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CASE NO.:

Appeal (civil) 3579-81 of 1984

PETITIONER:

INDIAN TOOL MANUFACTURERS

RESPONDENT:

ASSTT. COLLECTOR OF CENTRAL EXCISE, NASIK AND ORS.

DATE OF JUDGMENT: 23/09/1994

BENCH:

B.P. JEEVAN REDDY & SUHAS C. SEN & K.S. PARIPOORNAN

JUDGMENT:

JUDGMENT

1994 SUPPL. (4) SCR 1

The Judgment of the Court was delivered by

SEN, J. : The appellants manufacture and sell what they call as 'THROW-AWAY

INSERTS' (hereinafter referred to as 'the Inserts') During the period upto

17.6.77. these Inserts were classified under T.I. No. 68. In view of the

amendment in T.I. No. 5lA, these Inserts were classified under that Tariff

Item Number from 18.6.77. Until 28.2.79, the appellants paid duty

accordingly. On 1.3.79. they filed a revised classification list in which

inserts were listed at Serial Nos. 1716 to 1741. Since the Department

intended to make certain inquiries likely to take sometime, classification

of the inserts was provisionally approved under Item Nos. 51A(iii). On

25.2.80 the Assistant Collector, Central Excise, issued a Show Cause Notice

asking the appellants as to why the classification in respect of the

Inserts approved earlier provisionally under T.I No. 51A(iii) should not be

changed to T.I. No, 62. A similar Show Cause Notice was issued in respect

of the Classification List No. 5 effective from 20.6.79 No. 6 effective

from 2.7.79 No. 7 effective from 6.7.79 No. 8 effective from 12.7.79 and

No. 14 effective from 28.11.79 in so far as these pertained to the

'Inserts'. Under an order dated 28.4.80/2.5.86, reclassification proposed

under the Show Cause Notices was confirmed. That is to say, the 'Inserts'

were classified under T.I. No. 62 as 'Tools Tips'.

Being aggrieved, the appellants filed an appeal registered as Appeal No.

1982/80 (F.No. V.2(62)1982/80). Besides this appeal, there were two other

appeals, one registered as Appeal No, 2218/80 (F. No. V2(51A)2218/80,

against the Order No. V- 51A(17)l3l/VC/80 dated 10.7.80, passed by the

Assistant Collector of Central Excise, Nasik, by which he confirmed the

demand for differential duty (as a result of reclas-sification) in respect

of the 'Inserts' cleared from April, 1976 to December, 1978.The other

appeal was registered as Appeal No. 35/81 (F. No. V..2(62)988/81), against

the Assessment order No. 35/81 dated 7.1.81, made by the Superintendent of

Central Excise, Range 'C', Nasik, by which he indicated that short levy in

respect of the 'Inserts' cleared from January, 1979 to April, 1980s

differential duty demanded was on account of the reclassification made as

aforesaid.

The Collector of Central Excise (Appeals) held :-

"As I understand, the basic difference between the 'Tool Tips' and the so-

called 'Inserts' is that the former are mounted on Tool by brazing

(soldering), whereas the latter are clamped on the tools and are separable.

Having regard to these facts and to the scope of the expression 'in any

form or size' appearing in T.I. No. 62,1 find difficult to persuade myself

to agree with the appellants' contention. Now let us see what the

IS:4022.1967 for 'Cemented Carbide Indexable Throw Away Inserts' states. It

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says "Indexable inserts are being increasingly used for machining of metal

by turning and milling. They derive their name from the fact that the

insert is held mechanically in a tool holder for turning or in milling

cutter for milling". From this, it is seen that these are known as

'Inserts' because of the manner in which they are inserted in a Tool

Holder. In fact at Para 0.6 of the standard, it is stated that this

standard is based on Draft ISO Recommendation No. 977 "Throw Away Carbide

Tips' of the International Organisation for Standardisation (ISO). From

this also, one can infer that these are not two different things, specially

in view of the scope of the Item 62. The mere fact that the mode of

fixation of Tips and Inserts is different, should not in any way blur the

correct classification and for the reasons stated earlier, the inserts are

classifiable under T.I. No. 62 as held correctly in the impugned order.'

The Collector further held that the demand for short levy for the period

January, 1979 to February, 1979 was barred by limitation. But the demand

for the period Match, 1979 to April, 1980 was sustainable.

