogram. However, this

notification was read with another Notification Number 81/83-CE dated 01.03.1983, which

stated that nothing contained in this notification, was to apply to the goods which were

manufactured or produced in a Free Trade Zone and brought to any other place in India.


under the Chapter Heading 53 of the Schedule to the Central Excise Tariff Act, 1985

(Number 5 of 1986)

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ITEM NUMBER 19 - COTTON FABRICS

The Central Excise duty on the tariff item, Cotton Fabrics, was imposed on

01.01.1949. Initially this item was numbered 12.

This tariff item underwent many changes. First of which was made in the year 1955

when the tariff description was substituted as under.

“12. Cotton Fabrics –

“Cotton Fabrics” mean all varieties of fabrics manufactured

either wholly or partly from cotton, and include dhotis, sarees,

chadars, bed sheets, bed spreads, counterpanes and table cloths,

but do not include any such fabrics –

a) if it contains forty per cent or more by weight of wool,

b) if it contains sixty per cent or more by weight of rayon or

artificial silk; or

c) if manufactured on a handloom.

“(1) Cotton fabrics, superfine - that is to say, fabrics in

which the average count of yarn was 48s or more - Two annas per

square yard

(2) Cotton fabrics, fine - that is to say, fabrics in which the

average count of yarn was 35s or more but is less than 48s - One

anna and three pies per square yard

(3) Cotton fabrics, medium - that is to say, fabrics in which

the average count of yarn was 17s or more but is less than 35s -

Six pies per square yard

(4) Cotton fabrics – coarse - that is to say, fabrics in which

the average count of yarn was less than 17s - Six pies per square

yard

Explanation I: “Count” means count of grey yarn.

Explanation II: For the purpose of determining the average Count

of yarn, the following rules shall apply, namely –

a) yarn used in the borders or selvedges shall be ignored;

b) for multiple fold yarn, the count of basic single yarn shall

be taken and the number of ends per inch in the reed or the number

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of picks per inch, as the case may be, shall be multiplied by the

number of plies in the yarn,

c) the average count shall be obtained by applying the

following formula, namely -

“(Count x (No of ends/inch + (Count x (Number of picks

of warp) in the reed) of weft) per inch)

-----------------------------------------------------------------------

(No of ends/inch in reed + (Number of picks per inch)

the result being rounded off, wherever necessary, by treating

any faction which is one half or more as one, and disregarding

any fraction which is less than one half.”

Explanation III: For the purposes of this item, “staple fibre”

shall not be deemed to be rayon or artificial silk”

By Finance Bill, 1960, the item description underwent second change and with effect

from 20.09.1960 it was numbered 19 and the relevant tariff description read as under.

“19. Cotton Fabrics –

“Cotton Fabrics” means all varieties of fabrics manufactured either

wholly or partly from cotton and include dhotis, sarees chadars, bed

sheets, bed spreads, counterpanes and table cloth, but do not include

any such fabric –

a) if it contains 40 per cent or more by weight of wool,

b) if it contains 40 percent or more by weight of silk,

c) if it contains 60 per cent or more by weight of rayon or artificial silk, or

d) if manufactured on a handloom

1. Cotton fabrics – Superfine, that is to say, fabrics in which the

average count of yarn is 48s or more in which the average

count of yarn is 48s or more – forty five naye paise per square

meter

2. Cotton Fabrics – Fine, that is to say, fabrics in which the

average count of yarn is 35s or more which the average count

of yarn is 35s or more but is less than 48s - fortyfive naye paise

per square meter

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3. Cotton Fabrics – Medium, that is to say, fabrics in which the

average count of yarn is 17s or more but is less than 35s -

thirty naye paise per square meter

4. Cotton Fabrics – Coarse, that is to say, fabrics in which the

average count of yarn is less than 17s - thirty naye paise per

square meter

5. Cotton fabrics, not otherwise specified - fortyfour & half naye

paise per square meter

Explanation I: “Count” means count of grey yarn,

Explanation II: For the purpose of determining the

average count of yarn the following rules shall apply -

a) Yarn used in the borders or selvedges shall be ignored,

b) for multiple fold yarn, the count of the basic single yarn

shall be taken and the number of ends per 25.4

millimeters in the reed or the number of picks per 25.4

millimeters, as the case may be, shall be multiplied by

the number of plies in the yarn,

c) In the case of fabrics manufactured from cotton and

other yarns, the other yarns shall, for the aforesaid

purpose, be deemed to be cotton yarn,

d) The average count shall be obtained by applying the

following formula, namely -

“(Count x (No of ends/inch + (Count x (Number of picks

of warp) in the reed) of weft) per inch)

-----------------------------------------------------------------------

(No of ends/inch in reed + (Number of picks per inch)

the result being rounded off, wherever necessary, by

treating any fraction which is one half or more as one,

and disregarding any fraction which is less than one

half.”

By Finance Bill, 1972. the tariff description of this item again underwent a change

when the same was amended which read as under.

(a) in the second column, in the opening portion –

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(1) for the brackets, figures and words,

“(ii) 40 per cent or more by weight of silk; or

(iii) 60 per cent or more by weight of rayon or artificial silk;”

the brackets, figures and words -

“(ii) 40 per cent or more by weight of silk,

(iii) 60 per cent or more by weight of rayon or artificial silk, or

(iv) 50 per cent or more by weight of Jute (including Bimlipatam jute

or mesta fibre”

shall be substituted

(2) in the proviso, for the words, brackets and figures “referred to in (i) to

(iii)” the words, brackets and figures “referred to in (i) to (iv)” shall

be substituted.

By Finance Bill, 1976, the tariff description was amended and following was

substituted which read as under.

“2(2) Others -

(a) Cotton fabrics, superfine – that is to say, fabrics – Fifteen per cent

in which average count of yarn is 61s or more ad valorem

(b) Cotton fabrics, fine - that is to say, fabrics in which - Fifteen per cent

average count of yarn is 41s or more but less than 61s ad valorem

(c) Cotton fabrics, Medium A - that is to say, fabrics in - Three per cent

which average count of yarn is 26s or more but is ad valorem

less than 41s

(d) Cotton fabrics, Medium B – that is to say, fabrics in - Three per cent

which average count of yarn is 17s or more but is ad valorem

less than 26s

(e) Cotton fabrics, Coarse – that is to say, fabrics in - Three per cent

which average count of yarn is less than 17s ad valorem

(f) Cotton fabrics not otherwise specified - Fifteen per cent

ad valorem

By Finance Bill, 1977, tariff item number 19 was amended to read as under.

(a) “(2) Cotton fabrics means all varieties of fabrics

manufactured either wholly or partly from cotton and

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includes dhotis, sarees, chaddars, bed sheets, bed

spreads, counterpanes, table cloth, embroidery in the

piece, in strips or in motifs and fabrics impregnated,

coated or laminated with preparations of cellulose

derivatives or of other artificial plastic materials, if (i)

in such fabrics cotton predominates in weight, or (ii)

such fabrics contain more than 40 per cent by weight of

cotton and fifty per cent or more by weight of non

cellulosic fibres or yarns or both:

Provided that in the case of embroidery in the

piece, in strips or in motifs and fabrics impregnated,

coated or laminated with preparations of cellulose

derivatives or of other artificial plastic materials, such

predominance or percentage, as the case may be, shall

be in relation to the base fabrics which are

embroidered or impregnated, coated or laminated, as

the case may be”

(b) For sub item (I), the following sub item shall be substituted, namely –

“I. Cotton fabrics, other than (i) embroidery in the

piece, in strips or in motifs and (ii) fabrics

impregnated, coated or laminated with preparations of

cellulose derivatives or of other artificial plastic

materials.” - Twenty percent ad valorem

(c) For Explanation II, the following Explanation shall be substituted,

“Explanation II: Where two or more of the following fibres, that is to

say,

(a) man made fibre of cellulosic origin,

(b) cotton,

(c) wool,

(d) silk (including silk noil),

(e) jute (including Bimlipatam jute or mesta fibre),

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(f) man made fibre of non cellulosic origin,

(g) flax,

(h) ramie

in any fabric are equal in weight, then, such one of those

fibres the predominance of which would render such fabric

fall under that item (hereafter in this Explanation referred to

as the applicable item) among the item numbers 19, 20, 21,

22, 22A and 22AA which read with the relevant notification

for the time being in force issued under the Central Excise

Rules, 1944, involves the highest amount of duty, shall be

deemed to be predominant in such fabrics and accordingly

such fabric shall be deemed to fall under the applicable

item.”

(d) Explanation III shall be omitted.

By Finance Bill, 1979, yet another amendment was made to the tariff description of

this item, that is to say, after Explanation II, following Explanation was added -

“Explanation III: This item does not include floor

covering, falling under item number 22G”

By Finance Bill, 1980, following sub item was substituted for sub item (I), namely

“I. Cotton fabrics, other than (i) embroidery in the piece, in strips or

in motifs and (ii) fabrics impregnated, coated or laminated with

preparations of cellulose derivatives or of other artificial plastic

materials -

(a) cotton fabrics, not subjected to any process - Five per

cent ad valorem

cotton fabrics, subjected to the process of bleaching, mercerizing, dyeing, printing, water-

proofing, rubberizing, shrink-proofing, organdie processing or any other process or any two

or more of these processes - Five per cent ad valorem”

Finance Bill, 1985, was a revolutionary one since for this tariff item number 19 major

amendments were carried out – both in the item description and duty structure, which read as

under.

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Description of Goods Basic Duty Additional Duty Handloom Cess

19. Cotton Fabrics - “Cotton Fabrics”

means all varieties of fabrics manufactured

either wholly or partly from cotton, and

includes dhotis, sarees, chaddars, bed

sheets, bedspreads, counter panes, table

cloth, embroidery, in the strips, in piece or

in motifs, fabrics impregnated, coated or

laminated with preparations of cellulose

derivatives or of other artificial plastic

materials and fabrics covered partially or

fully with textile flocks or with preparations

containing textile flocks, if in such fabrics

cotton predominates in weight

Provided that in the case of embroidery in

the piece, in strips or in motifs, fabrics

impregnated, coated or laminated with

preparations of cellulose derivatives or of

other artificial plastic materials and fabrics

covered partially or fully with textile flocks

or with preparations containing textile

flocks, such predominance or percentage,

as the case may be, shall be in relation to

the base fabrics which are embroidered or

impregnated or coated or laminated or

covered as the case may be -

I. Cotton Fabrics, other than (i)

embroidery in the piece, in strips or in

motifs, ii) fabrics impregnated, coated

or laminated with preparations of

cellulose derivatives or of other

artificial plastic materials, and (iii)

fabrics covered partially or fully with

textile flocks or with preparations

containing textile flocks -

(a) cotton fabric not subjected to any 20% ad 5% ad valorem 1.9 paise per sq.

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process valorem mtr.

(b) cotton fabric subjected to the process of

bleaching, mercerizing, dyeing, printing,

waterproofing, rubberizing, shrink-

proofing, organdie processing or any other

process or any two or more of these

processes

20% ad

valorem

5% ad valorem 1.9 paise per sq.

mtr.

II. Embroidery, in the piece, in strips or in

motifs, in or in relation to the manufacture

of which any process is ordinarily carried

on with the aid of power

The duty

for the time

being

leviable on

the base

fabrics, if

not already

paid, plus

25% ad

valorem

The duty for the

time being

leviable on the

base fabrics, if

not already paid

The duty for the

time being leviable

on the base fabrics,

if not already paid

III. Cotton fabrics coated, impregnated or

laminated with preparations of cellulose

derivatives or of other artificial plastic

materials

The duty

for the time

being

leviable on

the base

fabrics, if

not already

paid, plus

35% ad

valorem

The duty for the

time being

leviable on the

base fabrics, if

not already paid,

plus 10% ad

valorem

The duty for the

time being leviable


if not already paid

IV. Cotton fabrics covered partially or fully

with textile flocks or with preparations

containing textile flocks such as flock

printed fabrics and flock coated fabrics

The duty

for the time

being

leviable on

the base

fabrics, if

not already

paid, plus

30% ad

valorem

The duty for the

time being

leviable on the

base fabrics, if

not already paid,

plus 10% ad

valorem

The duty for the

time being leviable


if not already paid

Explanation I: “Base fabrics” means fabrics falling under sub item I of this

item which are subjected to the process of embroidery or which are

impregnated, coated or laminated with preparations of cellulose derivatives

or of other plastic materials or which are covered partially or fully with textile

flocks or with preparations containing textile flocks.

Explanation II: Where two or more of the following fibres, that is to say,

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a) man-made fibre or cellulosic origin,

b) cotton,

c) wool,

d) silk (including silk noil),

e) jute (including Bimlipatam jute or mesta fibre),

f) man made fibre of non cellulosic origin,

g) flax,

h) ramie, in any fabric are equal in weight, then,

such one of those fibres the predominance of

which would render such fabric fall under that

item (hereafter in this explanation referred to as

the applicable item) among the item numbers 19,

20, 21, 22, 22A and 22AA, which read with the

relevant notification, if any, for the time being in

force issued under the Central Excise Rules,

1944, involves the highest amount of duty shall

be deemed to be predominant in such fabric and

accordingly such fabric shall be deemed to fall

under the applicable item.

Explanation III: This item does not include floor covering, falling under item 22G.

POWERLOOMS

With a view to provide protection to and the growth of Powerlooms a set of new rules

was prepared by which special procedure was offered to the powerloom units, gist of the said

rules were as under.

Rule 96-I:

An application, if no written permission from the Textile Commissioner was obtained,

was required to install powerlooms without spinning or processing plants to produce cotton

fabrics. The Collector was empowered to sanction the same for at least a period of 12 months

which period was renewable after its expiry.

Rule 96-J:

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Powerloom owner was liable to discharge duty liability as fixed by the Government

per powerloom per quarter or part thereof. MF(DR) Notification Number 233/77-CE dated

15.07.1977 fixed Rupees one hundred was the rate payable per quarter (or part thereof) per

powerloom;

Rule 96-K:

The powerloom owner was required to declare the place and the number of

powerlooms installed by him or on his behalf.

Rule 96-L:

The powerloom owner enjoyed exemption from the operations of the provision of

rules 47, 48, 49, 50, 51, 51A, 52, 52A, 53, 54, 55, 223, 223A, 224, 224A, 229 in addition to

the rule 9 (except third proviso to sub rule (1). Also he was not required to pay rebate of

excise duty on exports.

Rule 96-M:

The powerloom owner was liable for penalty for mis-declaration, such as (1)

difference between the sum payable and paid, (2) confiscation of stock of cotton fabrics, and

(3) penalty not exceeding rupees two thousand;

Rule 96-MM:

The powerloom owner, who want granted permission, was required to pay a certain

sum of money for commencement of production either for the first time or after having

ceased the production;

Rule 96-MMM:

Under this provision every meter of the width of Roller Locker machine was reckoned

as one powerloom and for the purpose of reckoning fraction of meter was treated as one

whole meter.

Rule 96-MMMM:

Under this provision the Collector was empowered to condone failure on the part of

the powerloom owner who failed to avail the special procedure or failed to comply with the

conditions laid down,

Rule 96-MMMMM:

The provisions under this rule related to stoppage of work or reverting back to the

normal procedure other than the Special Procedure granted to the powerloom owner.

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In this connection, the Notification Number 211/72-C.E. dated 31.08.1972 refers

under which the abovesaid rules of special procedure were framed.

Compounded Levy System was also introduced to the Powerlooms Sector. This was

done with a view to protect the powerloom owners for a certain period for the fabric

manufactured on a set of four powerlooms, done on behalf of some person, which was fully

exempted. Incidentally, Cess on handlooms was also made leviable on the fabrics

manufactured by the Composite Textile Mills with a purpose to protect the handloom sector.

Mushroom growth of powerloom sector took place especially from the year 1960.

Many reasons lead to the fast growth of this sector, such as (1) this was a decentralized

sector, (2) there were packages with variety of benefits available like exemptions, tax

holidays, subsidiary, incentives (3) workers were not organized. Thus this sector, on the one

hand, enjoyed the very basic factor – low cost of production and high returns, and, on the

other, sustained the competition. Whereas picture of the Composite Textile Mills was very

gloomy, organised labour, high cost of production, low returns, heavy taxation, old

machinery and competition, both among themselves and from the powerloom sector,

Composite Textile Mills were sandwiched between workers strikes and deteriorated market

conditions, as a result of which, one by one Composite Textile Mills just vanished. Textile

centers like Bombay, Solapur, Ahmedabad lost their luster as textile hub. Many textile mills

were closed and the mills, which were working so to say, got their weaving job done by such

tiny powerloom units on contract basis.

Master weaver was the principal person who purchased yarn, gave the same to the

powerloom owners on his behalf on job-work basis for manufacture of powerloom fabrics

and sold the same powerloom fabrics made from out of the yarn so purchased was liable to

pay duty. (1986(25) ELT 609(S.C.) refers.

In the history of India, Textile industry was not only the father of other industries but

was closely associated with India‟s political destiny also. This industry, both the mill owners

and the mill workers, wholeheartedly rose to the occasions when the stalwarts like Gandhi

and Nehru gave a call to the nation. This industry played a major role in India‟s freedom

movement so far as men, money and might was concerned. This textile industry was the

backbone of economy. This was an industry that generated major revenue, which can be seen

from the following.

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Year Rupees in Crores

1951 – 1952 16.22

1952 – 1953 13.42

1953 – 1954 21.77

1954 – 1955 27.59

1955 - 1956 29.25

This industry was also responsible for generating sourcing or ancillary units, which

were dependent on this industry. Textile industry generated direct and indirect employment

to hundreds of thousands people. Chimneys which once churned money and nothing like

money now stands as a dead symbol of its old prosperity. This industry, at last, itself became

a lump, lost its past glory and came to be known as a pawn of the gloomy situation.

Solapur itself boasted to be a major powerloom center where the powerloom owners

consistently produced quality chaddars, bed sheets, terry towels and other cotton fabrics.

During my tenure of service there, a concept of „master weaver‟ was very popular, which

simply means a person was able to get the job done from other powerloom weavers on

contract basis. He used to give raw material including yarn, various chemicals, etc, and in

return got the finished fabrics to be either processed further or to be sold in the market.

There was a protection to the powerloom industry. Legislative history says that the

manufacturer producing the cotton/silk fabrics on powerloom in factories that have no

spinning plant were granted protection by the Government and these manufacturers enjoyed

certain reliefs and exemptions from the payment of excise duty also. Certain rules were

framed in the Central Excise Rules, 1944, like rule 96I, 96J

As per the Supreme Court decision Calendering is not a process of manufacture.

(1989(39) ELT 498(S.C.) refers)

Shearing process is a finishing process and not manufacturing process since shearing

means cutting/removing/ trimming uneven, protruded threads or stray fibres from the face of

grey fabrics which did not bring any new change in the grey fabric. (1989(40) ELT 218(S.C.)

refers)

Additional Duties of Excise (Goods of Special Importance) Act, 1957, (Act

NO.58/1957) was imposed in lieu of sales tax from 01.04.1957, under which levy and

collection of additional duties in respect of the textiles, i.e. cotton/rayon/artificial

silk/Woollen fabrics in addition to the goods such as sugar, tobacco were covered.

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In addition, the Additional Duties of Excise (Textiles and Textile Articles), 1978

(Act No.40 of 1978) was also imposed for levy and collection of additional duties of excise

on certain textiles and textile articles.

Further, Textiles Committee Act, 1963 (Act Number 41/1963) was enacted on

03.12.1967 which provided for establishment of a committee with a view to generate

collection of new duty avenues and the matters connected therewith.

Cess was also imposed on the manufacturers of textile and textile machineries in

India. Machinery manufacturers of Handlooms and powerlooms were exempted from this

tax but the manufacturers of the machinery used in the composite textile mills were required

to pay this cess.

As per Pune Collectorate Trade Notice No.276/81 dated 05.01.1982, Moleskin cloth,

i.e. closely woven fabric in satin weave, which was manufactured exclusively for Post and

Telegraph department, was not eligible for the exemption benefits as available under the

Notification Number 230/77 dated 15.07.1977.

The Supreme Court of India, on the connotation of fabric and textiles, had decided

that according to the dictionary meaning the term „fabric‟ covers all textiles no matter how

constructed or manufactured or the name of the material from which made and the expression

„textiles‟ is described as any product manufactured from fabric through twisting, interlacing,

bonding, looping or any other characteristic properties of the individual fabric are not

suppressed. (1980 ELT383 (S.C.) refers).

Further, on this subject of connotation of cotton fabrics, it was also held that (1) to be

a cotton fabric, three conditions are required to be fulfilled. First, the article must be a fabric.

Secondly, it must have been manufactured, and, thirdly, it was not to contain forty per cent or

more by weight of rayon or artificial silk and must not be manufactured on a handloom. (2)

In this primary sense, „fabrics‟ connotes a woven, knitted or felted material for wear or

ornament such as cloth, felt hosiery or lace. In the secondary sense, however, it comprehends

anything made of parts put together or something resulting from the compounding or inter

relating of two or more articles so as to produce a whole. (1984 (17) ELT 268 (Guj) refers.

In this connection, the Supreme Court of India had decided that the word „textiles‟ is

derived from the Latin „texere‟ which meant to weave and it meant any „woven fabrics‟.

When yarn, whether cotton, silk, woollen, rayon, nylon or of any other description or made

out of any other material was woven into fabric which came into being is a „textile‟ and it

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was known as such. It may be cotton textile, silk textile, woollen textile, rayon textile, nylon

textile or any kind of textile. The method of weaving adopted may be the warp and weft

pattern as is generally the case in most of the textiles or it may be any other process or

technique. In view of the phenomenal advance in science and technology, it would be most

unwise to confine the weaving process to the warp and weaving pattern, woven fabrics would

be textile. (1983 ELT 1607 (S.C.) refers)

The Collector of Central Excise, Bombay, when a question came up as to how to

determine a „commodity‟ as a „cotton fabrics‟ has held that in order to hold a „fabric‟ as

cotton fabrics, predominance in weight is the primary test. To begin with, the first essential

is that forty per cent of the fabric should contain fabric cotton by weight and fifty per cent or

more by weight of non-cellulosic fibres or yarn or both in the end product. This primary

requirement under tariff item 19 was not waived or diluted under any sub heads. Therefore,

to bring any item under heading III of item 19, it is necessary that the goods must come

within the ambit of cotton fabrics as defined in the main head.

While maintaining „fabrics‟ does not mean only garments, the Government of India,

had decided that a plain reading of items 19 and 21 would show that the scope of these items

was quite wide. Therefore, it could not be said that the term „fabrics‟ would mean only those

woven materials which were used as garments or as covering or for similar other purposes.

(1982 ELT 555 (Government of India).

As envisaged by Section 2(f) of the Central Excises and Salt Act, 1944, processes

such as dyeing, printing and finishing of cotton fabrics was manufacture. In this connection

the Hon‟ble Tribunal stated that what was given to the processors was grey cloth, which was

unbleached, and when this grey cloth was made available to the processors, it was first

bleached then dyed and printed and thus finished cloth was manufactured. Therefore, it could

not be said that the finished cotton fabric had substantially the same identity as grey cloth and

continued to be cotton fabrics even after it was subjected other processes and there was no

manufacture. (1983 ELT 1736 (Bom) refers)

Cotton fabrics treated with resins or blends of resins, etc, at the intermediate stage in

the manufacture of rigid plastic laminates were classifiable under item 19(III) of Central

Excise Tariff.

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By Notification Number 139/77C.E. (as amended by Notification Number 6/79-C.E.)

Foundation cloth for flexible card clothing of width less than 15mm was exempted from the

countervailing duty of excise.

Processed fabrics are goods. The Section 2(f) as well as Tariff description of item 19-I

covered not only dyeing but also any other process. Since the Parliament had laid down that

a certain process would be treated as manufacture and the fabrics, which had undergone such

process, would be liable to further duty. (1984(18) ELT-403 (T) refers)

Authoritative definitions of “dye” in technical literature as also Section 2(f) of the Act

and the Tariff Item 19-I, as amended, made no distinction between kutcha dyeing and pucca

dyeing. Once a manufacturer had applied a dye to the grey fabrics it amounted to dyeing and

the fabrics ceased to be grey thereafter. Even if it were accepted that kutcha dyeing is not

dyeing, the fact remained that it was a process applied on grey fabrics and it amounted to

manufacture under Section 2(f) of the Act and this section as well as the tariff description of

item 19-I covered not only dyeing but also any other process. (1984(18) ELT-403 (T) refers)

Handkerchiefs were classifiable under item 19 of the Central Excise Tariff as „cotton

fabrics‟ and not under item 68 as „goods not elsewhere specified‟. Merely because edges of

handkerchiefs were stitched, it would not in any way affect their character as cotton fabrics

and could not take the article out of the scope of item 19 since stitching was essentially

involved in the manufacture of several items under heading 19. (1983 ELT 2020(T) refers)

Tarpaulin sold as a finished product could not at all be treated as „textiles‟. Tarpaulin

as a finished product was a different marketable commodity and it could not be said that it

was either sold as a textile or it continued to have the properties or the characteristics of

cloth. ((1974) 34 STC-4 (Madras High Court) refers)

With effect from 01.03.1985 the goods of this tariff entry were classifiable under

chapter heading numbers 52, 58 and 59 of the Schedule to the Central Excise Tariff Act,

1985 (Number 5 of 1986)

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TARIFF ITEM 20 - SILK FABRICS

This tariff item was introduced by the Finance Bill, 1960, for the first time, and was

placed at Tariff Item Number 12B with effect from 01.03.1960. However, this tariff item

was re-numbered as Tariff Item 20 with effect from 20.09.1960, the description of which was

as under.

“12B. “Silk Fabrics” included all varieties of fabrics

manufactured either wholly or partly from Silk but did not include

any such fabrics -

i) if it contained forty per cent or more by weight of wool,

ii) if it contained Cotton or Artificial Silk and less than forty

percent by weight of Silk,

iii) if it contained no Cotton and no Artificial Silk and less than

forty per cent by weight of wool and less than forty per cent by

weight of Silk, or

iv) if manufactured on a handloom.”

Tariff rate of duty of excise was thirty six naye paise per sq mtrs.

By Budget 1965, full exemption was granted to this commodity, as the revenue yield

was very low. (In India, Silk fabrics woven on handlooms and Silk fabrics woven on

powerlooms were exempted.)

By Budget 1972, the description of sub item (iii) and (iv) was amended which read as

under.

“(iii) if it contained no Cotton and no Artificial Silk and

less than forty per cent or less by weight of Silk,

(iv) if it contained fifty per cent or more by weight of jute

(including Bimlipatam Jute or Mesta fibre); or

(v) if manufactured on a handloom”

By Budget 1977, the description of this tariff item again underwent a change and the

amended description was as under.

“Silk Fabrics” included all varieties of fabrics,

manufactured either wholly or partly from Silk but did

not include any such fabric -

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i) if it contained any such fabric forty per cent or more

by weight of wool,

ii) if it contained Cotton or Artificial Silk or both and

less than forty per cent by weight of Silk,

iii) if it contained no Cotton and no Artificial Silk and

less than forty per cent by weight of Silk; or

iv) if manufactured on a handloom.”

In the Central Excise Law Guide (2nd

Edition, written by Mr. R.K. Jain) the said term

read as under.

“20. Silk Fabrics -

“Silk Fabrics” means all varieties of fabrics manufactured

either wholly or partly from silk and includes embroidery

in the piece, in strips or in motifs, in each of which silk

(including Silk Noil) predominates in weight and which is

not manufactured on handlooms -

Provided that in the case of embroidery in the piece, in

strips or in motifs, such predominance shall be in relation

to the base fabrics which are embroidered

1) Silk fabrics, other than embroidery in the piece, in strips or

in motifs,

2) Embroidery, in the piece in strips or in motifs or in relation

to the manufacture of which any process is ordinarily

carried on with the aid of power

Explanation: 1) “Base Fabrics” means fabric falling under sub item

(1) of this item which are subjected to the process of embroidery,

2) Explanation II under item number 19 shall, so far as may be,

apply in relation to this item as it applies in relation to that item.”

As per MF (DR&I) letter bearing F. No.25/12/69 CX-2 dated 18.01.1974, the

Embroidery fabrics even if subjected to processing was not to fall again under the tariff sub

item for base fabrics; therefore, no further processing duty leviable on the base fabrics that

was subjected to the processing after being embroidered.

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With regard to the Silk Tapes, the said goods were liable to the duty of excise at the

appropriate rate. Exemption allowed in respect of Cotton and Woollen fabrics of not more

than fifteen cms and 30.5 cms in width respectively had no bearing on the matter as no

specific exemption having been granted in respect of narrow width silk fabrics. (Central

Board of Excise and Custom‟s letter bearing No. 13/3/64 CX-2 dated 25.02.1965 refers)

The Hon‟ble Orissa High Court held that Tassar was not silk. Although the process of

manufacture was somehow similar, silk and tassar are different commercial commodities. (38

STC (Orissa High Court) refers)

In regard to the assessment of duty for the item “Artificial Silk”, the Deputy

Commissioner of Sales Tax, confirmed that prima facie “artificial” indicated that was not

genuine. But, silk, be it filative, foreign or charakha, must be taken to have reference o the

thread produced by the silk worm and not what silk like. Unless it was indicated to be

exempted from taxation it was not liable to duty. (1954 5 STC 180 (MYS) refers)

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ITEM NUMBER 21 – WOOLLEN FABRICS:

Prior to 20.09.1960, this item was numbered 12B, which came on Tariff Schedule, for

the first time on 01.03.1955.

The tariff description read as under.

―12B. Woollen Fabrics.

Woollen fabrics means all varieties of fabrics, manufactured

wholly of wool or which contained 40% or more by weight of wool

and include blankets, lohis, rugs and shawls, but did not include

such fabrics

(a) if manufactured on a handloom,

(b) if manufactured by or on behalf of the same person in one or

more factories in which less than five powerlooms in all were

installed.

By the Act, 1960 dated 22.09.1960, this item was numbered 21 and the tariff

definition read as under.

―21. Woollen fabrics—

Woollen fabrics means all varieties of fabrics manufactured

wholly of wool or which contains forty per cent or more by

weight of wool and include blankets, lohis, rugs and shawls but

do not include any such fabric if manufactured on a

handloom.‖

With regard to this item, by Notification No.77-78/61, Woollen fabrics, manufactured

/ produced in units where two, three or four powerlooms were installed exemption was

allowed to the extent of fifty per cent of the total amount of both the Basic and Additional

Excise duties leviable at the normal rates. This notification has got retrospective effect from

01.03.1961.

By Finance Bill, 1962, the provision of (b) was deleted which, in other words, it

meant that woolen fabrics manufactured on powerlooms (less than four powerlooms) were

dutiable.

However, by Finance Bill, 1977 dated 18.06.1977, the description was slightly

amended to read as under.

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―Woollen Fabrics means all varieties of fabrics manufactured

in which wool predominates in weight or which contain more

than 30 per cent of wool and 50 per cent or more of the non-

cellulosic fibre or yarn or both.

Provided that in the case of embroidery in piece, in strips or in

motifs, such predominance or the percentage, as the case may

be, shall be in relation to the base fabrics, which are

embroidered.

Explanation II: Explanation II under item number 19 shall so

far as may apply in relation to this item as it applies to that

item

By Finance Bill, 1980, the following was substituted, namely –

―(1) Woollen fabrics, other than embroidery in the piece, in

strips or motifs –

(a) woollen fabrics, not subjected to any process

(b) woollen fabrics, subjected to the process of milling,

raising, blowing, tentering, dyeing or any other process or

any two or more of these

processes‖

By Finance Bill, 1985, the Tariff description was substituted to read as under.

―21. Woollen Fabrics.

―Woollen fabrics‖ means all varieties of fabrics in which wool

predominates.

Provided that in the case of embroidery in the piece, in strips

or in motifs, such predominance or percentages, as the case

may be, shall be in relation to the base fabrics which are

embroidered –

(1) Woollen fabrics, other than embroidery in the piece, in strips

or in motifs –

(a) Woollen fabrics, not subjected to any process;

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(b) Woolen fabrics, subjected to the processes of

milling, raising, blowing, tentering, dyeing or any

other process or any two or more of these processes.

(2) Embroidery in the piece, in strips or in motifs, in or in


carried on with the aid of power.

Explanation I: ―Base fabrics‖ means the fallings falling

under sub item (1) of this item which are subjected to the

process of embroidery,

Explanation II: Explanation II under item number 19, shall, so

far as may be, apply in relation to this item as it applies in

relation to that item.

Explanation III: This item does not include floor coverings,

falling under item 22G

Thus the tariff description was amended as above so as to provide woollen fabrics to

be included.

By Notification No.57/85-CE dated 17.03.1985, Shoddy blankets and blankets made

from indigenous wool were exempted from the purview of the whole of the duty of excise

leviable thereon under Section 3 of the Central Excises and Salt Act, 1944.

Under Tariff Advice Number 126/81 dated 19.11.1981, the Government gave the

following definition of “Melton Cloth” for the purpose of the levy of excise duty on Woollen

fabrics under the Notification Nos.274/76 and 275/76, both dated 13.11.1976.

(1) Fairchild‘s Dictionary of Textiles by Wingate:

A heavily filled, plain cloth having the shortest nap in the group of face

finished woolens. It was originally all wool or cotton warp and woollen

weft, but today is sometimes made in combination including synthetic

fibres made with a tight construction and finished to conceal all trace of

the warp and weft it is a completely smooth fabric. It takes its name from

Meltron, England, where it was first made and used for overcoating

uniforms, etc.

