Holding

Lympo is not classifiable under Tariff Item 23(1) or 23(2) but under Tariff Item 68 of the Schedule to the Central Excises and Salt Act, 1944.

Summary

Cemento Corporation Ltd manufactured a lime‑pozzolana mixture called Lympo from 1982 and claimed it was a cement substitute, seeking classification under the residuary Tariff Item 68 of the Central Excises and Salt Act, 1944, which would exempt it from excise duty. The Collector of Central Excise classified Lympo as a variety of cement under Tariff Item 23(2) and demanded duty for the period 1982‑1985; the CEGA Tribunal upheld this classification. On appeal, the Supreme Court examined the meaning of Tariff Item 23, the trade‑parlance of the product, and the classification under the later Central Excise Tariff Act, 1985, which placed cement under Chapter 25.02 and Lympo under Chapter 25.05, concluding that Lympo is not cement nor a variety of cement. Consequently, the Court held that Lympo falls under Tariff Item 68 of the 1944 Act and is not liable to duty for the period in question. The appeal was allowed, directing the authorities to consider the appellant’s claim for exemption under the 1975 notification.

Issues considered

Whether Lympo, a lime‑pozzolana mixture, is classifiable under Tariff Item 23(1) or 23(2) of the First Schedule to the Central Excises and Salt Act, 1944.
Whether, if not cement, Lympo should be placed under the residuary Tariff Item 68 of the same Act.
How the classification under the Central Excise Tariff Act, 1985, impacts the interpretation of the 1944 Act for the period 1982‑1985.

Legislation cited

Central Excises and Salt Act, 1944s. First Schedule, s. Section 5(A)
Central Excise Tariff Act, 1985s. Schedule Chapter 25

Subjects

excise dutyclassificationtariff headingcement substituteLympoCentral Exciseresiduary itemtax exemption

Judgment

A CEMENTO CORPORATION LTD.
v.
COLLECTOR CENTRAL EXCISE

OCTOBER 23, 2002

B [RUMA PAL AND S.N. VARIAVA, JJ.]

Central Excises and Salt Act, 1944-First Schedule, Tariff Item 23(1),
23(2) and 68-Lympo, a lime-pozzolana mixture-Classification offor purpose
C of Excise Duty-Excise Department claiming it a variety of cement exigible to
duty- Assessee claiming it to be a cement substitute and thus classifiable
under Tariff Item 68 - Collecto~ holding it to be classifiable under Tariff
Item 23(2)-Tribunal upholding the order-On appeal held: Once it is admitted
that Lympo is a cement substitute, Tribunal erred in holding that Lympo was
cement or a variety of cement-Further if Lympo is not cement or a variety
D of it under the 1985 Tariff Act it could not have been cement under the
Schedule of the 1944 Act either-Hence lympo not classifiable under Tariff
Item 23(1) or (2) but under Item 68 of the Schedule of 1944 Act-Central
Excise Tariff Act, 1985-Schedule Chapter 25.

The question which arose in this appeai, was regarding classification
E of Lympo, a Iime-pozzolana mixture for the purposes of excise duty for
the period 1982-1985.

Prior to the amendment of Central Excises and Salt Act, 1944 in
1985, Cement was specified in Tariff item 23 in the First Schedule of the
Act and was exigible to duty. In 1985, First Schedule to 1944 Act was
F repealed and re-enacted as Schedule to Central Excise Tariff Act 1985 in
terms of which cement was classified under Tariff Item 25.02 while Lym po
came under Tariff Item 25.05. Appellants manufactured Lympo-lime-
pozzolana mixture since 1982. Respondent-Excise Department claimed
that Lym po is a variety of cement and hence exigible to duty. Appellants r
G contended that Lympo was a cement substitute and was classifiable under
Tariff Item 68 and not under 23. Collector held that lympo was correctly
classifiable under Tariff Item 23(2) and was subject to duty, upto the
amendment of 1944 Act. Tribunal upheld the order. Hence the present
appeal.