The assessee applied for revision to the Central Government against the

aforesaid order passed by the Collector. These cases were transferred to

the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT). The

Tribunal held that:-

"The undisputed facts about the nature of the products are that both Tool

Tips as well as Throw Away Inserts are made from carbide powder of the

metals such as tungsten, molybdenum and vanadium. Both are pressed into the

required shapes and then sintered (heat treated). Both are affixed on the

tool handle and perform the function of machining of metals (turning and

milling etc.). Thus, both are tools. So far as the differences between Tool

Tips and Throw Away Inserts are concerned, the appellants gave an imposing

list of 10 points of difference. The Bench asked them io show the

authorities and technical literature etc, on which these points of

difference were based. The appellants were not able to produce any. The

points of difference between Tool Tips and Throw Away Inserts, as

understood by us on the basis of the samples, catalogues and Indian

Standard Specifications etc. shown to us are as under :-

(i) The Inserts are clamped on the tool handle and are detach-able. The

Tool Tips are brazed (welded or soldered) on the tool handle.

(ii) The Inserts are pre-ground (sharpened) before clearance from the

factory. Tool Tips are ground after they are welded on the tool handle.

(iii) Inserts: have multiple edges, when one edge is blunted, the other

edge can be put in place by manipulation of the angle. Tool Tips have only

one edge.

(iv) When all the edges of the Inserts are blunted after use, the Inserts

have to be thrown away. They cannot be sharpened again. The edge of the

Tool Tip can, however, be sharpened and used again."

The Tribunal further held that the proposition enunciated by the appellants

that in the absence 6f a statutory definition, reliance has to be placed on

the trade parlance and understanding for classification of goods under the

Central Excise Tariff, was correct. The only evidence the appellants

produced was Tool Tips and Throw Away Inserts, which were inter-nationally

known by two different names and that there were two separate ISI

Specifications for them. The Tribunal observed that the more important test

would be to find out the basic character, function and use of the articles,

The Tribunal recorded that the appellants themselves admitted that so far

as the names were concerned, the Inserts were also cafied as Tips'.

Item 68, was introduced in the Tariff in 1973. At that time I.S.

Specification 4022-1967 was in vogue. In the Chapter 'Foreward' in

para-graph 03. Inserts were described as 'Tips'. Paragraph 0.6 further

stated that the said Standard was based on Draft ISO Recommendation No.

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977 Throw Away Carbide Tips' of the International Organisation for

Standardisation. This, according to the Tribunal, went to show that the

trade and industry the world over did not consider Inserts and Tips as two

different things. In that view of the matter, the Tribunal held that the

entry Tool Tips, in any form or size.....' encompassed Throw Away Tips as

well as Inserts.

The Tribunal further explained the position in the following manner-

"Both Tips and Inserts are made from the same raw material, undergo

practically the same process of manufacture and perform basically the same

function of machining the metal Difference in the method of fixing them on

the tool handle and the shorter life span of the Inserts do not make them

basically different goods. It only means that Inserts are a separate

variety of Tool Tips. From their disposable character or the shorter life

span, the Inserts have acquired the adjective Throw Away' and from their

method of fixing by insertion or clamping the name Throw Away Inserts' has

come to be more commonly used. But in their basic character and use, the

Inserts are nothing more than a separate species of the generic item Tool

Tips'."

The Tribunal concluded that Throw Away Inserts, being a variety of the

generic item Tool Tips, had to be classified as specific item 62 and could

not fall under the more generic Item 51-A(iii) - Tools'.

Aggrieved by the decision of the Tribunal, the appellants have now come up

to this Court and contend that Carbide Throw Away Inserts, manufactured by

the appellants, fell under Item 51- A(iii) of the Central Excise Tariff and

not Under Item 62, as held by the Tribunal. The relevant Tariff Items, as

they stood at the relevant time, were as under :-

"51A(iii) Tools designed to be fitted 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;"

"62. Tool Tips, in any form or size, unmounted, of sintered carbides of

metals such as tungsten, molybdenum and vanadium."

A distinction has been drawn between 'Tools, designed to be fitted in hand

tools, machine tools and tools of other specified categories' under one

heading, 'Tool Tips in any form or size' under the other heading. In order

to find out whether Throw Away Inserts' manufactured by the appellants fall

in the category of Tool Tips or Tools, the essential characteristics of the

Inserts will have to be examined. There is no dispute that the Throw Away

Inserts are unmounted and are of 'sintered carbides of metals such as

tungsten, molybdenum and vanadium' Therefore, the only question that

remains to be considered is whether a 'Throw Away Insert' is a variety of

Tool Tip. This controversy is basically one of fact. The Tribunal has

pointed out that an Insert is multi-edged, detachable and has a shorter

life span. It has to be thrown away when its edges get blunted. The edge of

an ordinary Tool Tip can, however, be sharpened and used again.