(2) Mercury Dictionary of Textile Terms:

A heavy smooth cloth made all of wool or from cotton warp and wool weft

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woven 76” to 80” to finish 50” to 56” wide and about 24ozs per yard. The

cloth is raised and cropped and very heavily milled. The 2x2 twill is used,

especially in the all wool styles, Meltons, Kerseys and tweeds for coatings and

uniforms are very similar in appearance when finished.

(3). Textile Terms and Definition:

A heavy weight fabrics all wool or with cotton warp and woollen weft which is

finished by heavy milling and cropping. The fibres in the cloth are tightly melted together by

the milling process and this gives the fabrics a felted appearance. It is usually made in 2x2

twill specially if all wool but it is sometimes made in others weaves to facilitate milling and

the covering of cotton warp.

(Board‘s letter No.53/2/77-CX 2 dated 28.09.1977 refers)

For the purpose of Central Excise duty, Woollen felt sheets were not classifiable as

“woollen fabrics” since they were not formed at any stage in the manufacture of articles like

cylinders or rollers (known as tubes).

It also appeared that some other articles of different sizes and shapes, such as pads,

bods, plug washers, ring seals, were manufactured out of cuttings and trimmings of woollen

felt sheets. These cuttings and trimming could not be treated as excisable since these were

not marketed as woollen fabrics (felts). Since the articles made out thereof were also not

excisable the question of levying Central Excise duty thereon was also, as per Board‟s letter

No.14/14/65/CX-2 dated 02.05.1967, did not arise.

As regards „Baby Blankets‟, that is to say, processed shoddy woollen fabrics piece

measuring 54” x 54” (137 cms x 137 cms approximately), were classifiable as fabrics, other

than blankets. (Tariff Advice Number 126/81 dated 19.11.1981 refers)

The term “woollen fabrics” in Tariff Entry No.21 meant “all varieties of fabrics

manufactured out of wool including blankets, lohis, rugs, shawls and embroidery in piece, in

strips and in motifs. In scientific and technical sense also the term is wide enough to cover

woven or knitted material, which is wool based. Therefore, the word „fabrics‟ under tariff

item 21 was used to mean woven material in which sense it was popularly understood and

included not only woolen garments but also the woollen material used as covering or for

similar other purposes. (1977 ELT (J24)(S.C.) and AIR 1976 Raj 190-(27) 1976 Raj L.W.

185 refers).

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Woollen tufted carpets were not woollen fabrics since they were non-woven and as

such were not chargeable to the duty of excise under the Tariff Item 21.

Paper maker felts (both cotton and woollen) were textile fabrics classifiable under the

tariff item number 19 and 21 of the Central Excise Tariff respectively. (1983 ELT 679(Del)

refers).

According to the High Court ruling (1973 Tax L.R. 2361 Orissa High Court

refers)“Shorter Oxford Dictionary”, the word “fabrics” means a manufactured or woven

material and currently it has the meaning of textile material. Since „fabrics‟ had neither been

defined under the Act nor under the Rules thereof it must be construed not in technical sense

but as understood in the common parlance and therefore woollen blankets/kambals not to be

taken to mean „fabrics‟.

With regard to woollen rags, it goes without saying that the rags by themselves did

not require any manufacturing activity nor do they entail any such process, which could be

deemed to be manufactured within the meaning of Section 2f of the Central Excise Act.

(1983 ELT 1020 (T) refers)

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ITEM NUMBER 22 - RAYON OR ARTIFICIAL SILK FABRICS.

This item was brought under the excise net by the Budget, 1960 for the first time,

effective from 01.03.1960. The item description read as under.

22. ―Rayon or Artificial Silk Fabrics‖ include all varieties of

fabrics manufactured either wholly or partly from rayon or the

artificial silk, but do not include any such fabric

(i) if it contains forty per cent, or more by weight of wool,

(ii) if it contains forty per cent or more by weight of silk,

(iii) if it contains cotton, and less than sixty per cent by

weight of rayon or artificial silk

(iv) if it contains no cotton, and less than forty per cent by

weight of wool and less than forty per cent by weight of

rayon or artificial silk; or

(v) if manufactured on a handloom.‖

By Budget 1970 the duty pattern was changed from specific to ad valorem.

By Budget 1972 the item description was substituted as under.

(iii) if it contains cotton and less than sixty per cent by weight of rayon

or artificial silk;

(iv) if it contains no cotton and less than forty per cent by weight of

wool or less than forty per cent by weight of rayon or artificial

silk; or

(v) if it contains fifty per cent or more by weight of jute

(including Bimlipatam jute or mesta fibre;‖

By Budget 1977, the description of this item was substituted to read as under.

22. Man-Made Fabrics –

―Man-Made Fabrics‖ means all varieties of fabrics

manufactured either wholly or partly from man made fibres

or yarn and includes embroidery in the piece, in strips or in

motifs and fabrics impregnated, coated or laminated with

preparations or cellulose derivatives or of other artificial

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plastic materials, in each of which man made (i) cellulosic

fibre or yarn, or (ii) non-cellulosic fibre or yarn ,

predominates in weight;

Provided that in the case of embroidery in the piece, in

strips or in motifs and fabrics impregnated, coated or

laminated with preparations of cellulose derivatives or of

other artificial plastic materials, such predominance shall

be in relation to the base fabrics which are embroidered

or impregnated, coated or laminated, as the case may be -

(1) Man-made fabrics other than (i) embroidery in the piece, in

strips or in motifs, and (ii) fabrics impregnated, coated or

laminated with preparations of cellulose derivatives or of

other artificial plastic materials,

(2) Embroidery in the piece, in strips or in motif, in or in

relation to the manufacture of which any process is

ordinarily carried on with the aid of power,

(3) Fabrics impregnated, coated or laminated with

preparations of cellulose derivatives or of other artificial

plastic materials.

Explanation I: ―Base fabrics‖ means fabrics falling under sub

item 1 of this item which are subjected to the process of

embroidery or which are impregnated, coated or laminated

with preparations of cellulose derivatives or of other plastic

materials.

Explanation II: This item does not include gas fabrics or

fabrics falling under item number 19 or item number 21.

Explanation III: Explanation II under item number 19 shall, so

far as may be apply in relation to this item as it applies in

relation to that item.

By Finance Budget 1979, Explanation 4 was added which was read as under.

“Explanation IV: This item does not include floor covering,

falling under item number 22G”

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By Finance Budget 1980, for the sub item (1) following sub item was substituted,

namely –

―(1) Man made fabrics, other than (i) embroidery in the piece,

in strips or in motifs, and (ii) fabrics impregnated, coated or

laminated with preparations of cellulose derivatives or of other

artificial plastic materials –

(a) man made fabrics, not subjected to any process

(b) man made fabrics, subjected to the process of bleaching,

dyeing, printing, shrink proofing, tentering, heat setting, crease

resistant processing or any other process or any two or more of

these processes.

With regard to the scope of this item, the Supreme Court of India had held that the

item 22(3) of the tariff spoke of fabrics impregnated or coated with the preparations of

cellulose derivatives or of other artificial plastic materials which included rubberized cloth,

tarpaulin cloth, PVC cloth, waterproof cloth, that is to say, the whole range of fabrics. (1980

ELT 383(S.C.) refers)

As to the distinction between knitting and knotting it was held that the contention that

knitting would not amount to weaving at all was not tenable because after seeing the sample

knotting was another way of knitting. In fact, the word „knot‟ means uniting together.

Therefore, it was not understood how knotting could be included in the wider meaning of

weaving and felting. In this case, the seminal material, which was the basis of the fabric was

subjected to the process of weaving so it was woven material since the material was

interlaced, intertwined and put together. In fact, putting together can be done by any means or

method, can be weaving or can be knotting also. (1984(18) ELT 141(Bom) refers).

According to the Oxford dictionary, the word „net‟ meant a fabric of twine, cord, hair,

etc., but it was not strictly necessary to go through the dictionary meaning at all. (1984(18)

ELT 141(Bom) refers)

The Hon‟ble Tribunal on the interpretation of „man-made fibres or yarn‟ decided that

merely because the petitioners were using a particular type of yarn called a twine, the special

type of twine which they were using could not be said to be a different thing and as such

could be included within the expression man-made fibre or yarn used in tariff item 22. It was

further hold that in the absence of connotation of the term „fabric‟ given by the department to

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be said it was manufactured out of twine was certainly erroneous. Since the twine was a kind

of yarn or a special type of yarn, it was difficult to appreciate how it could not include the

clear words „man-made fabrics‟ or „yarn‟ in item 22 of the Central Excise Tariff. (1984(18)

ELT 14(Bom) refers)

The compounding of various laces intertwined either by way of knotting or knitting,

involved a process of putting together which when completed, a product which was formed

was certainly a fabric in the common trade parlance. (1984(18) ELT 14(Bom) refers)

While commenting on the „varieties of fabrics‟ and the word „all‟ it was hold that

while the expression „varieties of fabrics‟ must include any material used in composing in the

nature of the fabric. If a variety was in the nature of the fabric that also would be included in

the varieties of fabrics. Similarly, the expression „all‟ is an adjective, which was also used,

could not be easily overlooked. Secondly, it also included fibres and yarn wholly or partly

manufactured. (1984(18) ELT(14)(Bom) refers)

Fabric need not be textile fabric. The word „textile‟ has not been defined in the Act.

Giving the widest meaning to the word „textile‟, it could not be said that the „fabric‟, which

must be included in the meaning of this entry, must be a textile fabric alone and since fish net

was not a textile, it could not be said to be a fabric. Fabrics meant the things put together. It

was a frame or a structure that was woven, knitted or felted. Nylon yarn was the basic

constituent of this frame. Therefore, the entry which said that „man-made fabrics‟ meant „all

varieties of fabrics manufactured either wholly or partly from man-made fabrics or yarn‟ was

quite clear to show that the fishing net, made of this yarn or man-made fibre, was classifiable

under item 22. On the other hand, item 68 of the Central Excise Tariff was a house of last

resort and, therefore, if a particular product fall under General Entry Number 22, then it was

not correct to had a recourse to item number 68, which was in the form of a residuary entry.

(1984(18) ELT 141(Bom) refers)

Impregnation, lamination or coating are all processes which upto a stage were to leave

finished product still capable of being called a fabric.

However, when the proportion of plastic material reached such a level that the final

product did not retain the characteristic of a fabric, it was not proper or correct to treat this

final product as an impregnated, coated or laminated fabric merely because there was a fabric

embedded inside it. (1984(16) ELT 301(T) refers).

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Handloom cess was leviable on trade samples of processed man-made fabric. The act

or the tariff did not prescribe any minimum length of the man-made fabric. A full saree cut

from the processed man-made fabric was a complete fabric by itself. A piece cut from the

running length fabric and even much smaller pieces such as rags and chindhies were known

in the trade as well as dealt with by the Central Excise Tariff as fabrics. Accordingly,

handloom cess was payable on processed man-made fabrics it was also payable on trade

samples of such fabrics. (1984(16) ELT 321(T) refers)

While distinguishing between Cellulosic and Non-Cellulosic fibre, the Collector of

Central Excise, decided that a fabric as a whole was a “man-made fabric”, if over fifty per

cent of the weight consisted of man-made fibres. It should matter little whether one part of

the man-made fibre was cellulosic and another part was non-cellulosic. It was anomalous

and illogical to hold that a fabric in which sixty five per cent of the weight comes wholly

from man-made cellulosic fibre, was a man-made fabrics; but in which thirty five per cent of

the weight came from man-made cellulosic fibre and another thirty per cent from man-made

non-cellulosic fibre (or vice versa) was not a man-made fabric. No distinction should be

drawn between the cellulosic and non-cellulosic man made fibres when considering whether

a fabric was a man-made fabric or not. (1983 ELT 2491(T) refers) Tyre Cord Fabric was a

woven fabric in which the intermediate process of weaving the weft thread across the warp

cord was an integral stage of manufacture. Therefore, when the purchaser bought the product

it was entire integrated woven fabrics, which he purchased, and not merely the tyre cord

itself. Therefore the tyre cord fabric was a textile fabric falling under the tariff item 22 of the

Central Excise Tariff. (1980 ELT 383(S.C.) refers)

Under Notification Number51/62 the duty of excise was leviable only on those rayon

and artificial silk fabrics, which were processed with the aid of power. Therefore, if the

goods were dyed or printed without the aid of power or steam they were not liable to duty

under this notification. (1982 ELT 895 (P&H) refers)

Calicut special containing less than forty per cent and more than sixty per cent

synthetic fibre could never be classified as cotton fabric but under the tariff item 22 of the

Central Excise Tariff. (Gujrat High Court Special Civil Application No. 67 of 1968, decided

on 30.04.1970 refers)

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It is well known that the word “or” did not invariably had to be read as a disjunctive

sense or as separating two alternatives but depending on the context it was to be read as

meaning “and”. (1983 ELT 2491 (T) refers)

The goods covered under this item were classified under Chapter Heading 54, 55, 58

and 59 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986)

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ITEM NUMBER 22A – JUTE MANUFACTURE

This commodity was brought under the excise net by Budget 1962 with effect from

01.03.1962. The tariff description read as under.

―22A. Jute Manufactures (including manufactures of

Bimlipatam jute or of mesta fibre) – All sorts

(i) Hessians

(ii) All other descriptions of jute manufactures not

otherwise specified including cloth bags, twist, yarn,

rope and wine)

There was no change in the tariff description of this item till the year 1972; however,

by Budget 1972 the description was changed to read as under.

―22A. Jute manufactures (including manufactures of

Bimlipatam jute or of mesta fibre) All sorts, not elsewhere

specified but excluding any such manufacture –

(i) if it contains forty per cent or more by weight of wool, or

(ii) if it contains no wool or less than forty per cent by weight

of wool and less than fifty per cent by weight of jute (including

Bimlipatam jute or mesta fibre)

1. Hessian

2. Others

By Budget 1977 the tariff description was amended to read as under.

(a) in column (2) for the words, brackets and figures

following be substituted ―in which jute (including

Bimlipatam jute or mesta fibre) predominates in

weight…‖

(b) for the entry in the third column against sub item (2)

the entry ―Six hundred rupees per metric tonne‖

shall be substituted.

(c) The following Explanation shall be inserted at the

end, namely -

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―Explanation: Explanation II under Item 19 shall, so far as

may be, apply in relation to this item as it applies in relation to

that item.‖

The description of this item again underwent a change in the year 1985, the amended

description which read as under.

―22A. Jute manufactures (including manufactures of

Bimlipatam jute or of mesta fibre), all sorts, not elsewhere

specified in which jute (including Bimlipatam jute or mesta

fibre) predominates in weight –

1. Hessian

2. Others‖

The Central Government, under its Notification Number 234/69-CE dated

13.12.1969, exempted jute manufactures falling under this tariff item as was, to the

satisfaction of the Collector of Central Excise, required and used by the Indian Jute Industries

Research Association, Kolkatta, and Government Test House, Alipore, Kolkatta, for test or

research purpose, from the whole of the duty leviable there on provided the remnants left

over after the testing were destroyed.

Jute yarn, twist or twine as also jute carpets, mattings and webbings were deemed to

be outside the purview of sub item (1) and were assessable under sub item (2) of tariff item

number 22A. (Boards letter No.6/45/63-CX 2 dated 20.12.1963 refers)

As to the distinction between Hessian and other jute manufactures, the Board under

their letter number 10/4/62 CX-7 dated 05.10.1962, stated that normally what was not

included in the sacking list was to be treated as Hessian. Ordinarily „Hessian‟ was a plain

weave fabric made from the yarns and usually weighing 6 to 15 ozs per yarn of forty inches

width. On the other hand, sacking was a loosely woven cloth made of coarse yarn. In short,

Hessian was a superior quality of jute manufactures.

The process of manufacture of single lined hessian rolls/bags was that the inside of

the hessian roll/bag was laminated to kraft paper using bitumen as an adhesive and the other

face was hessian fabric. In the case of double lined hessian bag/roll, Hessian fabrics formed

both the outer surfaces and the paper was placed between the two layers of hessian fabric

with bitumen as an adhesive coated on both sides of the paper. The paper was used only to

cover up warp and weft holes of the hessian fabric so as to withstand moist.

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Bangalore Trade Notice Number 24/72 dated 28.03.1972, with regard to the products

commonly known as polyethylene or polythene lined hessian or jute fabric made it clear that

the process of manufacture in this case also was the same. It appeared that because of the

very coarse structure of the base the adherence of the film is only loose and it was easily

separated. In that case it was difficult to treat it as coated fabric. Therefore, it was construed

that such laminated jute products were the fixation of film on the hessian in loose condition

and could be separated from the base very easily, were to be classified under the tariff entry

number 22A.heading

Hessian sandwich paper was made out of hessian, which was sandwiched between

two layers of kraft by means of bitumen, which acted as an adhesive and contained seventy

per cent hessian by weight. Since tariff item 22A of the Central Excise Tariff covered jute

manufactures, all sorts, not elsewhere specified in which jute predominated in weight and

therefore the Hessian sandwich paper was appropriately classifiable under tariff item 22A of

the Central Excise Tariff and tariff item 17(2) was void of any application because it covered

„Papers, All Sorts‟ only and not paper products. (1981 ELT 611 (App. Coll. Madras)

If the jute twines and yarns directly go to the weaving section for manufacture of

sacks and Hessians, they could not be treated as manufactured or marketable goods of

commercial value for levy of cess under section 9 of the Industries (Development and

Regulations) Act, 1951. 1981 ELT 30 (Pat)

The Government, in response to a representation from the industry enacted Jute

Manufactures Cess Act, 1983, and the same was made effective from 07.09.1983. This cess

was liable to be paid along with the duty of excise. This act was enacted with a purpose to

carry out development of the industry and by this act it was provided for the levy and

collection of cess on the jute manufactures. At present the Jute Cess is one per cent ad

valorem.

With effect from 01.03.1986 this commodity was classified under Chapter Heading

Number 53, 56, 57 and 63 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5

of 1986)

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ITEM NUMBER 22AA - TEXTILE FABRICS,

NOT ELSEWHERE SPECIFIED

By Finance Bill, 1972, this commodity was, for the first time, brought into the excise

net with effect from 17.03.1972, the description of which read as under.

―22A. Textile fabrics, not elsewhere specified, and containing

any two or more of the following fibres, namely –

1) Cotton,

2) Silk

3) Wool

4) Jute, (including Bimlipatam jute or mesta fibre, and

5) Man-made fibre

With effect from 18.06.1977, the description of this tariff item underwent a change as

under.

―22AA. (i) Flax Fabric, in which flax predominates in

weight, (ii) Ramie Fabric, in which ramie predominates in

weight

Explanation: Explanation II under item number 19 shall,

so far as may be, apply in relation to this item as it

applies in relation to that item.

By Notification Number 231/83-C.E. dated 19.08.1983 the Government exempted the

Ramie fabric from so much of the duty of excise leviable thereon under the Central Excises

and Salt Act, 1944 at the rate specified in the First Schedule as is in excess of the amount

calculated at the rate of ten per cent ad valorem. However, it was further added that nothing

contained in this notification shall apply to the goods which were produced or manufactured

in a free trade zone and brought to any other place in India.

Neither there was any further change in the tariff item description nor this tariff item

could fetch any considerable revenue.



1986).

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ITEM 22B - COATED TEXTILES

This item was brought into the Excise net with effect from 01.03.1968 and the

description of this item read as under.

―22B. Textile fabrics impregnated, coated or laminated with

preparations of cellulose derivatives or of other artificial

plastic materials, not elsewhere specified.‖

In regard to the scope of this item, the Board, under its letter No.45/1/76-CX 2 dated

27.06.1977, clarified that this item 22B was a residuary item whereas tariff item 22A was

specific for jute manufactures. If any product was not covered under tariff item 22A then

only the said product would be exigible to the duty of excise under the tariff item 22B.

By Notification Number 250/77-C.E. dated 23.07.1977 the Government granted

exemption to the fire resistant products falling under tariff item 22B from the whole of the

duty of excise leviable thereon subject to the condition that unprocessed jute manufactures

was used in the manufacture of such fire resistant products and the appropriate amount of

duty of excise was paid on such unprocessed jute manufactures.

The essence of textile was the spinning of the cotton or other fibre and weaving such

yarn so as to produce a definite patterned article or commodity. Though normally weaving

was a process of interlocking using the warp and woof pattern of thread it could not be

restricted to that sense because with the advancement of science and technology methods it

had become possible even without using warp and woof pattern to produce textiles. Thus, in

order to produce textiles any method of grouping, banding, braiding, twisting or weaving

could be adopted but merely by reason of twisting of yarn, the article produced would not

become textile. Normally, use of the article could be put as a test for determining the

character of an article as understood in common parlance. Therefore, it was not possible to

restrict the meaning of textiles with reference to the specified articles nor it was possible to

enlarge the meaning by reference to the same. (1979 Tax L.R. 2376 (Mad) refers)

Percentage of polythene plastic only 37 and not penetrated through body of cotton

fabric, the produce could not be termed as „cotton fabrics‟ coated or impregnated with

polythene plastic. Such a product falls under item 19-I (2)(f). (1978 ELT (J540)-16 Guj

L.R. 1788 (Guj) refers)

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Interlining material for collars of shirts manufactured by sprinkling polythene powder

on the cotton fabric by hand screen and thereafter passing through the heat chamber, where

the powder, that is to say, small particles stick in an uneven position, could not be treated as

laminated, impregnated or coated fabrics. (1978 ELT (J540) refers)

The process for the manufacture of „Stiff collars‟ could not be included under tariff

item 22B. In the manufacture of stiff collar dry plastic powder was spread on the cotton

fabric. Then it was rolled into a hot chamber where the plastic material gets stuck in places

where it has fallen. Whereas hot calender coating process was a different process from the

one adopted for the manufacture of stiff collars. (ILR (1974) 1 All.86 refers)

PVC Rexin cloth was an article with cloth as base on which coating or coatings of

polyvinyl chloride were applied in processing factories by special spreading machines. The

finished product resembled leather and was known as „artificial leather‟ or „leather cloth‟ in

commercial parlance. Therefore, PVC Rexin cloth was leather cloth. (1967) 19 STC 230

(MP) refers)

There is no change in the tariff description and this item was renumbered and was

classifiable under Chapter Heading 59 of the Schedule to the Central Excise Tariff Act, 1985

(Number 5 of 1986).

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ITEM NUMBER 22C – LINOLEUM

The excise duty was imposed for the first time on this commodity by Finance Bill,

1971 with effect from 28.05.1971 with a tariff rate of twenty per cent ad valorem. The

description of this item read as under.

―22C. Linoleum, that is to say the covering material prepared

on a base paper or paper board (including felt paper or felt

paper board or Textile fabrics by impregnation or coating with

a linoleum cement.‖

Samples of this commodity enjoyed exemption under the Notification Number

200/73-C.E. dated 01.12.1973 if they were drawn for the home market from the whole of the

duty of excise leviable thereon subject to the limitations and conditions laid down in the

corresponding entries in column (4) thereof, that is to say –

Sr. No. Variety Size Limitation and Conditions

1. Plain and Inlaid i) 35 sq centimeters Total quantity of samples

ii) 207 sq centimeters not to exceed 300 sq mtrs

in a year

2. Printed i) 532 sq centimeters

ii) 932 sq centimeters

With regard to the excisability of linoleum cut to size, e.g., tiles, the Bombay

Collectorate issued a Trade Notice Number 103(M.P.) dated 16.06.1971 vide which it was

stated that the base for linoleum was hessian fabric, paper (including felt paper), paperboard

(including felt paperboard) and other textiles. Linoleum cut to sizes, e.g. tiles, were eligible

to the duty of excise under this item.

With effect from 01.03.1986 the goods under this tariff item were classified under the

Chapter Heading 59.04 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of

1986)

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ITEM NUMBER 22D -

ARTICLES OF READY TO WEAR APPARELLS.

This item was brought into the Excise net by the Finance Bill, 1971, with effect from

29.05.1971 and was placed at Tariff Entry 22D with the tariff rate of duty at the rate of ten

per cent ad valorem, which read as under.

―22D. Articles of ready to wear Apparels, known commercially

as Readymade Garments, including under garments and body

supporting garments but excluding the articles of Hosiery, in

or in relation to the manufacture to which any process is

ordinarily carried on with the aid of power.‖

Unlike other excisable articles, especially Textiles, the tariff description of this

commodity was not altered, amended, changed or substituted.

As the word “readymade” shows the Readymade garments were always made

according to the standard sizes. They did not include garments made to order after taking

measurements of the individual customer. (1974 Tax L.R. 1810 (Guwahati High Court)

Ironing with electric iron was a process of manufacture carried out with the aid of

power (1978 ELT J-520)(Kerala High Court)

Brassieres were the articles of readymade garments subjected to the duty of excise

under item 22D of the Central Excise Tariff.

Articles of ready to wear apparels having a registered brand name but not used as

garments as such was not liable to duty (SLA Number 844 of 1971 decided by the High

Court of Gujrat.

The Finance Act, 1984, omitted this item.

With effect from 01.03.1986 the goods covered by this tariff entry were classifiable

under the Chapter 61 and 62 of the Schedule to the Central Excise Tariff Act, 1985 (Number

5 of 1986) as the tariff schedule covered all the goods under the sun.

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ITEM NUMBER 22E – TYPEWRITER AND SIMILAR RIBBONS

The Finance Act, 1971, introduced this item for the first time under the Tariff

Schedule with effect from 29.05.1971, the description of which read as under.

“ 22E. Typewriter and similar ribbons, whether or not on

spools”

Initially the rate of duty applicable to this item was ten per cent ad valorem, which

was increased to twenty per cent ad valorem. This item also enjoyed SSI exemption with

effect from 01.04.1983.

Ahmedabad Collectorate Trade Notice Number 62/71 dated 27.06.1971 with regard to

the scope of this item stated that the tariff description of item 22E covered the ribbons meant

for typewriters, calculating machines or any other machines incorporating a device for

printing by means of such ribbons, whether or not on spools. Ribbons used in automatic

balances, tabulating machines, teleprinters, barographs, thermographs, to print and record the

movement of the recording machine needle were also excisable under this item. These

ribbons usually of woven textiles but sometime they were made of artificial plastic materials

or paper. In short, if such ribbons had been prepared to give an impression of whatsoever

nature were liable to excise levy under this item.

With effect from 01.03.1986, the goods covered by this item were classifiable under the

Chapter Heading 96.12 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of

1986)

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ITEM NUMBER 22F –

MINERAL FIBRES, YARN AND PRODUCTS

By Finance Bill, 1976, this tariff item was brought into the excise net with effect from

16.08.1976 and was numbered 22F of the Central Excise Tariff, the description of which read

as under.

―22F. 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

wherefrom‖ shall be deemed to include -

(i) glass fibre and yarn including glass tissues and glass

wool,

(ii) asbestos fibre and yarn,

(iii) any other mineral fibre or yarn, whether continuous or

otherwise such as slagwool and rock wool, and

(iv) manufactures containing mineral fibres and yarn other

than asbestos cement products.‖

By Finance Bill, 1979, following changes were made in the above cited description of

this item, that is to say,

(a) The Explanation shall be numbered as Explanation I and for clause (iv)

of the Explanation as so numbered, the following clause shall be substituted,

namely–

―(iv) manufactures in which mineral fibres or yarn or both

predominates or predominates in weight‖

(b) After Explanation I as so numbered, the following Explanation shall be

inserted, namely –

―Explanation II: This item does not include asbestos cement

products‖

The Central Government, under Notification Number 87/76-C.E. dated 16.03.1976,

granted exemption to rock wool glass fibres yarn and glass fabrics and manufactures

therefrom from the whole of the duty of excise leviable thereon. However, it was also stated

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by way of Explanation thereto that in the said Notification “yarn spun wholly out of glass

fibres” was not included in the continuous filament yarn.

Glass sleevings woven in tubular form in a braiding machine from glass yarn/cord

was classifiable as fabrics since braiding was also a manufacturing process of fabrics.

Sleevings as fabrics in unvarnished stage was classifiable under 22F and the same was

exempted under the Notification Number 87/76-C.E. dated 16.03.1976 but such glass fabrics

when they were coated or impregnated in the manner in item 22B were falling under item

22B of Central Excise Tariff. (Board‟s Tariff Advice Number 120/81 dated 10.11.1981

refers)

Non-vehicular application gaskets made out of compressed asbestos jointing sheets

and asbestos mill board or in combination with brass components, etc, were classifiable under

the Tariff Item 22F of the Central Excise Tariff as per Board‟s Tariff Advice Number 27/80

dated 22.05.1980.

As per Board‟s Tariff Advice 79/80 dated 05.12.1980 woven rovings were classifiable

under Tariff Item 22F as glass fabrics meriting exemptions vide Notification Number 87/76-

C.E. dated 16.03.1976.

As to the distinction between glass fibre and glass filaments it was held by the

Government that the term glass fibre would include glass filaments also. (1982 ELT

191(Government of India)

Since the process of spinning was not restricted only to glass yarn composed of staple

fibre twisted together but also included impugned glass yarn spun out of glass fibre covering

staple fibre as well as glass filaments. (1982 ELT 191 (Government of India)

The Central Excise Gold Control Appellate Tribunal (in short, CEGAT) has decided

that Asbestos fluff produced from asbestos rock treated as the process of manufacture. The

mined asbestos rock was, admittedly, crushed pulverized and then sieved in order to separate

asbestos fluff and asbestos powder from the rock particles. Therefore, a commercial

commodity emerges out of the process adopted that was distinct from the original product

mined from the quarries, which was a manufacture. (1984 ECR 1877 (CEGAT)

As regards the imposition of duty of excise on the Asbestos fibre obtained from

Asbestos rock, it was held that Asbestos rocks were not saleable as such and it was only

when the detailed process of manufacture was to be carried out so as to obtain asbestos fibre

which was different and distinct from asbestos rock on which the Legislature had imposed

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the duty of excise. Therefore, it can be said that imposition of duty on asbestos fibre or

insertion of Tariff Item 22F in the First Schedule to the Central Excise Tariff Act, was not

ultra vires and invalid. (1980 ELT 735 (Del) refers).

Beater addition process asbestos or Beater addition asbestos jointings containing 28-

39% asbestos are manufactures containing mineral fibres or yarn classifiable under Tariff

Item 22F as it stood before to its amendment in 1980. The fact that the goods were not

considered as falling under item 58(1) of the old Customs Tariff would not stand in the way

of their being classified for the purposes of countervailing duty under tariff item 22F ibid

which is comprehensive enough to cover them. (1984(15) ELT 193 (T) refers)

It was clarified that Epoxy Resin treated glass cloth, in running length of 1400 meters

and of width 36 inches was not a tape, it was classifiable under item 22(3) of the Central

Excise Tariff prior to the introduction of Tariff Item Number 22F (i.e. prior to 1976 Budget

changes)

Under Notification Number 83/83-C.E. dated 01.03.1983, SSI Exemption was

extended to this industry from 01.03.1983.

With effect from 01.03.1986, the goods covered under this item were covered by the

Chapter Heading 25, 68 and 70 of the Schedule to the Central Excise Tariff Act, 1985

(Number 5 of 1986)

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ITEM NUMBER 22G – FLOOR COVERINGS

Floor Coverings came on the Tariff Schedule with effect from 01.03.1979 that were

introduced by the Finance Bill, 1979. Tariff rate was thirty per cent ad valorem and the

description of this entry read as under.

―22G. Floor coverings, namely Carpets, Carpeting and Rugs

(Made up or not)

Explanation I: This item does not include Dari, Satranji,

Namdahs, Jute Carpets and Coir products.

Explanation II: This item shall include carpets, carpeting and

rugs, having the characteristics of floor covering but intended

for use for any other purpose whatsoever.‖

By a Notification Number 61/79-C.E. dated 01.03.1979 handmade carpets were fully

exempted from the purview of the duty of excise leviable thereon.

It was also made pellucidly clear in the said Notification that no such exemption was

available in or in relation to the manufacture of which any process was ordinarily conducted

with the aid of power or steam.

Manually operated looms and manually operated implements, used independently by

hand such as hooking guns, tufting guns and knitting guns were not considered as machines

for the purpose of exemption as was granted vide the abovesaid Notification.

By its Tariff Advice Number 53/80 dated 06.09.1980, the Board had directed that

Polypropylene Tufted carpets were considered as fabrics classifiable under tariff item 22

during the period prior to 01.03.1979 and thereafter as carpets under the tariff item 22G.

With effect from 01.03.1986, the goods covered by this item were classifiable under

the Chapter Heading 57 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of

1986)

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ITEM NUMBER 23 – CEMENT, ALL VARIETIES.

This item came to be taxed on 01.03.1954 and was placed at number 23 of the Central

Excise Tariff. Initially, the tariff rate was Rs.23.60 per MT. Till 1969, both the description

and the rate structure of this item did not change, but with effect from 01.03.1969 the duty

structure was changed from specific to ad valorem.

With effect from 15.03.1976, the tariff description of this item underwent a change to

read as under.

23. Cement, All varieties.

1. Grey Portland cements (including ordinary Portland

cement, pozzolana cements and blast furnace slag

cement) masonry cement, rapid hardening cement, low

heat cement and water - proof (hydrophobic) cement.

2. All Others.

Cement, commonly known also as Sagol, obtained by heating limestone and burnt

coal in a kiln, was exempted from the whole of the duty of excise leviable thereon under the


Board‟s Tariff Advice Number 46/79 dated 28.09.1979 took into consideration the

point of inclusion of packing charges in the assessable value of Superfine cement and

Hydrophobic cement and decided that these two were not the varieties of cement requiring

repacking to prevent deterioration and hence the cost of packing was not liable to be included

in their assessable value.