H 210
CEMENTO CORPORATION LTD. v. C.C.E. 211
Allowing the appeal, the Court A
HELD: t.t. Lym po was not classifiable under Tariff Item (T.I.) 23(1)
or 23(2) but under T.I. 68 of the Schedule to Central Excises and Salt Act,
1944. 1218-G)

1.2. The Tribunal and the Collector incorrectly interpreted the B
provisions of Tariff Item 23 of the First Schedult to the Central Excises
and Salt Act, 1944. The Tariff heading of the entry is 'Cement'. Therefore,
when T.I. 25(2) speaks of "all others" it means "all other kinds or varieties
of cement". It is axiomatic that if the product is not cement but can be
used for some purposes like cement, such product is not cement. The test C
as enunciated by the Tribunal for determination of the question of
classification is no doubt how the product is known to the trade. Appellant
has produced evidence to show that lympo had never been known or
indeed advertised as 'cement' whether of a superior or inferior quality,
but was known as a cement substitute. Respondents have produced nothing
to show to the contrary. A substitute necessarily implies a difference in D
identity. When once it is admitted that lympo is a co~ment substitute,
Tribunal could not have come to the conclusion that lympo was cement
or a variety of cement. There is no ambiguity in the defi11ition of T.I. 23(1)
or 23(2). Even if there were, on the principle that when two constructions
can be equally drawn, the one favourable to the taxpayer should be E
adopted, Tribunal should have held in favour of appellant.
1217-E, H; 218-Af

Dunlop India Limited v. Union of India and Ors., [19761 2 SCC 241,
relied on.

1.3. The position has been clarified by the 1985 Act beyond doubt.
F
Cement and all its varieties including 'Sago!' and 'Ashmoh' have been
separately provided for under Tl 2502 and Lympo has been classified
under a different Tariff item altogether. The Schedules to the 1944 and
the 1985 Act deal with the same commodity. If lympo is not cement or a
variety of it under the 1985 Act it could not have been cement under the G
Schedule of the 1944 Act either. Since even according to the respondents
there was no other entry of the Schedule to the 1944 Act, under which
lympo could have been classified, necessarily it would have to be classified
under the residuary Tariff item 68. [218-E, Fi

Income Tax Officer v. Mani Ram, AIR (1969) SC 543, relied on. H
212 SUPREME COURT REPORTS [2002] SUPP. 3 S.C.R.

A Nageswara Pozzolana Works Pvt Ltd. v. Collector of Central. Excise.,
(1992) 58 ELT 321, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2657 of
1994.

B From the Judgment and Order dated 14.9.1993 of the Central Excise
Customs and Gold (Control) Appellate Tribunal, New Delhi in A.No. E. 98
of 1988-C in F.O. No. 299 of 1993-C.

Rajesh Kumar and Nischal K. Neeraj, for the Appellant.
c Yashank Adhyaru, Sanj iv Sen and B. Krishna Prasad, for the Respondent.

The Judgment of the Court was delivered by

RUMA PAL, J. The Issue in this case relates to the classification
D for the purposes of excise duty of a product manufactured by the appellant,
which the appellant claims is a cement substitute and not cemento. The
product is 'Lympo' which is a lime - pozzolana mixture which the appellant
manufactures under the trade name "Gajaraj Lympo". The respondent's
•
claim that lympo is in fact a variety of cement and was exigible to duty
as such.
E
The. issue has arisen in the context of the Central Excise and Salt
Act, 1944 prior to its amendment in 1985. Cement was then specified in
Tariff item (T.I.) 23 in the First Schedule of that Act and was exigible to
duty. The relevant entry then read as follows:
F
Item No. 23-Cement.

Item No. Tariff Description Rate of duty

(1) Grey portland cement (including ordinary Two hundred and
G portland cement, portland-pozzolana cement fifty rupees per
and portland slag cement), masonry cement, metric tonne.
rapid hardening cement, low heat cemento and
waterproof (hydrophobic) cement.

(2) All others Forty per cent ad
H valorem
CEMENTO CORPORATION LTD. v. C.C.E. [RUMA PAL, J.] 213
According to the appellant since its product was not cement, it was not A
classifiable under T. 123 and was classifiable under T.l. 68 which covered all
·other goods, not elsewhere specified excluding a few specified articles which
are not material to the case before us.