These facts are not disputed. In fact, the Assistant Collector, who

personally visited the factory of the appellant, has recorded :-

"..,....none of the blanks as such can be used as finished product. Blanks

for tool tips are first brazed (welded) to the tool or to be more precise

tool holder and after welding the same the tips are ground and only one

edge of the tip is available for cutting. In case of blanks for inserts all

the edges are available for cutting.

Thus there being no difference in the process of manufacture and in the end

use except the difference that the so- called inserts which are nothing but

tool tips are affixed to the tip of the tool through clamping device and

they are replaceable easily while the other tips are permanently welded and

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not easily detachable. But in the Case of the latter if the customer has

the facilities for brazing the tips to the tools, the customer purchases

these tool tips (unground blanks for tips) from the manufacturer and to

that extent one can say that even the so- called tool tips are also

replaceable."

On behalf of the appellants, it has been contended that to decide this

controversy, regard must be had to the market parlance. A customer wanting

to buy Throw Away Inserts will not ask for Tool Tips. Similarly, a person

wanting to buy Tool Tips will not look for Inserts in the market.

That may be the position. But that will not solve the controversy in this

case. If there is a general heading for the purpose of levy of Excise Duty,

then every variety of goods falling under that general heading will have to

be taxed under that heading. The fact that a particular variety is known by

a particular name in the market will not take it out of the general

heading. For example, when duty is leviable on biscuits, then every variety

of biscuits will be taxed under that heading. A particular type of thin

crisp biscuits is known in the market as 'wafer', but basically it is a

biscuit. It was held by the Andhra Pradesh High Court in the case of

International Foods v. Collector of Central Excise, Hyderabad, (1978)

E.L.T. (J 50), that 'wafer' was a kind of biscuit, although it may be

different in size and shape from an ordinary biscuit. A pear-shaped

drinking glass with a small opening is known as 'snifter'. Because of that,

'snifter' will not cease to be a drinking glass. To decide the question,

whether Throw Away Inserts are Tool Tips, nature and function of Inserts

will have to be examined. The form or size of the Inserts are quite

immaterial for this purpose. From the finding of fact recorded by the

departmental authorities and the Tribunal, it appears that the basic

character, function and use of an Insert is not different in any way from

a Tool Tip.

The finding of the Department which has been upheld by the Tribunal is that

both Tool Tips as well as Throw Away Inserts were Carbide Tips for

machining of metal. The Inserts had shorter functional life and were

replaceable. The Tool Tip had one cutting edge while the Insert had

multiple cutting edges. These facts did not alter in any way the basic

character and function of the two articles. Both were tips meant for

machining of metal. Both were manufactured by the same process and had been

made out of same metals. The Inserts were clamped on the holders. The

ordinary Tool Tips were brazed on the holders. This will not take the

Inserts put of the amplitude of the description in Tariff Item 62 'Tool

tips in any form or size....,.'. This wide description will encompass every

type of Tool Tips detachable or otherwise. Whether a Tool Tip is brazed:on

a tool handle or clamped on a tool handle will not alter its basic

character, function or use. The form of the Tool Tip is also immaterial.

The detach-able Tool Tip is only a variety of Tool Tips and the fact that

it is identified by the name 'Throw Away Insert' will not take it out of

the ambit of the heading 'Tool Tips in any form or size..,,..'.

Moreover, the Tribunal dealt with the argument based on trade parlances :

":__we find that all that they have to show by way of evidence of trade

parlance is that (1) Tool Tips and Throw Away Inserts are known by

different names and that (2) there are two separate Indian Standard

Specifications for them. We find that these two factors by themselves can

hardly constitute adequate evidence of trade parlance...... We find farther

that the appellants themselves admit that even so far as the name is

concerned, until recently the Inserts were also called as Tips. Item 62

was introduced in the Tariff in Specification IS : 4022-1967 was in vogue.