As per Board‟s letter No.1/16/64-CX 7 dated 24.01.1964 it was made clear that the

Hydraulic cement was not liable to duty under the tariff item number 23 of the Central Excise

Tariff

Adhesive cement, such as „Rapifix‟, etc, prepared by mixing duty paid nitrocellulose

ancillaries in liquid form with duty paid solution of resin was not chargeable to duty again

when it also conformed to the description of nitrocellulose lacquer in liquid form. (Baroda

Trade Notice Number 54/67 dated 24.05.1967 refers)

The Board, by its letter Number 39/24/58-CX 4 dated 01.04.1959 made it clear that

“Acid, Alkali resisting cement” and “Fire cement” were only the special types of cementing

materials and they did not set with the water at ordinary temperature and also they were

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required to be heated to high temperature so as to set. These are not excisable under the tariff

item number 23 of the Central Excise Tariff.

In an important clarification relating to the exemption contemplated in the

Notification Number 118/72 dated 08.04.1972, the Ministry of Finance (Department of

Revenue Intelligence) by their letter number 1/7/69-CX 4 dated 08.04.1972 stated that the

exemption was intended to apply only to High Alumina cement which may be used otherwise

than in refractories.

With effect from 01.03.1986, the goods covered under this tariff entry were

classifiable under Chapter 25 of the Schedule to the Central Excise Tariff Act, 1985 (Number

5 of 1986)

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ITEM NUMBER 23A – GLASS AND GLASSWARE

Finance Act, 1961, introduced this tariff item for the first time when the description

read as under.

―23A. Glass and Glassware -

1. Sheet Glass and Plate Glass,

2. Laboratory Glassware,

3. Glass Sheets, Glass globes and chimneys for lamps and

lanterns,

4. Other Glassware including table wares‖

This was made effective from 01.03.1961.

By Finance Bill, 1979, with effect from 01.03.1979, some amendments were made,

that is to say –

1) sub item (1) of tariff item 23A was substituted by words ―Flat

Glass‖

Explanation – ‗Flat Glass‘ includes sheet glass, wired glass

and rolled glass whether in the form of plate glass, figured

glass or in any other form,

2) sub item (4) was substituted as ―Other Glass and Glassware‖.

3) Explanation was also inserted which read as under.

Explanation: This item does not include electrical insulators

or electrical insulating fittings or parts or such insulators or

insulating fittings.”

Board under its letter dated 22.06.1961 directed that Optical glass does not fall under

any of the sub items of the tariff item 23A and hence not exigible to the duty of excise.

This item was amended as a result of the decision of the Gujrat High Court dated

23.11.1978 which hold that figured glass, wired glass, coloured figured class, rolled glass,

collex wired glass, did not come within the scope of item 23(4)(i) but under the Residuary

item, item 68, as they were not sheet glass.

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Winchester did not have any special shape or design to restrict their use mainly in

laboratories and they are mainly used as commercial containers. Therefore, they were

correctly classified under Tariff Item 23A(4) of Central Excise Tariff. (1979 ELT (J 40)

(Government of India) refers)

Tincture bottles could not be treated as laboratory glassware under item 23A(2) but

were liable to be charged duty as other glasswares under the tariff item number 23A(4) of the

Central Excise Tariff. (AIR 1965 All-305 refers)

As per the decision dated 28.11.1978 in the Miscellaneous Petition Number 955 of

1973, the Bombay High Court maintained that “Cell O Therm” was a Thermal Insulation

product, which was cut and shaped in various forms to serve various insulating needs. It was

manufactured from broken glass, which was powdered and then mixed with certain chemicals

such as carbon black and foamed in electric furnace and annealed in a “annealing leim”. This

item was neither “glass” nor “glassware” as understood in their ordinary sense and, therefore,

not liable to duty under item 23A of the Central Excise Tariff.

Bombay High Court has decided that Magnifying Glasses (optical appliances) were

not “glassware” but the optical appliances ((1976) 38 STC 92 refers). However, a contrary

view was taken by the Madras High Court (AIR 1965 Mad 312 refers)

With effect from 01.03.1986, these goods were classifiable under Chapter Heading 70

of the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986)

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ITEM NUMBER 23B – CHINA WARE AND PORCELAIN WARE, ALL SORTS.

By Finance Act, 1961, this item was brought into the Revenue net with effect from

01.03.1961 and was placed at number 23B of the Central Excise Tariff, which read as under.

―23B. Chinaware and Porcelain ware – All Sorts,

1. Table ware,

2. Sanitary ware,

3. Glazed tiles,

4. Not Otherwise Specified

Explanation: Chinaware includes all glazed clay wares but

does not include terra cota.‖

By Finance Bill, 1979, the above cited item description was amended as under.

(a) For the entry in the third column against sub item (4), the

entry ―Thirty per cent ad valorem‖ was substituted,

(b) the Explanation was numbered as Explanation I and after

that Explanation as so numbered, the following

Explanation was inserted, namely –

―Explanation II: This item does not include electrical

insulators or electrical insulating fitting or parts of such

insulators or insulating fittings.‖

Madras High Court with regard to the connotation of Porcelain had expressed that

while Porcelain was madeup of components like Kaolin China clay, Feldspar, which contains

silicon, calcium and quartz, which was mainly silicon, the variation in the proportions of each

of these elements, subject to limitations, would not alter the character of the product as

porcelain. Therefore, the variations in the proportions or quality of porcelain in the matter of

thermal expansion and pressure translucency or composition would not alter the character of

the article as Porcelain. (1979 ELT J-36 (Mad HC) refers)

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Although Rasching Rings were unglazed that did not matter as the test of glaze

applied only to tiles and to chinaware and not to porcelainware. Thus Rasching rings were

rightly classifiable under sub item (4) of item 23B of Central Excise Tariff. (1979 ELT

(J29)(MP HC) refers)

Sihori Vatkas (bowls – yellow coloured), also known as “Imrat ban” were not the

articles which could be used at the table because, in common parlance, these bowls were not

known as “tablewares” as they were commonly used by the people for the purpose of keeping

and storing pickles, curd, milk, etc, in kitchen – at best these could be termed as

“kitchenware” but surely not “tableware”. (Gujrat High Court Special Civil Application

Number 1328 1965, decided on 31.07.1970 refers)

HRC Fuselink could not be regarded as porcelainware merely because one of its

components was made of porcelain and, therefore, they were not liable to the duty of excise

under tariff item 23B of Central Excise Tariff.



1986)

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ITEM NUMBER 23C – ASBESTOS CEMENT

For the first time, this item was introduced by the Finance Bill, 1962, into the Excise

net, with effect from 24.04.1962, and was placed at number 23C of the Central Excise Tariff

attracting duty of excise at the rate of ten per cent ad valorem. The description of this item

read as under.

―23C. Asbestos cement products, all sorts including flat and

corrugated sheets, fibres, tubes and tiles.‖

This item remain as it was introduced till 28.02.1986 and with effect from

01.03.1986, the goods covered by this item were classified under the Chapter Heading 68 of

the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986)

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ITEM NUMBER 23D – SILVER

This item was included into the Excise net as early as in the year 1930, that is to say,

it was made effective from 01.04.1930.

However, this item was omitted with effect from 01.03.1984.

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ITEM NUMBER 23E - MARBLE

This tariff item came into existence from 17.03.1985, the definition of which read as

under.

“23A. Marble in the following forms, namely –

1. Blocks,

2. Slabs, and

3. Tiles.”

By the Notification Number 60/85-CE dated 17.03.1985 full exemption was granted

to Marble (Blocks, Slabs and Tiles) subject to the condition that if in or in relation to the

manufacture of such marble slabs and tiles no process is carried on with the aid of power and

if such marble tiles are manufactured from marble slabs on which the duty of excise leviable

under the said Act was paid.

It was also made clear that the exemption was on the stocks of marble in the country

except such stock which were clearly recognizable as non duty paid were deemed to be

marble slabs on which the duty of excise was already paid.

With effect from 01.03.1986 this item was classified under Chapter Heading 96.25 of

the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986).

Exemption Notification No.83/83-CE dated 01.03.1983 was also made applicable to

the item, that is to say, clearance value upto the first one hundred lakh rupees was exempted

from the purview of the duty of excise.

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ITEM NUMBER 24 - ITEM OMITTED

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ITEM NUMBER 25 – IRON IN ANY CRUDE FORM

By Finance Bill, 1960, this item was covered by the Excise into its umbrella for the

first time and was placed at number 35, which was made effective from 01.03.1960 attracting

the duty of excise at the rate of rupees ten per metric tonne.

However, this item was renumbered as item 25 with effect from 20.09.1960.

By Finance Act, 1964 (Number 5 of 1964) the tariff description was substituted to

read as under.

―25. Iron in any crude form including pig iron, scrap from

molten iron or iron cast in any shape or size.‖

With effect from 01.03.1983, the tariff description was entirely amended and was

aligned with BTN or HSN Headings of International repute. The substituted description read

as under.

―25. Iron and Steel and products thereof, the following, namely

1. Pig Iron, cast iron and spiegeleisen in pigs, blocks, lumps

and similar forms; and molten iron

2. Ferro alloys

3. Waste and scrap (i) of Iron, (ii) of Steel,

4. Shot and angular grit, whether or not graded; and wire

pellets, (i) of Iron, (ii) of Steel,

5. Iron or steel powders; sponge iron or steel,

6. Puddled bars, pilings, ingots, blocks, lumps and similar

forms of iron or steel, (i) puddle bars and pilings of iron,

(ii) ingots, blocks, lumps and similar forms of steel, iii)

not elsewhere specified

7. Blooms, billets, slabs and sheet bars (including tinplate

bars) and hoe bars, (i) of iron, (ii) of steel,

8. Pieces roughly shaped by rolling or forging of iron or

steel, not elsewhere specified,

9. Bars (including flats) and rods (including wire rods) of

iron or steel rolled, forged, extruded, formed, finished,

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whether in straight lengths or in coils; hollow mining

drill steel (i) flats (ii) others

10. Railway track construction material, the following, Rails,

Sleeper and Sleeper bar

11. Angles, shapes and sections of iron or steel, not

elsewhere specified, other than slotted angles and slotted

channels, rolled, forged, extruded, formed, finished, sheet

piling of iron or steel whether or not drilled, punched or

made from assembled elements.

12. Hoops, strips and skelp of iron or steel, whether

galvanized or not (i) hoopes and strips, (ii) skelp

13. Coils for re-rolling, sheets, plates and universal plates or

iron or steel, hot or cold rolled, whether galvanized or

not, forms such as ridges, channels (other than slotted

channels) rain-water pipes and their fittings made from

sheets, plates or universal plates; and tin plate and

tinned, lacquered or varnished sheets including tin

taggers and cuttings of such plates, sheets or taggers - (i)

galvanized sheets, plates and forms (ii) tin plate and

tinned sheets including tin taggers and cuttings of such

plates, sheets or taggers (iii) lacquered sheets, varnished

sheets including cuttings of lacquered sheets and

varnished sheets (iv) other

14. Iron or steel wire, whether or not coated but not

insulated

15. Tubes and pipes and blanks therefore, or iron or steel,

rolled, forged, spun, cast, drawn, annealed, welded or

extruded

16. Castings or iron or steel, not otherwise specified (i) of

iron, (ii) of steel

Explanation: In this terms -

(i) ―iron‖ includes pig iron, cast iron and spiegeleisen;

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(ii) ―pig iron‖ and ―cast iron‖ means ferrous products containing, by

weight, 1.9 per cent or more of carbon, and which may contain one or

more of the following elements within the weight limits specified:

less than 15 per cent phosphorous

not more than 8 per cent silicon

not more than 6 per cent manganese

not more than 30 per cent chromium

not more than 40 per cent tungsten, and

an aggregate of not more than 10 per cent of other alloy elements (for

example, nickel, copper, aluminium, titanium, vanadium, molybdenum)

but does not include ferrous alloys known as ―non distorting tool

steels‖ containing by weight 1.9 per cent or more of carbon and

having the characteristics of steel;

(iii) “spiegeleisen” means ferrous products containing, by weight,

more than 6 per cent but not more than 30 per cent of manganese and

otherwise conforming to the specifications mentioned in (ii) above,

(iv) “ferro alloys” means alloys of iron (other than master alloys)

which are not usefully malleable and are commonly used as raw

material in the manufacture of ferrous metals and which contain, by

weight, separately or together -

more than 8 per cent of silicon, or

more than 30 per cent of manganese, or

more than 30 per cent of chromium, or

more than 40 per cent of tungsten, or

a total of more than 10 per cent of other alloy elements (aluminium,

titanium, vanadium, copper, molybdenum, niobium or other elements,

subject to a maximum content of 10 per cent in the case of copper)

and, which contain, by weight not less than four per cent in the case of

ferro alloys containing silicon, not less than eight per cent, in the case

of ferro alloys containing manganese but no silicon or not less than ten

per cent in other cases of the element iron;.

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(v) “puddle bars” and “pilings” mean products for rolling, forging or

remelting obtained either -

(i) shingling balls of puddle iron to remove the slag arising during

puddling, or

(ii) by roughly welding together by means of hot rolling, packets of

scrap iron or steel or puddle iron;

(vi) ―ingots‖ means products for rolling or forging obtained by casting

into moulds;

(vii) ―blooms‖ and ―billets‖ mean semi finished products of

rectangular section, of a cross sectional area exceeding 1,225 sq

millimeters and of such dimensions that the thickness exceeds one

quarter of the width;

(viii) ―slabs‖ and ―sheets bars (including tinplate bars)‖ mean semi

finished products of rectangular section of a thickness not less than 6

millimeters of width not less than 150 millimeters and of such

dimensions that the thickness does not exceed one quarter of the width,

(ix) “waste” and “scrap” means waste and scrap of iron or steel fit only

for the recovery of metal or for use in the manufacture of chemicals,

but does not include slag, ash and other residues;

(x) ―hollow mining drill steel‖ means steel hollow bars of any cross-

section, suitable for mining drills, of which the greatest external

dimension exceeds 15millimetres but does not exceed 50 millimeters,

and of which the greatest internal dimension does not exceed one third

of the greatest external dimension,

(xi) ―angles, shapes and sections‖ means products which do not have

cross sections in the form of circles, segments of circles, ovals,

isosceles triangles, rectangles, hexagons, octagons or quadrilaterals

with only two sides parallel and the other two sides equal and which

are not hollow,

(xii) ―skelp‖ means hot rolled narrow strip of width not exceeding

600 millimeters with rolled (square, slightly round or beveled) edge;

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(xiii) “hoops” means hot rolled flat products in rectangular cross

section of thickness less than 3 millimeters and width less than 75

millimeters;

(xiv) “strips” means hot or cold rolled products, rolled approximately

in rectangular cross section of thickness usually ten millimeters and

below with mill, rolled, trimmed or sheared edges and supplied in coil

or flattened coil (straight length) form but excludes hoop and skelp;

(xv) “coils for re-rolling” means coiled semi finished hot rolled

products, of a rectangular section, not less than 1.5 millimeters thick,

of a width exceeding 500 millimeters and of a weight not less than 500

kilograms per piece;

(xvi) “universal plates” means products of rectangular section, hot

rolled lengthwise in a closed box or universal mill, of a thickness

exceeding 5 millimeters but not exceeding one hundred millimeters

and a of a width exceeding 150 millimeters but not exceeding 1,200

millimeters;

(xvii) “plate” means a hot or cold rolled flat product, rolled from an

ingot or slab or sheet bar or produced by cold reduction of coils, in

rectangular cross section of thickness five millimeters and above but

not exceeding one hundred millimeters and width six hundred

millimeters and above, and supplied in straight lengths;

(xviii) “sheet” means a hot or cold rolled flat product, rolled in

rectangular section of thickness below five millimeters and supplied in

straight lengths, the width of which is at least hundred times the

thickness and the edges are either mill, trimmed, sheared or flame cut;

(xix) “wire” means cold drawn products of solid section of any cross

sectional shape or which no cross sectional dimension exceeds thirteen

millimeters;

(xx) “bars (including flats) and rods (including wire rods)” means

products of solid section which do not conform to the entirety of any of

the definitions at (vii), (viii) (xii), (xiii), (xiv), (xv), (xvi), (xvii), (xviii)

and (xix) above, and which have cross sections in the shape of circles,

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segments of circles, ovals, isosceles, triangles, rectangles, hexagons,

octagons or quadrilaterals with only two sides parallel and the order

sides equal.

(xxi) “flats‟ means finished products, generally or rectangular cross

section, having rolled edges only (square or slightly rounded) of

controlled contour and of thickness 3 millimeters and over, width 400

millimeters and below and supplied in straight lengths and includes

flat bars with bulb that has swelling on one or two faces of the same

edge and a width of less than 400 millimeters;

With effect from 01.03.1986 the goods covered under this item were classified under

the Chapter Heading 72 and 73 of the Schedule to the Central Excise Tariff Act, 1985

(Number 5 of 1986)

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ITEM NUMBER 26 – STEEL INGOTS

This was one of the oldest commodity, date of inclusion into the excise net

01.04.1934, that was destined to cover the excise income.

It remained so till 1960 and with effect from 20.09.1960 the Steel Ingots occupied

their position at item 26 of the First Schedule with no change either in the tariff description or

in the rate of duty of excise.

With effect from 28.04.1964, the tariff description was changed to read as under.

―26. Steel Ingots including steel melting scrap.‖

With regard to the effects of the Notification Number30/60 dated 01.03.1960 relating

to this item, the Supreme Court, hold that this notification did not say that the exemption

would not be available if duty paid pig iron was mixed with the other non-duty paid

materials. If such were the intention of the Government then the Notification would have

used the expression “only” or “exclusively” or “entirely” in regard to duty paid pig iron.

Thus the object of the notification was to grant relief by exempting duty paid pig iron. (1977

ELT (J-61)(S.C.) refers)

With effect from 01.03.1983 this item was omitted.



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ITEM NUMBER 26A – COPPER AND COPPER ALLOYS

This item was brought into the Tariff Schedule with effect from 01.03.1961. The

original tariff description of this item read as under.

“26A. Copper and Copper Alloys, containing not less than fifty

per cent by weight of copper.

1) Manufactures, the following, namely, plates, sheets,

circles, strips and foils in any form or size,

2) Pipes and tubes”

The rate of duty was ten per cent ad valorem.

The abovementioned tariff description was amended with effect from 22.06.1962,


“For sub item (1) and (2) the following was substituted.

1) In any crude form including ingots, bars, blocks, slabs, billets and pellets,

2) Manufacture, the following, namely –

Plates, sheets, circles, strips and bolts in any form and size

3) Pipes and tubes.

In respect of sub item (1) and (2) above, the rate of duty was specific, that is to say,

Rupees One hundred per MT and Rupees Three hundred per MT respectively and for sub

item (3) the same assessed to duty at the rate of ten per cent ad valorem.

By Finance (Number 2) Bill, 1980, -

(A) in the entry in the second column, the words “and copper alloys

containing not less than fifty per cent by weight of copper” were

omitted, and

(B) the following explanation was inserted at the end.

Explanation: „Copper‟ shall include any alloy in which copper

predominates by weight over each of the other metals.

By Finance Bill, 1981, following amendments were carried out –

(A) after sub item (1a), the following sub item was inserted, namely –

“(1b) “waste and scrap”,

(B) for sub item (3), the following sub items were inserted

3. Pipes and Tubes, excluding shells and blanks therefore,

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4. Shells and Blanks for pipes and tubes

(C) The Explanation shall be numbered as Explanation (1) and, after the

Explanation as so numbered, the following Explanation shall be inserted,

namely -

Explanation II: “Waste and Scrap” means waste and scrap of

copper fit only for the recovery of metal or for use in the

manufacture of chemicals, but does not include slag, dross,

scaling, ash and other cuprous residues.”

With effect from 01.03.1984, the entire tariff description was aligned with HSN

Heading. The amended description read as under.

“26A. Copper and products thereof.

“Copper” shall include any alloy in which copper


(1) Unwrought copper in any form (refined or not including blister

copper and cement copper), including ingots, notched bars,

wire bars, blocks, slabs, billets, shots, pellets, cathodes and

cakes. Explanation: This sub item includes wire bars and

billets with their ends tapered or otherwise worked simply to

facilitate their entry into machines for converting them into, for

example, wire rods or tubes.

(2) Waste and scrap of copper.

(3) Wrought bars, rods (including wire rods), angles, shapes and

sections, of copper -

(i) wrought bars and rods (including wire rods) of

copper,

(ii) wrought angles, shapes and sections of copper,

(4) Castings, not otherwise specified,

(5) Copper wire,

(6) Wrought plates, sheets, blanks (including circles) and strips of

copper. Explanation: In this sub item, “blank” means a piece

of plate, sheet or strip, in any shape, including a circle,

prepared for subsequent fabrication,

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(7) Copper foil,

(8) Copper powders (excluding cement copper) and flakes

(9) Pipes and tubes of copper,

(10) Shells and blanks for pipes and tubes; hollow sections of

copper.

Explanation: In this term -

(i) “waste and scrap means” waste and scrap metal fit

only for the recovery of metal by remelting or for use in

the manufacture of chemicals, but does not include slag,

dross, scalings, ash and other cuprous residues;

(ii) “wrought bars and rods (including wire rods)” means

(a) any extruded, rolled, drawn or forged products of

solid section of which the width or the maximum cross

sectional dimension exceeds 6 millimeters and which,

if they are flat, have a thickness exceeding one tenth of

the width; or

(b) any cast or sintered products, of the same forms

and dimensions, which have been subsequently worked

after production (otherwise than by simple trimming or

de-scaling) provided that they have not thereby

assumed the character of any article or product falling

under any other item;

(iii) “wrought angles, shapes and sections” means –

i. any extruded, rolled, drawn or forged

products, of solid section (other than round,

rectangular, square and hexagonal), of

which the width or the maximum cross

sectional dimension exceeds six millimeters

and which, if they are flat, have a thickness

exceeding one tenth of the width; or

ii. any cost or sintered products, of the same

forms and dimensions, which have been

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subsequently worked after production

(otherwise than by simple trimming or

descaling), provided that they have not

thereby assumed the character of any article

or product falling under any other item)

(iv) “wire” means any rolled, extruded or drawn

product of solid and uniform cross section, of which no

cross sectional dimension exceeds 6 millimeters, but does

not include electric wires and cables, falling under item

number 33B;

(v) “plate” means a flat product whose thickness

exceeds 10 millimeters and the width exceeds 300

millimeters;

(vi) “sheet” means a flat product, cut to length, whose

thickness exceeds 0.15 millimeter but does not

exceed ten millimeters and the width exceeds three

hundred millimeters;

(vii) “strip” means a flat product whose thickness

exceeds 0.15 millimeter but does not exceed 10

millimeters, of any width and generally not cut to

length and usually in coil,

(viii)“foil” means a flat product of thickness

(excluding any backing) not exceeding 0.15

millimeters, of any width, generally not cut to

length and usually in coil , whether or not

embossed, cut to shape, perforated, coated, printed

or backed with paper or other reinforcing material;

(ix)“powders and flakes” means all types of powders

and flakes, but does not include cement copper and

powders and flakes prepared as colours, pigments,

paints of the like;

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(x)“pipes and tubes” means a hollow product of

uniform cross section and wall thickness having a

continuous periphery produced by drawing; casting

or extrusion process;

(xi)“shells and blanks” means a hollow cylinder

produced by extrusion, rotary piercing or casting

for subsequent drawing into pipe or tube;

(xii)hollow section” means a section which is normally

extruded, drawn or cast the cross section of which

completely encloses a void or voids;”

Bare copper/aluminium strips were insulated so as to use advantageously as a

conductor and its use became more convenient by insulating it either by glass-fibre or by

paper or cotton cover. Therefore, mere application of such special process or giving it a

different name could not make it a different or distinct article than the original article, viz.

copper strips so as to amount to manufacture under Section 2(f) of the Central Excises Act,

1944. (1982 ELT 10 (Bom) refers)

With effect from 01.03.1986, the goods covered by this item were classifiable under


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ITEM NUMBER 26AA – IRON OR STEEL PRODUCTS

This item was brought under the excise net with effect from 24.04.1962 by the

Finance Bill, 1962, the description of which read as under.

“26AA. Iron or Steel products, the following, namely –

(i) Bards, rods, coils, wires, joists, girders, angles, channels,

tees, flats, beams, zeds, trough, piling and all other rolled,

forged or extruded shapes and sections, not otherwise

specified.

(ii) Plates and sheets, other than plates and sheets intended for

tinning, and hoops and strip all sorts, including galvanized

or corrugated plates and sheets.

(iii) Uncoated plates and sheets intended for tinning.

(iv) Pipes and tubes (including blanks therefore) all sorts,

whether rolled, forged, spun, cast, drawn, annealed,

welded or extruded.

(v) All other steel castings, not otherwise specified.”

By the Finance Bill, 1963, the tariff description was amended as under.

“Sub item (i) shall be renumbered as (ia) thereof and before the

sub item (ia), as so numbered, the following sub item shall be

inserted, namely –

“(i) Semi finished steel including bloom, billets, slabs, sheet bars,

tin bars and hoe bars”

By the Finance Bill, 1964, following was the amendment made.

“(i) for the entry in the third columns against each of the sub

items (i) and (ia), the entry :Forty rupees per metric tonne plus

the excise duty for the time being leviable on steel ingots”

ii) for sub item (ii) and (iii), the following sub items shall be

substituted, namely

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“(ii) Plates and sheets (including uncoated plates and sheets

intended for tinning) all sorts, and hoops and strips, all sorts,

other than skelp

(iii) Skelp”

By the Finance Bill, 1965, the following amendments were carried,

“(i) for the entry in the third column against each of the sub

items (i) and (ia) the entry “fortyfive rupees per metric tonne

plus the excise duty for the time being leviable on steel ingots”

(ii) for sub items (ii) and (iii), the following sub items shall be

substituted, namely,

“(ii) Plates and sheets (including uncoated plates and sheets

intended for tinning and forms such as ridges, channels,

rainwater pipes and their fitting made from plates and sheets

but not including plates and sheets after tinning), and hoops,

all sorts other than skelp and strips,

(iii) Skelp and strips”

By Finance Bill, 1975, the Explanation was added after sub item (v), which read as under.

“Explanation: “Skelp” means hot rolled narrow strips of

width not exceeding six hundred millimeters with rolled

(square, slightly round or leveled) edge.”

The stainless steel products referred to as “patties” in commercial parlance and made

in a place other than a strip mill by hot or cold rolling process from scrap cuttings of duty

paid unused re-rolled rods/billets were not classifiable as “strips” under the item 26AA (III)

but were classifiable under item 26AA(ia) of the Central Excise Tariff.

The words “shapes and sections” were not included as agricultural implements or

hand tools, that is to say, the agricultural implements or hand tools were not covered under

item 26AA(ia). (AIR 1968 Mys 237 refers)

The criteria for ascertaining whether a product was a flat or not was that its width was

required to be more than the thickness (Order in Review No.757 of 1975 decided on

12.05.1975 passed by the Government of India refers)

According to ISI definition given in the ISI 5-113, narrow strips had to be in straight

length or in coil form or had to be either trimmed or with sheared edges. Since the stainless

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steel scrap did not conform to the above specifications, they were not eligible to be covered

under the definition of “strips”. (1977 ELT (J 128) and (J 82) refers)

The word „plus‟ in item 26AA(I) of the first schedule to the Act indicated that the rate

of duty consists of two parts, one part ad valorem duty and the other being the excise duty

calculated according to formula given. (1969(2) SCR 481-1970(1) SCJ 829 refers)

By Finance Bill, 1983, this tariff item was omitted with effect from 01.03.1983.

With effect from 01.03.1986, the articles of Iron and Steel were classified under the


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ITEM NUMBER 26B - ZINC

This item was brought within the Excise ambit under the Finance Bill, 1961, and was

made effective from 01.03.1960, the description of which read as under.

“26B. Zinc

(1) Manufactures, the following, namely, plates, sheets,

circles, strips and foils in any form or size,

(2) Pipes and Tubes.”

The specified tariff rate was Rupees three hundred per MT and ten per cent ad

valorem respectively for item (1) and (2) above.

By Finance Act, 1965, amendments by way of substitution were made which read as

under.

“For sub item (1) and (2), the following was substituted, namely -

(1) Unwrought, including ingot, cakes, bars, blocks, hard or

soft slabs, billets, plates, cathodes, anodes, pellets,

smelter, dross, ushers and broken zinc;

(2) Manufactures, the following, namely, plates, sheets,

circles, strips and foils in any form or size;

(3) Pipes and tubes”

By Finance Bill, 1980, the Explanation was added, which read as under.

“Explanation: “Zinc” shall include any alloy in which zinc

predominates by weight over each of the other metal.

By Finance Bill, 1984, the tariff item 26B was substituted by the following which

aligned with the Custom‟s tariff. (Harmonised System of Nomenclature)

“26B. Zinc and products thereof –

“Zinc” shall include any alloy in which zinc by weight

over each of the other metals.

1. Unwrought zinc, in any form including blocks,

plates ingots, cakes, bars, billets, hard or soft slabs,

cathodes, anodes, pellets, smelter and broken zinc.

2. Waste and scrap of zinc,

3. Wrought bars, rods (including wire rods), angles,

shapes and sections of zinc; zinc wire;

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ii. Wrought bars and rods including wire rods) of zinc

iii. Wrought angles, shapes and sections of zinc and

zinc wire,

4. Wrought plates, sheets, blanks (including circles,

but excluding calots) and strips of zinc; zinc foil,

Explanation: In this sub item, “blank” means a piece

of plate, sheet or strip in any shape, including a circle,

prepared for subsequent fabrication.

5. Zinc calots

6. Zinc powders and flakes

7. Pipes and tubes of zinc

8. Shells and blanks for pipes and tubes; hollow sections of

zinc

Explanation: In this item -

i) “Waste and scrap” means waste and scrap

metal fit only for the recovery of metal by

remelting or for use in the manufacture of

chemicals, and includes dross and ash;

ii) “Wrought bars and rods (including wire rods)”

means

(a) any extruded, rolled, drawn or forged products

of solid section, of which the width or the maximum

cross-sectional dimension exceeds six millimeters

and which, if they are flat, have a thickness

exceeding one-tenth of the width; or

(b) any cast or sintered products, of the same forms

and dimensions, which have been subsequently

worked after production (otherwise than by simple

trimming or de-scaling), provided that they have not

thereby assumed the character of and article or

product falling under any other Item;

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iii) “wrought angles, shapes and sections”

means -

(a) any extruded, rolled, drawn or forged

products of solid section (other than

round, rectangular, square and

hexagonal), of which the width or the

maximum cross-sectional dimension

exceeds six millimeters and which, if they

are flat, have a thickness exceeding one-

tenth of the width; or

(b) any cast of sintered products, of the

same forms and dimensions, which have

been subsequently worked after

production (otherwise than by simple

trimming or de-scaling), provided that

they have not thereby assumed the

character of any article or product,

falling under any other item;

(iv) “wire‟ means any rolled, extruded or drawn

product of solid and uniform cross section, of which

no cross sectional dimension exceeds six

millimeters;

(v) “plate” means a flat product, cut to length,

whose thickness exceeds ten millimeters and width

exceeds 500 millimeter

(vi) “sheet” means a flat product whose thickness

exceeds 0.15 mm but does not exceed ten

millimeters, and width exceeds 500 millimeters;

(vii) “strip” means a flat product, generally not cut

to length, whose thickness exceeds 0.15 millimeter

but does not exceed 10 millimeters, and width does

not exceed 500 millimeters;

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(viii)“foil‟ means a flat product whose thickness

(excluding any backing) not exceeding 0.15

millimeters, whether or not embossed, cut to shape,

perforated, coated, printed or backed with paper or

other reinforcing material;

(ix)“powders and flakes” means all types of

powders and flakes, including dust, but excluding

powders and flakes prepared as colours, pigments,

paints or the like;

(x)“pipes and tubes” means a hollow product of

uniform cross-section having a continuous

periphery produced by drawing, casting or

extrusion process;

(xi)“hollow section” means a section which is

normally extruded, drawn or cast and the cross-

section of which completely encloses a void or

voids.”

It was held that rough rolled zinc as a pre-end product did not fall under Excise tariff

item number 26B (1978(2) ELT J-180 refers)

It was held that flat form of zinc known as zinc steel in the trade parlance was

classifiable under the tariff item 26B of the First Schedule to the Central Excise Tariff Act,

1985 (Number 5 of 1986). (1979 ELT J-674 refers)

With effect from 01.03.1986 the goods covered under this item were covered by the


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TARIFF ITEM 27 - ALUMINIUM

This item was brought under the Excise revenue net for the first time by the Finance

Bill, 1960, and was placed at Tariff Item Number 27 of the Central Excise Tariff, effective

from 01.03.1960, the definition of which read as under.

“27. (a) In any crude form including ingots, bars, blocks, slabs, shots

and pellets,

(b) The following manufactures, namely, plates, sheets, circles,

strips and foils in any form and size.”

In the year 1961, by Budget, sub item (c) was added as under

(c) Papers and Tubes

By Finance Act, 1962, sub item (b) was bifurcated as (b) and (bb) as under.

(b) the words „foils in any form and size‟ were deleted from (b) above;

and

(bb) „foils‟ that is a product of thickness (excluding any backing) not

exceeding 0.15 millimeters”

By Finance Bill, 1964, the entry against sub item (a) was substituted which read as

under.

(a) “manufactures the following, namely, plates, sheets, circles,

strips and extruded shapes and sections in any form or size”

By Finance Bill, 1977, the entry against sub item (b) was substituted with effect from

18.06.1977, which read as under.

“(b) manufactures, the following, namely, plates, sheets,

circles, strips, shapes and section, in any form or size; not

otherwise specified.”

By Finance Bill, 1981, after item (a) the following sub item as (aa) along with

Explanation III was inserted.

“(aa) Waste and Scrap.