The appellant's further case is that the manufacturing activity had been
started in 1982 with technical assistance from the Khadi and Village Industries B
Commission in Patna, Bihar and, therefore, was also entitled to the benefit of
notification No. 116175-CE dated 30th April 1975 by which products of
village industries falling under tariff Item 68 of the First Schedule to the
Central Excise and Salt Act, 1944 were exempted from the whole of the duty
of excise leviable thereon provided the Khadi and Village Industries C
Commission certified that the said products were the genuine products in the
industry as specified in the Schedule to the Khadi and Village Industries
Commission Act, 1956. The Director ofKVIC by his letters dated 1/2.4.1981
and 2.3.1983 had, a-:co:·ding to the appellant, certified that technical cosultancy
services were being extended to th~ appellant to establish a Lympo unit
(Lime Pozzolana Mixture) and that lympo was the substitute of cement, it D
was a masonry binder and not cement and that the product fell under "Village
Industry" as specified under the Khadi and Village Industries Commission
Act, 1956. On the basis of this ce11ificatt:, the appellant cleared the lympo
manufactured, at Nil rate of duty.

On 31st July 1982, the Superintendent Central Excise, Ranchi directed
E
the appellant to clear its product lympo by classifying the same under T.I.
23(2) upon payment of duty as specified against that tariff entry. Samples of
the appellant's product were taken on 8th October 1982. One of the samples
was given to the Chemical Examiner, Customs House, Calcutta which
according to the respondent submitted a report that Lympo could be regarded F
as a type of cement. The report is not on record. By letter dated 3rd May
1983 issued by the Superintendent, Central Excise, Ranchi the appellant was
again directed not to clear the product without payment of duty and proper
licence treating its product as classifiable under T.I. 23(2). The appellant
filed a writ application before the High Court at Ranchi/v.ide C.W.J.C. No. G
691 of 1983 challenging the demand. The Court directed a fresh sample of
the appellant's product to be drawn. This was done on 14th September 1983
and sent to the Director General. National Test House, Alipore, Calcutta. The
Test certificate states:

"the said sample fails to meet the requirement as covered under tariff H
214 SUPREME COURT REPORTS (2002] SUPP. 3 S.C.R ..

A item No. 23 ( l) of Central Excise and Salt Act, 1944. It appears that
tariff item 23(2) of the said Act does not specify any particular variety
of cement but include all others. In absence of the identity of the
variety of cement it will not be possible to comment on the material
covered under T.l.·23(2) on the basis of the result oftest carried out."

B On the basis of this report, the High Court dismissed the writ application
and gave the appellant liberty to challenge the directive ofthe Superintendent
Central Excise before the Collector, Central Excise. The appellant duly
approached the Collector (Appeal) who by an order dated 3rd April 1984 set
aside the impugned directive but leaving the question of classification open
C for a fresh determination in accordance with the prescribed procedure.

On 30th May 1984 a show cause notice was issued to the appellant by
the Superintendent, Central Excise. The.appellant gave its reply in which it
was contended that lympo was not a cement but was a cement substitute.
Material was also submitted and reliance was placed on the Indian Standard
D specifications to show that there was a marked difference between the
compressive strengths and composition of different varieties of cement and ,
lympo. In addition the names of various manufactures in West Bengal who
were manufacturing lympo and taking the benefit of the Exemption
Notification dated 30th April 1975 were also submitted.

E The Collector, Central Excise by his order dated 29th September 1987
accepted that there was a difference between the plasticity and setting property
of lympo and ordinary portland cement, but rejected the appellant's case on
the following grounds:

I. Since lympo serves the purpose of all types of residential
F constructions, save and except R.C.C. work, the characteristics
and actual uses of the product conforms fully to cement, as it is
known in common parlance.

2. Tariff item 23 covers all varieties of cement including inferior
G variety with lower compressive strength such as 'Sago I' and
'Ashmoh' and that these inferior varieties of cement were covered
by Tariff Item 23(2) as was clear from Notification No. 5/70
dated 31st January 1970 and 14/79 dated 27th January 1979.

3. Tariff item 23 was not based on Indian Standard Specifications
H and, therefore, merely because lympo did not meet the l.S.
CEMENTO CORPORATION LTD. v. C.C.E. [RUMA PAL, J.] 215

Specification for eement or its varieties did not mean that lympo A
was not classifiable under Tariff Item 23.

