ORDER
A.C.C. Unni, Member (J)
1. This appeal filed by the Collector of Central Excise, Chandigarh challenges the order-in-appeal dated 19-9-1991 passed by the Collector of Central Excise (Appeals), Chandigarh. The issue involved relates to classification of lime/quick lime and hydrated lime.
2. The respondents filed classification list claiming that their product, namely, lime/quick lime/hydrated lime does not come within the purview of Central Excise duty under Section 3 of the Central Excise Act, 1944 by virtue of Chapter Note 2 of Chapter 25 to the Schedule to the CETA, 1985.
3. The Assistant Collector by the order-in-original dated 6-7-1990 held that since the process involved heating of limestone (calcium carbonate) to convert it into quick lime (calcium oxide) there was manufacture and therefore quick lime is classifiable under Chapter 25 and held that the item manufactured by the appellants was correctly classifiable under Chapter Heading 25.05. However, by the impugned order Collector (Appeals), Chandigarh, set aside the order-in-original and held in favour of the present respondents.
4. In the Departmental appeal against the Collector (Appeals) order it has been contended that in Heading 25.05 the sub-heading also included lime. The Department contended that before 1-3-1990, 25.05 included lime. Though previously it was included in the Chapter Heading 25.05,00, after 1-3-1990 it has been included in the sub-heading 2505.60. The Department argued that the purpose of Chapter Notes and Section Notes are for facilitating classification. This cannot take out an item from the purview of a heading when it is specifically mentioned therein. Department has referred to the Chambers Dictionary of Science and Technology wherein ‘lime’ has been defined as “a substance produced by heating limestone to 825°C or more as a result of which carbonic acid and moisture are driven off.” The Departmental representative argued that slaked lime or calcium hydroxide/hydrated lime is that lime which is produced by calcination or heating limestone. As such there was no need to include lime specifically in the heading if the purpose of the Chapter Note was to exclude lime from the Chapter. Further, Explanatory Note of P-266 explained that quick lime is classifiable under Chapter 25. Since Chapter Note 2 excluded products which are “roasted, calcined”, the products which are obtained as a result of roasting of certain products are not excluded from Chapter 25. The classification under Chapter 25 Heading 25.05.00 and sub-heading 25.05.00 was therefore the correct classification.
5. Shri A.C. Jain, ld. Counsel appearing for the respondents argued that the impugned order has correctly held their product, namely, lime was covered by Chapter Note 2 of Chapter 25 which provided that Heading Nos. 25.01, 25.03 and 25.05 (the heading presently under consideration) covered only products which have washed, even with chemical substance for eliminating impurities without changing the structure of the product, crushed, grounded etc. excepting when the products have been roasted, calcined or obtained by mixing.
6. We have considered the rival contentions. In the instant case it is not in dispute that the item in dispute is lime, which is obtained by calcination of limestone in kiln by heating or roasting it with the help of steam, coal, etc. As has been observed in the Tribunal decision in Mettur Chemicals & Industrial Corporation Ltd. v. Collector of Central Excise, Coimbatore-1994 (73) E.L.T. 567 (T), Note 2 to Chapter 25 will apply where the products have been washed with chemical substances, crushed, etc. which does not bring about any change in the structure of the product. We find that under Note 2, Chapter Heading Nos. 25.01,25.03 and 25.05 do not cover products that have been roasted, calcined or obtained by mixing. Since in the instant case the process admittedly involves heating we agree with the view taken by the Collector (Appeals) that the same gets excluded from Chapter Heading 25.05 by virtue of Note 2 to Chapter 25 and, therefore, not excisable to duty. We find that this Tribunal has in Final Order No. 161/91-C, dated 25-1-1991 in the case of Luxmi Chemicals v. Collector of Central Excise, Jaipur, following the decision in Madhusudan Ceramics (Order No. 1252/90-C, dated 13-11-1990) 1991 (53) E.L.T. 90 (T) held that quick lime is covered by Note 2 to Chapter 25 and is, therefore, not dutiable. We see no reason to differ from the ratio of the said decisions.