Explanation III : “Waste and Scrap” means waste and scrap of

Aluminium fit only for the recovery of metal for use in the

manufacture of chemicals, but does not include sludge, dross,

scaling, Skimming, ash and other residuary.”

By Finance Bill, 1984, the entire tariff description was substituted as under.

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“27. Aluminium and Products thereof -

“Aluminium” shall include any alloy in which aluminium


(1) Unwrought aluminium in any form including ingots,

pigs, blocks, billets, slabs, notched bars, wire bars, shots

and pellets.

(2) Waste and scrap of aluminium

(3) Wrought bars, rods (including wire rods), angles,

shapes and sections of aluminium,

(4) Castings, not otherwise specified.

(5) Aluminium wire,

(6) Wrought plates, sheets, blanks (including circles) and

strips of aluminium

Explanation: In this sub item “blank” means a piece of

plate, sheet or strip in any shape, including a circle,

prepared for subsequent fabrication,

(7) Aluminium foil,

(8) Aluminium powders and flakes

Explanation: This sub item includes aluminium powders

mixed with other base metal powders, but does not include

powders or flakes, prepared as pigment paste, colours,

paints or the like,

(9) Pipes and tubes of aluminium

(10) Shells and blanks for pipes and tubes; hollow sections

or semi hollow sections of aluminium,

(11) Containers, plain, lacquered or printed or lacquered

and printed

Explanation: In this item –

(i) “waste and scrap” means waste and scrap

metal fit only for the recovery of metal by remelting

or for use in the manufacture of chemicals, but does

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not include sludge, dross, scalings, Skimmings, ash

and other residues;

(ii) “wrought bars, rods (including wire rods)” means


of solid section, of which the width or the

maximum cross-sectional dimension exceeds

six millimeters and which, if they are flat, have

a thickness exceeding one-tenth of the width;

or

(b) any cast or sintered products, of the same


subsequently worked after production

(otherwise than by simple trimming or

descaling), provided that they have not thereby

assumed the character of any article or

product falling under any other item;

(iii) “wrought angles, shapes and sections” means –


of solid section (other than round, rectangular,

square and hexagonal), of which the width or the

maximum cross sectional dimension exceeds six

millimeters and which, if they are flat, have a

thickness exceeding one tenth of the width; or

(b) any cast or sintered products, of the same


subsequently worked after production (otherwise

than by simple trimming or descaling), provided

that they have not thereby assumed the character

of any article or product falling under any other

item;

(iv)“wire” means rolled, extruded or drawn

product, of solid and uniform cross section of which

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no cross sectional dimension exceeds six

millimeters, but does not include electric wires and

cables falling under item No.33B;

(v)“plate” means a flat product of rectangular

section, generally cut to length, whose thickness is

six millimeters and above;,

(vi) “sheet” means a flat product of rectangular

section, generally cut to length whose thickness

exceeds 0.15 millimetre but is below 6 millimeters

and includes a corrugated or troughed sheet;

(vii) “strip” means a product of rectangular

section, supplied in coil or flat form, of thickness

exceeding 0.15 millimetre but below 6 millimeters

with length more than eight times the width;,

(viii) “foil” means a flat product of rectangular

section, of thickness (excluding any backing) not

exceeding 0.15 millimetre, whether or not

embossed, cut to shape, perforated, coated, printed

or backed with paper or other reinforcing material;

(ix) “pipes and tubes” means a hollow product of

uniform cross-section having a continuous

periphery produced by drawing, casting, extrusion

or welding process;

(x) “hollow section” means a section which is

normally extruded, drawn or cast and the cross-

section of which completely encloses a void or

voids,

(xi) “semi hollow section” means a section which is

normally extruded , drawn or cast and any part of

whose cross section is a partially enclosed void, the

area of which is substantially greater than the

square of the width of the gap;

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(xii)“container” means containers ordinarily

intended for packaging of goods for sale, including

collapsible tubes, casks, drums, cans, boxes, gas

cylinders and pressure containers, whether in

assembled or unassembled condition and containers

known commercially as flattened or folded

containers.

With regard to the classification of Aluminium, the department had clarified that

Aluminium powders and flakes, aluminium wires, Hollow Sections of Aluminium which

were classified under tariff item number 68 till 31.07.1984 were covered by the revised tariff

item number 27. This item was not to cover Electric Wires and Cables falling under tariff

item number 33B. Bare Aluminium wires finer than 10 SUG, which was not covered by

tariff item number 33B, was covered under the revised tariff item number 27 from

01.08.1984. Aluminium slags / studs used in the manufacture of aluminium containers were

classifiable under sub item (6) of revised tariff item number 27.

Recycling of waste or scrap as a raw material for the same end product in the same

factory did not amount to removal within the meaning of rule 56A(3)(iv)(a) on the basis of

newly added explanation to rule 9 and rule 49 of the Central Excise Rules, 1944. This was

removal from the factory in accordance with the provisions of rule 56A ibid. (1984(16) ELT

356 (T) refers)

Dross and Skimmings arising out of process of manufacture were not „goods‟ and

hence the same are not liable to any duty of excise. (1984 ECR 1871 (CEGAT) refers)

Conversion of duty paid sheets into circles was an act of manufacture and such circles

were dutiable unless there was any exemption or set of off duty to that effect. (1984 (18) ELT

319 (T) refers)

Aluminium strips made out of duty paid aluminium wire rods in coil were again liable

to the payment of duty of excise because the aluminium strips was an item which was

entirely different from aluminium wire rods, therefore, duty was leviable on the manufacture

of strips. The mere fact that the base product, aluminium wire rods, were already liable to the

excise duty was no ground to claim that the manufacture of aluminium strip was not liable to

the payment of the excise duty.

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With effect from 01.03.1986 the goods were classified under Chapter Heading 76 and

83 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986)

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TARIFF ITEM 27A - LEAD

This commodity was brought on the tariff schedule with effect from 28.05.1965 and

was placed at number 27A of the Central Excise Tariff, the description of which was read as

under.

―27A. Lead unwrought, including ingots, pigs, blocks,

anodes, slabs and cast articles.‖

By Finance Bill, 1984, the description of the entire tariff entry was amended, which

was as under.

―27A. Lead and products thereof.

―Lead‖ shall include any alloy in which lead


1) Unwrought lead (including argentiferous lead),

including ingots, pigs, blocks, anodes, slabs

cakes and cast sticks.

2) Waste and scrap of lead.

Explanation: In this sub item, ―waste and

scrap‖ means waste and scrap metal fit only for

the recovery of metal by remelting or for us in

the manufacture of chemicals, but does not

include slag, ash and other residues.

3) Pipes and tubes of lead.

4) Shells and blanks for pipes and tubes.

5) Wrought lead in the form of bars, rods, angles,

sections, shapes, wires, plates, sheets, circles,

strips and foils.‖

With effect 01.03.1986, these goods were classified under Chapter Heading 78 of the

Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986)

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TARIFF ITEM 28 -

TIN PLATE & TINNED SHEETS INCLUDING

INCLUDING TIN TAGGERS & CUTTINGS OF SUCH PLATES, SHEETS AND

TAGGERS

These goods came on the tariff schedule with effect from 01.03.1960 as they were

introduced by the Finance Bill, 1960, and the same was placed at tariff item number 28 of the

Central Excise Tariff. The description of which read as under.

―28. Tin plate and tinned sheets including tin taggers

and cuttings of such plates, sheets and taggers.‖

However, by the Finance Act, 1977, the entire tariff description underwent a change and was

substituted as under.

―28. Tin plate and tinned, lacquered or varnished

sheets including tin taggers and cutting of such plates,

sheets or taggers -

1) Tin pate and tinned sheets including tin

taggers and cuttings of such plates, sheets or

taggers.

2) Lacquered sheets, varnished sheets,

including cuttings of lacquered sheets and

varnished sheets.‖

This tariff item was omitted by the Finance Bill, 1983.

With effect from, 01.03.1986, the said goods were covered by Chapter Heading 72

and 80 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986)

-- -- -- --

There have been certain commodities which have been omitted from the Central Excise

Tariff due to some reason or the other (or why they were omitted was known best only to the

Government) so it is likely that a question will arise why these commodities were again

covered under various chapters of the Schedule to the Central Excise Tariff Act, 1985

(Number 5 of 1986). This is so because this Schedule is based on the internationally

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standardized nomenclature and/or Brussels Trade Agreement. This schedule is an indication

of India‟s excise structure, and the principle appears to be “there may be any revenue or not

but „anything under the sun is excisable‟”.

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TARIFF ITEM 28A – ELECTRICAL STAMPINGS

This tariff item was introduced in the Finance Bill, 1974 and was made effective

from01.03.1974 which was placed at tariff item number 28A of the Central Excise Tariff, the

description of which was as under.

“28A. Electrical Stampings and laminations, all sorts”

Stampings were made from a special type of steel known as „Silicon Steel sheets‟

which were mainly used for electrical equipments. However, in the instant case, the plates

were made of MS Steel Sheets and were used for mechanical protection in stators and rotors

and by themselves did not have any specific electric functions as a lamination or electrical

stamping. Accordingly they were not classifiable as electric stampings under this item. (1981

ELT 813 (Government of India) refers)

The tariff description of item number 28A was quite exhaustive and did not make any

distinction between electrical stampings or laminations made of steel or electrical grade steel.

Therefore, all electrical stampings and laminations, whether made of electrical grade steel or

otherwise, were covered within the purview of tariff item number 28A of the Central Excise

Tariff. (CBE&C Tariff Advice Number 9/76 dated 17.02.1976 refers)

Notification Number 95/83 permitted set off of duty paid on electrical stampings and

laminations against the duty payable in respect of electric motors if used therein. Similarly,

the duty paid on the electric motors was allowed set off if the motors were used in the

electric fans. Admittedly, the appellants have not paid any duty on the electric motors

because they were exempted from the payment of the duty of excise. Therefore, the

Appellants were not entitled to claim the benefit of proforma credit on stampings and

laminations towards payment of duty on electric fans manufactured by them. (1984(16) ELT

264(T) refers)

With effect from 01.03.1986, these goods were classified under the Chapter Heading


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TARIFF ITEM 29 - INTERNAL COMBUSTION ENGINE

By the Finance Bill, 1960, this item was introduced for the first time on 01.03.1960,

which was placed at number 29 of the Central Excise Tariff, the description of which read as

under.

―29. Internal Combustion Engines, All Sorts, namely,

i) Those designed for use as a prime mover for

transport vehicles and have been given for that

purpose some special shape or size or quality

which would not be essential for their use for

any other purposes.

ii) Others.‖

Internal Combustion Engines designed for the forklift trucks were classifiable under

tariff item number 29 of the Central Excise Tariff. (1984(12) ELT 543 (T) refers)

With effect from 01.03.1986, the goods falling under this item were classified under


1986)

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TARIFF ITEM 29A - AIR CONDITIONING MACHINERY, ALL SORTS.

This item came on the Tariff Schedule with effect from 01.03.1961, which was

introduced for the first time by Finance Bill, 1961. It was placed at Tariff Item Number 29A

of the Central Excise Tariff, the description of which read as under.

―29A. Air Conditioning machinery, All Sorts.

However, with effect from 22.06.1962, the tariff description of this item was amended

as under.

―29A. Refrigeration and parts thereof such as are

specifically designed for the use with the refrigeration.‖

The description of this tariff entry again underwent a change and the same was as

under.

―29A. Refrigerating and Air-conditioning appliances

and machinery, all sorts, and parts thereof

1. Refrigerators and other refrigerating appliances,

which are ordinarily sold or offered for sale as

ready assembled units, such as ice makers, bottle

coolers, display cabinets and water coolers.

2. Air conditioners and other air conditioning

appliances, which are ordinarily sold or offered for

sale as ready assembled units, including package

type air conditioners and evaporative type of

coolers.

3. Parts of refrigerating and air conditioning

appliances and machinery, all sorts.‖

This means that the tariff item number 29A and number 40 were merged together to

form an item number 29A. There is no change in the description of this item since then.

As per the Board‟s letter bearing Number 49/12/61 CX-IV dated 01.01.1962, the

Board decided that for the present the following main functional parts of refrigerators be

only assessed to the duty of excise as „parts of refrigerators‟, that is to say,

i) Cooling Coils or Evaporator,

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ii) Compressor,

iii) Condenser,

iv) Thermostat,

v) Cooling unit, and in the case of absorption types of

refrigerators in which there was no compressor, heaters,

vi) Starting relay and Control/Pressure switch,

vii) Overload protection/Thermal relay.

The rate of duty of excise originally was 20%, 20% and 30% ad valorem respectively

was steeply increased in the year 1984 to 80%, 110% and 125% respectively. This

enhancement in the duty of excise showed that there was no rationality in taxation. In India,

there was a socialistic pattern of society and it was treated that air-conditioners, refrigerators

as luxury goods or high quality of goods utilized by the rich people and as such highly

prohibitive taxes were levied. It was a myth and no reality that air-conditioners, refrigerators

were used by the rich. It had other essential uses in the fields like production/manufacturing

or medical, etc.

X Ray film processing unit, which had refrigeration or cooling process attached or

built into it, was classifiable as a refrigerating appliance under this item. Reversing the trial

court‟s judgment, the appellate authority decided that this item was inapplicable. It was

observed that though a cooling process was attached to an X Ray processing unit, the basic

and predominant purpose and nature of the X Ray processing unit, namely, to develop X Ray

films, did not change. The cooling effect achieved by the cooling process built into the

system was secondary. The basic character and the purpose of the unit, which was X Ray

film processing, remained unaltered. The only effect of the combination of the cooling

process with the processing unit was to get better results, since the unit was indigenously

manufactured by the assessee for the first time there was no question of finding out the trade

nomenclature. (1981 ELT 344) refers.

A cooling plant used to cool caustic soda solution used for mercerizing process in

textile mills was a refrigerator. (13 STC 102 refers)

In a sales tax case spray booths, dust collectors and textile humidification plant were

held not classifiable as air conditioners. An air conditioner should be one which should

enable not merely the cooling of the atmosphere in an enclosed place but it should control the

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temperature by a device of adjustment helping to lower or increase the temperature to the

required degree. (29 STC 454, 458 refers)

The fact that Amerio Plate Freezer was imported without the condensing unit

compressor, motor pump and cooling tower was held irrelevant, if it could be sold as an

assembled unit. That was sufficient to attract countervailing duty on the basis of this item.

(1979 ELT (J-81) refers)

Since a stabilizer had a separate identity of its own and was sold in the market as such

and as refrigerators can work without a stabilizer in tows where there was no voltage

fluctuation, the voltage stabilizer cannot be treated as an inseparable part of a refrigerator and

its cannot be added to the assessable value of the refrigerator. (1979 ELT (J-111) (Appl Coll)

refers).

Cooling coils and condensers were not covered by this item as this item specially

referred to and restricts the applicability of duty to goods which were assembled units and

which were generally offered for sale (1979 Cencus 283D, 1980 ELT 600 refers)

With effect from 01.03.1986 these goods were classified under Chapter Heading 84,

85 and 90 respectively of the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of

1986)

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TARIFF ITEM 30 - ELECTRIC MOTORS, ALL SORTS, AND PARTS THEREOF

By the Finance Bill, 1960, this tariff item was introduced for the first time for the duty

of excise and was placed at number 30 of the Central Excise Tariff, the description of which

was as under.

―30. Electric Motors, all sorts, and parts thereof, namely -

1) Those designed for use in circuits of less than 10

amperes and at a pressure not exceeding 250 volts,

2) Those designed for use in circuits at a pressure

exceeding 400 volts, and

i) with a rated capacity not exceeding 10 HP

ii) exceeding 10 HP

3) All Others

4) Parts of Electric Motors‖

Originally on 01.03.1960 the item number was 31; however, with effect from

20.09.1960, this article was placed at tariff item number 30.

With effect from18.06.1977, the tariff description of this item was substituted which

read as under.

―30. Electric Motors, All Sorts and parts thereof, namely,

(A) Motors which operate on alternating current

1. Single Phase motors

2. Three Phase motors

(i) For rated output not exceeding 7.5 Kw

continuous rating or, in the case of short

time or intermittent rated motors, its

equivalent continuous rating

(ii) For rated output exceeding 7.5 Kw

continuous rating of, in the case of short

time or intermittent rated motors, its

equivalent continuous rating.

(B) Motors which operate on direct current

(i) With rated output not exceeding 7.5 Kw

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(ii) With rated output exceeding 7.5 Kw

(C) Parts of Electric Motors

Explanation I: In the case of any multi-speed motor, the

highest rated output of the motor shall be deemed to be

the rated output of the motor.

Explanation II: This item does not include motors

specially designed for use in gramophones or record

players and all parts of such motors.‖

By Finance Bill, 1978, sub item „C‟ of item number 30 was inserted as under.

―C. Motors which were capable of operating on

alternative current or direct currents.‖

And “Parts of Electric Motors” was numbered as sub item „D‟

By Finance Bill, 1982, Explanation (3) was added, which read as under.

“Explanation III: This item includes motor equipped with gear

or gear boxes.‖

By Finance Bill, 1983, sub item „D‟ was substituted as under.

―D. Parts of Electric Motors including die cast rotors.‖

Raw die cast rotors were not classifiable under tariff item 30(4) of the Schedule (1980

ELT 6 refers)

Since by fitting the electric motor to a pumping set, another product with a distinct

identity and distinct name was not brought into existence, excise duty payable on electric

motor cannot be included in the value of the power driven pump of which the electric motor

forms a part (1981 ELT 18 refers)

The main function of the pump was to shift or to lift liquid from one point to another

or from a lower point to a higher point by rotating action of the shaft and the impellers. Thus

it converts mechanical energy into kinetic energy of the liquid which was forced out by great

pressure from the pump itself, It was the bowl assembly that perform all these functions and

hence it alone can be called “power driven pump” classifiable under this item. The column

assembly, discharge head assembly, pre-lubricating tanks, lubricator, suction pipe, depth

indicator and strainer contribute to the effectiveness of the bowl assembly, but they do not

perform the essential function of a power driven pump in building up pressure in liquid.

Hence they were not components or essential parts or accessories of power driven pumps

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classifiable under 30A, even though they may attract duty under a different item (1979 ELT

J-546) refers.

This item referred to pumps driven by an external source of power. Pumps, which

were not driven by an external source of power, were not covered by this item. Since the

source of power of Barmag precision gear pumps was not an external force, this item did not

cover them. (1981 ELT 722 (Government of India) refers)

With effect from 01.03.1986 this commodity was classified under the Chapter

Heading 85.01 and 85.03 (being parts thereof) of the Schedule to the Central Excise Tariff

Act, 1985 (Number 5 of 1986).

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TARIFF ITEM 30A – POWER DRIVEN PUMPS

This item was first introduced by the Finance Bill, 1969, and was made effective from

01.03.1969, which was placed at tariff number 30A of the Central Excise Tariff, the


―30A. Power driven pumps (including motor pumps, turbo

pumps and mono block pump sets) for liquids whether or

not fitted with the necessary devices‖

The description given above of this tariff item was as per HSN Heading or Brussels

Trade Nomenclature.

By a Notification dated 01.03.1978 the following Power Driven Pumps were

unconditionally exempted wholly from the payment of duty of excise leviable thereon.

A) Centrifugal Pumps (Horizontal or Vertical),

B) Deep Tube well turbine pump,

C) Submersible pumps, and

D) Axial Flow and Mixed Flow Verticle Pumps.

These pumps were primarily designed for handling water and were used mainly in

irrigation.

Since by fitting the electric motor to a pumping set, another product with a distinct

identity and distinct name was not brought into existence, excise duty payable on electric

motor cannot be included in the value of the power driven pump of which the electric motor

forms a part (1981 ELT 18 refers)

The main function of the pump was to shift or to lift liquid from one point to another

or from a lower point to a higher point by rotating action of the shaft and the impellers. Thus

it converts mechanical energy into kinetic energy of the liquid which was force out by great

pressure from the pump itself It was the bowl assembly that perform all these functions and

hence it alone can be called “power driven pump” classifiable under this item. The column

assembly, discharge head assembly, pre-lubricating tanks, lubricator, suction pipe, depth

indicator and strainer contribute to the effectiveness of the bowl assembly, but they do not

perform the essential function of a power driven pump in building up pressure in liquid.

Hence they were not components or essential parts or accessories of power driven pumps

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classifiable under 30A, even though they may attract duty under a different item (1979 ELT

J-546) refers.

This item referred to pumps driven by an external source of power. Pumps, which

were not drive by an external source of power, were not covered by this item. Since the

source of power of Barmag precision gear pumps was not was not an external force, this item

did not cover them. (1981 ELT 722 (Government of India) refers)

With effect from 01.03.1986 this commodity was classified under the Chapter

Heading 84.13 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986).

TARIFF ITEM 30B - MOTOR STARTERS

This commodity was brought into the Excise net for the first time by Finance Bill,

1971, with effect from 29.05.1971, and was placed at Tariff Item Number 30B of the Central

Excise Tariff.

The original description of this Tariff Item, that is to say, “Motor Starters” had not

changed since then.

Electrical Control Panel assemblies used as components of hoists essentially perform

“start” and “stop” functions like a motor starter and were classifiable under the Tariff Item

30B and not under Tariff Item Number 68 (Residuary Items) of the Central Excise Tariff.

With effect from 01.03.1986, the goods falling under this category were classified


(Number 5 of 1986)

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TARIFF ITEM 32 -

ELECTRIC LIGHTING BULBS AND FLUORESCENT LIGHTING TUBES

This commodity was initially introduced by the Finance Act, 1955 (Number 15 of

1955) and was placed at Tariff Item Number 19 of the Central Excise Tariff (which,

however, was re-numbered as Tariff Item Number 32 with effect from 20.09.1960, the


―32. Electric Lighting Bulbs and Fluorescent Lighting Tubes -

1. Vacuum and Gas filled bulbs –

(i) not exceeding one hundred watts and train lighting

bulbs,

(ii) exceeding one hundred watts but not exceeding

three hundred watts and engine head light bulbs,

(iii) exceeding three hundred watts.

2. Fluorescent Tubes

3. Sodium and Mercury vapour discharge lamps, and

4. All Sorts, not otherwise specified.‖

Electric Lighting Bulbs of the type commonly known as “Miniature Lamps” were

exempted from purview of the duty of excise under Notification Number 18/55-CE dated

18.04.1955.

Miniature Lamps, as the word implied “generally the lamps of small size”. One of the

distinguishing features of all these miniature lamps was that their caps were small and they

did not fit into the sockets provided for bulbs used for house lighting and ordinary

illumination purposes. The miniature lamps were generally used for operations on voltages

not exceeding 24 exceeding telephone switchboard lamps which were also used on voltages

higher than 24. It was, however, pointed out in this connection that there were some train

lighting lamps which operated on 24 volts but, as far as it was known, they were fitted with

the standard bayonet caps (as were used for the common house lighting lamps) and,

therefore, were easily distinguishable from the other categories of miniature lamps. (Central

Board of Revenue‟s letter bearing No.5/32/55 CXM II dated 15.09.1955 refers)

There were the miniature bulbs for the automobiles (as head lamps, side lamps and

tail lamps), for flash lights, cycle dynamo lamps, illuminating radio dials and panels,

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telephone switch board series, decorative lamps and for miner‟s safety lamps. Photoflash

bulbs were classifiable under the Tariff Entry Number 32(4) of the First Schedule to the

Central Excise Tariff Act, 1985 (Number 5 of 1986).

For the first time, with effect from 01.03.1969, the Central Excise duty was imposed

on the Domestic Electrical Bulbs and this excise coverage included all types of domestic

electrical appliances, other than the appliances falling under the Notification Number 16/69-

CE. However, this was replaced with effect from 18.06.1977.

Bulbs for neon ignited lamps, neon flood flash, neon flash lamps, LED lamps, exciter

lamps, which were used for illuminating cine film sound track were classifiable as electric

light bulbs, falling under tariff item number 33(iv) of the Central Excise Tariff. (1976 LR

1430 (CAL) refers)

The Government, by Notification Number67/83-CE dated 01.03.1983 exempted the

following goods from so much of duty of excise leviable thereon at the rates specified in the

said First Schedule as was in excess of the amount calculated at the rates specified therein

respectively

Sr. No. Item

No

Description Effective Rate

01 32(1) Visual Indicator Lamps used in telephonic and

telegraphic switch boards and for allied purposes

Ten per cent

02 32(1) Miniature Bulbs Ten per cent

03 32(1) Krypton or Argon gas filled bulbs (lamps) for

miner‟s cap lamps

Nil

04 32(1) Vacuum and Gas filled bulbs not exceeding sixty

watts, other than those specified in Sr. No (1) to (3)

above

Nil

05 32(2) Fluorescent Lighting Tubes Twenty percent

ad valorem

Explanation I: For the purposes of this Notification,

“Miniature Bulbs” shall mean only such bulbs or lamps

excluding Krypton or Argon gas filled bulbs (lamps) for

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Miner‟s cap lamps which have the following wattage and

dimensions, namely –

i) wattage not exceeding six watts,

ii) length less than thirty mm (nominal), and

iii) diameter less than eighteen mm (nominal)

Explanation II: For the purposes of determining, under this

Notification the classification and nomenclature of bulbs or

lamps, or, as the case may be, the wattage, length or diameter

of bulbs or lamps, the definition as well as the procedure for

testing, including allowances for tolerances as prescribed in the

Indian Standards Specifications shall be adopted.

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TARIFF ITEM 33 - ELECTRIC FANS

This commodity was brought into the Excise net by the Finance Act, 1955

(Number15 of 1955) dated 27.04.1955 and was placed at tariff item number 18, which,

however, was re-numbered as tariff item number 33 vide Act Number 38 of 1960 dated

20.09.1960. The definition of this item was as under.

33. Electric fans, including air circulators but

excluding those which were designed for use in an

industrial system as parts indispensable for its

operations and have been given for that purpose some

special shape or quality which would not be essential

for their use for any other purpose, and parts of such

electric fans, that is to say -

1. Table, Cabin, Carriage, Pedestal and Air

Circulator Fans not exceeding sixteen inches

2. All other fans,

3. Following parts of fans mentioned above, namely,

complete motors, stators and rotors -

a) if designed for use in respect of any fan falling

within sub item (1)

i) Complete motors,

ii) Stators,

iii) Rotors

b) if designed for use in respect of any fan falling

within sub item (2)

i) Complete Motors,

ii) Stators,

iii) Rotors‖

For the purpose of the assessment of the duty of excise, sixteen inches electric fans

were considered as Cabin fans under the tariff item 18(1) and were exigible to Central Excise

duty at the rate of rupees five per fan.

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It was decided by the Government that complete warping fan which was used for

warping machine in the Textile Mill as well as several other industrial types of fans which

have been given a special shape or quality which would not be essential for their use for any

other purposes was not liable to the duty of excise under tariff item number 30 as “Electric

Fans.” However, the electric motors, which drive these warping fans or other industrial types

of fans, were liable to the duty of excise at the appropriate rates as applicable.

Exhaust Fans were assessed to the duty of excise under tariff item number 33(2) of

Central Excise Tariff attracting the excise duty at the rate of rupees fifteen per fan

irrespective of the size of fan. The duty on turntable circular fans, which had blades of size

21cms, was chargeable to the duty of excise at the rate of rupees five per fan. Besides,

twenty per cent excise duty was also required to be paid.

A doubt was raised as to what were the components and accessories, which constitute

an electric fan, designed for use in an industrial system, for the purpose of sub item number

(2) of tariff item 22 of the First Schedule to the Central Excises and Salt Act, 1944. The

Central Board of Revenue, after consulting the Director General of Technical Development

and Indian Standards Institution, advised that for the purpose of sub item (2) of tariff item

number (33), the industrial fan had to include the impeller, its shaft, its bearings, the casing

within which the impeller rotates, the flared duct connected thereto, if any, the pedestal and

also the motor if it forms an integral part of the fan, i.e. without being connected through a

belt or coupling.

“Multi-purpose Fan” or “All Purpose Fan”, that is to say, the fan which could be

hung on the wall, used as a table fan or a cabin fan or a ceiling fan, was classified under tariff

item number 33(1) of the First Schedule to the Central Excise Tariff Act, 1985 (Number 5 of

1986).

Partial exemption was granted by the Notification Number 46/84-CE dated

01.03.1984 to this category as under.

Sr. No. Sub Item No. Description

1. (1) Electric fans of a diameter (blade sweep) not exceeding 40.6

centimeters and regulators therefor

(a) Table Fan

(b) Cabin, Carriage, Pedestal and Air Circulator Fans and

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Circulators therefor

2 (3) Electric fans, not otherwise specified

(a) Ceiling Fans of diameter (blade sweep) not exceeding

107 cms.

(b) Others

3 (3) Regulators

The assessable value of ceiling fans was inclusive of the value of regulators but in

cases, where a manufacturer had billed the fan without regulator and sold the regulators

separately, it was not possible to include the value of the regulators in the value of the fan for

the purposes its assessment.

Regulators, Switches and Resistance Box for Carriage Fan, when they were supplied

independently for use with railway, Carriage Fans, were not classifiable as “regulators”

under tariff item number 33(1).

Air circulating device fitted in room heater and cylindrical rotary by itself was not

classifiable under tariff item 33 as Electric Fans.

Gear Fan was simply a fan with switch with seven inches blade size, meant for air-

cooling, and such Gear Fans, were leviable to the duty of excise as they were classifiable

under the Central Excise tariff Item Number 33(I).

The distinction between Blower and Compressor was purely on the basis of the

pressure it produced, that is to say, when the machine produced lower pressure it was termed

as “blower” and when it produced higher pressure it was known as “compressor.”

Tariff Item 33 of the Central Excise Tariff encompassed within its scope, blowers in

the category of fan, which was also testified by the Chambers Technical Dictionary as well

as Entry84.11 of Brussels Trade Nomenclature, classifying the fans and blowers together

having similar uses. Therefore, it was stated that they were known in technical as well as the

trade parlance as fans classifiable under tariff item number 33 of the Central Excise Tariff.

In accordance with the ISI specifications as also with the trade practice a Regulator

was a part and parcel of a Ceiling Fan, unless the latter was of a type designed to work

without the former. Moreover, no customer would buy a fan without a regulator with the

consequences that the assessable value of the regulator was liable to be included in the cost of

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the fan under Section 4 of the Central Excises and Salt Act, 1944, and also under the tariff

item number 33 as it stood even before its amendment from 17.06.1977.

SSI exemption for clearance value upto first rupees one hundred lacs leviable thereon

was available to this commodity.

With effect from 01.03.1986, Electrical Fans were classifiable under Chapter Heading

84.14 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986).

At present this item attracts the duty of excise at the rate of sixteen per cent ad

valorem.

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TARIFF ITEM 33A - WIRELESS RECEIVING SETS

This item was brought into the Excise net by Finance Bill, 1961, and was made effective

from 01.03.1961. Initially, the tariff description was under

―33A. Wireless Receiving Sets, All Sorts, Including Transistor

sets and Radiograms with or without Loudspeaker.‖

By Finance Bill, 1972, two sub items were created as under.

―33A. Wireless Receiving Sets, All Sorts, including

Transistor Sets and Radiograms, with or without

Loudspeaker

1. Broadcast television receiver sets

2. Others

By Finance Bill, 1975, the tariff description was substituted as under.

―33A. Wireless Receiving Sets, All Sorts, including any

combination of two or more of the following, namely, Broadcast

Television Receiver sets, Radios including Transistor sets,

Gramophones (including Record Players, Record Playing Decks

and Record Changing Decks) and Tape Recorders (including

Cassette recorders and Tape Decks), in each case whether with or

without loudspeakers -

1. Broadcast Television Receiver Sets,

2. Radios (including Transistor Sets),

3. Radiograms (including radio or transistor sets with

extra space in cabinet for fitting in record players

or record changers),

4. Others‖

By the Finance Bill, 1976, the tariff description underwent an amendment, which read

as under.

(a) “For the entries in the third column against sub

items (2) and (3), the entries ‗four hundred rupees

per set‘ and ‗four hundred rupees per set‘ shall

respectively be substituted,

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(b) for the entry in the second column against sub item

(3) the entry - ―Radiograms (including radio or

transistor sets with extra space in cabinet for fitting

in record players or record changers) and

combination sets of radios (including transistor

sets) and tape recorders (including cassette

recorders and tape desks‖ shall be substituted,

By Finance Bill, 1977, again the tariff description was amended and the following

was substituted

(a) in the second column - “Tape Recorders (including

Cassette Recorders and Tape Decks) and Tape

Players” (including Cassette”)

(b) for the entry in the second column against sub item (3),

the entry “Radiograms (including radio or transistor

sets with extra space in cabinet for fitting in record

players or record changers)” shall be substituted,

(c) for each of the entries in the third column against sub

items (2), (3) and (4), the entry “thirty five per cent ad

valorem” shall be substituted.

Closed Circuit television sets which accepted only video signal and not wireless

signal, did not fall within the specification of broadcast television receiver set under tariff

item 33A of the Central Excise Tariff (Tariff advice of the Board bearing No.16/72 dated

11.12.1972 refers)

In the case of TV cum Radios where the radio circuit and power supply circuit were

common for both the items and when one worked the other cannot function such whole

composite unit was classified and assessed as television set including the value of radio under

tariff item number 33A(1). In the case of transistor cum tape recorders, since these two

appliances are independent but these are only combined together for the sake of convenience

the excise duty will be charged on the transistor and tape recorder separately at each stage.