Accordingly, the Collector held that lympo was correctly classifiable
under Sub-Item (2) of item 23 and was subject to duty during the relevant
period, namely, upto the amendment of the 1944 Act.
B
This decision was upheld of 14.9.1993 by the impugned decision of the
New Delhi Bench of Customs, Excise and Gold (Control) Appellate Tribunal
(CEGA T). In rejecting the appellants appeal, the Tribunal said:

"The ultimate test of classification is how the product is known in the
trade parlance. 'Lympo' is put to practically all the uses to which C
cement is put - except for RCC construction work. Considering all
the facts and circumstances, it appears to be an inferior type of cement
like 'Sago!' and 'Ashmoh' as held by the Collector-though described
as a Cement substitut<J. '\\!hen the substitute is so much like the real
think, it is difficult not to hold it as the same."
D
Before dealing with the submissions of the parties, it may be noted at
this stage in 1985, the first Schedule to the 1944 Act was repealed and re-
enacted with some changes, as the Schedule to the Central Excise Tariff Act,
1985 (hereinafter referred to as ' 1985 Act'). Cement has now been classified
under Chapter 25 of the Schedule to the 1985 Act along with 'Salt Sulpur: E
Clay and Stone: Plastering Materials: and Lime'. The specific tariff entry
relating to cement is 25.02 which reads:

Heading Sub- Description of goods Rate of
No. Heading Duty
F
(1) (2) (3) (4)

25.02 2502.10 Cement clinkers Rs. 200 per tonne
Portlant cement (including or-
dinary portland cement, Portland G
pozzolana cement and Portland
slag cement)

25.02.21 White cement, whether or not 25%
artificially coloured and whether
H
216 SUPREME COURT REPORTS (2002) SUPP. 3 S.C.R.

A or not with rapid hardening properties
2502.29 Others Rs. 350 per
tonne
2502.30 Aluminous cement (Cement 25%
fondu)
J3 2502.40 Sago!: ashmoh 25%

2502.50 High alumina refractory cement 25%

2502.90 Other 25%
c
It is not and cannot be disputed by the respondents that lympo is not
classifiable under T.L 25.02 but under T.L 25.05 which reads:

Heading Sub- Description of goods Rate of
D No. Heading Duty
...
(I) (2) (3) (4)

25.05 2505.00 Mineral substances not Nil
elsewhere specified (including clay,
E earth colours, natural abrasives,
sulphurs, slate and stone) lime:
Plasters with a basis of Calcium
Sulphate, plasters specially prepared
for use in Dentistry.

F Although lympo has not been mentioned either in T.l. 25.02 or 25.05,
the appellant has drawn our attention to the Budget speech of the finance
Minister in 1988 where in paragraph 135, it is stated :

"It is time. that we think innovatively and use unconventional materials
G for housing which could be cheap and functional. The excise duty on
blocks, slabs, lintels, etc. constituting structural intermediates and
components of pre-fabricated building is being reduced from 12% to
5% ad valorem. Similarly, fly ash bricks will pay a lower duty of 5%
ad velorem, and lympo, a cement substitute, will bear a zero rate of
duty."
H
CEMENTO CORPORATION LTD. v. C.C.E. [RUMA PAL, J.] 217

·Soon after this a Notification was issued being Notification No. 33/88- A
C.E. dated 1st March 1988 exempting lympo from the whole of duty of
excise leviable thereon.

In 1990, Notification No. 16/90-CE dated 20th March 1990 was issued
under Section 5(A) of the 1944 Act exempting certain goods described in
column (3) of the Table annexed to the notification and falling under the B
heading number or sub-heading number of the 1985 Act from the levy of
excise duty. Among the goods so exempted were cement which was described
as being under Tl 2502.20 and lympo which was described as being under
Tariff Entry 25.05 of the Schedule to the 1985 Act.