7. The Departmental appeal, therefore, fails and is rejected.
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(A.C.C. Unni)
Member(J)
S.K. Bhatnagar, Vice President
8. With due respects to Hon’ble Member (Judicial), my views and orders in the matter are as follows.
9. I observe that the entire controversy arises from the fact that lime was specifically covered by Heading 25.05 being included in the main heading prior to 1989-90 and not only mentioned in the main Heading 25.05 but also covered by sub-heading 2505.60 in 1991-92. In fact, in the later case, the subheading covered quick lime, slaked lime and hydraulic lime, other than calcium oxide and hydroxide of Heading No. 28.25 and the controversy has arisen regarding the excisability of these products inspite of being mentioned in the tariff in view of Chapter Note (2) as it stood during the relevant period. This Chapter note reads as follows :-
“Heading Nos. 25.01, 25.03 and 25.05 cover only products which have been washed (even with chemical substances, eliminating the impurities without changing the structure of the product), crushed, ground, powdered, levigated, sifted, screened, or concentrated by flotation, magnetic separation or other mechanical or physical processes (except crystallisation), but not products that have been roasted, calcined or obtained by mixing.”
10. The department has emphasised the fact that the items are specifically incorporated in the heading whereas the respondents have relied upon Chapter Note (2) and the fact that such items have been held as non-excisable, in view thereof, in the Tribunal’s orders relied upon by them and referred to in para 6 of this order.
11. In my opinion, prima facie, some error appears to have crept in the orders of the Tribunal relied upon by the respondents. This will be clear from the following facts.
12. According to the ‘Condensed Chemical Dictionary – Tenth Edition by Gessner G. Hawley’, it is mentioned as follows :-
1. “Limestone. CaCO3. A non-combustible solid characteristic of sedimentary rocks and composed mainly of calcium carbonate in the form of the mineral calcite.
Uses : Building Stone; metallurgy (flux); manufacture of lime; source of carbon dioxide, agriculture; road ballast; cement (Portland and natural); alkali manufacture; removal of SO2 from stack gases and sulfur from coal.”
2. “Lime. Specifically, calcium oxide (CaO); more generally, any of the various chemical and physical forms of quicklime, hydrated lime, and hydraulic lime.
Hazard : Unslaked lime (quicklime) yields heat on mixture with water, and is a caustic irritant.”
3. “Calcium Oxide, (lime; quicklime, burnt lime; calx; unslaked lime; fluxing lime) CaO. See also lime.
Derivation: Calcium carbonate (limestone) is roasted in kilns until all the carbon dioxide is driven off.
Uses : Refractory; flux in steel manufacture; pulp and paper; mfg. of calcium carbide; SO2 removal from stack gases; sewage treatment (phosphate removal, pH control); poultry feeds; neutralization of acid waste effluents; insecticides and fungicides; dehairing of hides; sugar refining; food additive; glass manufacture; sodium carbonate by Solvay process; CO2 absorbent.”
4. “Calcium hydroxide. (Calcium hydrate; hydrated lime; caustic lime; slaked lime) Ca(OH)2.
Properties : Soft, white crystalline powder with alkaline, slightly bitter taste.
Derivation : Action of water on calcium oxide.”
Uses : Mortar; plasters; cements; calcium salts; causticizing soda; depilatory; unhairing of hides; white-wash; Soil conditioner; ammonia recovery in gas manufacture; disinfectant; water softening; purification of sugar juices; accelerator for low-grade rubber compounds; petrochemicals; food additive, as buffer and neutralizing agent; shell forming agent (poultry).”
5. “Lime, hydrated. See Calcium Hydroxide.”
6. “Lime, hydraulic. A variety of calcined limestone, which, when pulverized, absorbs water without swelling or heating and gives a cement that hardens under water.”
7. “Lime, unslaked. See Calcium oxide.”
8. “Calcium carbonate. CaCO3.
Properties: White powder or colorless crystals, odorless, tasteless; sp. gr. 2.7-2.95; decomposes at 825°C; non-combustible; nontoxic; very slightly soluble in water (a few parts per million); soluble in acids with evolution of carbon dioxide.
Occurrence : Calcium carbonate is one of the most stable, common, and widely dipersed materials. It occurs in nature as aragonite, oyster shells, calcite, chalk, limestone, marble, marl, and travertine, especially in Indiana (structural limestone), Vermont (marble), Italy (travertine), and England (chalk).