(Circular of the Board bearing Number 1/75 (W.R.S.) dated 29.03.1975 refers)

Under Notification Number 208/77, Wireless Receiving Sets of a value of Rs.165/-

were exempted from the whole of the duty of excise leviable thereon. Manufacturer sold the

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sets to wholesale dealers at prices ranging at a price above RS.165/-but in their turn the

wholesale dealers sold these sets at a price above Rs.265/-, it was held that the manufacture

was entitled to the benefit of Notification 208/77 because he had sold the sets below Rs.165/-

and had no control over the dealers. (Order In Appeal No.2200/78, decided on 30.12.1978 by

the Appellate Collector of Customs and Central Excise, refers)

With effect from 1985 the goods covered by this item were classified under Chapter

Heading 85 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986)

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TARIFF ITEM 33AA - PARTS OF WIRELESS RECEIVING SETS

This item was first introduced under the Excise schedule with effect from 01.03.1968 which

was an outcome of Finance Bill, 1968, and was placed at Tariff Item Number 33AA of

Central Excise Tariff, the description of which was as under.

―33A. Parts of Wireless Receiving Sets (including parts of

Transistor Sets and radiograms), namely, electronic valves and

tubes, transistors and semi-conductor diodes‖

The tariff rate of duty of excise of this commodity was rupees five per piece.

By their letter bearing Number152/3/71 CX-4 dated 04.02.1972, the Board expressed

in unequivocal words that the diodes which were designed for and used in wireless receiving

sets were correctly classifiable under the tariff item number 33AA but the diodes which were

not designed for, and not capable of being used in the wireless receiving sets were not

covered under the tariff item number 33AA.

The Board, under their Tariff Advice Number 15/77 dated 14.04.1977 held that a

television set functions efficiently with a fixed antenna if it was located in close proximity to

a television broadcasting station. It has been, therefore, suggested that an external antenna

was not to be treated as an integral part of a television set and such antenna was not to be

covered under the Tariff Item Number 33AA. However, it was liable to be covered under

Tariff Item Number 68, i.e. Residuary Items, subject to fulfillment of the other conditions

attached thereto.

With effect from 01.03.1986, this commodity was classified under the Chapter 85 of

the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986)

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TARIFF ITEM 33B - ELECTRIC WIRES AND CABLES.

These goods were covered by the Excise net by the Finance Bill, 1962 and were made

effective from 24.04.1962, which were placed at Tariff Item Number 33B of the Central

Excise Tariff, the description of which was as under.

―33B. Electric Wires and Cables, All Sorts, not otherwise

specified -

i) Insulated Wires and Cables whether sheathed or

unsheathed, when designed for use in circuits of

less than ten amperes and at a pressure no

exceeding 250 volts

ii) All Others‖

This item was attracting the rate of duty of excise at the rate of fifteen per cent and

five per cent ad valorem respectively.

By Finance Bill, 1964, the description was amended to read as under.

―33B. Electric Wires and Cables, All Sorts, not otherwise

specified -

i) Insulated Copper Wires and Cables whether

sheathed or unsheathed, any core of which, not

being one specially designed as a pilot core, has a

sectional area of less than 8.0645 sq millimeters

and wires and cables of other metals and alloys of

not more than equivalent conductivity.‖

By Finance Bill, 1966, the sub item (1) was substituted to read as under.

―Insulated wires and cables of copper, aluminium and other

metals and alloys, whether sheathed or unsheathed, the conductor

of any core of which not being one specially designed as a pilot

core, has a sectional area not exceeding 1.5 sq millimeters in the

core of copper or not exceeding 2.5 sq millimeters in the core of

aluminium or of not more than equivalent conductivity as of

Copper in the case of other metals and alloys.‖

After sub item (ii), the following explanation was added, namely -

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―Explanation: The expression ―Electric Wires and Cables, All

Sorts‖ used in this item shall not include square or rectangular

conductors whether insulated or not.‖

The Aluminium scrap in the form of electric wires and cables of short length of

unstranded form could not be treated as electric aluminium wires classifiable under the Tariff

Item Number 33B (1982 ELT 643 (Government of India) refers)

Since the function of the bare coppers wires in 30, 40 and 45 SWG was to carry

electric current, their classification as „Electric Wires and Cables‟ falling under the Tariff

Entry Number 33B was correct (1980 ELT 577 (CBE&C) refers)

Insulated Aluminium Cables with sectional area of 2.545 square millimeters were

assessable to the duty of excise under Central Excise Tariff Item Number 33B(ii). (1979 ELT

(J-27) (KER) refers)

With effect from 01.03.1986, this commodity was covered under the Chapter Heading


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TARIFF ITEM 33C - DOMESTIC ELECTRICAL APPLIANCES

This item was covered by the Excise revenue net, for the first time, by the Finance

Bill, 1969, which was placed at Tariff Entry Number 33C of the Central Excise Tariff, the


―33C. Domestic electrical appliances, not elsewhere specified.

Explanation I: ―Domestic electrical appliances‖ means

electrical appliances normally used in the household and

similar appliances used in hotels restaurants, hostels, offices,

educational institutions, hospitals, train kitchens, aircraft or

ships, pantries, canteens, tailoring establishments, laundry

shops and hair dressing saloons.

Explanation II: Interchangeable parts or auxiliary devices

accompanying an appliance to make it suitable for various

purposes shall be assessed to duty along with the appliances.‖

By Notification dated 01.02.1969 following appliances were made dutiable.

01. Vacuum Cleaners,

02. Floor Polishers,

03. Grinders and Mixers,

04. Juice Extractors,

05. Cream Whippers and egg beaters,

06. Clothes Washing machines,

07. Dish Washing machines,

08. Automatic smoothing irons fitted with device for

automatic regulation of temperature,

09. Geysers and water heaters, all types but excluding

immersions heaters,

10. Water Boilers,

11. Shavers,

12. Hair dryers, Hair curlers, permanent waving apparatus

and curling tong heaters,

13. Massage apparatus,

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14. Kettles, Sauce Pans, steamers, coffee makers (including

percolators of the domestic type), cookers, egg boilers,

frying pans,

15. Toasters,

16. Hot Plates, cooking ranges, grillers, boiling plates, plate

warmers, food warming trollies, hot food cabinets,

17. Coffee roasting appliances,

18. Room Heaters fitted with air circulation device,

19. Ice cream churners,

20. Domestic ovens, of all types, and

21. Rectangular Beverage Jug (Hot).

As to the scope of this item, it was the electric element or motor or rotor or starter,

which gave the specific character to the goods of the description as electric appliance. Unless

electric parts were fitted into it by which the said appliance worked, the rest of the

assemblage was only a domestic appliance, which could not be covered under the description

of „electric appliance‟ falling under tariff item number 33C of the Central Excise Tariff.

(1981 ELT 121 (Guj) refers)

Since “flour grinding mill‟ was not an electric appliance, as such, it was not

classifiable under tariff item number 33C of the Central Excise Tariff. (1981 ELT 121(Guj)

refers)

Electric automatic pressure cookers were classifiable under tariff item number 33C of

the Central Excise Tariff.

Steam pressing equipments with device for automatic regulation of temperature were

appropriately covered under tariff item number 33C and were chargeable to countervailing

duty under Sr. No. 8 of the Notification Number 33/69-CE dated 01.03.1969 (as amended)

Wet Grinder, which had a detachable electric motor with a „V‟ Belt arrangement for

transmission of motion, was classifiable as a domestic electrical appliance under tariff item

number 33C of the Central Excise Tariff. (Tariff Advice Number 27/29 dated 18.06.1969

refers)

As per Board‟s letter Number 46/2/69 C.E.9 dated 15.01.1970, Notification Number

33/69-CE dated 01.03.1969 was to be construed as referring only to such appliances having

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in-built electrical devices to operate them instantaneously when connected with the main or

with power. In other words, the appliances referred to in the notification which did not have

in-built electrical devices did not attract the levy.

Certain accessories of water heaters such as, (1) Heating elements, (2) Templates, (3)

Lead Pipe Connector, (4) Gaskets, (5) Jewel Light Assembly, (6) Terminal Board, (7)

Pressure Release Valves, (8) Fixing Bolts, (9) Resistance Wires, and (10) Thermostats,

supplied with water heaters were not covered by the „Explanation‟ to tariff item number 33C

of the Central Excise Tariff, as these items were neither interchangeable parts for alternate

uses (like dry grinders, meat mincers, etc, supplied with mixies) nor they were accessories to

be treated as part and parcel of a mother item for its functioning or installation. Therefore, no

duty was chargeable on them nor their value was added for the purpose of assessment of

water heaters.

With effect from 01.03.1986, the goods covered under this tariff entry were classified

under Chapter Heading 84, 85 and 90 of the Schedule to the Central Excise Tariff Act, 1985

(Number 5 of 1986)

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TARIFF ITEM 33D - OFFICE MACHINES

For the first time, by Finance Bill, 1970, this commodity was brought on the Excise

taxation and was placed at tariff item number 33D of the Central Excise Tariff. This was

made effective from and the description of which was as under.

―33D. Office machines and apparatus, including typewriters,

calculating machines, cash registers, cheque writing machines,

accounting machines, statistical machines, intercom devices (but

excluding telephones) teleprinters and auxiliary machines for use

with such machines, whether in assembled or unassembled

condition, not elsewhere specified.

Explanation: The term ―Office machines and apparatus‖

shall be construed so as to include all machines and

apparatus used in offices, shops, factories, workshops,

educational institutions, railway stations, hotels and

restaurants for doing office work, for data processing and

for transmission and reception of messages.‖

By Budget, 1976, the words ―Computers including Central Processing Unit and

Peripheral devices‖ were deleted.

The words ―not elsewhere specified‖ after the words “or unassembled condition”

were added by the Budget 1976.

As regards the Ribbons for typewriter, it was decided by the Supreme Court of India

that typewriter ribbon was not a part of the typewriter (unlike spools) thought it may not be

possible to use the latter without the former. Just as aviation petrol was not a part of the

aeroplane not diesel was a part of a bus, in the same way ribbon was not a part of the

typewriter though it was not possible to type all or any matter without the same. ((1977) 39

STC 8(S.C.) refers)


the Chapter Heading 83, 84, 85, 90 and 91 of the Schedule to the Central Excise Tariff Act,

1985 (Number 5 of 1986)

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TARIFF ITEM 33DD - COMPUTERS

By the Finance Bill 1976, this tariff item was first introduced within the ambit of

excise revenue with effect from 16.03.1976 when it was placed at number 33DD of the

Central Excise Tariff and its definition was as under

―33DD. Computers (including central processing units

and peripheral devices), all sorts‖

There was exemption available to this commodity if cleared for display in any fair or

exhibition under the Notification Number 215/84-CE dated 09.11.1984.

As per the Central Board of Excise and Customs Tariff Advice Number 29/82 dated

03.06.1982 Floppy Disc Drives and Line Printers for use as peripherals NELCO 3000 system

were classifiable as peripherals of computers under item number 33DD of the Central Excise

Tariff for the purpose of levying of countervailing duty.

According to MF (DR&I) letter bearing 1(O.M.A.)/76 dated 01.05.1976, since the

notification number 148/76 did not indicate the tariff item under which the peripheral devices

were required to pay duty. Set off of duty was available under this notification irrespective of

whether the peripheral devices had discharged duty liability under the tariff item 33D or the

tariff item 33DD of the Central Excise Tariff.

This was very sensitive item of the excise and often the rate of duty kept on changing.

With effect from 01.03.1986, this tariff item was classified under Chapter heading


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TARIFF ITEM 33E - ELECTRICITY SUPPLY METERS

This item was introduced by the Finance Bill, 1971, for the first time, and was made

effective from 01.04.1971. It was placed at Tariff Entry Number 33E and the description of

which was read as under.

―33E. Electricity Supply Metres

Explanation: ―Electricity supply meters‖ means meters for

measuring and registering the amount of electricity

consumed in ampere hours or multiples thereof, or the

amount of electric energy consumed in watt hours or

multiples thereof.

Since then there has been no change in the tariff description of this item and with

effect from 01.03.1986 the goods covered by this commodity were classified under the


1986)

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ITEM 33F - MUSICAL SYSTEMS

This item was included into the excisable articles with effect from 18.06.1977, the


“33F. Musical systems commercially known as stereo or hi-fi

systems, namely,

(i) Stereo or hi-fi amplifiers.

(ii) Speakers and speaker systems housed in acoustically

designed enclosures which are ordinarily used as

attachments with stereo or hi-fi systems, or with radios

(including transistor sets), tuners, radiograms,

gramophones (including record players) and tape

recorders or players (including cassette recorders or

players) having in-built stereo devices.”

By the Notification No.70/81-CE dated 25.03.1981, the musical systems manufactured /

produced in small units were exempted with effect from 01.04.1981 from so much of the duty

of excise leviable thereon as is in excess of ten per cent ad valorem –

(i) if an officer not below the rank of an Assistant Collector of

Central Excise, was satisfied that the sum total of the value of

capital investment made from time to time on plant and

machinery installed in the industrial unit in which the said

goods, under clearance, are manufacture, is not more than

rupees twenty lakhs, and

(ii) if the aggregate value of clearances of the said goods, if any,

for home consumption, from such industrial unit, by or on

behalf of one or more manufacturers, during the preceding

financial year had not exceeded rupees one crore:

Provided that the aggregate value of the first clearance of the

said goods, for home consumption, at the reduced rate of duty

as specified in the abovesaid notification –

(i) by or on behalf of a manufacturer, from one or more

industrial units, or

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(ii) from any industrial unit, by or on behalf of one or more

manufacturers

shall not exceed, in either case, rupees fifty lakhs, in any

financial year

Provided also that nothing contained in this notification shall apply to a

manufacturer if the aggregate value of clearances of the said goods, if

any, for home consumption by him or on his behalf, from one or more

industrial units, during the preceding financial year had exceeded

rupee one crore --

Provided also that nothing contained in this notification shall apply if

the aggregate value of clearances of all excisable goods for home

consumption –

i) by or on behalf of a manufacturer, from one or more industrial

units, or

ii) from any industrial unit, by or on behalf of one or more

manufacturers,

had exceeded rupees two crores during the preceding financial

year.

Explanation I: While determining the sum total of the

value of the capital investment, only the face value of

the investment at the time when such investment was

made shall be taken into account, but the value of the

investment made on plant and machinery which have

been removed permanently from the industrial unit or

rendered unfit for any use shall be excluded from such

determination.

Explanation II: For the purposes of this notification,

“value” shall have the same meaning as in section 4 of

the Central Excises and Salt Act, 1944 (Number 1 of

1944).

Exemption was also granted to the musical system by Notification Number 215/84-

C.E. dated 09.11.1984 provided it was cleared for display in any fair or exhibition.

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The Ministry of Finance under its letter No.27/1/77-TRU dated 14.09.1977 directed

that amplifiers, which were commercially marketed as „Mono‟ amplifiers without hi-fi or

which were low fidelity amplifiers and were chargeable to duty under Tariff Item

Number37A before 1977 budget proposals were outside the scope of new tariff item 33F.

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TARIFF ITEM 34 -

MOTOR VEHICLES AND TRACTORS INCLUDING TRAILERS.

This commodity was brought under the excise net by the Finance Bill, 1956 and with

effect from 01.12.1956 it was placed at Tariff Item Number 27 of the Central Excise Tariff,

the description of which read as under.

―27. Motor Cars, including taxi cabs, driven by internal

combustion engines, with a carrying capacity of not more than

nine persons, but excluding -

i) 4 cylinder cars of not more than 20 horse power

by Royal Automobile Club (RAC) Rating,

ii) 6 cylinder cars of not more than 16 horse power

by Royal Automobile Club (RAC) Rating.‖

Prior to 20.09.1960, the goods covered by this tariff item were numbered at 27,

however, with effect from 20.09.1960, the same were renumbered as item number 34 of the


By Finance Bill, 1960, the description of this item was changed, that is to say –

―27. Motor Vehicles -

―Motor Vehicles‖ means all mechanically propelled

vehicles adapted for use upon roads, and includes a chassis

and a trailer, but does not include a vehicle running upon

fixed rails –

1. Auto cycles, motor cycles, scooters, auto

rickshaws and any other three wheeled motor

vehicle,

2. Motor Vehicles of not more than 16 HP by Royal

Automobile Club (RAC) Rating,

3. Motor cars of more than 16 HP by Royal

Automobile Club (RAC) Rating, constructed or

adapted to carry not more than nine persons,

4. Motor Vehicles, not otherwise specified‖

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The above description again underwent a change with effect from 18.06.1977, which

was as under.

―34. Motor Vehicles and Tractors -

I. Motor Vehicles -

―Motor Vehicles‖ means all mechanically propelled

vehicles, other than tractors, designed for use upon roads -

(1) Two wheeled and three wheeled motor vehicles,

(2) Motor Vehicles of engine capacity not exceeding

2500cubic centimeters – (i) Motor Vehicles with

body (ii) Other Motor Vehicles (including chassis

whether or not with cab)

(3) Motor Vehicles of engine capacity exceeding 2500

cubic centimeters

II. Tractors, including agricultural tractors.

Explanation I: ―Motor Vehicles‖ and ―Tractors including

agricultural tractors‖ shall include a chassis and a trailer

but shall not include a vehicle running upon the fixed rails,

Explanation II : For the purpose of this item, where a

motor vehicle is mounted, fitted or fixed with any weight

lifting or other specialized material handling equipment,

then, such equipment shall not be taken into account.‖

By the Finance Act, 1978, the tariff description was amended to read as under.

“34. Motor Vehicles and Tractors, including trailers.‖

Sub Item (iii) was added against which the words

―Trailers‖ were mentioned.

Explanation I was amended and the amended Explanation I was read as under.

Explanation I: ―Motor Vehicles, tractors, including agricultural

trailers and trailers shall include a chassis but shall not include a

vehicle running upon a fixed rail.‖

As to the scope of this item it was clarified that the duty of excise levied under tariff

item number 34 was not applicable to a motor vehicle, which was not suitable for use on

public roads. (1978 ELT (J-15) (KAR) refers)

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In the expression “adapted for use upon road” referred to in tariff item number 34 of

the Central Excise Tariff, the words “adapt” and “roads” were the key words. The word

„adapt‟ means „apt‟ or „fit‟ which was used in an adjective sense means „suitable‟ or „apt for

use‟, while the word „road‟ means a „public road‟ or a „highway‟ to which the public have an

access. Therefore the expression „adapted for use upon the road‟ referred to in Central

Excise Tariff item Number 34 means that the vehicle should befit or suitable to run on the

road but will not exclude vehicles which were suitable for use upon roads but were not

actually used as such for much of the time. (1980 ELT 423 (DEL) refers)

As to the distinction between agricultural tractors and ordinary tractors it was decided

that agricultural tractors were required to use various agricultural implements like a wood

board plough, a cultivator, etc, and hence they were fitted with a three point linkage,

hydraulic lift housing and position and draft control. On industrial tractors a hydraulic

system with draft control and position control was not provided because the industrial tractors

were used for hauling and material handling purposes only. (1984 (18) ELT 262 (BOM)

refers)

Rear dumpers were „motor vehicles‟ within the meaning of the Central Excise Tariff

item number 34. The mere fact that a motor vehicle was fitted with a specialized material

handling equipment did not take these dumpers out of the category of „motor vehicles‟.

(1981 ELT 305 (Government of India) refers)

Industrial Tractor Hauler was classifiable under Central Excise Tariff Item Number

34(3a) (now 34-II). (1983 ELT 1804 (T) refers)

Bus body mounted upon motor chassis could not be regarded as an accessory or spare

part of motor vehicle. (39 STC 44 (P&H) refers)

According to Central Board of Excise and Customs Tariff Ruling Number 6/67 dated

13.09.1967, “chassis” included chassis frame, wheels, brake, transmission, etc, assembly and

prime mover.

Trailers designed for being coupled to a vehicle were falling within the purview of the

tariff item number 34(4) of the Central Excise Tariff. However, the duty of excise was to be

charged at the stage when a trailer in an identifiable form came into existence that is to day,

immediately after the trailer was produced and before the air compressor or similar

specialised equipments were fitted on the trailer. (Board‟s Tariff Advice Number 41/75 dated

25.09.1975)

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Also by yet another letter bearing Number 45/4/61 CX 4 dated 20.04.1961, the

Central Board of Revenue, clarified that the Trailers conforming to the definition of a trailer

as given in the Motor Vehicles Act, was to be charged to the duty of Central Excise. The

definition as given in the said Act runs as follows.

“2(32) “Trailer” means any vehicle other than a side

car drawn or intended to be drawn by a motor vehicle”

As per MF (DR&I) letter bearing number 13/19/68 CX-4 dated 14.05.1968,

Bulldozers, scrapers, draglines, excavators were outside the purview of the tariff item number

34 of Central Excise Tariff.

Similarly, Road Rollers were excluded from the purview of the levy of Central Excise

under tariff item number 34 as per their letter bearing No.45/57/60 CX4 dated 17.08.1960

issued by the Central Board of Revenue.

With effect from 01.03.1986 the goods covered under this Chapter were classified

under the Chapter 87 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of

1986)

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TARIFF ITEM 34A –

PARTS AND ACCESSORIES OF MOTORMOTOR VEHILES,NOT OTHERWISE

SPECIFIED

This item was introduced for the first time by the Finance Bill, 1971 and with effect

from 01.04.1971 it was placed at Tariff Item number 34A of the Central excise Tariff, the


―34A. Parts and accessories of Motor Vehicles, not otherwise

specified.

Explanation: The expression ―Motor Vehicles‖ has the

meaning assigned to it in Item Number 34‖

The tariff description was again amended which read as under -

―34A. Parts and accessories of Motor Vehicles and tractors

{including agricultural tractors) not otherwise specified‖

With effect from 10.05.1979, the tariff item number 34A was substituted to contain

the following 15 specific articles, that is to say -

i) Break Linings,

ii) Clutch facings,

iii) Engine Valves,

iv) Gaskets,

v) Nozzles and Nozzle holders,

vi) Piston,

vii) Piston Rings,

viii) Gudgeon pins,

ix) Circlips,

x) Shock Absorbers,

xi) Sparking Plugs,

xii) Thin-Walled Bearings,

xiii) Tie Rod Ends,

xiv) Electric Horns,

xv) Filter elements, inserts and cartridges.

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Rest of the items were classified under the tariff item number 68 (Residuary Items) of

the Central Excise Tariff.

Thin Walled Bearings:

(1) The following types of bearing of thickness 3/16 or below were to be

considered as thin-walled bearings

i) Bearings for camshafts,

ii) Bearings for connecting rods (small end and big end);

and

ii) Bearings for crankshafts.

(2) For deciding the total thickness of the thin walled bearings, the thickness

of the lining of the metal (bearing metal) plus that of the shell was to be taken

into account. These bearings could be bi-metallic or multi-metallic.

(3) The bearings thicker than the thin-walled bearings described earlier were

to be considered as thick-walled bearings.

In the absence of any definition of „Thin Walled bearings‟, the petitioners own

declaration of 4mm thickness at the time of payment of duty was clear enough to indicate that

hey were at least upto the thickness of 4mm commercially known as „Thin-walled Bearings‟.

Further, if the Director General (Technical Development) had certified that thin-walled

bearings were of thickness upto 3.16” or 4.76mm, therefore, the thickness of 3.65mm of ISI

specifications could not be accepted. (1982 ELT 496 (Government of India)

As per the Board‟s Tariff Advice number 47/81 dated 03.06.1981, thin walled

bearings were the bearings, which were to be decided on the basis as to how they were

known in the market. The thin walled bearings falling under tariff item 34A were essentially

motor vehicle parts. When an article was described as a bush actually it functions as a

bearing primarily, it was to be classified as such but not otherwise.

As per yet another Tariff Advice Number 30/77 dated 10.08.1977 camps, U. Bolts,

Eye Bolts and nuts were liable to be covered under the tariff item number 34A of the Central

Excise Tariff.

Bangalore Trade Notice Number 219/72 dated 09.08.1972 directed that Sparking

Plugs which were so distinct in shape, size, dimensions, etc, as to make them incapable of

uses as parts of motor vehicles were to all beyond the scope of levy under tariff item number

34A of the Central Excise Tariff. However, in case sparking plugs were interchangeable and

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could not be distinctly identifiable as parts for industrial applications, they were required to

pay the duty of Excise under tariff item number 34A.

Washers were not to be treated as “Gaskets” and their value was not to be included in

the assessable value of gaskets. (Tariff Advice Number5/75 dated 15.03.1975 refers)

As to the meaning of parts and accessories, it was decided that a thing is a part of the

other only if the other is incomplete without it. A thing was an accessory of the other only if

the thing was not essential for the other but only adds to its convenience of effectiveness.

((1976) 38 STC 198(KER) refers)

In view of the fact that the said filters made in accordance with the drawings and

specifications of Kirloskar Cummins Limited were for predominant use in stationary and

industrial applications such as pumps, compressors, drilling rigs, generator sets, etc, these

were not classifiable as parts of motor vehicles under tariff item number 34A (1985(19) ELT

453 (T) refers)

„Belt Pulley‟ means a pulley over which a belt may pass to transit power to other part

of the machines. Even in a motor car, there used to be belt pulley and the rotational

movement was transmitted from the rotating fan via the belt in the tractor but was also used

in water pumps, threshers. It was also used as spare part, which could, thus be used in many

machines, such as motor car engines. It is true that the belt pulley when used in a tractor may

increase the utility of the tractor for agricultural operations but that by itself did not lead to

the inevitable conclusion that belt pulley attachment was an agricultural implement.

(1985(19) ELT 19(S.C.) refers)

Indian Standard Institution Specifications were often resorted to for the purpose of

deciding how the tariff entries were to be applied to various commodities in the market.

From paragraph 2 of the definition thereof it was obvious that an agricultural tractor was

designed primarily to operate various agricultural implements and machineries and paragraph

4 dealing with matching implements was also to indicate that agricultural implements were

designed to be used with agricultural tractors and agricultural tractors can be effectively used

only when agricultural implements were used with such tractors. Therefore, such implements

must be considered as accessories of agricultural tractors even under the ISI specifications.

(1984(18) ELT 262 (BOM) refers)

Seat covers could not be treated as adapted parts and accessories of motor vehicles.

(1970) 25 STC 277 (MYS) refers)

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With effect from 01.03.1986 the goods covered under this category were classified

under Chapter Heading 68, 73, 84, 85 and 87 of the Schedule to the Central Excise Tariff

Act, 1985 (Number 5 of 1986)

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TARIFF ITEM 34B -

FORKLIFTS AND PLATFORM TRUCKS

By Finance Bill, 1971 this commodity was, for the first time, introduced into the

Excise revenue net and with effect from 01.04.1971 it was placed at tariff item number 34B

of the Central Excise Tariff, the definition of which was as under.

“34B. Works Trucks, mechanically propelled, used for

short distance transport of handling of goods, the

following, namely -

iii) Forklift trucks,

iv) Platform trucks‖

Since then there has been no change in the description of this tariff item.

With effect from 01.03.1986 the goods covered under this tariff item were classified


(Number 5 of 1986)

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ITEM NUMBER 35 -

CYCLES, PARTS OF CYCLES OTHER THAN MOTOR CYCLES.

The duty of excise was imposed for the first time on this item by the Finance Bill,

1960. This item was numbered 29 and the description of this item read as under.

“29. Cycles, parts of cycles other than motor cycles.

i) Free wheels,

ii) Rims

Originally this item was appearing at number 29, however, with effect from

20.09.1960 the entire tariff schedule was substituted and also the item number was changed

to number 35 of the Central Excise Tariff.

By Finance Bill, 1976, while retaining the item description, the word „cycle‟ was

deleted.

Cycle spokes, nozzles and washers are classifiable under tariff entry number 68 and

not under tariff entry 35 (1983(12) ELT 547(Mad) refers).

Cycle dispatched in CKD condition as per the prevalent practice was classifiable

under tariff entry number 35 whereas assembling of CKD cycle parts into cycles was not to

be treated as manufacture. (1983(12) ELT 681 (Mad) refers)

In the field of taxation, at some point or other the question of interpretation of any

legal term often arises. The Hon‟ble Madras Tribunal had come across such a legal tussle and

it was held that as per the accepted cannons of interpretations, the word “namely” has a

meaning quite different from “such as” or “e.g.” or “the like”. The word “namely” is not

illustrative but restricts the scope of the Entry to the articles named therein. As regards the

appellant‟s argument of the Government‟s intention, it is also when the natural meaning of

the Entry is clear, there is no scope for any intendment or presumption. The position in the

instant case is that only free wheels and rims, which were specifically named in the item 35,

fell under that item and the subject spokes, nipples and washers, being neither specified in the

said item 35 nor in any other item of the tariff from 1 to 67, the department has correctly held

them to fall under the residuary item 68. (1983(12) ELT 547 (Mad) refers).

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TARIFF ITEM 37 - CINEMATOGRAPH FILMS

By Finance Bill, 1960, this was brought under the Excise net for the first time and

with effect from 01.03.1960 this was placed at number 32 of the Central Excise Tariff but

with effect from 20.09.1960 the tariff item was renumbered as item number 37, the


―37. Cinematograph Films exposed

1. News reels and shorts not exceeding 500

meters

i) Of a width of 30 mm or higher

ii) Below 30mm in width

2. Feature films, advertisement shorts, and

films not otherwise specified

i) Of a width of 30 mm or higher

ii) Below 30mm in width‖

There were separate rates prescribed for news reels and shorts not exceeding five

hundred metres and higher rates of duty of excise were prescribed for feature film,

advertisement shorts and the films not otherwise specified. The intention was that the duty

of excise was to be levied on each copy as finally edited by the producer and on the length

actually approved by the Film Censor Board as fit for public exhibition.

With effect from 01.03.1969 “Cinematograph film, unexposed” was brought under

the excise net and with effect from 18.06.1977 this tariff item was again re-numbered to read

as the tariff item number 37I and number 37II for Cinematograph Film Unexposed and

Cinematograph Film Exposed respectively. Since then the description of this tariff item was

not changed which reads as under.

―37. Cinematograph Films

(I) Unexposed

(II) Exposed

(A) News reels and shorts not exceeding 600 meters

(B) Feature film

(i) Not exceeding 4,000 mtrs

(ii) Exceeding 4,000 mtrs

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(a) Made wholly in black and white

(b) Made wholly or partly in colour

(III) Advertisement shorts and films not otherwise

specified

(a) Made wholly in black and white

(b) Made wholly or partly in colour‖

“Patch prints” were obviously “exposed cinematograph films” and they were covered

by II(2) of tariff item 37 (now 37-II(iii)) of Central Excise Tariff. According to the Board‟s

Tariff advice number 25/76 dated 15.10.1976 a „patch print‟ was a replacement of a portion

of feature films and a fragment of a complete feature film can not itself be called a „feature

film‟.

Micro Films were still pictures and hence were not classifiable as the cinematograph

film, which were motion pictures. As such the microfilms were not assessable under tariff

item number 37 of the Central Excise Tariff. (Board‟s Tariff Advice Number25/76 dated

15.10.1976 refers)

As to the distinction between “advertisement shorts” and “shorts not exceeding 500

meters”, the Central Board of Revenue, vide their letter bearing Number 42/6/60 CX-1 dated

09.08.1960, had clarified that “advertisement shorts” were to be taken to include (a) shorts

which advertise a commercial product, (b) shorts which advertise a commercial service, (c)

shorts which advertise a business or manufacturing concern, and (d) trailers of films; whereas

all other shorts, subject to their length being nor more than 500 mtrs were to be treated as

“shorts not exceeding 500 mtrs”

Censor Certificate length of film was hot an article of commerce and merely because

it was affixed to the main feature film, it could not be said to be the „excisable goods‟ and,

therefore, were not classifiable under tariff item number 37 of the Central Excise Tariff.

(1980 ELT 107 (BOM) refers)

Censor Certificate length of film was only a certificate annexed to a feature film in

compliance with the legal provisions and neither the people in trade nor the spectators treat or

understand it as a film or a feature film. Since mere attaching a censor certificate to the

original film no new and distinct product comes into existence, which could be called a

manufactured product, therefore, it was not liable to the duty of excise under tariff item 37 of

the Central Excise Tariff. (1983 ELT 754(BOM) refers)

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The Department paid a rich, befitting tribute to the honour of the Father of Nation, Mahatma

Gandhi, who not only fought for the freedom of India but also cultivated his principle of

non-violence, which lured the non-Indian personalities like Nelson Mandela.

By order Number 4/84 dated 09.05.1984, the department granted exemption from the

whole of the duty of excise leviable thereon under Section 3 of the Central Excises and Salt

Act, 1944 to the following patch prints, each measuring 179 ft in length of the film

“Mahatma” produced by Gandhi Film Foundation on the life of Mahatma Gandhi.

1. Early Years.

2. Birth of Satyagraha,

3. Emergence of Gandhi,

4. The Great Trial,

5. The Epic March,

6. New Challenges,

7. The Nation‟s Representative,

8. A Cry for Justice,

9. A Call of the Villages,

10. Quit India,

11. Hour of Destiny,

12. Pilgrim of Peace,

13. India liberated, and

14. Martyrdom.

With effect from 01.03.1986 the goods falling under this category were classified


(Number 5 of 1986)

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TARIFF ITEM 36 - FOOTWEAR

This commodity also boasts to be among the first to be brought under the excise net,

i.e., by Finance Bill, 1954, this was introduced for the first time and with effect from

01.03.1954 was placed at tariff item number 17 of the Central Excise Tariff. The description

of which read as under.

―17. Footwear and parts thereof in or in relation to

the manufacturing of which any process was ordinarily

carried on with the aid of power.

1. Footwear,

2. Parts of footwear.

Explanation: Footwear includes all varieties of

footwear, whether known as boots, shoes, sandals,

chappals or by any other name.‖

Prior to 20.09.1960, this item was classified under tariff item number 17 of the First

Schedule to the Central Excises and Salt Act, 1944.

The tariff description was changed by the Budget 1960, which read as under.

