Holding

The tanks and vats are classifiable as "builders' ware of plastics" under Heading 39.25 Sub‑heading 3925.10 and are therefore liable to excise duty.

Summary

The Collector of Central Excise, Bombay, appealed against K.W.H. Heloplastics Ltd. for non‑payment of excise duty on plastic tanks and vats. The department classified the goods under Heading 39.25, Sub‑heading 3925.10 as "builders' ware" liable to duty, while the assessee claimed exemption under Sub‑heading 3926.90 as "other articles of plastics". The Customs, Excise and Gold (Control) Appellate Tribunal held in favour of the assessee, finding no evidence that the goods were "builders' ware" and thus exempt. The Supreme Court held that the Tribunal erred, applying the proper rules of interpretation of the Excise Tariff and noting that the description, purpose and use of the tanks matched Note 11(a) of Chapter 39, thereby classifying them under Sub‑heading 3925.10 and liable to duty. The Court set aside the Tribunal’s order and remanded the appeals for consideration of the extended limitation period under Section 11(A).

Issues considered

Whether the plastic tanks and vats manufactured by the respondent fall under Heading 39.25 Sub‑heading 3925.10 (builders' ware) or under Sub‑heading 3926.90 (other articles of plastics) for excise duty purposes.
Whether the Tribunal correctly applied the Rules of Interpretation of the Excise Tariff.
Whether the extended period of limitation under the proviso to Section 11(A) of the Central Excise Act applies to the demand.

Legislation cited

Central Excise Act, 1944s. Section 11(A)
Central Excise Tariff Act, 1985s. Chapter 39, s. Note 11(a)

Subjects

central exciseclassificationbuilders' wareexcise dutytariff interpretationextended limitation periodsub‑heading 3925.10sub‑heading 3926.90

Judgment

A COLLECTOR OF CENTRAL EXCISE, BOMBAY
•
v. '
r-..
MIS. K.W.H. HELIPLASTICS LTD.

JANUARY 12, 1998

B [J.S. VERMA, CJ., B.N. KIRPAL AND V.N. KHARE, JJ.]
,....

Excise Laws :
"'
Central Excise Tariff Act, i985: Chapter 39 Note ii (a).
c '
Excise duty-Heading 39.25-Sub-heading 3925. iO or 3926.90-Tanks
and vats-Capable of being used for water supply and storage-Classification
of-Held: classifiable under Sub-heading 3925-iO and not under Sub-heading
3926.90-in absence ofdefinition of the term ''builders' ware'' under Heading
39.25 to determine whether the goods were covered under this Head, CEGAT
D should have applied the Rules of interpretation of the Excise Tariff-In view ~
....
of R.4 CEGAT should have found out the relationship of the said goods with
the description of goods under disputed headings of the classification list-
Such a relationship depends upon disputed headings of the classification
list-Such a relationship depends upon description, purpose and use of the
E goods-Since the desc~iption of tanks and vats tallied with that given in
Note 11 (a) of Ch. 39, the said goods had relationship with Heading 39.25
Sub-heading 3925.iO-Rules of interpretation of Schedule, Rr. I to 4.

The respondent-assessee was engaged in the manufacture of tanks
and vats. The excise authorities were of the opinion that goods manufactured
F by the respondents were classifiable under Heading 39.25 Sub-heading
3925.10 as "builders' ware" whereas the respondent contended that he
~ ..
goods were classifiable under Heading 39.25 Sub-heading 3926.90 as "other
articles of plastics" which were exempt from duty. Excise duty was, therefore,
demanded from the respondents.
G Being aggrieved the respondents preferred an appeal before the
Customs. Excise and Gold (Control) Appellate Tribunal. The Tribunal held
Y"-
that since no evidence was produced by the appellant-Revenue to establish
that the goods manufactured by the respondent were "builders' ware" their
classification would fall under Heading 39.25 Sub-heading 3926.90 and not
H under Heading 30.25 Sub-heading 3925.10 of the Central Excise Tariff Act,
74
C.C.E. v. K. W.H. HELlPLASTICS LTD. [V.N. KHARE, J.) 75
1985. Hence this appeal. A
~-1
Allowing the appeal, this Court

HELD: I. The approach of the Customs, Excise and Gold (Control)
Appellate Tribunal was not legally correct. It was admitted before the Tribunal
by the respondent that they have been selling tanks and vats to the government
B
-~ ~
department etc. for purpose of water storage and supply. This admission
~ unambiguously indicates that these tanks and vats can be used and are
capable of being used for water storage either where there is a building
activity or in any industrial plant. The term "builders' ware" is not defined
any where. Under such circumstances, it would have been more appropriate c
for the Tribunal to have applied Rules of Interpretation of the Excise Tariff
Rules 1, 2 and 3 for Interpretation of the Schedule not being applicable in
view of Rule 4, the Tribunal should have found out the relationship of goods
manufactured by the respondent with the description of goods under disputed