In supersession of this notification another was issued by the Central
c
Government under 5A(l) of the 1944 Act being notification No. 7192 dated
J
I st March 1992 again exempting lympo from the whole of the duty and
describing the corresponding ehtry ·in the 1985 Act as 25.05. Therefore for
the period after the 1985 came into force, a distinction has been statutorily
maintained, betwllen cement, the different varieties and 'other' cement which D
.,., have been classified under T.I. 2502.02 and lympo which has been classified
under TI 25.05. The only question which remains is whether for the period
1982 to 1985 the lympo manufactured by the appellant could be classifiable
tinder the Tl 23(2) of the Schedule to the 1944 Act.

/ In our view, the Tribunal and the Collector have incorrectly interpreted E
the provisions of Tariff Item 23 of the First Schedule to the 1944 Act. The
Tariff heading of the entry is 'Cement'. Therefore when T.I. 25(2) speaks of
"all others" it means "all other kinds or varleti~s of cemetit", It is axiomatic
that if the product is not cement but cart be used for some purposes like
cement, such product is not cemllllt. 'rhe test as enunciated by the Tribunal F
for detennination of the question of classification is no doubt how the product
is known to the trade' The appellant has produced evidence to show that
lympo had never been known or indeed advertised as 'cement' whether of a
superior or inferior quality, but was known as a cement substitute. The
respondents have produced nothing to show to the contrary. A substitute
necessarily implies a difference in identity. When once it is admitted that G
lympo is a cement substitute, the Tribunal could not have come to the
conclusion that lympo was cement ot ii variety of cement. In our view, there
is no ambiguity in the definition of T.I. 23(1) or 23(2). Even if there were,
on the principle that when two constructions can be equally dra~n, the one
I. See: Dunlop India Limited v. Union of/J1dla a11d Ors .. (1976] 2 SCC 241. H
218 SUPREME COURT REPORTS [2002] SUPP. 3 S.C.R.

A favourable to the tax payer should be adopted, the Tribunal should have held
in favour of the appellant.

Indeed an earlier Bench of the same Bench of CEGA T, in Nageswara
Pozzolana Works Pvt. Ltd. v. Collector of C. Ex. (1992) 58 EL T 321 had
B clearly held:

"The dictionary meaning of cement cannot be the factor for considering
the product in question as cement as cement has a different meaning
and trade understanding. The product which is an alternative, is used
for such purposes as laying bricks and plastering which function can
C be obtained by mixture of limestone and, therefore, cannot be
considered as a cement."

In that case after considering a vast volume of technical material and
taking into consideration the trade parlance and understanding of cement and
Lime pozzolana mixture, the Tribunal came to the conclusion that the latter
D cannot be considered as a variety of cement to be classifiable under T.1.23(1)
or T.1.23(2) to the First Schedule of the 1944 Act but under Tariff Item 68.
Appeals (C.A. No. 7504-7505 of 1995) filed by the Collector of Central
Excise against this decision of CEGA T were dismissed by this Court on 15th
February 1996.

E In any event, the position has been clarified by the 1985 Act beyond
doubt. Cement and all its varieties including 'Sago!' and 'Ashmoh' have
been separately provided for under Tl 2502. Lympo on the other hand has
been classified under a different Tariff item altogether. The Schedules to the
1944 and the 1985 Act deal with the same commodity. If lympo is not
p cement or a variety of it under the 1985 Act it could not have been cement
under the Schedule of the 1944 Act either. [See in this connection Income
Tax Officer v. Mani Ram, AIR (1969) SC 543. Since even according to the
respondents there was no other entry of the Schedule to the 1944 Act, under
which lympo could have been classified, necessarily it would have to be
classified under the residuary Tariff item viz., Tl 68.
G
For all these reasons, we set aside the impugned decision of the Tribunal
and allow the appeal and hold that lympo was not classifiable under T.1.23(1)
or 23(2) but under T.!.68 of the Schedule to 1944 Act. Since the appellant's
case was dismissed in /imine by t!1e Tribunal and the respondent authorities,
H the further question whether the appellant was entitled to the benefit of
CEMENTO CORPORATION LTD. v. C.C.E. [RUMA PAL, J.] 219

Notification 116/75-CE dated 30th April 1975 had not been considered by A
them. With this judgment the respondent will consider the appellant's claim
to exemption from excise duty under the notification treating the appellant's
product for the period in question as classifiable under T.1.68.

The appeal is allowed accordingly without any order as to costs.
B
N.J. Appeal allowed.