―17. Footwear –

Footwear includes all varieties of footwear, whether known

as boots, shoes, sandals, chappals, or by any other name,

and component parts thereof –

1) Footwear produced in any factory including the

precincts thereof whereon fifty or more workers are

working or were working on any day of the preceding

twelve months, in any part of which the process of

manufacturing footwear is being carried on with the aid of

power or is ordinarily so carried on, the total equivalent of

such power exceeding two horse power,

2) Component parts of footwear in, or in relation to the

manufacture, of which any process is ordinarily carried on

with the aid of power.‖

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With effect from 20.09.1960 this tariff item number was changed and the same was

renumbered as 36 of the Central Excise Tariff.


under Chapter Heading 64 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5

of 1986)

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TARIFF ITEM 37A - GRAMOPHONES

This tariff item was, for the first time, brought under the Excise net by Finance Bill,

1962 and with effect from 24.04.1962 it was placed at number 37A of the Central Excise

Tariff, the description of which was as under.

―37A. Gramophones, including record players, whether

mechanically or electrically driven and with acoustic, electronic or

transistorised system of reproduction or amplification and parts

and accessories thereof and gramophone records, all sorts

i) Gramophones or record players, including radiograms,

ii) Parts and accessories of gramophones or record players,

all sorts,

iii) Gramophone records, all sorts, other than matrices,

iv) Matrices for records, impressed

v) Gramophone needles or styli –

a) Wholly made of steel,

b) Others‖

Since then there has been no change in the description of this tariff item.

With effect from 01.03.1986 the goods falling under this tariff item were classified

under the Chapter Heading 85 and 92 of the Schedule to the Central Excise Tariff Act, 1985

(Number 5 of 1986)

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TARIFF ITEM 37AA - TAPE RECORDERS

Initially, this tariff item was introduced under the Excise umbrella by the Finance Bill,

1974 and it was placed at number 37AA of the Central Excise Tariff and with effect from

01.03.1974 the tariff description of this item was as under.

―37AA. Tape Recorders (including Cassette Recorders)‖

By Finance Bill, 1977, the above mentioned tariff description was, however, amended

with effect from 18.06.1977 which read as under.

“37AA. Tape Recorders (including Cassette Recorders and Tape

Decks) and Tape players (including Cassette Players)‖

With effect from 01.03.1986, the goods falling under this item were classified under


1986)

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TARIFF ITEM 37B - CINEMATOGRAPH PROJECTORS

This item was introduced for the first time by the Finance Bill, 1971. With effect

from 01.03.1971 this item was placed at tariff entry number 37B of the Central Excise Tariff,

and the description of this tariff item was as under.

―37B. Cinematograph Projectors‖

Later on ―and parts thereof‖ was added to the abovesaid description.

With effect from 17.03.1972 the tariff description was changed again, which read as

under.

―37B. Cinematograph Projectors and parts thereof

1) Cinematograph Projectors,

2) Parts thereof.

Explanation: For the purpose of this item, ‖Cinematograph

Projectors‖ means cinematograph projectors whether in a

completely assembled condition or otherwise‖

There was no change in the tariff definition since then.

With effect from 01.03.1986, the goods under this category were classified under the

Chapter Heading number 85 and 80 of the Schedule to the Central Excise Tariff Act, 1984

(Number 5 of 1986)

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ITEM NUMBER 37BB --

TELEVISION IMAGE AND SOUND RECORDERS

AND REPRODUCERS, ETC

This commodity was brought into the excise net with effect from 28.02.1982 and

came to be known as Tariff Item Number 37BB. The item description read as under.

“37BB. Television Image and Sound Recorders and Reproducers

(including video cassette recorders and reproducers and video

cassette decks), whether or not in combination with one or more of

the following –

i) Television sets,

ii) Radios (including Transistor sets).

iii) Television cameras (including video cameras)”

There is no change in the above mentioned tariff entry since it was originally

introduced.

Bombay I Collectorate Trade Notice Number 52/84 dated 06.09.1984 made it

sufficiently clear that closed circuit television sets were appropriately classifiable under this

tariff item 37BB and not under the Tariff Entry number 68 of the Central Excise Tariff.

At present this item has been classifiable under Chapter Heading 85 of the Schedule

to the Central Excise Tariff Act, 1985 (Number 5 of 1986) with effect from 01.03.1985.

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TARIFF ITEM 37C – PHOTOGRPHIC APPARATUS AND GOODS.

By Finance Bill, 1971, this item was brought under the revenue net for the first time

and with effect from 01.03.1971 was placed at number 37C of the Central Excise Tariff,

when the tariff description was ―Photographic Cameras‖.

With effect from 01.03.1974, the tariff description was amended, which read as under.

―37C. Photographic apparatus and goods, the following,

namely–

1. Photographic Cameras,

2. Sensitized papers (including Diazo type papers and

sensitized paper board.‖

As per Bombay Collectorate Trade Notice Number 58/82 dated 16.04.1982 Photo

Micrographic Equipment was correctly classifiable under tariff item number 37CC of the


“Camera Lucida” did not merit classification as a photographic camera under tariff

item number 37CC of the Central Excise Tariff as it was not designed or used for taking

photographs whereas “Vertical Camera” and “Eye piece Camera” were classifiable under

tariff item 37CC ibid (CBE&C‟s tariff advice number 69/80 dated 12.11.1980 refers)

Board‟s Budget Circular Number11/71 dated 23.07.1971 clarified that photographic

cameras without lens (optical elements) were also liable to the duty of excise under tariff item

number 37CC of the Central Excise Tariff.

Bangalore Traded Notice Number 201/71 dated 20.09.1971 made it clear that

Photographic cameras were also covered cameras used for composing and preparing printing

plates and cylinders by photographic means. To this group belongs the following

1. Vertical land horizontal process cameras, three colour cameras,

etc,

2. Cameras which photograph blocks of type previously set by hand

and by machine; and

3. Supplementary photographic devices, which converted a normal,

lead casting type setting and composing machine into a machine,

which operates by photographing the matrices, as they were set.

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Television cameras were treated as electrical equipment thus they cannot be treated as

photographic cameras. (Board‟s Tariff Advice Number 4/71 dated 28.12.1971 refers)

When treated with Dichromate solution and dried, Carbon Tissue Paper became

sensitive to light. The character of such Carbon Tissue Paper was nothing but that of a

sensitized paper suitable for photogravure purposes and therefore the same was classifiable

under the Tariff Item Number 37CC of the Central Excise Tariff. (1980 ELT 359

(Government of India) refers)


Chapter Heading 37 and 90 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5

of 1986)

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ITEM NUMBER 38 - MATCHES.

This item was brought on the tariff schedule for the first time on 01.04.1934. The

description of this item reads as under.

“38. Matches --

“Match” includes a firework in the form of a match; and

where a match stick has more heads than one capable of being

ignited by striking, each such head shall be deemed to be a

match.”

There is no change in this tariff description since then. This item was numbered 2 as

per the First Schedule from the year 1960.With effect from 01.03.1985 this item was

classified under the Chapter Heading 36 of the Schedule to the Central Excise Tariff Act,

1985 (Number 5 of 1986).

For administering the duty of excise for this item certain rules, No.58 to No.78, were

framed; however, the rules from Sr. No.58 to Sr. No.61 were omitted by the Ministry of

Finance under their Notification number 107/63-C.E. (N.T.) and number 31/89-CE (N.T.)

dated 29.06.1963 and 22.06.1989 respectively. Salient rules are given hereunder.

Rule 62 – for storage of finished matches at a secure place,

Rule 63 – for number of matches to be packed in a box,

Rule 64 – for annual payment of duty on the matches so packed,

Rule 65 – for procurement of Central Excise Stamps of proper value,

By Notification No.45/61-C.E. dated 01.03.1961 the Central Government exempted

the matches of type known as „Bengal Tiger‟ when manufactured in a factory whose output

did not exceed five hundred million matches per year and packed in boxes containing on an

average not more than ten such matches from the payment of so much of the excise duty

leviable thereon as was in excess of 77 paise per gross of boxes.

Central Excise banderols were reintroduced vide MF (DR&I) F. No.261/38/34/72-

CX-8 dated 02.01.1976 both in the non-power operated sector and power operated sectors.

Further, it was also stated vide MF (DR&I) F. No.261/38/14/75 CX 8(Pt) dated 27.02.1976

that printing of blue banderols, which were meant for the match boxes of 50s manufactured

in the power operated sector was discontinued since 07.02.1976. As a result, only maroon

and green banderols were printed. The then existing stock of blue banderols was continued

to be used for match boxes of 50s manufactured in the power operated sector and maroon

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banderols were to be used for match boxes of 50s whether manufactured in the power

operated sector or non power operated sector. Green banderols were to be used for matches

other than 50s and those liable for tariff rate of duty including Bengal Light and Booklet

matches. It was also made clear that the banderol was to be so pasted as to cover one side of

the inner tray and a part of one side of the outer box.

So important and so sensitive was the matter of Excise Banderol that a Press Note

dated 06.03.1975 was issued by the Central Board of Excise and Customs, inasmuch as rule

68 of the Central Excise Rules, 1944, was widely publicized for information of trade and

public in general. Salient features of rule 68 , in a nut shell, were as under.

a) As regards affixing banderols it was to be so affixed that the box or

booklet on which the banderol was affixed could not be opened without

tearing the banderol,

b) where it was to affixed to a box, the banderol was to cover one side of

the inner tray and a part of the rear or bottom or front or top of the outer

box and the banderol itself was not to be covered by either the factory‟s

label or by any advertisement label,

c) banderol was to be affixed in such a way so as to be wholly visible,

d) any departure from the provisions of the rule 68 or misuse of the

banderols was treated as an offence and was open to penal action.

By yet another rule, i.e. rule 231 of the Central Excise Rules, 1944, matches could be

sold only after prescribed banderols affixed to a container and any retailer, dealer, trader was

liable to confiscation in addition to a penalty of rupees one thousand if any matches were

found in their possession without banderol or the banderol was cut/torn or the

container/wrapper witnessed any other mark or appearance of having been opened/tampered

with such goods.

A strict watch was kept on the account of banderols that were with the licensee and

their utilization was subject to surprise checks so as to have no scope for diversion of

banderols from the non-power operated sector to the power operated sector – since the former

was enjoying various concessional rates of duty and the latter was required to pay higher

duty.

By Notification Number 41/81-CE dated 01.03.1981, effective from 01.04.1981, the

exemption was also granted to the matches in or in relation to the manufacture of which one

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or more of the following mechanical processes were ordinarily carried on with the aid of

power, falling under the tariff item number 38 of the First Schedule to the Central Excises

and Salt Act, 1944 (Number 1 of 1944) and cleared for home consumption by a

manufacturer--

i) the process of giving the veneer flats or strips, the configuration of

a match box including the outer slide or the inner slide with the

use of match paper;

ii) frame filling;

iii) dipping of splints in the composition for match heads;

iv) filling of boxes with matches;

v) the process of affixing labels, by pasting or any other means on

match boxes or veneers;

vi) affixing of the Central Excise stamps; and

vii) packaging.

By the Notification Number 22/82-C.E. dated 23.02.1982, the Central Government

granted exemption to this tariff item in or in relation to the manufacture of which no process

was ordinarily carried on with the aid of power in respect of the first clearances for home

consumption from a factory not exceeding 93.50 million matches cleared during a financial

year from so much of the duty of excise leviable thereon as was in excess of Rupee 1.60

Paise per gross boxes of fifty matches, subject to the condition that the clearances from the

said factory during such financial year did not exceed 116.65 million matches and also

subjected to the following other conditions, namely --

i) the total production of matches in a calendar month during the aforesaid

period by the said factory did not exceed fifteen million matches; ii) the total

clearances, if any, of matches for home consumption from the said factory

during the preceding financial year, did not exceed one hundred and fifty

million matches

Provided that –

(a) the amount of exemption shall be increased by fifty paise per gross

boxes of fifty matches if bamboo is used for the splints or for both

splints and veneers;

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(b) if the splint of such matches are made of bamboo and the matches are

packed in boxes of forty matches, the rate of duty was four fifths of the

rate applicable to matches of identical description produced in the

same factory but packed in boxes of fifty matches and if such packing

in boxes of fifty matches was not done, it was four fifths of the

notionally determined rate for matches packed in boxes of fifty

matches;

Provided also that the exemption contained in this notification was not applicable to

the said matches where a manufacturer used any other manufacturer‟s label which was

approved by the proper officer for matches packed in boxes attracting a higher rate of duty

than the rate of duty specified in this notification.

Explanation – For the purposes of this notification, no process other than the

mechanical process employed for -

a) filling of boxes with matches;

b) dipping of splints in the composition for match heads;

c) frame filling;

d) affixing of Central Excise stamps;

e) packaging;

f) the process of giving the veneer flats or strips the configuration

of a match box including the outer slide or the inner slide with

the use of match paper;

g) the process of affixing labels by pasting or any other means, on

match boxes or veneers

was deemed to be a process ordinarily carried on with the aid of power.

The above Notification was slightly amended vide Section 52 read with Fourth

Schedule to the Finance Act, 1982, which read as under --

1) The opening paragraph of the Notification was effective with respect to any

period before the 1st day of April, 1981,

2) The first proviso to the Notification was not effective with respect to any

period before the 1st day of October, 1981 and the said Notification was

effective with respect to any period before the 1st day of October, 1981 as if it

contained the following proviso in place of the said first proviso, namely –

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Provided that -

a) in the case of matches packed in boxes in which both the outer

slide as well as the inner slide were made of cardboard, the

amount of exemption was to be increased by 60 paise per gross

of boxes,

b) in the case of matches packed in boxes in which the inner slide

alone is made of cardboard, the amount of exemption was

increased by 24 paise per gross of boxes;

c) the amount of exemption was increased, or further increased as

the case may be, by 50 paise per gross of boxes if bamboo was

used for the splints or for both splints and veneers;

d) if the splints of such matches were made of bamboo and the

matches were packed in boxes of 40 matches, the rate of duty

was four fifth of the rate applicable to matches of identical

descriptions produced in the same factory but packed in boxes

of 50 matches and if such packing in boxes of 50 matches was

not done, it was four fifths of the notionally determined rate for

matches packed in boxes of 50 matches

3) The second proviso and clauses (f) and (g) of the explanation to the

Notification was not effective with respect to any period before

01.10.1981:

4) Clauses (c). (d) and (e) of the Explanation to the Notification was

not effective with respect to any period before the 01.10.1981.

As regards the issuance of the Notification Number 22/82-CE, the Hon‟ble Madras

Tribunal, in the case of Bharath Match Works Vs Union of India (1984(16) ELT-3 refers) has

dealt with in detail and rendered an important decision that –

1) Once the power of the Legislature or of the Government acting u/r 8 of the

Central Excise Rules was exercised, then necessarily some classification was

made to distinguish between the persons to whom the exemption was to be

granted and the persons to whom the exemption was not intended. The

Government has chosen to fix 150 million matches as the maximum limit of

output for availing of the exemption under Notification No.22/82-CE, it could

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not be contended that some other limit, which was beneficial to the petitioners,

was to be prescribed and therefore the Notification No.22/82-CE was arbitrary

and discriminatory.

2) This notification was also neither discriminatory nor violative of Article 14

of the Constitution. Merely because the object of enacting Section 52 of the

Finance Act, 1982, was to enable the Government to withhold the levies

already made, it could not be struck down as having been enacted with an

oblique purpose of retaining the levies, which had been held to be invalid.

The purpose of Validation Act, was to validate levies, it could not be attacked

as having been brought in with an oblique purpose to enable the Government

to retain illegal levies.

3) The grant of exemption was in the exclusive direction of the Government

and merely because the Government had chosen to extend the benefit of

exemption to the category of cottage units whose output was less than a

particular limit as per the said Notification No.22/82-CE it did not mean to

impose a restriction on the production of goods in question because other units

were always at liberty to produce whatever quantity they want. Therefore

they cannot challenge the Notification finding the maximum limit for getting

the benefit of exemption as an unreasonable restriction on their right to carry

on trade under Article 19(1)(g) of the Constitution.

4) The abovesaid Notification gave retrospective effect to see that only the

tiny sector whose maximum output was less than 150 million matches alone

got the benefit of exemption from the date of the Notification Number 99/80

and the persons in other non-mechanised sectors did not get the benefit of

exemption. Thus the exemption Notification No.22/82-CE was not a levy

measure because of its retrospective effect.

Since the Notification No.99/80 had dispensed with the condition relating to a sale

through a Government agency or a co-operative society or the Khadi and Village Industries

Commission for getting the benefit under the aforesaid Notification, therefore, the condition

of limitation of output of matches prescribed by KVIC was ultra vires and not enforceable.

(1983 ELT 99 (Mad) refers)

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While maintaining that the coloured matches are not matches, the Hon‟ble Madras

High Court held that the word “matches” according to the popular understanding of everyone

was safety matches and not coloured matches. If matches are asked in the market coloured

matches are not given. Coloured or star matches were the matches manufactured for a

particular purpose and intended for a particular use. They were not popularly known as

matches or safety matches. ((1973) 31 STC 132(Madras HC) refers)

With effect from 01.03.1986, the goods covered by this category were covered by the

Chapter Heading 36 of the Schedule to the Central Excise Tariff Act, 1985 (No. 5 of 1986)

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ITEM NUMBER 39 - LIGHTERS

This was one of the oldest item introduced under the excise net, i.e., it was brought on

the tariff schedule on 01.04.1934. The definition was as under.

“39. Lighters, not elsewhere specified.

“Lighter” means any mechanical, chemical, electrical or

electronic (containing piezo-electric materials) contrivance for

causing ignition, which is portable and which operates by

producing a spark or flame whether by itself or when brought into

contact with gas, and includes a lighter issued from a factory in an

incomplete state or requiring for its completion the addition of

flint.”

There has been no change in the definition of this tariff entry since when it was

brought into the excise net.

As regards this item the Tariff Advice Number 71/81 dated 29.07.1981 electrical and

electronic gas lighters were not classifiable under tariff item number 39 of the Central Excise

Tariff.

Flint lighter having the trade name „Gas O Fire‟ was a portable mechanical

contrivance for gas ignition and hence was classifiable under the Central Excise Item number

39. The mere fact that the bracket was fixed on this contrivance permitting the same to be

hung near the gas stove did not mean that it was not portable. Further, the fact that the

apparatus did not have any in-built fuel to hold a flame could not disqualify this lighter from

including it under the said tariff item which covered any mechanical or chemical contrivance

which was operated by producing a spark or flame whether by itself or when brought into

contact with gas. (1984(16) ELT 327(T) refers).

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ITEM NUMBER 40 - STEEL FURNITURE

This item was brought into the Excise net on 01.03.1968 and was numbered 40.The item

description read as under.

―40. Steel Furniture made partly or wholly of steel, in or in


carried on with the aid of power, whether in assembled or

unassembled condition, and the parts of such steel furniture (but

excluding slotted angles and channels made of steel)‖

As regards the scope of this item, as per MF (DRI) letter Number B-212/68-CX I dated

25.03.1968, the Explanatory Notes to the BTN made it clear that only movable articles which

had the essential characteristics that they were constructed for placing for on the floor or on

the ground and which were used mainly with the utilitarian purpose to equip private

dwellings, hotels, theatres, cinemas, offices, churches, schools, cafes, restaurants,

laboratories, hospitals, dentists, surgeries, etc, or ships, aircrafts, railway coaches,

ambulances, caravans, trailers or similar means of transport, to be regarded as covered by

item „furniture‟. Thus especially designed manufactures of steel like counters, storage cabins,

cat-walks, etc, used in the industrial establishments were not regarded as “steel furniture”.

As per MF (DR) CircularNo.1/Steel Furniture/68, there are certain articles which are

covered under this tariff entry and which are given hereunder.

Statement I: Under this category, articles of steel furniture – chairs and other seats,

whether or not convertible into beds, means -

1. Chairs

with arms,

2. Chairs

without arms,

3. Resting

chairs,

4. Typist

chairs,

5. Revolving

chairs,

6. Stacking

type chairs,

7. Revolving

& tilting chairs,

8. Counter

Chairs,

9. Executive

chairs,

10. Garden

chairs,

11. Sofa cum

beds,

12. Matching

sofa sets,

13. Tubular

sofa sets,

14. Assembly

chairs,

15. Desk

chairs,

16. Easy

chairs,

17. Lounge

chairs,

18. Tubular

Reclining chairs,

19. Tubular

sofa chairs,

20. Divan, 21. Folding

chairs,

22. Canteen

chairs,

23. Dining

chairs,

24. Drawing

room chairs,

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25. Examinati

on chairs,

26. Examinati

on couches,

27. Dentists

and similar chairs with

mechanical elevating,

rotating or reclining

movements,

28. Benches

with or without arms and

back,

29. Stools for

all purposes,

30. Invalid

chairs,

31. Invalid

wheel chairs,

32. Barbers or

hair cutting saloon chairs,

33. Tipup &

push back chairs,

34. Resolving

top stools,

35. Picnic

chairs,

36. Sofa

chairs,

37. Sofas, 38. Sofa sets, 39. Couches,

40. Setties, 41. Seats for

aircrafts, railway couches,

motor vehicles (exempted),

42. Revolvin

g and adjustable chairs,

43. Desk cum

chairs,

44. Ottomans, 45. Camping

chairs,

46. Rocking

chairs,

47. Jhula, and 48. Auditoriu

m and cinema chairs.

Statement II: List of articles of Steel Furniture – Tables:

01. Plain

Table

02. Tabl

e with Drawers and/or

cupboards

03. Folding

table

04. Writi

ng Table

05. Cent

re Table

06. Side

Table

07. Teap

oy

08. Con

ference Table

09. Dining

Table

10. Offic

ers Table

11. Med

ical Table

12. Minor

Operations Table

13. Majo

r Operations Table

14. Oph

thalmic Operations Table

15. Urologic

al Operations Table

16. Orth

opedic Table

17. Plas

ter Table

18. Obstetri

c or Labour Table

19. Stud

ents Desks

20. Ove

rbed Tables

21. Sewing

Tables

22. Side

Tables

23. Slidi

ng Door Table

24. Office

Tables,

25. Visa

dex Table

26. Pun

ctures Table

27. Kitchen

Table

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28. Cant

een Tables

29. Exa

mination Tables

30. Adjustab

le Bed size Table

31. Writi

ng Desk

32. Dres

sing Table

33. Ironing

Table

34. Instr

ument Table

35. Kitc

hen Corner Piece

36. Executiv

e Desk

37. Typi

st Table

38. Secr

etariat Table

39. Garden

Table

40. Exhi

bition Table

41. X

Ray Table

42. Post

Mortem Table and

43. Over

bed Adjustable High Table.

44. 45.

46.

Statement III: List of articles of Steel Furniture – Beds and Cots:

01. General sheet

cot (whether folding or not)

02. General spring


03. General strip


04. Upholstered bed 05. Special

Hospital bed

06. Fowler

Position Bed

07. Maternity cot 08. Maternity cot

with crib

09. Drop side

adult/baby Bed,

10. Drop side adult

bed

11. Crib, and 12. Obstetric

Bed.

Statement IV: List of articles of Steel Furniture - Stands:

1. Wall

Stand

2. Telephone

Stand for keeping on floor

3. Wash

basin stand for keeping on

floor

4. Towel

stand for keeping on floor

5. Gas

cylinder stand for keeping on

floor

6. Irrigator

stand

7. Hot plate

stand

8. Bessinet

stand

9. Medicine

stand

10. Crib

Stand

11. Saline

stand

12. Drum

stand

13. Air

Cooler stand

14. Air

conditioner stand

15. Steel cot

stand, that is to say, steel

frame with legs,

16. Flower

stand

17. Stand for

spittoons

18. Form

stand

19. Curtain

stand, and

20. Domestic

Gas cylinder stand.

21.

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Statement V: List of articles of Steel Furniture – Racks, Cabinets and Almirahs:

01. Bed side locker 02. Tubular bed side

locker

03. Machine stand with

cupboard

04. Surgical instrument

cabinet

05. Show cases 06. Book cases

07. Plan filling cabinet 08. Bin Cabinet 09. Tools cabinet

10. Post Box cabinet 11. Racks, all sorts 12. Kitchen racks

13. Bed side locker 14. Filing cabinet 15. Card index cabinet

16. Cabinets, all sorts 17. Show cases 18. Pigeon hole cabinet

19. Lock storage cabinet 20. Almirahs, all sorts 21. Cupboards, all sorts.

Statement VI: List of articles of Steel Furniture: Trolleys.

01. Tea trolley 02. Food trolley 03. Dressing

trolley

04. Instruments

trolley

05. Patient

trolley

06. Gas cylinder

trolley

07. Instrument cum

dressing trolley

08. Stretcher

trolley

09. Anesthetic

trolley

10. Ward dressing

wagon

11. Curved

instrument trolley.

Statement VII: List of articles of Steel furnitures – Miscellaneous:

01. Ward bed screen 02. 0ffice partition

screen.

As per Punjab & Haryana Tribunal, the word „furniture‟ was not defined in the

Central Excises and Salt Act, 1944 and according to dictionary meaning „furniture‟ is an

article of convenience or decoration used to furnish a house, apartment, place of business or

other accommodation, such as beds, tables, etc. (1980 ELT 350 (P&H) refers.

Hon‟ble Tribunal had held that the word „furniture‟ had got a peculiar connotation

and indicated that these articles can be used for the convenience or comfort of a human being

either in the house or in the office. (1980 ELT 350 and 1982 ELT 349 (both P&H refers).

The Joint Secretary, Ministry of Finance, Government of India, has decided that

Orthopedic and Fracture Tables known also as „Orthopoise-99‟ are not steel furniture and

hence were not classifiable under the Tariff Entry 40 of the Central Excise Tariff, whereas X-

Ray protective screen was treated as steel furniture exigible to the duty of excise. (1985 (19)

ELT 3(S.C.) refers).

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Cinema chairs were not steel furniture (1983 ELT (J 144)(GOI) and 1976 ELT (J 206)

Appl. Collector, Delhi) refers.

Where the vehicle was used for carrying passengers and the seats had to be provided

for the travelers, the seats so provided did not amount to manufacture but they formed as a

part and parcel of the said vehicle itself and hence the seats so provided were more in the

nature of fixtures not furnitures. The fact that the chairs or seats which were fixed in the

buses, when removed from the buses, could be used as furniture, did not furnish any criterion

to determine whether the seats, when fixed to the bodies of buses by the firm carrying on the

business of building bodies for passenger buses, amount to furniture or not. (1971 (73) PLR

1003 = 1972 Tax L.R. 2427 (P&H) refers)

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TARIFF ITEM 41 - CROWN CORKS

This item was introduced, for the first time, by the Finance Bill, 1968 and was placed

at tariff entry number 41, the description of which was as under.

―41. Crown corks with or without washers or other fittings of cork,

rubber, polyethylene or any other material‖.

This was effective from 01.03.1968 and attracted the duty of excise of two paisa per

piece.

There has been no change in the description of this tariff item since then.



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TARIFF ITEM 42 - PILFER PROOF CAPS

This item was brought into the excise net by the Finance Bill, 1969 and was placed at

tariff entry number 42, the description of which was as under.

―42. Pilfer Proof Caps for packaging, All Sorts, with or without

washers or other fillings of cork, rubber, polyethylene or any other

material‖

This was effective from 01.03.1969 and attracted the duty of excise of two paisa per

cap.

There has been no change in the tariff description since then.

As to the scope of this item the Government hold that despite the words “all sorts”

appearing as at the end of description of this tariff item, the condition precedent for any

goods to fall within the ambit of item 42 was that these must be pilfer proof. According to

ISI the test for distinguishing pilfer proof caps from ordinary caps was that the seal or strip or

any additional appendage of the cap which gave the character of pilfer proof once torn by its

first use could not be used again. Since this test was not satisfied in regard to impugned

goods, therefore, they were not classifiable under tariff item number 32 of Central Excise

Tariff. (1982 ELT 578 (Government of India) refers)

The test for distinguishing Pilfer Proof caps from ordinary caps was that the seal or

strip or any additional appendage of the caps which gave it the character of pilfer proof once

torn out could not be used again. (1982 EKT 578 (Government of India) refers)

Since the vial seals did not conform to the Indian Standards specifications for pilfer

proof caps, therefore, they were not classifiable under tariff item 42 but under the tariff item

number 68. (1981 EKT 723 (Government of India) refers)

Since tariff item number 42 of the Central Excise Tariff did not contain a built in

definition of the expression “pilfer proof cap”, one had to go by the plain meaning of the

expression and in this light there was no denying that the subject caps seals were nothing but

pilfer proof caps classifiable under tariff item number 42 of the Central Excise Tariff. The

fact that cap seal and tap seal did not have threads and they cannot be screwed on to the lids

or closure of the drum would not make any difference to the position that they do act as a

check or barrier against pilferage. (1983 ELT 1163 (T) refers)

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As per the Board‟s Advice Number 10/80 dated 27.03.1980 Aluminium Easy Open

Tops / Flip Top Ends / Pull Ring Ends were classifiable under this tariff.

As per Tariff Advice bearing Number 85/81 dated 25.08.1981 of the Board

Aluminium Foil Caps / Thin Aluminium Foils coverings were classifiable neither as pilfer

proof caps under this tariff item nor under the tariff item number 68 as “All Other Goods Not

Elsewhere Specified”.

Tin Shoulders with rotor necks affixed with plastic perforated caps on cylindrical

metal containers (packs) were not liable to be classified under the tariff item number 42 as

“Pilfer Proof Caps” (Tariff advice of the Board bearing number 76/80 dated 24.11.1980

refers)

A device made of aluminium known as Tear Away Seal or Caps consisting of three

parts, that is to say, inner seal, outer seal and an identification lid assembled together as a

complete seal was to be classifiable as “pilfer proof cap” under the tariff item number 42 of

the Central Excise Tariff. (Tariff Advice Number 39/79 dated 24.08.1979 of the Central

Board of Excise and Customs refers)


under Chapter Heading 39, 40 and 83 of the Central Excise Tariff Act, 1985 (Number 5 of

1986) respectively.

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TARIFF ITEM 43 - WOOL TOPS

This tariff item was introduced for the first time by the Finance Bill, 1969 and was

made effective from 01.03.1969. Initially it was placed at Tariff Item Number 43 and the

description of this commodity was as under.

―43. Wool Tops, that is to say, tops containing more than fifty per

cent by weight of wool. Calculated on the total fibre contents.‖

By Finance Bill, 1979, the description was amended to read as under.

―Wool tops and carded gilled slivers containing, in either case,

more than fifty per cent, by weight of wool calculated on the total

fibre content‖

As to the scope of this item, the Board under their letter bearing Number 56/1/75 CX-

2 dated 05.02.1976 had clarified that the tariff item number 43 covered only wool tops

obtained from the wool of sheep or lamb and, therefore, tops made from mohair, Cashmere or

Pashmina did not classifiable under the purview of this item.

Dyed wool tops, duty thereon was to be charged on the basis of their weight at the

grey state and not with reference their weight after dyeing. (Ahmedabad Collectorate Trade

Notice Number 166/77 dated 23.07.1977 refers)

The Ministry of Finance, under their letter bearing Number 56/2/75 CX-2 dated

30.06.1976 clarified that no further duty could be levied on the Blended wool tops which

were produced from the duty paid wool tops.

No duty of excise could be levied and recovered on sliver consumed within the very

premises in which it was manufactured because in such cases there was no removal of sliver

from the place of manufacture as envisaged by rule 9 r/w rule 49 of the Central Excise Rules,

1944. (1980 ELT 320 (DEL) refers)



of 1986)

SSI exemption was extended to this commodity with effect from 01.03.1983.

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TARIFF ITEM NUMBER 44 - WATCHES, CLOCKS AND TIME PIECES.

As to the history of this tariff item it can be said that initially by Finance Bill, 1970,

with effect from 01.03.1970, item “Sparking Plugs” was introduced under the excise net and

was placed at number 44 of the Central Excise Tariff, exigible to the duty of excise at the rate

of ten per cent ad valorem, the description of which was as under.

―44. Sparking Plugs‖

However, this tariff entry was omitted and instead a new item was introduced by the

Finance Bill, 1977, namely, “Watches and Clocks” and was effective from 18.06.1977. This

was numbered as 44 of the Central Excise Tariff and the description was as under.

―44. Watches, clocks and time pieces, primarily designed to show

the time of day‖

As to the scope of this item, Bombay Trade Notice Number 115/77 dated 04.07.1977

clarified that the tariff item number 44 in the Central Excise Tariff did not include stop

watches and other articles which were not designed to show the time of day. However, any

article, which shows the time of day and serves some other purpose, in addition was to be

assessable under this tariff item.

One Day Alarm Timepieces were fully exempted under the Notification dated

28.02.1982, however, it was clarified that the electronic timepieces operated with the help of

Battery/Electricity was excluded from this exemption.

Braille watches were also fully exempted from the purview of the duty of excise.

With effect from 01.03.1986, these goods under this tariff item were covered under

the Chapter Heading 91 of the Schedule to the Central Excise Tariff Act, 1985, (Number 5 of

1986)

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TARIFF ITEM 45 - SAFETY RAZOR BLADES.

Initially, by Finance Bill, 1970, this tariff item was introduced and was made effective

from 01.03.1970. It was placed at number 45 of the Central Excise Tariff and the description

of which was ―45. Razor blades made of stainless steel‖, attracting the excise duty at the

rate of ten per cent ad valorem.

However, by February 1976 Bill, this item was omitted and with effect from

18.06.1977 a new item was inserted on the Tariff schedule, the description of which was as

under.

―45. Machinery and appliances for determination of weight

including parts of weigh bridges.

