Holding

If a general heading exists, every variety sharing the same basic character, function and use must be taxed under that heading; market parlance does not remove a variety from the general heading.

Summary

Indian Tool Manufacturers produced carbide "throw‑away" inserts that were initially classified under Tariff Item 68, later under Item 51A(iii) after an amendment, and subsequently re‑classified by the Assistant Collector of Central Excise as Item 62 (Tool Tips). The manufacturer appealed the re‑classification, arguing that market parlance distinguished the inserts from tool tips and that they should remain under the generic heading of tools. The Collector (Appeals) upheld the re‑classification and the Central Excise & Gold (Control) Appellate Tribunal affirmed that the inserts are a variety of tool tips and must be taxed under Item 62. The Supreme Court examined whether market or trade terminology could override the principle that a general heading covers all varieties sharing the same basic character, function and use. It held that the detachable, multi‑edged inserts share the same basic character and function as tool tips, and therefore fall within the general heading of Item 62, irrespective of their market name. Consequently, the appeals were dismissed and the classification under Item 62 was affirmed.

Issues considered

Whether carbide throw‑away inserts should be classified under Tariff Item 51A(iii) (tools) or Item 62 (tool tips) for central excise duty.
Whether market or trade parlance can override the principle that a general heading includes all varieties sharing the same basic character, function and use.

Legislation cited

Subjects

central excisetariff classificationtool tipsthrow‑away insertsmarket parlancegeneral heading principleexcise duty

Judgment

INDIAN TOOL MANUFACTURERS A
v.
ASSTT. COLLECTOR OF CENTRAL EXCISE, NASIK AND ORS.

'; SEPTEMBER 23, 1994

[ll.P. JEEVAN REDDY, SUHAS C. SEN AND B
K.S. PARIPOORNAN, JJ.]

Central Excise :

Tariff Item Nos. 51A(iii), 62 and 68-Carbide Throw Away In- c
serters-Oassified as Item No. 6~Subsequent reclassification under Item
•• No. 51A(iii)-Held: Goods falling under the general heading one to be taxed
under that heading-Market parlance cannot take it out of the general head-
ing-Merely because the inserters are detachable and thrown awc:ry after use
cannot change the basic character or function.
D
The appellants have been manufacturing and selling Carbide Throw
Away Inserters, which were classified under Tariff Item No. 68 till
17.6.1977. However, by an amendment these inserts were classified under
Tariff Item No. 51A from 18.6.1977. Appellants paid duty accordingly. On
25.2.1980 the Assistant Collector, Central Excise issued a show cause E
notice asking the appellants as to why the classification sbonld not be
changed to Tariff Item No. 62. The reclassification proposed was con-
firmed and the inserters were classified under Tariff Item No. 62 as 'Tools
and Tips'.

The appellants preferred appeals and the Collector of Central Excise F
(Appeals) held that the classiflcation was validly made. The demand for
short levy for January and February, 1979 was held to be barred by
limitation, but the demand from March 1979.to April 1980 was sustained.·

The appellant applied for revision to the Central Government and
G
it was transferred to the Customs, Excise and Gold (Control) Appellate
r Tribunal. The Tribunal held that the Inserts being a variety of generic item
Tool Tips, had to be. classified as specific Item 62 and conld not fall under
the more generic Item 51-A(iii)· 'Tools'.

The said order of the Tribunal was challenged by the appellant in H
1
2 SUPREME COURT REPORTS (1994) SUPP. 4 S.C.R.
. -- ---- -- .._ __ ~

A the present appeals, contending that regard must be had to the market
parlance in deciding the iss~e. .

Dismissing the appeals, this Court

HELD : 1.1. If there is a general heading for the purpose of levy of
B Excise Duty, then every variety of goods falling under that general heading t
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. [8-D)

.C 1.2. The fin.ding of the Department which has been unheld 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 fa~ts did not alter in any way the
basic character and function of the two articles. Both were tips meant for
D machining of metal. Both were manufactured by the same process and had
b'een 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 out of the amplitude of the description in T3riff Item 62 'Tool Tips
in any form or size'. This wide description will encompass every type ofTool 0

Tips detachable or otherwise. Whether a Tool Tip Is brazed on a tool
E (
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'.. (8-G-H, 9-A-B)
F
1.3. 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 differentfrom a Tool Tip, except that
it has multiple cutting edges. Its function is the same as that of a Tool Tip.
G The fact that It Is detachable and has to be thrown away after use, will not
change its basic character or function, 111:G-H] ·

Plasmac Machine Manufacturing Co. Pvt.· v. Collector of Central 'Ex-
cise, Bombay, (1991) Supp.1 SCC 57, relied.on.

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

.. -
INDIAN TOOL v. ASSIT. COLLECTOR OF CENTRAL EXCISE [SEN, J. J 3

E.L.T. (J.50), referred to. A

Brussels Tariff Nomenclature relating to 'Tools Tips', referred to.
> CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 3579-81"
of 1984.
B
From the Judgment and Order dated 12.7.84 of the Central Customs,
Excise & Gold (Control) Appellate Tribunal, New Delhi in A Nos.
ED(SB) 333/81D; 738/84D & 737/84D.

Anil Nauriya and Ms. H. Wahl for the Appellants.
c
N.A. Dalvi and R.B. Hathikhanvala for the Appellant in C.A. No.
1357/93.

A.K. Ganguli, N.K. Bajpai and C.V.S. Rao for the Respondents.

The Judgment of the Court was delivered by D

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. 51A, these Inserts were classified E
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 F
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 G
effective from 28.11.79, in so far as these pertained to the 'Inserts'. Under
an order dated 28.4.80/2.5.80, 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 H
4 SUPREME COURT REPORTS (1994] SUPP. 4 S.C.R.