-
--'I
..!.._
headings of the classification list. The relationship of goods with particular
heading depends upon description, purpose and use of the goods. The
description and usage of tanks and vats manufactured by the respondent
tallies with the description of goods given in Note 1 l(a) of Chapter 39 of the
D

Central Excise Tariff Act, 1985. Therefore, there is a relationship between
the goods manufactured by the respondent with the heading 39.25. and hence
E
the said goods fall under Sub-heading 3925. 10 and not Sub-heading 3926.90.
178-F-H; 79-A-F]

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2817-18 of
1993.
F
~
, ... ~
From the Judgment and Order dated 12.8.92 of the Customs, Excise and
Gold (Control) Appellate Tribunal, New Delhi in Appeal No. 3 I 53/89-C
and E/A No. 3104/90-C.

Anoop Choudhary, K.C. Kaushik and V.K. Verma for the Appellant. G

Joseph Vellapally, P. Venugopal and K.J. John for the Respondent.

The Judgment of the Court was delivered by

V.N. KHARE, J. These two appeals are directed against the order H
76 SUPREME COURT REPORTS [ 1998] 1 S.C.R.

A dated 12.8.92 passed by the Customs, Excise and Gold (Control) Appellate
Tribunal, New Delhi (hereinafter referred to as the 'tribunal'), whereby the ';>-:
tribunal allowed the respondent's appeals holding that the tanks and vats
manufactured by the assessee would be classified under sub-heading 3926.90
of the schedule to the Central Excise Tariff Act, 1985 as "other anicles of
B plastics" and not under heading 39.25 and sub-heading 3925.10 as "builders
ware" of plastics.

The facts of the case, briefly stated, are these :

The respondent herein is engaged in business of manufacture of vessels, }...
C chemical tanks, reaction vessels, pipes and gobar gas plants. On a surprise
inspection of the respondent's factory by the Central Preventive Unit of the
Central Excise Department it \Vas found that the respondent's uni~ was engaged
in manufacture and sale of reservoir tanks etc. \Vithout payment of excise
duty. Earlier, the respondent claimed exemption from licensing control by
D declaring the goods manufactured by them being goods covered by sub-
heading 3926.90 of the Central Excise Tariff Act. The Excise authorities being
of the opinion that there was suppression of material facts in the declaration
given by the respondent \Vith the purpose of evading duty, 22 tanks/reservoirs
manufactured by the respondent were seized. Consequently, a show-cause
notice dated 16.1.1989 was served upon the respondent, whereby the assessee
E
was di:ected to show cause why duty amounting to Rs. 4,97,883 towards the
goods cleared by them be not demanded and recovered under rule 9(2) of the
Rules read with proviso to Section 1 l'(A) of the Act. In response to the said
show cause notice, the respondent submitted its explanation \\'herein it was
stated that the goods manufactured by them were exempt from payment of I
F duty as the same fall under sub-heading 3926.90 as "other anicles of plastics''.
The Additional Collector of Central Excise, Bombay held that heading 39.25
covers not only plastic tanks used in the construction of building, but also
in the construction of industrial plants. )he explanation of the respondent
that the heading 39.25 should be given the restricted meaning and confined
G to the reservoir used in construction of building was rejected. On the question
of application of extended period of limitation contained in proviso to Section
I !(A) of the Act for the purpose of raising demand, the Additional Collector
held that since the respondent had misled the depanment into believing that 1

these were anicles of plastics falling under sub-heading 3926.90 and that, they
H had deliberately suppressed the facts that the goods manufactured by them
C.C.E. v. K.W.H. HELIPLASTICS LTD. [V.N. KHARE, J.] 77
are actually storage tanks, the demand raised by the department deserved to A
be confirmed.
-~\

Being aggrieved, the respondent preferred Appeal No E/3153/88-C against ·
the order confirming the demand raised by the Department an~ imposing
penalty, besides confiscating 182 plastic reservoirs, inter alia, contending that B
the goods manufactured by them are classifiable under sub-heading 3926.90
~
as against sub-heading 3925.10 and that the demand of duty beyond the
period of six months is barred by time. The respondent also preferred Appeal
No. 3104/90C before the Tribunal against the order of the Collector (Appeals)
setting aside the approval of the classification list by the Assistant Collector.
c
Since both the appeals raised common question of facts and law, they were
heard and decided together by the tribunal. The tribunal held that for the
goods to be classified under sub-heading 3925.10 as "build.ers ware of plastics"
not elsewhere as specified of included, it was necessary for the department
to establish that the reservoir/tanks, Vats and similar containers manufactured
)_
D
._._, by the respondent were essentially "builders ware". The tribunal further held

·\. that since no evidence was produced by the department to establish that the
goods manufactured by the respondent were "builders ware", their
ciassification under sub-heading 3925.90 would be appropriate. Consequently,
both the appeals were allowed by the impugned order.
E
The foremost question that arises for consideration in these appeals is,
as to whether the goods manufactured by the respondent full under sub-
heading 3925.10 of the Tariff or they fall under sub-heading 3926.90, as "other
articles of plastics" and were exempt from duty.
F
... Jo.: Before we answer the question, it is necessary to reproduce the relevant
heading, sub-heading and description of the goods occurring in classification
list contained in Chapter 39 of the Act.