Explanation: This item does not include scales having

arms of equal length which determines weight by balancing

the object against weight.‖

There was ten per cent ad valorem duty of excise for this item.

With effect from 01.03.1986, the goods covered by this tariff item were classified

under the Chapter Heading 84 and 90 of the Schedule to the Central Excise and Tariff Act,

1985 (Number 5 of 1986) 135/1975

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TARIFF ITEM 46 - METAL CONTAINERS

This tariff item was for the first time introduced by the Finance Bill, 1970 and was

placed at tariff entry number 46 which was made effective from 01.03.1970 when it was

exigible to the duty of excise at the rate of ten per cent ad valorem. The description of this

tariff item was as under.

―46. Metal containers ordinarily intended for packaging of goods

for sale including casks, drums, cans, boxes, gas cylinders and

pressure containers but excluding collapsible tubular containers

made of aluminium.‖

However, by the Finance Bill, 1971 the tariff description mentioned supra was

amended to read as

―Metal containers not elsewhere specified.

Explanation: The expression ―container‖ in the

meaning assigned to it in the explanation to item 2.‖

Lipstick containers were actually plastic containers and therefore could not be

classified as metal containers under this tariff item. Metal Sleeves used were a non-essential

part fixed only to decorate the plastic containers and as such were not intended to hold goods

(1980 ELT 375 (Appl. Coll.)

Metal containers in unassembled condition for packing prepared or preserved food

were covered by this item. (1980 ELT 366 (Government of India) refers)

Metal containers being complete without pilfer proof caps, the value of the said pilfer

proof caps not required to be added to the containers. (1979 ELT (J-560) (Government of

India) refers)

Since lids were supplied later and not with the containers it was held that the value of

the lids could not be added to the value of the containers. (1978 ELT (J-258) (App. Coll.)

refers)

The verb „to contain‟ was to show that a container must be something, which was

intended to hold or contain something else. A container was a receptacle of a defined shape

or flexible in form for putting other things into it. It must be something, which was

recognized as a container. A container must be an independent unit or a separate entity by

itself. It must be such before anything was put into it. The cheese cubes were packed in

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aluminium foils, which had to definite form or shape except that of a thin flat sheet and only

when it was coasted on to the cheese cubes, it took shape of cheese cubes. Thus it was held

that the aluminium foils were not taxable as containers. (1981 ELT 322 (Government of

India) refers)

With effect from 01.03.`986 the goods covered under this tariff item were classified


(Number 5 of 1986)

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TARIFF ITEM 47 - ELECTRICAL MACHINES FOR GAMES OF SKILL OR CHANCE

The history of this interesting titled tariff item was that, initially, by the Finance Bill,

1970, with effect from 01.03.1970 it was placed at tariff entry number 47 reading it as

―Slotted angles and Channels made of Steel‖ and attracting the duty of excise at the rate of

ten per cent ad valorem.

This tariff item was omitted with effect from 18.06.1977.

With effect from 01.03.1979 under this same tariff item number a new tariff entry was

introduced, reading

―47. Locks, All sorts, and keys therefor‖

Explanation: ―Lock‖ means a locking device operated by a

key or controlled by a combination of letters or figures.‖

However, this newly inserted entry was also omitted and instead a yet new tariff item was

added reading –

―47. Electronic Machines for games of skill or chance (including

electronic machines used for television games and video games)

Explanation: ―Electronic machines‖ means ―machines and

apparatus containing thermionic valves or transistors or

similar semi-conductor devices or light emitting diodes or

electronic microcircuits of capacitors other than paper

capacitors‖.



(Number 5 of 1986)

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Now that I am a retired employee of the Excise department and when I look back and

take stock of those days, full with enthusiasm and cherished view of the duties allotted, I

wonder, nay I feel pity of the persons who taxed excise duties on such flimsy items which did

not generate revenue enough even to sustain the Government expenses that were made to

implement such unrewarding taxation.

During the period of British, awestruck Indians never dared to ask any question,

howsoever equitable or correct, but worked in a numb manner obeying the orders given to

them as most faithfully as they can; whereas under independent Indian governance, on the

contrary, revenue generation and the government expenses incurred for that were not in

proper balance, i.e., more expenses than the revenue generated. Also basic material meant

for production, like, for example, yarn in case of textiles, was not optimally excised thus

leading to chaos and complications in the minds of both the tax collector and the taxpayer.

The condition „to the satisfaction of the proper officer‟ was so vague and was

ineffective in implementing the excise policies in their true spirit. When technical

requirements were implemented excise formalities should have been done accordingly

leaving the assessee no any reason to feel obliged. Whereas „to the satisfaction of the proper

officer‟ condition actually came to such a meaning that „give something to get something‟.

Thus neither of the party used to be satisfied, the receiver, for whose vicious demands sky

was not the limit and the giver, in these days of depression and gloomy economy, is nabbed

like anything.

Simplification of the procedure is a novel idea, which is now being implemented.

Numbers of rules have also been slashed and creating a compact, assessee friendly picture of

the excise taxation is a welcome thing.

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TARIFF ITEM 48 -

SAFE, STRONG BOXES OF BASE METALS

This tariff item was initially introduced by the Finance Bill, 1970, and with effect

from 01.03.1970 it was placed at tariff item number 48 of the Central Excise Tariff. This was

exigible to the duty of excise at the rate of thirty five per cent ad valorem and the description

of this tariff item was as under.

―48. Safes, Strong Boxes, Strong room linings and Strong room

doors (whether or not with door frames) and Cash and Deed

Boxes, and the like of Base Metal‖

Since then there is no change in the item description and with effect from 01.03.1986,

the goods covered under this category were classified under the Chapter Heading 84 of the


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TARIFF ITEM 48A - TRAVEL GOODS

This tariff item is the very youngest in the Excise family of taxable goods; that is to

say, this item came on the excise schedule as late as in the year 1985.

With effect from 17.03.1985, this tariff item was placed at number 48A of the Central

Excise Tariff; exigible to the duty of excise at the rate of twenty five per cent ad valorem and

the description was as under.

―48A. Travel Goods, the following, namely Suit cases, brief

cases, vanity bags and vanity cases, all sorts‖

There has been no change in this description since then and with effect from

01.03.1986, the goods covered by this item were classified under the Chapter Heading 42,

43, 46 and 76 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986)

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TARIFF ITEM 49 - ROLLING BEARINGS


from 29.05.1971 was placed at Number 49 of the Central Excise Tariff, attracting thereby the

duty of excise at the rate of ten per cent ad valorem.. The description of this tariff item was

as under.

―49. Roller Bearings, that is to say, Ball or Roller Bearings, All

Sorts‖

The cost of hubs was not includable in the assessable value of bearings because the

manufacturer of bearings was complete before it was fitted in the hub. (1977 ELT (J-

84)(Appl. Coll.) refers)

The Government of India had decided that only the bearing portion of Jockey Pulley

was liable to the duty of excise under this. (1981 ELT 322 (Government of India) refers)

Since then there has been no change in the above description of this item.



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TARIFF ITEM NUMBER 50 - WELDING ELECTRODES

This commodity was, for the first time, introduced under the Finance Bill, 1971, and

was placed at tariff entry number 50 of the Central Excise Tariff, the description of which

was as under.

―50. ―Welding Electrodes, All Sorts‖

There has been no change since then in the description of this tariff item and with

effect from 01.03.1986, the goods covered under this category were classified under the

Chapter Heading 83 of the Schedule to the Central Excise Tariff Act, 1985(Number 5 of

1986)

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TARIFF ITEM 51 - COATED ABRASIVES AND GRINDING WHEELS

Initially by Finance Bill, 1971, this commodity was for the first time included into the

Excise revenue net and was placed at tariff entry number 51 of the Central Excise Tariff, the

description of which was under.

―51. Coated Abrasives and Grinding Wheels, in or in relation to

the manufacture of which any process was ordinarily carried on

with the aid of power, the following, namely -

1. Natural or artificial abrasive powder or grain on a base of

woven fabric, of paper, of paper board or of other

materials, whether or not cut to shape or sewn or otherwise

made up.

2. Grinding wheels and the like (including grinding,

sharpening, polishing, trueing and cutting wheels, heads,

discs and points), of natural stone (agglomerated natural

or artificial) abrasives, or of pottery, with or without cores,

shanks, sockets, axles and the like of other materials but

not mounted on frameworks, segments and other finished

parts of such wheels, of natural stone (agglomerated or

not), of agglomerated natural or artificial abrasives, or of

pottery,

Explanation: The expression ―grinding wheels and the

like‖ and ―segments and other finished parts of such

wheels‖ shall mean those used on machine tools, electro-

mechanical or pneumatic hand tools, for the trimming,

polishing, sharpening, trueing or cutting of metals, stone,

glass, plastics, ceramics, rubber, leather, mother of pearl,

ivory and the like.‖

Since then there has been no change in the description of this tariff item and with

effect from 01.03.1986 the commodities covered by this tariff item were classified under the


of 1986)

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TARIFF ITEM 51A - HAND TOOLS AND CUTTING TOOLS

By Finance Bill, 1974, this item was first introduced under the revenue net and was

placed at tariff item number 51A of the Central Excise Tariff. This was made effective from

01.03.1974 when the description of this item was as under.

―51A. Cutting Tools, the following, namely,

1. Files and Rasps,

2. Hacksaw Blade,

3. Twist Drills,

4. Reamers, and

5. Milling Cutters‖

With effect from 18.06.1977 the above given description was changed to read as

under.

―51A. Tools, the following, namely

i) Hand Tools, the following,

a) Pliers (including cutting pliers)

b) Spanners,

c) Wrenches,

d) Files and rasps,

e) Screw drivers (including ratchet types)

ii) Tools for working in the hand, pneumatic or with self-

contained non-electric or electric motor,

iii) Tools designed to befitted into hand tools, machine

tools or tools falling under sub item (ii) including dies for

wire drawing, extrusion dies for metals and rock drilling

bits;

iv) Industrial knives and blades for hand or machine saws‖

Broaches were used in the manufacture of other hand tools after fitting them into the

machine tools; therefore, even though they were not expressly mentioned in this item they

were covered under this item. (1981 ELT 307 (Cent. Board) refers)

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This item covered hand tools like pliers, spanners, wrenches, files, rasps and

screwdrivers. Accordingly this item was obviously eligible to cover wrenches (1981 ELT

815 (Government of India) refers)

This item referred to specific dies and not to dies of all types and therefore “forged

dies” were not covered under this item. (1982 ELT 345 (App. Coll.)

With effect from 01.03.1986 the goods covered by this item were classified under the

Chapter Heading 82, 84 and 85 of the Schedule to the Central Excise Tariff Act, 1985

(Number 5 of 1986)

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TARIFF ITEM 52 - BOLTS AND NUTS.

For the first time, this commodity was introduced by the Finance Bill, 1971 and was

placed at Tariff Entry Number 52 of the Central Excise Tariff, the description of which was

as under.

―52. Bolts and nuts, threaded or tapped, and screws of base metal

or alloys thereof, in or in relation to the manufacture of which any

process is ordinarily carried on with the aid of power.

Explanation: The expression ―bolts and nuts, threaded or

tapped, and screws‖ used in this item shall include bolt

ends, screw studs, screw studding, self tapped screws,

screw hooks and screw rings.‖

Since then there has been no change in the description of this item.

Components and spare parts of mining machines were not known in the trade parlance

by bolts, nuts and screws and therefore they were not exigible to the duty of excise under

tariff item number 52 of the Central Excise Tariff. (Order In Appeal Number54/78 dated

08.05.1978, by Appellate Collector, New Delhi, refers)

With effect from 01.03.1986, this commodity was classified under the Chapter

heading 83 of the Schedule to the Central Excise Tariff Act, 1985 (Number 5 of 1986)

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TARIFF ITEM 53 - ZIP OR SLIDE FASTNERS

For the first time, this item was introduced by the Finance Bill, 1971, and was placed

at tariff item number 53 of the Central Excise Tariff, the description of which read as under.

―53. Zip or slide fasteners and parts thereof –

1) Zip or Slide Fasteners,

2) Parts of zips or slide fasteners.‖

This was exigible to the duty of excise at the rate of twenty per cent ad valorem.

Since there has been no change in the tariff description and with effect from

01.03.1986 the goods covered under this tariff item were classified under Chapter 96 of the


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TARIFF ITEM 54 - PRESSURE COOKERS

This was introduced by the Finance Bill, 1971 and with effect from 01.04.1971 it was

placed at tariff entry number 54 of the Central Excise Tariff which attracted the rate of duty

of excise at the rate of twenty per cent ad valorem and the description read as under.

―54. ―Pressure Cookers‖ means enclosed cooking vessels for use

with an external heat source, capable of maintaining working

steam pressure, known commercially as Pressure Cookers‖

Milk cookers were outside the purview of this tariff item since they were no treated as

pressure cookers because its gadget was not so designed to maintain any steam pressure on

the product to be cooked in the vessel (Central Board of Excise and Custom‟s letter bearing

Number 11/1/72 CX-3 dated 02.03.1972 refers)

As per the letter, bearing Number B-5/1/71 CX-2 dated 28.07.1971 issued by the

Ministry of Finance (Department of Revenue Intelligence), it was clarified that the value of

these containers which were in the nature of vessels placed inside a pressure cooker were not

to be included for purposes of assessment to the duty of excise, provided their values were

indicated separately.

Bombay Trade Notice Number 104 (M.P.) dated 16.06.1971 confirmed that the tariff

description specifically referred only to such type of cookers, which were commercially

known as pressure cookers. Ordinary vessel types of cookers consisting merely of a vessel

and a lid, without special gadgets as were normally found in pressure cookers stood excluded

from the purview of tariff item number 54.

It was true that an electric element was fitted inside the cooking vessel at the bottom,

but this element by itself was not a heat source of the cooker. Since the electricity that

supplied the heat for cooking the food was supplied from outside it was necessary to be

treated as an external heat source, and accordingly, the subject electric pressure cooker was

classifiable under tariff item number 54 of the Central Excise Tariff. (1983 ELT 962 (T)

refers)



(Number 5 of 1986)

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TARIFF ITEM 55 - VACUUM FLASKS, OTHER VACUUM VESSELS

AND PARTS THERESOF

This item was brought under the excise net by the Finance Bill, 1971, and with effect

from 01.04.1971 it was placed at tariff entry number 55 of the Central Excise Tariff, the

definition of which was as under.

―55. Vacuum Flasks and other Vacuum Vessels and parts thereof

i) Vacuum Flask and Other Vacuum Vessels,

ii) Parts of Vacuum Flask and Other Vacuum

Vessels.‖

Since then neither the definition has changed nor the rate of duty has undergone any

change, that is to say, it was exigible to the duty of excise at the rate of fifteen per cent ad

valorem and twenty per cent ad valorem respectively for Vacuum Flasks and for the parts

thereof.

Shoulders and bottoms themselves did not conform to the description of the outer

casing as such they were not liable to the duty of excise (Board‟s letter Number 118/2/72

CX-3 dated 01.12.1972 refers)

Rule 223A of Central Excise Rules, 1944, denoted a duty on the appropriate officer to

take into account receipts and deliveries and to make allowance for waste by evaporation or

other natural causes, therefore, it was irrational for the officer to say that he was no required

to make an allowance for a single vacuum flask refill merely because the manufacturers had

not kept account of a day to day breakages in their bonded store room. Such an act was to

mean that the Assistant Collector failed in his statutory duties to apply the provisions of said

rule 223A ibid in the matter of giving an allowance for the breakage, which was a natural

cause within the meaning of that rule and acted arbitrarily. (1983 ELT 2095 (BOM) refers

It was irrational to disallow the shortage of vacuum refills on the ground that the

manufacturers had not kept account of the day-to-day breakages in their bonded store room.

Since the proposition was to mean that repository of the power did not apply his mind at all

to the normal and natural cause of business of manufacture and storage of commodity like

vacuum flask and acted arbitrarily. (1984 ECR 787 (BOM) refers)

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With effect from 01.03.1986, the goods covered under this tariff item were classified under

the Chapter Heading 96 of the Central Excise Tariff Act, 1985 (Number 5 of 1986).

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TARIFF ITEM 56 - PLAYING CARDS

This item was for the first time introduced by the Finance Bill, 1974 and with effect

from 01.04.1971 it was placed at tariff entry number 56 of the Central Excise Tariff, the


“56. Playing Cards‖

Playing Cards, which had some defects and were cleared as „second‟ on lesser value,

were to be cleared as „second‟ and marked/printed as such on each carton before these were

cleared as „second‟ from the manufacturing premises. (CBEC letter bearing Number B-

53/1/71-CX –2/ CX-8 dated 26.10.1972 refers)

The description of this tariff item has not changed since then and with effect from

01.03.1986 the goods falling under this category were classified under the Chapter Heading


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TARIFF ITEM 57 - CAMPHOR

Finance Bill, 1971, was the source through which this item was initially included in

the Excise net and with effect from 01.04.1971 it was placed at tariff entry number 57 of the

Central Excise Tariff, the definition of which was as under.

―57. Camphor‖

Bombay Trade Notice bearing Number 88(MP)/1/71 dated 14.06.1971 directed that

mere refining, altering the physical form and/or repacking of duty (or duty free pre excise

stock) paid camphor was not liable to attract any further duty of excise under this item.



(Number 5 of 1986).

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TARIFF ITEM 58 - MENTHOL

It was the Finance Bill, 1971, that introduced this tariff item for the first time for the

excise taxation and with effect from 01.04.1971 it was placed at tariff entry number 58, the


“58. Menthol‖

Liquid Menthol was not liable to the duty of excise under this tariff item; however, it

was covered under the tariff item number 68 (Residuary items) provided other conditions

were fulfilled. (CBEC Tariff Advice Number 4/77 dated 24.02.1977 refers)

Bombay Trade Notice Number 90(MP) 1/71 dated 15.06.1971 directed that

subsequent refinement and/or repacking of duty paid (or duty-free pre-excise stock) Menthol

was not liable to attract any further duty of excise under this tariff item.

The item description mentioned supra has not changed since then and with effect from

01.03.1986 the goods covered by this tariff item were classified under the Chapter Heading

29 of the Central Excise Tariff Act, 1985 (Number 5 of 1986)

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TARIFF ITEM 59 - SOUND AND IMAGE RECORDING ARTICLES.

The history of this tariff entry was very much topsy-turvy, many tariff items have

come and gone under this heading.

By the Finance Bill, 1971 and with effect from 01.04.1971, new tariff item was

brought into the excise net for the first time and was placed at tariff entry number 59 was

Electric Insulating Tapes, that is to say,

―59. Electric insulating tapes, in or in relation to the manufacture

of which any process is ordinarily carried on with the aid of

power.‖

which was omitted with effect from 18.06.1977.

Second one to take its place was Tooth Brush, which came on the tariff schedule with

effect from 01.03.1979 and the description was as under –

―59. Tooth Brush‖

which was omitted with effect from 01.03.1980.

With effect from 28.02.1982 the following was replaced against the omitted item, that

is to say,

―59. Articles of a kind used for sound or sound and image

recording, whether recorded or not, namely -

1. Magnetic tapes of width not exceeding 6.5 millimeters for

sound recording, whether in spools or in reels or in any

other form or packing, but excluding cassette tapes,

2. Sound recorded magnetic tapes of width not exceeding

6.5 millimeters, whether in spools or in reels or in any

other form or packing, but excluding sound recorded

cassette tapes,

3. Cassette tapes for sound recording,

4. Sound recorded cassette tapes,

5. Prepared media for television image and sound recording

such as video tapes and video discs.

6. Television image and sound recorded media such as

video tapes and video discs.‖

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As to the scope of this tariff item it was only after varnishing that tapes became

insulation tapes to warrant duty under tariff item number 59 of the Central Excise Tariff.

(1982 ELT 135 (BOM) refers)

As per Central Board of Excise and Customs Tariff Advice Number 42/82 dated

21.07.1982 assembling of video cassette tapes out of the imported video magnetic tapes and

video cassette cases on which the appropriate amount of countervailing duty had been paid

was to amount to „manufacture‟ as defined under Section 2(f) of the Central Excises and Salt

Act, 1944, and accordingly duty will be leviable under the tariff item number 29(5) of the


Videotapes in rolls were to be appropriately classifiable under tariff item number

59(5) of the Central Excise Tariff for the purpose of levy of the additional duty. (Tariff

Advice Number 27/84 dated 08.06.1984 refers)

The definition of „tapes‟ itself indicated that the tapes were frequently adhesive and

were used for covering of the joints, etc. The word „frequently‟ clearly established that there

were certain tapes, which were not adhesive, and the word „etc‟ indicated that the only use

was not for covering joints. Since the tapes in question, in fact, were used for covering joints

in or open ends of electric wires and cables and thus it could not establish that the product

was not known in the trade circles as the electric insulation tapes. Therefore, it cannot be

said that the impugned products were not classifiable under the item 59 of the Central Excise

Tariff (1982 ELT 135 (BOM) refers)

With effect from 01.03.1986,the goods covered under this tariff item were classified


(Number 5 of 1985)

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TARIFF ITEM 60 - ADHESIVE TAPES

It is the Finance Bill, 1971, that brought this item into the excise net for the first time

and with effect from 01.04.1971 this tariff item was placed at number 60 of the Central

Excise Tariff, the description of which was as under.

―60. Adhesive tapes, all sorts, not elsewhere specified, including

cellulose adhesive tapes and paper backed adhesive tapes in or in


carried on with the aid of power‖

As per CBE&C Tariff Advice Number 1/84 dated 11.01.1984 Cellophane adhesive

rolls of “13 or 26” width cannot be considered as adhesive tapes falling under tariff item

number 60 of the Central Excise Tariff.

Electrical Insulating Tapes (with adhesive properties) were classifiable under tariff

item number 60 of the Central Excise Tariff. (CBE&C Tariff Advice Number 19/80 dated

26.05.1980 refers)

Products like Dressiplast and Corn tapes which were generally manufactured in two

stages, viz., a first stage wherein the tapes were given an adhesive property by fixing

adhesives like natural, rubber, resin, etc, to them and then a second stage where the tapes

(which had been already given the adhesive property) were given their therapeutic property,

merit classification as an “adhesive tapes” at the intermediate stage of their manufacture

under item number 60 of the Central Excise Tariff. (CBE&C Tariff Advice No.37/79 dated

17.08.1979 refers)

Orthoplast Porous Adhesive Bandage the composition of which was stated to be non-

therapeutic, consisting of fabric base coated with adhesive material wherein calamine was

incorporated. Such non-therapeutic bandage was not classifiable under 14E (Patent and

Proprietary Medicines) but classifiable under tariff item number 60 of Central Excise Tariff.

(CBE&C Tariff Advice Number 51/78 dated 15.09.1978 refers)

Gummed paper tapes were classifiable under tariff item number 60 of the Central

Excise Tariff. (CBE&C Tariff Advice Number 8/72 dated 03.05.1972 refers)

Paper Strips coated with gum produced during the process of manufacture of paper

tube for dry cell was not dutiable under tariff item number 60 as the application of adhesive

to the strip was an intermediate stage in the process of manufacture of paper tube to be used

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as encasement for the metal battery cell and at no stage does an adhesive tape, marketable as

such came into existence as the process was continuous one and the adhesive remained in a s

wet for condition for a short period, before the other strip was affixed to it. (CBE&C Tariff

letter bearing number 76/1/76 CX dated 30.09.1979 refers)

The term „tape‟ was better appreciated by trade practice and usage than in any precise

specification of dimensions. No hard and fast rule regarding the width and other dimensional

specifications of tapes, can, therefore, be s laid down. Each individual case be decided on

merits taking into consideration ISI specifications, trade usage and the name given to such

product. (CBE&C Tariff Advice Number 7/72 dated 02.05.1972 refers)


under Chapter Heading 39(Plastic), 48 (Paper) and 59 (Cotton Fabrics) of the Schedule to

the Central Excise Tariff Act, 1985 (Number 5 of 1986)

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TARIFF ITEM 61 - ELECTRIC LIGHTING FITTINGS

This was brought within the purview of the duty of excise by Finance Bill, 1977 and

with effect from 18.06.1977 it was placed at tariff entry number 61, the description of which

was as under.

―61. Electric lighting fittings, namely –

Switches, plugs and sockets, all kinds, chokes and starters

for fluorescent tubes.‖

With regard to the scope of this item, Switches, plugs and sockets which were not

used as electric lighting fittings were not covered by this item. But if these articles were such

were used as lighting fittings and also as fittings for other purposes, they were liable to be

included within this item. (Delhi Trade Notice Number 57-CE/77 dated 17.06.1977 refers)

Ceiling roses of 5 Amp rating were not sockets and, therefore, these were outside the

purview of tariff item number 61 of the Central Excise Tariff but were liable to fall under

tariff item number 68 ibid.

15 Amp switches, sockets, switches, plugs, adopters, switch socket combinations and

lamp holders as were used for domestic power purposes for operation of domestic appliances

like washing machines, geysers, coolers, air-conditioners, refrigerators, mixers, etc, and

which were not generally used for electrical f lighting, fitting were outside the purview of

tariff item number 61 of the Central Excise Tariff. (CBE&C‟s letter bearing number

188/1/77-CX4 dated 21.06.1978 refers)

Light switches and bulb holders were correctly classifiable under tariff item number

61. Switches were used in torches and button switches used in cars which operate at a much

lower voltage than the conventional domestic range of 200-250 volts, were also classifiable

under the tariff item number 61. (CBE&C Tariff Advice Number 153/81 dated 05.12.1981

refers)

Lamp holders, adopters (including two way, three way, etc) and switch sockets,

combinations, which were essentially in the nature of switches, sockets and plugs were

covered by the tariff item number 61 if they were designed to function as electric lighting

fittings. (Ahmedabad Collectorate Trade Notice Number 245/77 dated 01.10.1977)

Main switches and switch fuse units, etc, were generally not directly proximate to the

electric lighting points but were generally in the nature of devices for making and breaking of

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electric circuits to the whose of part of the household or other place where electric lighting

was required. It was advised that such switches and switch fuse units etc, fall outside the

scope of the tariff item number 61 of the Central Excise Tariff. It was further clarified that

only those switches which, when manipulated, directly result in the switching on or switching

off of electric lights, fall within the scope of the present levy provided, they were not

designed for circuits of more than 350 volts. The above principles regarding switches hold

good in the case of plugs and sockets as well. (MF (DR) letter Number B-42/2/77-T R U

dated 20.07.1977 refers)



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TARIFF ITEM 62 - TOOL TIPS

This item was for the first time introduced by Finance Bill, 1973 and with effect from

01.03.1973 it was placed at tariff entry number 62, the description of which was as under.

―62. Tool Tips, in any form or size, unmounted, of sintered

carbides of metals such as tungsten, molybdenum and vanadium.‖

While clarifying the matter, the Government of India, Ministry of Finance

(Department of Revenue and Intelligence, by its bearing Number B-35/1/73-TRU dated

03.08.1973, stated that tool tip in any form and size would attract the duty of excise. Thus

the tool tips whether in the ground form or unground form were exigible to Central Excise

duty. Hence the value of the tool tips was to be taken as the value of the tips in the ultimate

form in which they were cleared from the factory of production. As regards the grinding of

unground tool tips by the purchasers (actual users/tool makers) in their own factories before

mounting them on to tools, it was stated that once duty was paid on unground tips, the

question of recovery of further duty on grinding of such tool tips did not arise.

Carbide throw away inserts as also tool tips were made from the same raw material,

undergo practically the same process of manufacture and perform basically the same function

of machining the metal except that from their disposal character or the shorter life span, the

inserts had acquired the adjective „throw away‟ and from their method of fixing by insertion

or clamping, the name „throw away inserts‟ came to be more commonly used; but, otherwise,

in their basic character and use, the inserts were nothing more than a separate species of the

generic name „tool tips‟. Therefore, „the throw away inserts‟, being a variety of the general

term „tool tips‟ were classifiable under specific tariff item number 62 and not under the more

general tariff item number 51A(iii) of the Central Excise Tariff. (1984(18) ELT 527 (T)

refers)


Chapter Heading appropriate to the constituent metal used in its manufacture of the Schedule

to the Central Excise Tariff Act, 1985 (Number 5 of 1986)

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TARIFF ITEM 63 - WIRE ROPES



―63. ―Wire Ropes‖ means ropes having a number of wire strands

of iron or steel helically laid about an axis but does not include

electric cables.‖

SSI Exemption for the clearance value from the payment of excise duty upto the first

slab of rupees one hundred lacs was extended with effect from 01.03.1983.

With effect from 01.03.1986 the goods covered by this item were classified under the


1986)

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TARIFF ITEM 64 - CARBON BLACK



―64. Carbon Black (including Lamp Black and Acetylene Black.‖

Preparation of carbon black containing emulsifying agents (dispersing agents) with carbon

black, unless they were marketed and commercially known as carbon black, could not be

equated with carbon black, and thus were not eligible to be covered under the newly created

tariff item number 64 of the Central Excise Tariff. (MF (DR&I) letter bearing Number B-

37/2/73-TRU dated 19.04.1973 refers)

SSI Exemption for the clearance value from the payment of excise duty upto the first

slab of rupees one hundred lacs was extended with effect from 01.03.1983.

With effect from 01.03.1986 the goods covered by this tariff item were classified


(Number 5 of 1986)

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TARIFF ITEM 65 - RUBBER PROCESSING CHEMICALS



―65. Rubber Processing Chemicals. The following, namely –

1) Accelerators

2) Antioxidants‖

As per tariff advice Number 44/79 dated 26.09.1979 Aniline Oil was not classifiable

as a “Rubber accelerator or anti-oxidant” under tariff item number 65 of the Central Excise

Tariff.

As per Tariff Advice Number 4/80 dated 11.01.1980 “Retarders” which retard

oxidation alone were classifiable as “Anti-Oxidants” under tariff item number 65 of the

Central Excise Tariff and therefore they were ineligible from the purview of the tariff item

number 68.

Bangalore Trade Notice Number 81/75 dated 12.05.1975 made it clear that

derivatives of diphenylamine were liable to duty under Central Excise Tariff item number 65

as they were used as anti-oxidants in rubber industry and were also sold as such.

Mono, Di, and Tri Ethanolamines was not known to be used at present as

“Accelerator/Anti-Oxidant” in rubber industry. In view of this, as also taking into account

the scope of the tariff heading related to tariff item number 65 of Central Excise Tariff, it

was felt that Mono, Di, and Tri Ethanolamines were not classifiable under the item number

65 of the Central Excise Tariff as Rubber Processing Chemical. (Tariff Advice Number

15/76 dated 02.04.1976 refers)

Retenol Recryst was recognized as rubber anti-oxidant in various literatures and was

recommended by the manufacturers for such use, therefore, it was liable to countervailing

duty under tariff item number 65 of the Central Excise Tariff. (1980 ELT 360 (Government

of India) refers)

“Rubber Processing Chemicals” under tariff item number 65 was more of a generic

description known, designated and recognized as such in technical literature as well as in

trade and consequently its use or predominant use were altogether irrelevant for its

classification under tariff item number 65 of the Central Excise Tariff. (1983 ELT 2483 (T)

refers)

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“Rubber Processing Chemicals” and among them accelerators and anti-oxidant

having a technical and scientific meaning and understood even in industrial circles as

denoting a group of chemicals, it was uncalled for to speculate about their actual use or

predominant use. What was generally known, as a „rubber processing chemical‟ did not

cease to be one because it was not being used as such predominantly. (1983 ELT 2483 (T)

refers)



(Number 5 of 1986)

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TARIFF ITEM 66 - PERMANENT MAGNETS


from 01.03.1974 the same was placed at tariff item number 66, the description of which was

as under.

―66. Permanent Magnets

Explanation: The expression ―Permanent Magnets‖ shall

include any piece of hard steel, special alloy or other

material, recognizable by its composition and shape, as

being intended to become permanent magnet after

magnetizing.‖

The goods covered by this item were exempted if intended for the purpose of research

and development.

SSI Exemption for clearance value upto the first slab of rupees one hundred lacs from

the duty of excise leviable thereon was granted to this commodity with effect from

01.03.1983.



1986)

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TARIFF ITEM 67 - GRAPHITE ELECTRODES

Initially this commodity was brought under the excise net by the Finance Bill, 1975

and with effect from 01.03.1975 the same was placed at tariff item number 67 of the Central

Excise Tariff and the description of this commodity was as under.

“67. Graphite Electrodes and Anodes, all sorts‖

Taking into consideration the scope of item 67 of Central Excise Tariff, the technical

opinions and the end usage, etc, it was felt that graphite had blocks which formed as

conductors between the furnace and the aluminium bus bars were chargeable to the duty of

excise as graphite electrodes under the tariff item number 67 of the Central Excise Tariff.

Regarding other forms of graphite specialties, they were not liable to Excise Duty if they did

not find use as such, as graphite electrodes or anodes. It was, however, felt that the final

decision about the classification of a particular graphite specially under tariff item 67 of the

Central Excise Tariff was a question of verification of the full facts of the specification,

design, purported uses, etc, before arriving at a decision in such cases. (CBEC Tariff Advice

Number 19/76 dated 24.04.1976 refers)

Since Tariff Item Number 67 confined itself to graphite electrodes and anodes, all

sorts, only carbon electrodes and carbon anodes which were distinguishable from the above

mentioned products were not eligible to be covered under the aforesaid tariff item in which

case these products were covered more appropriately within the scope of the residual tariff

item number 68. (CBEC letter Number B-34/2/75-TRU dated 23.07.1975 refers)



(Number 5 of 1986)

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TARIFF ITEM 68 - ALL OTHER GOODS, NOT ELSEWHERE SPECIFIED

Schedule I to the Central Excises and Salt Act, 1944, contains 67 specific tariff items,

listing individual commodities, and any commodity that was not covered by this list was

leviable to the duty of excise under tariff item number 68, that is to say, “Residuary items”.