A 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)131/VC/80 dated
10.7.80, passed by the Assistant Collector of Central Excise, Nasik, by
which he confirmed the demand for cliffereritial duty (as a result of reclas-
B sification) in respect of the 'Inseris' 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 orde~ 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, 1980, differential duty demanded was on account of the
C '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
D
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.l. No. 62, I
find difficult to persuade myself to agree with the appellants'
contention. Now let us see what the IS:4022.1967 for 'Cemented
E Carbide Indexable Throw Away Inserts' states. It says "Indexable
inserts are being increasingly ·used for machiillng of metal by
turriing and milling. They derive their name from the fact that the
insert is held mechanically in a tool holder for turning or in a
known
·milling cutter for milling". From this, it is seen that these are
F 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 Dr.if! 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
G 62. The mere fact that the mode of fy<ation of Tips and Inserts is
· different, should not in any way blur the corr¢ct classification and ·
for the reasons stated earlier, the inserts are classifiable under T.I.
No. 62 as held correctly in the impugned order.'

H· · Th~. Collector
,,_•·
further held that. the demand for ~hort levy for the
INDIANTOOLv. ASSIT. COLIECTOROFCENfRALEXCISE[SEN,J.] 5

period January, 1979 to February, 1979 was barred by limitation. But the A
demand for the period March, 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 :- B

"The undisputed facts about the nature of the products are that
both Tool Tips as well as Throw Away Insearts are made from
carbide powder of the metals such as tungsten, molybdenum and
vanadium. Both are pressed into the required shapes and then C
·-.,. 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
to show the authorities and technical literature etc. on which these D
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 :- E

(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 F
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. G
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." H
6 SUPREME COURT REPORTS (1994] SUPP. 4 S.C.R.

A The Tribunal further held that the proposition enunciated by the
appellants that in the absence of 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 appel-
lants produced was Tool Tips and Throw Away Inserts, which were inter-
nationally known by two different names and that there were two separate
B
!SI 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 calied as
'Tips'. Item 68, was introduced in the Tariff in 1973. At that time LS.
C Specification 4022-1967 was in vogue. In the Chapter 'Foreward' in para-
graph 0.3. Inserts were described as 'Tips'. Paragraph 0.6 further stated
that the said Standard was based on Draft ISO Recommendation No. 977
'Throw Away Carbide Tips' of the International Organisation for Stand-
ardisation. This, according to the Tribunal, went to show that the trade and
D 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:-
E •
"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
F 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
G 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 Tc~! Tips, had to be classified as specific Item 62 and
H could not fall under the more generic Item 51-A(iii) - 'Tools'.
INDIANTOOLv. ASSTf. COLLECTORQFCENIRALEXCISE (SEN, J.J 7

Aggrieved by the decision of the Tribunal, the appellants have now A
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 B
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."
c
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 charac- D
teristics 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, molybdennm and vanadium'. fherefore, 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
Tribuual has pointed out that an Insert is multi-edged, detachable and has E
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 F
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 P,ecise tool holder and after welding the same the tips are
ground and only one edge of the tip is available for cutting. In case G
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 H
8 SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.

A are nothing but tool tips are affixed to the tip of the tool through
cliiuping device and they are replaceable easily while the other
tips are permanently welded and 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
B 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
C 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
D 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 Ieviable 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
E 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 snape 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,
F 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.

G 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
H basic character and function of the two articles. Both were tips meant for
INDIANTOOLv. ASSIT. COLLECTOROFCENTRALEXCISE(SEN,J.] 9

machining of metal. Both were manufactured by the same process and had A
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· out of the amplitude of the description in Tariff Item 62 'Tool tips
in any fom1 or size ..... .'. This wide description will encompass every type of·
Tool Tips detachable or otherwise. Whether a Tool Tip is brazed on a tool
B
handle or damped 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 ..... .'.
c
, • Moreover, the Tribuµal 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 D
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
trad~ parlance ...... We find further 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 E
Tariff in Specification IS : 4022- 1%7 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 F
Standardisation (ISO). This shown that the trade and industry the
world over did not consider Inserts 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 G
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 H
10 SUPREME COURT REPORTS (1994) SUPP. 4 S.C.R.

A name has been gien to Throw Away type of Tips. There has,
however, been no change in the character or use of the article."

The assessee 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
B 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
P/asmac Machine Manufacturing Co. Pvt. Ltd. v. Collector of Central Excise,
C 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
D 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
E
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 :-

F "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
G 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
llldia Ltd. v. Union of India, [1976) 2 SCC 241, if an article is
classifiable under a specific item, it would be against the very
H principle of classification to deny it the proper parentage and
INDIAN TOOL v. ASSIT. COLLECTOR OF CENI'RAL EXCISE (SEN, J.) 11

consign it to the residuary item.' A
Our attention was also drawn to Brussels Tariff Nomenclature relat-
ing to 'Tool Tips', which is as under :-
-
,.
"82.07-TOOL-TIPS AND PLATES, STICKS AND THE LIKE
FOR TOOL-TIPS, UNMOUNTED, OF SINTERED B
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 C
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.
D
In view of their special properties these tips, plates, etc., are
welded or 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; E
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, molyb- F
denum, vanadium, will fall under this heading. 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
G
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. H
12 SUPREME COURT REPORTS (1994] SUPP. 4 S.C.R.

A 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 Apeals Nos. 3579-81 of 1984, this •
B appeal is also dismissed. There will be no order as to cost.

G.N. Appeals dismissed.

"