In the Chapter 'Foreword' in paragraph 0.3, this Specification describes

the In-serts as 'Tips'. Paragraph 0.6 thereof states further that the said

Standard was based on Draft ISO Recommendation No. 997 'Throw Away Carbide

Tips' of the International Organisation for Standardisation (ISO), This

shown that the trade and industry the world over did not consider Inserts

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and Tips as basically two different things, so much so that Inserts were

commonly referred to as Tips. Therefore, in the context of such trade

understanding, when they entry 'Tool Tips, in any form or size.....'

appeared in the Central Excise Tariff, the only reasonable conclusion can

be that it encompassed Throw Away Tips or Inserts as well. IS : 4022-1967

has remained current till about three months ago. The appellants state that

the revised Specification has dropped the name Tips' for Inserts. We have

not been shown the revised Specification, but even, if it is so, it can

only mean that a different name has been given to Throw Away type of Tips.

There has, however, been no change in the character or use of the

article."

The assesses has been unable to bring to the notice of the Court anything

to show that the nature and function or composition of a Throw Away Insert

is in any way different from an ordinary Tool Tip. The highest that can be

said for the appellants is that a Throw Away Insert is a detachable Tool

Tip with multiple edges.

We were also referred to the judgment of this Court in the case of Plastnac

Machine Manufacturing Co. Pvt, Ltd .v. Collector of' Central Excise,

Bombay, [1991] Supp. 1 SCC 57. In that case, the question was whether Tie

Bar Nuts' of base metal or alloys manufactured with the aid of power and

having 'acme threads', could be classified under Tariff Item 52, which at

the material time was as under :-

"52. Bolts and nuts, threaded or taped 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."

In that case, it was pointed that there was no dispute that Tie Bar Nuts

conform to the popular idea of nuts. It was observed :-

"Applying the foregoing principles and considering the fact that the Tie

Bar Nuts' function of fixing the platens as stated by the appellants and

that of fastening, as argued by them, are not basically different, and the

appellants themselves having called the goods as 'nuts', we are of the view

that the Tribunal is correct in classifying Tie Bar Nuts under Tariff Item

52. We, therefore, do not find any reason to interfere with the department

's prospective modification of the classification. We find no justification

for classifying those in the residuary Item 68. As was held in Dunlop

India Ltd. v. Union of India, [1976) 2 SCC 241, if an article is

classifiable under a specific item, it would be against the very principle

of classification to deny it the proper parentage and consign it to the

residuary item."

Our attention was also drawn to Brussels Tariff Nomenclature relating to

Tool Tips', which is as under :-

"82.07-TOOL-TIPS AND PLATES, STICKS AND THE LIKE FOR TOOL-TIPS, UNMOUNTED,

OF SINTERED METAL CARBIDES (FOR EXAMPLE, CARABIDES OR TUNGSTEN, MOLYBDENUM

OR VANADIUM),

This heading covers products made by sintering metal carbides (e.g., of

tungsten, molybdenum, titanium, tantalum, vanadium or niobium) usually with

a binder such as cobalt or nickel.

They are usually in the form of tool-tips, plates, sticks, rods, pellets,

rings, etc, and are characterised by great hardness, even when hot, and

great rigidity.

In view of their special properties these tips, plates, etc., are welded or

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brased on to lathe tools, milling tools, drills, dies or other high-speed

cutting tools used for working metals or Other hard materials. They fall

within this heading whether sharpened or not, or otherwise prepared, but

not if already mounted on tools; in the latter case, they fall within the

headings for tools, particularly heading 82,05."

This heading and the explanation thereunder do not support the case of the

appellants in any way. On the contrary, it makes it clear that the products

made by sintering metals carbides of, inter alia, tungsten, molybdenum,

vanadium, will fall under this beading. It has been clarified that these

products are usually in the form of Tool Tips, plates, etc. These products

will fall within this heading whether sharpened or not or other-wise

prepared, but not if already mounted on tools.

It is not the case of the appellant that its products are mounted on tools.

The composition of its product is same as mentioned in Tariff Item 62. In

shape or form it is not different from a Tool Tip, except that it has

multiple cutting edges. Its function is the same as that of a Tool Tip.

The fact that it is detachable and has to be thrown away after use, will

not change its basic character or function.

In view of the aforesaid, these appeals fail and are dismissed. The parties

will bear their own costs,

CIVIL APPEAL NO. 1357 OF 1993

In view of our decision in Civil Appeals Nos. 3579-81 of 1984,.this. ...

appeal is also dismissed. There will be no order as to cost.