The definition of this tariff item number 68 reads as under.

―68. All Other Goods, not elsewhere specified, manufactured in a

factory but excluding -

(a) alcohol all sorts, including alcoholic liquors for human

consumption;

(b) opium, Indian Hemp and other narcotic drugs and

narcotics; and

(c) dutiable goods as defined in Section 2(f) of the Medicinal

and Toilet Preparations (Excise Duties)Act, 1955.

Explanation: In this item, the expression ―factory‖ has the

meaning assigned to it in Section 2(m) of the Factories Act,

1948.

It may be noted that whereas the term “manufacture” has to be interpreted as per the

Central Excises and Salt Act, 1944, the definition of “factory” was as per the Factories Act,

i.e.,

i) whereon ten or more workers are working or were working on any day of

the preceding twelve months and in any part of which a manufacturing process

is being carried on with the aid of power, or is ordinarily so carried on, or

ii) whereon twenty or more workers are working, were working on any day of

the preceding twelve months, and in any part of which a manufacturing

process is being carried on without the aid of power or is ordinarily so carried

on, but does not include a mine subject to the operation of the Mines Act,

1952 (Number 35 of 1952) or a railway running shed.

By a Notification Number 54/75-CE dated 01.03.1975, only the goods manufactured

by factories where fifty or more workers were working with the aid of power or where one

hundred or more workers were working without the aid of power on any day of the

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preceding twelve months belonged to the dutiable category. The production of all other

factories was completed exempted.

Exemption was also provided for the following categories of goods, falling under the

item, that is to say -

a) all kinds of food products and food preparations (including grain

mill products),

b) electric light and power (Notification No.55/75-CE dated

01.03.1975 refers);

c) goods manufactured by factories belonging to the Central

Government, which were meant for the use by the various

departments of the said Governments; (Notification Number 56/75-

CE dated 01.03.1975 refers);

d) the goods manufactured by the factories belonging to any State

Government for the purposes declared by the Parliament by law to

be incidental to the ordinary functions of the Government

(Notification Number 57/75-CE dated 01.03.1975 refers)

The following industries were covered under this tariff item, if they were not already

excisable under tariff items 01 to 67 of the Central Excise Tariff, that is to say,

1) Wood Mills, Wooden and Cane Containers, Cork and Wood

products,

2) Furniture and Fixtures,

3) Printing, Publishing and allied industries (including newspapers);

4) Tanneries and Leather products,

5) Chemical and Chemical Products,

6) Gas Manufacturers,

7) Structural Clay products,

8) Non-Metallic Mineral products,

9) Manufacture of Metal products,

10) Machinery, Other than Electrical Machinery,

11) Electrical Machinery and Apparatus,

12) Ship Building,

13) Rail, Road Equipments,

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14) Professional, Scientific Measuring Instruments,

15) Aircraft,

16) Watches and Clocks,

17) Musical Instruments, and

18) Manufacturing Industries, not elsewhere specified.

On the side of imports, countervailing duty on like articles, when imported, was

exempted. As for the exports, rule 12 of the Central Excise Rules, 1944, was extended to the

items falling under this tariff entry.

“Self Removal Procedure” was extended to the factories with effect from 01.03.1975.

Departmental officers were directed to give all possible assistance promptly to the

producers/manufacturers in the matter of getting excise licence, approval of the classification

list as also the price list, opening of Personal Ledger Account, maintenance of various

Central Excise records, payment of duty, etc. These directives further stated that utmost care

was required to be taken by the departmental officers so as not to hold clearances of goods

such newspapers, town gas, etc, so that there may be no serious dislocation of normal public

and, in particular, it was to be ensured that no hold up of newspapers occurred.

Tariff Item Number 68 “All Other Goods, Not Elsewhere Specified” was initially

added to the first Schedule to the Central Excises and Salt Act, 1944, by the Finance Bill,

1975. Nominal one per cent ad valorem duty of excise was levied as an experimental

measure on commodities, which did not attract excise duty under any other specified heads.

The idea was to widen the coverage of taxable goods and to provide a more dependable

information base for future revenue raising exercises. To start with, exemption was allowed

in the year 1975 to the units with power upto 49 workers and to the units without power upto

99 workers.

It is pertinent to note the Budget speech of the Finance Minister on 28.02.1975 in

explaining the nature of new duty. The Hon‟ble Minister said that -

―I now come to a new concept in Central Excise Taxation.

Hitherto the Central Excise tariff covered only certain specified

goods. With a view to widen the coverage of taxable goods and to

provide a more dependable information base for future revenue

raising exercises, I propose to introduce a new item in the Central

Excise Tariff Schedule which, with a few exceptions, will cover all

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the goods produced for sale or other commercial purposes not

elsewhere specified in the Schedule. Goods covered under this new

item will be chargeable to a nominal duty at the rate of one per

cent ad valorem. While the tariff item will cover the production of

all the factories as defined in the Factories Act, 1948, I propose,

for the sake of administrative convenience, to exempt the

production of those factories which employ not more than forty

nine workers in the case of power operated factories and not more

than ninety nine workers in the case of non-power operated

factories. To further simplify the levy, I also propose to exempt

from duty intermediate products and component parts falling

within this item produced in a factory and consumed within the

same factory for the manufacture of finished goods. No

countervailing duty will be levied on imported goods

corresponding to this new item. This levy is admittedly an

experimental measure. I expect that this measure will yield a

revenue of rupees twenty four crores per annum.‖

In the Finance Bill, 1977, the rate of duty on the goods falling under the tariff item

number 68 was raised fro one per cent to two per cent ad valorem with effect from

18.06.1977. Simultaneously, the criterion for the exemption was also switched over from the

number of workers to the investment on Plant and Machinery and turn over in case of Small

Scale Units. The sealing prescribed for investment in Plant and Machinery was rupees ten

lacs with a turn over rupees thirty lacs.

The Hon‟ble Finance Minister, in his Budget Speech, stated as under.

―As the Hon‘ble members are aware, in 1975, as an experimental

measure one per cent general excise duty was levied on

commodities which did not attract excise duties under any

specified heads. The experiment has succeeded in the sense that

without imposing any undue burden or harassment we were able to

collect an appreciable sum of money, namely rupees thirty seven

crores. When we stand in need of additional resources, it seems

eminently suitable to raise the rate to two per cent. In order to

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minimize the cascading effect a set off will be given where these

goods go into the manufacture of other goods that are themselves

excisable. Realising that under this excise head fall a large number

of small units producing a variety of goods I have provided that no

duty will be levied on any unit whose annual turnover does not

exceed rupees thirty lacs. This will replace the existing exemption

based on the number of workers. I am also exempting all non-

power operated units from this levy.‖

In the Finance Bill, 1978, the rate of duty of excise was increased from two per cent

to five per cent ad valorem and the Government expected the revenue yield of rupees one

hundred crores.

The Budget speech of the Hon‟ble Finance Minister, delivered on 28.02.1978,

was as under.

―Under Item 68 of the Central Excise Tariff, the rate of duty

leviable on ―All Articles, Not Elsewhere Specified‖ is at present

two per cent ad valorem. I propose to raise this to the level of five

per cent ad valorem. While doing so, I propose to exempt to some

sensitive categories of goods, namely, pesticides, weedicides,

insecticides and fungicides, drugs and medicines, other than

Proprietary and Patent Drugs and Medicines, pharmaceuticals

and drug intermediates, from the whole of the duty leviable under

this item. Newspapers and periodicals are also being exempted

completely. The existing exemption in respect of small

manufacturers whose clearances of excisable goods does not

exceed rupees thirty lacs in the preceding year continues. These

proposals will yield a revenue of rupees one hundred crores.‖

In the Finance Bill, 1979, the Excise Duty was raised from five per cent to eight per

cent ad valorem and the additional yield that was expected was of rupees one hundred crores.

It was stated that there was already a provision for giving set off of the duty paid on the

goods falling under tariff item number 68 which are used in the manufacture of other

excisable goods and the Finance Minister further said that the increased revenue should not

have appreciable cascading effect. He also stated that while computing value of the

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clearances only the value relating to the clearances of the goods falling under tariff item

number 68 should also be computed and the value of the goods exported should not be

considered for the purpose of the eligibility of exemption.

In his Budget speech on 28.02.1979, the Hon‟ble Finance Minister stated as under.

―I propose to increase the rate of duty on the residuary heading

item 68 of the Central Excise Tariff from the existing level of five

per cent to eight per cent ad valorem. This will yield an additional

revenue of rupees one hundred crores. As the Hon‘ble Members

are aware, there is already a provision for giving set off of the duty

paid on goods falling under item 68 which are used in the

manufacture of other excisable goods. The increased levy should,

therefore, not have any appreciable cascading effect.‖

The tariff description was amended to delete the definition of factory. However, by

virtue of an exemption notification, goods manufactured in places other than „factories‟ were

completely exempted. This deletion had no revenue significance.

Diesel engine parts were exempted under this item. This exemption was withdrawn.

Free wheels and rims, which were specified cycle parts, were hitherto falling under

tariff item 35. This item was deleted. The effect of this deletion was that these parts, subject

to the exemptions, otherwise available, were liable to the duty of excise under item 68.

Cycles and cycle parts which were assessable to the duty of excise under this item

were chargeable to the duty at five per cent (as against the proposed rate of eight per cent)

After the enactment of the Finance Bill, 1979, free wheels and rims also became eligible to

this concessional rate of duty of five per cent subject to the exemption for small scale

manufacturers under this item.

Transformers and generators, falling under this item, were presently chargeable to

duty at a concessional rate of two per cent to two and half percent respectively.

Since the rate of duty for this item was to be raised to eight per cent, consequential

corresponding enhancement was also made in the duty for these articles.

Exemption scheme for Small Scale Industries manufacturing goods, falling under this

item, was changed with effect from 01.04.1979. In the proposed scheme, for the purpose of

eligibility criterion, value of export goods as also of excisable goods, not falling under tariff

item 68 were excluded. Simultaneously, the value limit for complete exemption available to

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a manufacturer under this scheme was reduced to rupees fifteen lacs in a financial year.

Clearances of a value exceeding rupees fifteen lacs but not exceeding rupees thirty lacs

attracted a concessional rate of duty of excise of four per cent ad valorem.

With effect from 19.06.1980, a clarificatory explanation was added to tariff item

number 68. In the case of small manufacturers of goods, falling under item 68, whose capital

investment on plant and machinery did not exceed rupees ten lacs, the limit for complete

exemption was raised from rupees fifteen lacs to rupees thirty lacs in a financial year,

provided their clearances during the preceding finance financial year did not exceed rupees

thirty lacs. For the rest of the current financial year the exemption limit was rupees twenty-

four lacs. Molasses fall under tariff item 15CC instead of tariff item 68, with effect from the

midnight of 18.06.1980/19.06.1980. The following were exempted from the duty.

i) Ocean going vessels,

ii) Ground Spices (Masalas) and Mixed Spices (Masalas),

iii) Sewing Machines and Parts thereof

iv) Cycles and Parts thereof

v) Articles of Hosiery made from fabrics, manufactured wholly from

cotton or from a blend of cotton with viscose fibre or yarn, and

vi) Goods manufactured by Bharat Electronics Ltd for supply to the

Ministry of Defence for official purposes.

The rate of excise duty was raised to ten per cent from the earlier rate of eight per cent

with effect from 01.03.1983.

The rate of duty of excise was increased to twelve per cent with effect from

17.03.1985 for the tariff item number 68.

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CHAPTER THIRTEEN - ADMINISTRATION SET UP

The British rulers were very shrewd as also were very practical persons.

Whereas their intention was to spread British Raj in India they were also of the

determined view that their hold on the Raj must not lack anywhere. So far as the

administration was concerned, especially in connection with tax collection, they

wanted to administer the system with minimum cost. Hence the native Indians were

educated and were appointed as the subordinate officers. These subordinate officers

did not have adequate knowledge of English and hence the following terminologies

were used which could easily be remembered and utilized in day today working.

Terminology

(A) EB = Entry Book

EB-1 For grower of unmanufactured product

EB-2 For curer of unmanufactured product

EB-3 For wholesale purchase in unmanufactured

product

3A (Biris) For contractors/agents of biri manufacturers

3B (Biris) For manufacturers of Biris

EB-4 For store room for excisable goods

EB4 (Matches) For match factory store room

(B) RG = Register

RG1 For daily stock account of excisable goods

(Also known as „Production Register‟)

RG3 For stock and receipt of match banderols

purchased for cash

RG3 (Cr) For stock and receipt of match banderols

purchased on Credit

RG4 For Cane account

RG5 For Gur (jaggery) account

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RG 6(C) For daily manufacture (Central Sugar

factories)

RG6 (G) For daily manufacture (Central refineries)

RG7 For Drier House Account

RG8 For State Sugar account

RG9 For Gunny Bags account

RG10 For raw materials used and

Khandsari/Palmyra sugar manufactured and issued

RG11 For daily account of sugar received for

crushing

RG12 For manufacture of excisable Tobacco

products

RG12A For manufacture of excisable tobacco product

(Biris)

RG13 For tobacco excise labels

RG14 For sugar received for manufacture of

confectionary

RG15 For manufacture and issue of confectionary

for export

RG16 For excisable goods used without payment

of duty for special industrial purposes

RG17 For daily account of loose tea utilized in the

production of package tea

RG19 For different equipments for manufacturing

Vegetable Non-Essential Oils with the aid of power

RG21 For different types of centrifugals installed

for the manufacture of Khandsari sugar under special

procedure

RG22 For accounting raw materials used in the

manufacture of Vegetable Non-Essential Oils

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RG23 For accounting duty paid material received

for manufacture of other excisable goods

RG25 Production register cum account current to

be maintained by the manufacturers of embroidery

working under special procedure;

(C) AR = Application for Removal

AR1 For excisable goods on payment of duty,

AR2 For matches from finishing to the storeroom,

AR3 For excisable goods from one bonded

warehouse to another

AR3A For excisable goods from one bonded

warehouse to another

AR4 For excisable goods for export

AR4A For excisable goods for export under Chapter

VII-A,

AR4 (Land) For excisable goods for export by sea or by

land,

AR5 (Conf) For Confectionary for export under claim for

rebate,

AR6 For cotton fabrics or silk fabrics produced on

powerlooms or powerlooms knitting machines,

AR7 For Vegetable Non Essential Oils produced with

the aid of Power

AR8 For Khandasari sugar produced under special

procedure,

AR9 For battery plates produced under special

procedure,

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AR11 For cotton fabrics processed without the aid of

power or steam under special procedure,

(D) TP = Transport Permit.

TP1 For duty paid unmanufactured product,

TP2 For non duty paid unmanufactured product,

TP3 For certificate for non duty paid unmanufactured

product,

TP4 For certificate for transport for unmanufactured

Green Tobacco on which duty has not been paid,

(E) GP = Gate Pass

GP1 For removal of excisable goods from a

factory/warehouse on payment of duty,

GP2 For removal of excisable goods without

payment of duty,

(F) RT = Return

RT1 For annual return for unmanufactured products

grown,

RT2 For annual return for unmanufactured products

cured,

RT3 For annual return for excisable goods

manufactured,

RT4 For monthly return for other goods

manufactured,

RT5 For periodical/quarterly return for materials

used,

RT6 For monthly return of stock/receipts of

banderols purchased for cash

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RT6 (Cr) For monthly return of stock/receipts of

banderols purchased on credit

RT7 (C) For periodical/monthly manufacturing

report for Central Sugar factories

RT7 (G) For periodical/monthly manufacturing

report for refineries,

RT8(C) For final manufacturing report for

Central Sugar factories, RT8 (G) For final

manufacturing report for Central refineries,

RT9 For monthly abstract of sugar received for

crushing,

RT11 For monthly return of excisable goods without

payment of the whole or part of duty for special

industrial purposes and of commodities manufactured

therefrom,

RT12 For monthly/periodical return of excisable goods

manufactured and issued by assesses working under

Chapter VII-A,

(G) WRG = Register for Warehouses and Curer‟s Storerooms

WRG1 For a public bonded ware house,

WRG2 For a private bonded warehouse,

WRG3 For curer‟s private bonded warehouse,

(H) CT = Certificate

CT1 For removal of warehoused goods under

particular bond,

CT2 For removal of warehoused goods under general

bond,

(I) D = Declaration

D1 For land for growing excisable goods,

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D2 For premises and equipments for manufacture of

excisable goods,

D3 For return of excisable goods,

(J) AL = Application for Licence

AL1 For curing unmanufactured products,

AL2 For carrying on wholesale trade in tobacco or to

purchase other unmanufactured products from a curer,

AL3 For carrying on business as a broker in respect

of unmanufactured products

AL4 For manufacture of excisable goods,

AL5 For storing excisable goods in a private bonded

warehouse/store room

AL6 For using excisable goods for special industrial

purposes without payment of whole or part of duty,

(K) L = Licence

L1 For curing unmanufactured products,

L2 For carrying on wholesale trade in

unmanufactured products,

L2(Tobacco) For carrying on wholesale trade in

unmanufactured tobacco

L3 For carrying on business as a broker or

commission agent in respect of unmanufactured

products,

L3 (Tobacco) For carrying on business as broker or

commission agent in respect of tobacco,

L4 For manufacturing excisable goods,

L5 For storing excisable goods in a private bonded

warehouse/store room,

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L6 For using excisable goods for special industrial

purposes without payment of the whole or part of the

duty of excise,

(L) B = Bond

B1 (Sur) With surety for the due dispatch of

excisable goods removed for export

B1 (Sec) With security for the due dispatch of

excisable goods removed for export,

B1 (Gen. Sur) General with surety for due dispatch of

excisable goods removed for export,

B1 (Gen. Sec.) General with security for the due

dispatch of excisable goods removed for exports,

B2 For the due disposal of excisable goods on

manufacture

B2A For satisfactorily accounting for excisable goods

on manufacture,

B3 (Sur) With surety in respect of match

banderols on credit,

B3 (TR) With Trust Receipt in respect of match

banderols on credit,

B4 (Sur) With surety for public/private bonded

warehouse,

B4 (Sec) With security for public/private bonded

warehouse,

B4 (A) For a curer‟s private bonded store room,

B5 (Sur) With surety for the due arrival or/and re-

warehousing of excisable goods removed from one

factory/warehouse to another,

B5 (Sec) With security for the due arrival or/and re-


factory/warehouse to another,

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B5 (Gen Sur) General with surety for the due arrival

or/and re-warehousing of excisable goods removed

from one factory/warehouse to another,

B5 (Gen Sur) General with security for the due

arrival or/and re-warehousing of excisable goods

removed from one factory/warehouse to another,

B6 For duty on excisable goods deposited in a

public bonded warehouse,

B6 (Gen Sur) General with surety for duty on

excisable goods deposited in a public bonded

warehouse,

B6 (Gen Sec) General with security for duty on

excisable goods deposited in a public bonded

warehouse,

B7 For confectionary exported under claim for

rebate of duty on sugar content,

B8 (Sec) With security for due disposal of

excisable goods obtained without payment of the whole

or part of the duty for use in special industrial

processes,

B8 (Sur) With surety for due disposal of excisable

goods obtained without payment of whole or part of the

duty for use in special industrial processes,

B10 (Sur) Bond with surety for provisional

assessment of goods to excise duty,

B10 (Sec) Bond with security for provisional

assessment of goods to excise duty,

B11 (Sec) Bond with security for obtaining release

of seized goods pending adjudication

B12 (Gen Sur) General with surety for storage, or the

due arrival and re-warehousing and for removal from

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time to time for export to a foreign country of excisable

goods without payment of duty,

B12 (Gen Sec) General with security for storage, for

the due arrival and re-warehousing from time to time

for export to a foreign country of excisable goods

without payment of duty,

B13 (Gen Sur) General Bond with surety for

provisional assessment of goods of excise duty,

B13 (Gen Sec) General Bond with security for

provisional assessment of goods to excise duty,

B14 (Gen Sur) General Bond with surety for part

payment of duty and interest thereon,

B15 (Gen Sur) General Bond with surety for the

due disposal of and satisfactory accounting of excisable

goods on manufacture, for the due arrival and re-


factory/warehouse to another and for removal from time

to time for export to a foreign country of manufactured

excisable goods without payment of duty,

B15 (Gen Sec) General Bond with security for

the due disposal of and satisfactory accounting of

excisable goods on manufacture for the due arrival and

re-warehousing of excisable goods removed from one

factory/warehouse to another and for removal from time

to time for export to a foreign country of manufactured

excisable goods without payment of duty,

B16 (Gen Surety/IES Security) General Bond

with surety/security for storage, for due arrival and

warehousing and for removal from time to time for

export to a foreign country of excisable goods without

payment of duty, for the disposal of and satisfactory

accounting of excisable goods on manufacture, for due

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accounting and disposal of excisable goods obtained

without payment of the whole or part of the duty for use

in the special industrial purposes, for obtaining

provisional assessment of goods to excise duty under

rule 9.3

Now I will turn to another part of this administration set up, i.e. rules. Act

passed was intended to give a concrete idea as to the related policy of the Government

whereas the rules were there to implement what was proposed as a policy. Thus, in

the sense, rules were even called as subordinate legislation.

Following are the important rules of the Central Excise Rules, 1944.

Rule 2: Deal with the definitions,

Rule 8: Confer power to authorize exemption from duty in

special cases,

Rule 9: Indicate time and manner of payment of Central Excise

duty

Rule 10 and Rule 10A: Relate to recovery of duty not paid or not levied or not

Paid or short levied or erroneously refunded; however,

this was omitted and was substituted now as Section

11A of the Central Excise Act, 1944;

Rule 11: About the refund of duty,

Rule 12: About the export of finished goods,

Rule 12A: Relate to rebate of input duty on the goods imported

which were used in the manufacture of goods that were

later on exported,

Rule 13: Meant for exports under Bond,

Rule 14: For the exporter who has to enter into a general bond,

Rule 14A: Regarding penalty for failure to furnish proof of exports

within a prescribed period,

Rule 14B: Relate to penalty for removing excisable goods the duty

leviable on which exceeded the bond amount. This rule

was inserted by the Notification No.71/57-CE dated

21.09.1957,

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Rule 15 to 42: Related to Unmanufactured Tobacco products,

Rule 43: Under this rule manufacturer had to give notice as to his

intention to manufacture excisable goods,

Rule 44: Made the manufacturer mandatory to give his prior

declaration of his factory premises and equipments,

Rule 45: Made the manufacturer to specify alteration, movement

of factory equipment,

Rule 46: Relate to marking of premises and equipments,

Rule 47: About the storage of goods within the Bonded Store

Room (BSR) without payment of duty,

Rule 48: Under this the manufacturer had to enter into a bond for

payment of duty,

Rule 49: Related to the duty chargeable only on removal of the

goods from the factory premises or from an approved

place of storage,

Rule 49A: About the collection of duty leviable on cellulosic spun

yarn and cotton yarn along with the duty on cotton

fabrics. This rule was inserted with effect from

21.11.1977.

Rule 50: Under this rule non-excisable products were not liable

to be removed without the permission of the proper

officer,

Rule 51: Regarding packing and weighment of goods, the

manufacturer was also to mark his products unless the

proper officer exempts him from doing so,

Rule 51A: Regarding removal of goods after payment of duty and

in no case no duty paid goods were permitted to be

stored in BSR,

Rule 52: Under this rule goods were required to be cleared only

on payment of duty,

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Rule 52A: This made the manufacturer to deliver the goods on a

gate pass. This rule was inserted by the Notification

Number38/49-CE dated 03.12.1949.

Rule 53: This rule administered maintenance of daily stock

account.

Rule 53A: Required to show the account of raw materials used in

the manufacture of Vegetable Non-Essential Oils,

Rule 54: Related to the submission of Monthly Returns,

Rule 55: Required the manufacturer to submit to the proper

officer in the proper form Quarterly Return in respect of

the raw material used and the finished goods

manufactured.

Rule 56: Related to taking out samples for excise purposes,

Rule 56A: This dealt with the Special Procedure for movement of

the duty paid materials or component parts to be used in

the manufacture of finished excisable goods, (This was

like conversion of VAT or the Modvat Credit

Procedure.) Under this rule the manufacturer could

bring the duty paid goods and could claim the refund or

credit of duty though utilized or the payment of duty of

the finished excisable goods.

In the Modvat Scheme liability of for payment of duty

on raw material was as per the notification in which the

description of inputs and the description of finished

goods was given whereas in the VAT system there is no

such restriction. This rule restricted relating to the

incident that the duty has been paid for such material

under the same item as the finished excisable goods as

has been specifically sanctioned by the Central

Government as against the Modvat Scheme.

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Modvat Credit Scheme was inserted as Section “AA” to

the Central Excises and Salt Act, 1944 with effect from

01.04.1986.

Rule 57A: Dealt with the Modvat Credit Scheme, which was

introduced with effect from 01.04.1986. With effect

from 01.03.1994, the Modvat Credit Scheme was also

extended to the Capital Goods and rules 57Q to 57U

were framed which dealt with the Modvat Credit

Scheme for the Capital Goods.

Rule 58 to 82A: Dealt with article Matches.

Rule 83 to 92F: Dealt with Sugar,

Rule 93 to 95A: Related to the Manufactured Tobacco Products,

Rule 96A/96C: Related to the Cotton Fabrics,

Rule 96D/96DD: Related to the special procedure for removal of Cotton

Fabrics or Jute manufacture or Man Made Fabrics from

one factory to another factory without payment of duty

for processing

Rule 96E/96EE: Dealt with the special procedure for removal of Cotton

Yarn or Jute Twist, yarn, threads, ropes and twine from

one factory to another without payment of duty,

Rule 96F: Related to Tea, fixation of area for the purpose of excise

duty,

Rule 96G: Regarding manufacturing of tea from green leaves

grown in other areas,

Rule 96H: Related to Package Tea, etc,

Rule 96I to Rule96MMMMM: About Cotton Fabrics, Powerloom (Special

Procedure)

Rule 96N/96U: Concerned with Vegetable Non Essential Oils units

working with the aid of power,

Rule 96ZA: Related to marking of labels in respect of Patents and

Proprietary Medicines,

Rule 96ZB: Regarding Yarn,

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Rule 96Z/96ZZZ: About Marble Slabs,

Rule 97: Refund of duty on goods returned to the factory,

Rule 97A: Regarding the goods cleared for exports may be

allowed to be returned to the factory,

Rule 97B: Regarding excisable goods exported may be allowed to

be returned to the factory for carrying out (a) repairs,

(b) reconditioning, (c) refining, (d) remaking or (e)

subjecting to any process similar to the process referred

to under (a) to (d)

Rule 98: Regarding unbanderolled and unlabelled goods

removed for export may be returned to the factory,

Rule 99: Related to the refund of purchase price of unused or

damaged banderols;

Rule 100: As to the refund of duty on sugar received for refining,

Rule 100A/ Rule 100H: These rules were inserted on 28.02.1981 and dealt with

the removal of goods from the Free Trade Zone or

100% Export Oriented Units for the excisable goods for

home consumption,

Rule 101: Related to Salt, which was omitted by the Notification

Number 98/59-CE dated 19.12.1959.

Rule 102/138: With regard to the Salt

Rule 139/173: Relating to the warehousing provisions applicable only

to the goods specially notified in the official gazette by

the Central Government,

Rule 173A: For removal of excisable goods on determination of

duty by producers, manufacturers or private warehouse

licensees

Rule 173B: Under this rule the assessee was to file a Classification

List for approval of the proper officer for determination

of the rate of duty,

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Rule 173C: Under this rule the assessee was require to file price list

of goods assessable ad valorem to be got approved from

the proper officer

Rule 173F: Under this rule the assessee was to determine the duty

of excise on the goods meant for removal and remove

them accordingly on payment of appropriate duty,

Rule 173G: Under this rule prescribed procedure was to be followed

by the assessee in respect of Self Removal Procedure,

Rule 173H: This rule related to the retention or re-entry of duty paid

goods in the factory or warehouse,

Rule 173I: This rule related to the assessment of the goods to be

removed by the proper officer,

Rule 173L: Regarding refund of duty as regards the goods returned

to the factory and re-issued on payment of duty,

Rule 173M: Under this rule goods cleared for export were allowed

to be returned to the factory,

Rule 173Q: Penal provisions, i.e. Confiscation of goods and

Penalty,

Rule 173S: Related to refund,

Rule 174/181: Regarding licensing,

Rule 182/184: Related to Matches but which were omitted by the

Notification Number 101/63-CE dated 29.06.1963;

131/66-CE dated 20.08.1966 and 147/64-CE dated

19.09.1964,

Rule 185/191: Related to the export of excisable goods under claim for

rebate of duty or under Bond,

Rule 191A: Regarding the procedure for export out of India of the

articles under rebate of duty on the excisable goods

used in their manufacture and packing. This rule was

inserted on 27.11.1956.

Rule 191B: Regarding manufacture in Bond of the articles of

excisable goods on which duty has not been paid,

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Rule 192/ Rule 196BB: Regarding the remission of duty on goods used for

Special Industrial Purposes (Chapter X Procedure)

Rule 197/209: Relating to Entry, Search, Seizure and Investigations,

Rule 210/215: Related to Penalty, Confiscation and Appeals,

Rule 221: Fixing responsibility of the corporate body for making

declarations and obtaining license

Rule 221A: Exemption from execution of bonds by the Central

Govt. undertakings and furnishing of securities or

surety by the State Govt. undertakings

Rule 222: Under this rule, collector was empowered to get a fresh

declaration

Rule 223: This related to the stock of excisable goods to be stored

in an ordinary manner (This rule was inserted on 29-10-

1949).

Rule 223A: Related to the manner of accounting, declaring

Rule 223B: Related to the manner of accounting of the stocks of

excisable goods

Rule 224: By this rule, restrictions were imposed on removal of

excisable goods.

Rule 224A: This rule enables the cancellation of Central Excise

documents.

Rule 224B: Under this rule, duplicate documents were granted on

payment of certain fees,

Rule 224C: Under this rule, endorsements were made on the

transport documents

Rule 225: Under this rule, the producer or the manufacturer liable

for removal of goods

Rule 226: Relating to the manner of maintaining Entry Books,

Stock Accounts, Warehouse register and penalty was

also imposable under this rule,

Rule 227: Relating to the provision and maintenance of weighing

and measuring apparatus,

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Rule 228: Related to the provision and maintenance of locks

Rule 229: Regarding the provision of accommodation at factory or

warehouse

Rule 230: Under this rule, goods, plant and machinery were liable

for confiscation in case duty was not paid,

Rule 231: As per this rule, matches and excisable tobacco

products were not to be sold except in the prescribed

containers bearing a banderol or a label,

Rule 232: Related to the Officer who was not to disclose

information he learnt in his official capacity

Rule 232A: Under this rule, the collector was empowered to publish

names with the other particulars or the persons who

have contravened the provisions of law in any way

Rule 233: Under this rule, the Collector was empowered to issue

supplementary instructions.

Rule 233A: This rule made it binding to issue show cause notice

before confiscation of any property or imposition of any

penalty.

It is surprising that the principles of natural justice were completely

ignored in framing the tax laws during the British Raj as the colonial

administration of British Raj was claimed to be based on so-called

legalism.

Rule 234: Bt this rule former rules, orders, notifications were

cancelled.

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CHAPTER FOURTEEN - APPELLATE TRIBUNAL

By Section 50 of the Finance (2) Act, 1980, (Number 44 of 1980), the Chapter

VIA relating to the “Appeals” was substituted and as per this amendment Appellate

Tribunals were created and were christened “Customs, Excise & Gold (Control)

Appellate Tribunal” and were located as Special Regional Benches at (1) New Delhi,

(2) Calcutta (now Kolkatta), (3) Bombay (now Mumbai) and (4) Madras (now

Chennai).

An appeal could be filed before the Commissioner (Appeals), Central Excise,

against the order passed by the officer below the rank of a Commissioner. An appeal

can be filed against the order passed by the Commissioner (Appeals) with the

Appellate Tribunal. A right of appeal was a substantive right and was a creature of

the statute. To file an appeal the order must be in writing containing the points for

determination and decision land reasons for the decision. Absence of the formulation

of the points for decision or want of clarity in a decision undoubtedly places the

assessee in a quandary. A decision must be firm, clear, certain, definite and without

ambiguity. The reasons were two fold – first was to enable to assessee effectively to

go in appeal if he felt he has been aggrieved, and the second – to aid the lower

authority in implementing the order of the superior tribunal, as refusal to carry out a

direction was a denial of justice and destructive of one of the basic principles in the

administration of justice based on the hierarchy of the authorities.

As to the powers and jurisdiction of the Appellate Tribunal, the Appellate

authority has jurisdiction and it was its duty to correct all errors in the proceedings

under appeal, to issue necessary directions to the authority against whose decision the

appeal was preferred to dispose of the whole or part of the matter afresh. The

Appellate Tribunal was invested with judicial powers to be exercised in a manner

similar to the exercise of powers of appellate court acting under the Code of Civil

Procedure. The Tribunal is the final fact finding body and its decisions on questions

of facts were not liable to be questioned before the High Court. The nature of the

jurisdiction predicated that the Tribunal will approach and decide the case in a judicial

spirit and for that purpose it must indicate the disputed questions before it with

evidence pros and cons and record its reasons in support of its decision. The power of

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the Tribunal was confined to the subject matter of the appeal before it and it could not

go beyond the scope of appeal Tribunal has implied powers to grant stay in a proper

case. As the Tribunal was a creature of the statute it can only decide the dispute

between the assessee and the commissioner in terms of the provisions of the act. The

question of ultra vires was foreign to the scope of its jurisdiction.

evolution of central excise duties in india-1944 to 1985

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