Derivation : (a) Mined from natural surface deposits. (2) Precipitated (made synthetically) by reaction of calcium chloride and sodium carbonate in water solution, or by passing carbon dioxide through a suspension of hydrated lime (Ca(OH)2) in water. Hazard: A nuisance particulate. Tolerance, 5 mg. per cubic meter of air.
Uses : Source of lime, neutralizing agent, filler and extender in rubber, plastics, paints; opacifying agent in paper; fortification of bread; putty; tooth powders; antacid; whitewash; Portland cement; SO2 removal from stack gases; metallurgical flux; analytical chemistry; CO2 generation (laboratory).”
13. From the above extracts, it would be clear inter alia that limestone and lime are two different commodities. The limestone is the raw material and lime is the product.
14. In a generic sense, lime includes its various chemicals and physical forms such as quick lime, hydrated lime or hydraulic lime but whereas hydrated lime is calcium hydroxide, hydraulic lime is a variety of calcined limestone which has been pulverized (powdered).
15. It is significant that we are not concerned here with chemical forms but items having different name, characteristics and uses and known as distinct commodities in the market.
16. The limestone is of course the basis raw material but, what is noteworthy is that :-
Roasting H2O
(i) Limestone-----------> Lime---------> Hydrated Lime
(CaCO3) (CaO) [Ca(OH)2]
Pulverisation
(ii) Calcined-------------------> Hydraulic
Limestone Lime
This shows that limestone is the raw material and roasting gives CaO (lime). Similarly, when calcined limestone is pulverised, the result is hydraulic lime. So, only the limestone is the raw material and hydraulic lime is the product.
17. With this background, if we read Chapter Note (2), it is noteworthy that it includes products which have been crushed or powdered on one hand but does not include products which have been roasted or calcined. In the post 1990 period also, the more significant addition to Chapter Note (2) is with reference to the terms “except where the context otherwise requires.”
18. It is significant that in the present case, it is the raw material called limestone which was being roasted and not the product namely, the lime and therefore, Chapter Note (2) did not come in the way of treating lime as excisable and once it was specifically covered by Heading 25.05, it remained excisable.
19. This also explains the post 1990 expansion of the entry to cover sub-heading explicitly quick lime, slaked lime and hydraulic lime because in the market, they are different commodities. Hydraulic lime is produced by pulverising calcined limestone. Therefore, it is the raw material which is being pulverised and not the product. Hence, Chapter Note (2) does not come in the way of treating this sub-heading as covering items which were covered specifically by the Entry 25.05 or one of its sub-headings. Since, there is no dispute that these goods are being marketed after being manufactured as above, therefore, in my opinion, they are excisable.
20. With due respects, therefore, I differ from the opinion expressed in the case law cited above including Luxmi Chemicals v. CCE, Jaipur.
21. Since however, the orders which have been cited have been followed by other Benches, I consider it more appropriate to refer the matter to the Larger Bench.
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(S.K. Bhatnagar)
Vice President
Dated 4-5-1998
POINT OF DIFFERENCE
22. In view of difference of opinion between Hon’ble Member (Judicial) and the Vice President, the matter is submitted to Hon’ble President for referring it to a Third Member on the following point :-
“Whether in view of the facts and circumstances of the case, the appeal of the department is required to be rejected as observed by Hon’ble Member (Judicial) or the matter is required to be referred to the Larger Bench in view of observations and findings of the Vice President”.