Heading 39.25 G

Heading Sub-heading Description of Rate of
No. No. goods duty

39.25 Builders ware H
111111-----------------------~·--··

{
78 SUPREME COURT REPORTS (1998] l S.C.R.

A of plastics, not
elsewhere specified
or included.

325.10 Reservoirs, tanks
vats and similar
B
containers, of
a capacity excee-
ding 300 litres. 300/o

'Other articles of plastics'
c
Heading Sub-heading Description of Rate of
No. No. goods duty

2926 Other articles of
plas-tics and articles
D of other materials of
heading Nos.3901
to39.14
xxx xxx xxx xxx

E 3926.90 Other 300/o

The case of the respondent before the Tribunal was that they are
supplying tanks and' vats to industrial plants and just because of usage for
industrial purpose, such tank and vats cannot be classified under heading
39.25 of the classification list. The Tribunal, while accepting the case of the
F respondent, held that in the absence of any evidence, that tanks and vats
manufactured by the respondent are purchased and used by the builders
while constructing building, they do not answer the description ''builders
\\'are" under the main heading 39.25. This approach of the Tribunal \Vas not
legally correct. It was admitted before the tribunal by the respondent that they
G have been selling tanks and vats to the government department etc. for
purpose of water storage and supply. This admission unambiguously indicates
that these tanks and vats can be used and are capable of being used for water
storage either \vhere there is a building activity or in any industrial plant. The ·•
term "building \\'are" is not defined any\vhere and as such, a controversy
H arose before the Tribunal whether the tanks and vats manufactured by the
C.C.E. v. K. W.H. HELIPLASTICS LTD. [V.N. KHARE. J.] 79
respondent would fall under heading 39.25, as "builders ware of plastics, not A
elsewhere specified or included". or, under sub-heading 3926.90 as "other
t- --i
articles of plastics". Under such circumstances, it would have been more
appropriate for the Tribunal to have applied Rules of Interpretation of the
Excise Tariff, rule 4 whereof provides that the goods which cannot be classified
in accordance with rules 1.2 and 3 of the Rules, they shall be classified under
B
heading appropriate to the goods to which they are most akin.
_)(
Apparently, rules 1,2 and 3 are not applicable for resolving the dispute
and, as such, what was required to be done by the Tribunal in the present
case was, to find out the relationship of goods manufactured by the
respondents with the description of goods under disputed headings of the c
classification list, as contended by the parties. The relationship of goods with
particular heading depends upon the description, purpose and use of the
goods. Note 11 (a) of Chapter 39 at the Act, provides that heading 39.25
applies also to reservoir, tanks, including septic tank, vats and similar
containers. The purpose and use of these goods is to hold liquids or something
D
_, A.-. in liquid form in process of manufacture as in tanning and dyeing etc. and
thus can be used and are capable of being used for water storage in connection
. with raising of construction or mixing construction materials. It is not disputed
that the goods manufactured by the respondent are tanks and vats. The
description and usage of tanks and vats manufactured by the respondent
tallies with the description of goods given in Note I !(a) of Chapter 39 at the E
Act. We, therefore, find relationship between the goods manufactured by the
respondent with the heading 39.25. Once it is established that the description
of the goods manufactured by the respondent are akin to descript:on of
goods given under heading 39.25 and sub heading 3925.10, there is no
difficulty in holding that the tanks and vats manufactured by the respondent F
~ would fall under heading 39.25 of the Tariff. We accordingly hold that tanks
~
and vats manufactured by the respondent are classifiable as "builders ware
of plastics" and the view taken by the Tribunal that the classification of
goods, i.e., tanks and vats would be appropriate under sub-heading 3926.90
of the classification list and are exempt from excise duty, is erroneous.
G
It was then contended on behalf of the respondent that these appeals
deserved to be remanded to the Tribunal for deciding the question as regards
the application of extended period of limitation. It is true that since both the
appeals of the respondent were allowed by the Tribunal on the ground that
the goods manufactured by the respondent are classifiable under sub-heading H
I
80 SUPREME COURT REPORTS [ 1998] l S.C.R.

A 3926.90, there was no occasion for the Tribunal to deal with the question of
extended period of limitation. Under such circumstances, we feel that this
question required to be considered by the Tribunal.

We accordingly set aside the ord.rs of the Tribunal and remit the
B appeals to the Tribunal for deciding the question relating to application of
proviso to Section 11 A of the Act in the rresent case. The appeals are
allowed accordingly. There shall be no order as to costs.

v.s.s. Appeals allowed.