PIDILITE INDUSTRIES PVT LTD Vs. GOVERNMENT OF INDIA

JUDGEMENT

(1.) The 1st petitioner is a private limited company and carries on business of manufacturing adhesives, dyestuffs, chemicals, paints, synthetic resins, etc. The 1st petitioner was also manufacturing pigment dispersions (emulsions) and one of the pigment dispersions manufactured by the petitioner was made from Carbon Black and was known as "Acron Black G. Supra Cone". The Central Excises and Salt Act, 1944 was enacted on February 24, 1944 and Section 3 of the Act provides that there shall be levied and collected in such a manner as may be prescribed, duties of excise on all excisable goods which are produced or manufactured in India at the rates set forth in the First Schedule. The First Schedule was amended from time to time and by Finance Act, 1955, Item No. 22-I(5) was introduced which reads as follows :

(2.) On February 24, 1967, the Deputy Chief Chemist, Bombay, secured samples of the product manufactured by the petitioners and forwarded his report on April 19, 1967 to the Assistent Collector of Central Excise. The report merely stated that the sample is aqueous emulsion of Carbon Black. This report obviously did not indicate that the product of the petitioners is a dispersed organic pigment. Relying on this report, the Assistant Collector directed the Inspector of Central Excise to assess the product under Tariff Item No. 14(4A) instead of sub-item (5). Accordingly, the Inspector informed the petitioners that they will be assessed under Tariff Item No. 14(4A). This letter was followed by a demand notice dated October 13, 1967 for the differential Central Excise duty on the clearance of Acron Black. The period covered by the demand notice was from July 3, 1967 to September 30, 1967 and the amount was Rs. 12,563.47. The petitioners immediately sent a letter on October 14, 1967 complaining that the product of the petitioners is assessed under Item No. 14(4A) on certain misunderstanding and requested the authorities to supply reasons for change of opinion. The authorities did not think it necessary to give any explanation but issued another demand notice on November 27, 1967 claiming an amount Rs. 55,612.40 as differential duty for the period commencing from June 23, 1966 to June 30, 1967. Thereafter the petitioners addressed another letter dated December 26, 1967 pointing out that Carbon Black from which Acron Black is manufactured is internationally accepted to be an inorganic pigment and there is no dispute about that among the chemist all over the world. The petitioners also requested the authorities to obtain the opinion of the qualified chemist and technicians from the Institute of Technology, University of Bombay. There is also one more letter addressed by the petitioners on February 1, 1968, reiterating their earlier stand.

(3.) The Assistant collector by a very cryptic order dated June 11, 1968 confirmed the demand notice holding that the Carbon Black is an organic pigment and Acron Black is manufactured out of Carbon Black and the same is liable for duty under Tariff Item No. 14(4A). The petitioners carried an appeal before the Collector of Central Excise against that order. During the pendency of the appeal, the petitioners addressed a letter dated July 14, 1969 to the Collector of Central Excise furnishing two reports of Mr. Clark, Chairman of the Colour Index Editorial Board and Prof. (Dr.) Sunthankar, Head of the Dyes and Intermediates Section. Department of Chemical Technology. Both these reports supported the claim of the petitioners that Carbon Black is an inorganic pigment. The petitioners also invited the attention of the Appellate Authority to a large number of textbooks of chemistry which are treated all over the world as authoritative and in which Carbon Black is treated as an inorganic pigment. The petitioners have also received a letter dated December 29, 1969 addressed by the Deputy Director (Chemical), National Test House, which is an organisation set up by Government of India, and where the Deputy Director stated that Carbon Black should be classified as an inorganic pigment. The petitioners laid all these material before the Appellate Authority to establish that the product Acron Black is manufactured from Carbon Black which is an inorganic pigment. The dispute before the Appellate Authority was whether the Carbon Black is an inorganic pigment or an organic one. During the hearing before the Collector of Central Excise the attention of the petitioners was invited to Chamber's Technical Dictionary and a book by Mooler "Inorganic Chemistry" in support of the claim that Carbon Black is an organic pigment. A report by the Chief Chemist dated December 7, 1968 was also read over to the petitioners, but more about this report at a later stage. The Appellate Authority by an equally cryptic order held that the Carbon Black is the basic constituent of all organic substances and since the petitioners' product has been classified by the Chief Chemist as organic pigment, the same is liable to excise duty under Tariff Item No. 14(4A). It requires to be stated that the Appellate Authority did not record any finding as to whether the authorities relied upon by the petitioners and the reports given by Dr. Clark, Dr. Bose and Dr. Sunthankar were correct or otherwise.