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(A.C.C. Unni) (S.K. Bhatnagar)
Member (Judicial) Vice President
Dated 6-5-1998 Dated 7-5-1998
K. Sankararaman, Member (T)
23. The difference of opinion between the Judicial Member and the Vice President which has led to this reference to me as the third Member concerns the question whether lime/quick lime/hydrated lime are covered by Chapter Note 2 under Chapter 25 of the Central Excise Tariff. The goods in question, as stated in paragraph 6 of the order of the Judicial Member are obtained by calcination of lime stone in kiln or roasting it with the help of steam, coal etc. Chapter Note 2 under Chapter 25 states that Heading 25.01, 25.03 and 25.05 cover only products which have been washed to eliminate impurities without changing the structure of the product, crushed, ground powdered levigated shifted, screened or concentrated by mechanical or physical processes but not products that have been roasted; calcined or obtained by mixing or subjected to processing beyond that mentioned in each heading or sub-heading. As, in the present case, calcining process has been gone through for obtaining the products in question, the Collector (Appeals) had allowed the appeal filed by the present respondent against the order-in-original passed by Assistant Collector holding the product to be classifiable under Heading 25.05. The department’s present appeal challenging the said decision of the Collector (Appeals) was proposed to be dismissed by the Judicial Member following earlier Tribunal decision in Mettur Chemicals & Industrial Corporation Ltd. v. Collector of Central Excise, Coimbatore reported in 1994 (73) E.L.T. 567 [not 1993 (63) E.L.T. 565 as stated in the order]. Shri Bhatnagar, Vice President was, however, of the opinion that the Chapter Note 2 did not come in the way of treating lime as excisable as it is specifically covered by Heading 25.05 and as the roasting was done on limestone and not the product lime.
24. When the matter came up for hearing, Shri Lakhinder Singh, learned Joint Chief Departmental Representative appeared for the appellant Collector and Shri A.C. Jain, learned Advocate appeared for the respondent. While Shri Lakhinder Singh supported the order proposed by the Vice President, Shri Jain stated that the matter stands covered by the Supreme Court’s decision in respondent’s own case, in respect of the same product which related to an earlier period. This has been reported in 1998 (99) E.L.T. 197. He pleaded that, following the said decision, the Department’s appeal be dismissed, as proposed by the Judicial Member.
25. I have been taken note of the submissions. I have perused the record and the decision cited by the learned Counsel and the ones referred to in the order proposed by the Judicial Member. In the case decided by the Supreme Court which was cited by the respondent’s Counsel, the matter related to the same issue of dutiability of quick lime and hydrated lime. The Supreme Court found that the Tribunal had held that quick lime and hydrated lime were not exigible to Excise duty. The department’s appeal against that decision was dismissed as the finding of the Collector (Appeals), adopted by the Counsel for revenue as his argument, was not easy to comprehend and the Counsel could not also enlighten the Court in the matter. The Court held that, in any event, where Technical processes are concerned the findings of the Tribunal should ordinarily not be disturbed and in the cases in question they found no reason to do so.
26. The present case concerns the same assessee and the same material for a later period. The Tariff Headings and the Chapter Note in question being materially the same, the law laid down by the Supreme Court is finding on the Tribunal and the authorities. If, however, it is the stand of the department that the exclusion of roasted or calcined items, in terms of the subject Chapter Note, is only from Chapter 25 or, more particularly, Tariff Headings 25.01,25.03 and 25.05 and not to make such products non excisable, if, they fall in other Chapters or under other Headings, appropriate action may be considered-by the Government. In fact, Tariff sub-heading 2505.60 which mentions quick lime, slaked lime and hydraulic lime refers to such goods other than calcium oxide and hydroxide of Heading No. 28.25 which would point to the latter two products falling under that heading which covers, inter alia, inorganic chemicals, that chapter itself falling in Section VI which covers products of the Chemical or Allied Industries. As against this, Chapter 25 under which, lime falls is in Section V which covers mineral products. Chapter Note 2 under Chapter 25 covers only material falling under 25.01,25.03 and 25.05 which have been subjected to mechanical or physical processes for eliminating impurities without changing the structure of the product but not products that have been roasted, calcined etc. Obviously the latter type of processes result in a chemical process changing the structure of the product. It is be noted that the Supreme Court did not disturb the findings of the Tribunal while dismissing the department’s appeal as the Counsel for the Government could not enlighten the Court about the findings of the Collector (Appeals) which he adopted as the stand of the Government in the appeal.
27. For the aforesaid reasons; following the Supreme Court decision in respondent’s own case, for the same goods, I concur with the findings of the Judicial Member ordering dismissal of the department’s appeal. The papers may be referred to the Bench for passing the final order in accordance with the majority view.
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(K. Sankararaman)
Member (T)
MAJORITY VIEW
28. In view of the majority opinion the Department’s appeal is rejected.