M/S Pleasantime Products Etc vs Commr.Of Central Excise,Mumbai-1 Etc

M/s. Pleasantime Products and Anr. ... Appellant (s)

Versus

Commissioner of Central Excise, Mumbai-I ... Respondent(s)

JUDGMENT

S. H. KAPADIA, J.

1. This batch of civil appeals filed by the assessee involves common

issue of classification of branded word game "Scrabble" - whether the

product "Scrabble" is classifiable under sub-heading 9503.00 or sub-heading

9504.90 of the First Schedule to the Central Excise and Tariff Act, 1985

("CETA", for short).

2. Assessee is a proprietary firm engaged inter alia in the business of

manufacture and trade of toys, games and puzzles of various kinds falling

under Chapter 95 of the First Schedule to the CETA. The goods are

manufactured by the assessee either under their own brand name of "United

Toys" or under different brand names. One of the items manufactured by 2

the assessee is "Scrabble" which is a registered brand name owned by M/s.

J.W. Spears & Sons Ltd., U.K. According to the assessee, "Scrabble" is a

puzzle or in the alternative it is an educational toy falling under sub-heading

9503.00 of the CETA. Assessee holds a licence from M/s. J.W. Spears &

Sons Ltd., U.K., to use the brand name(s) "Scrabble" and to manufacture the

product in India. Assessee pays royalty to M/s. J.W. Spears & Sons Ltd.,

U.K., on sale of "Scrabble" in India. In these civil appeals we are concerned

with the period March 1996 to June 2001.

3. On 12.4.96, the assessee filed a declaration under Notification

No.13/92-CE (NT) dated 14.5.92 informing the Department that the assessee

manufactured toys and puzzles falling under sub-heading 9503.00 of the

CETA which were fully exempt from payment of excise duty as per

Notification No.81/90-CE amended by Notification No.56/94-CE. In the

declarations for the relevant years in question, according to assessee, the

Department was informed that they were manufacturing items classifiable

under sub-heading 9503.00 as well as under Heading 95.04 either on their

own account or by using the brand name of others. According to the

assessee, along with the declaration(s), a list of toys manufactured by it,

classifiable under sub-heading 9503.00, was also furnished. In the list the

assessee stated that "Scrabble" was classifiable under sub-heading 9503.00. 3

According to the assessee, subsequent to the filing of annual declarations,

visits were made by the jurisdictional Central Excise Authorities and

samples were collected by the Department.

4. It may be mentioned that in this batch of civil appeals we are

concerned with the period March 1996 to June 2001 covered by two show

cause notices dated 23.3.2001 and 18.1.2002. On 23rd March, 2001, assessee

was served with a show cause notice (SCN) issued by the Commissioner

alleging that "Scrabble" was not a puzzle, it was not a toy but a game and,

therefore, it could not be classified under sub-heading 9503.00; that, all

games which contain boards and pieces were classifiable under sub-heading

9504.90 and since "Scrabble" has board(s) and pieces it was classifiable

under sub-heading 9504.90 of the CETA. The SCN also invoked longer

period of limitation under Section 11A(1) of the Central Excise Act, 1944

("1944 Act", for short) alleging that the declarations filed by the assessee

failed to mention that the assessee was manufacturing board games and that

they had deliberately suppressed the process of manufacturing "Scrabble".

On these allegations, the Commissioner made the demand of Rs.22,72,233

(by first SCN) and Rs.71,690 (by second SCN) on the clearances of

"Scrabble" made by the assessee during the period March 1996 to June 2001

charging excise duty for a longer period of limitation. In reply to SCN, 4

assessee submitted that the longer period of limitation could not be invoked

under Section 11A(1) of the 1944 Act as the assessee had stated in their

declarations that they were manufacturing toys and puzzles classifiable

under sub-heading 9503.00 as well as under sub-heading 9504.90 and they

had specifically stated in the declarations that they were manufacturing toys

and puzzles which also bear the brand name of M/s. J.W. Spears & Sons

Ltd., U.K., and since "Scrabble" was a product of M/s. J.W. Spears & Sons

Ltd., U.K., it could not be said that they had deliberately suppressed the fact

that they manufactured "Scrabble". On merits, the assessee replied to the

SCN that even if "Scrabble" would be treated as a table game still it would

be covered by the genus "puzzles of all kinds" in sub-heading 9503.00. On

the basis of definitions under various dictionaries, internet search on the

subject etc., the assessee submitted that in any event "Scrabble" was an

educational toy. Assessee also relied upon various dictionary meanings to

show that "Scrabble" was a puzzle and, therefore, classifiable under sub-

heading 9503.00 of the CETA. Assessee also furnished affidavits of

purchasers of "Scrabble" who deposed that "Scrabble" was an educational

toy used for imparting education to children and is treated as a puzzle by

adults.

5

5. Vide orders dated 30.1.02 and 30.9.03, the Commissioner (A) held

that "Scrabble" was a board game classifiable under sub-heading 9504.90 of

the CETA and liable for levy of central excise duty thereunder. The

Commissioner further held that the assessee had deliberately suppressed the

fact of manufacturing and clearance of dutiable brand goods "Scrabble"

under sub-heading 9504.90 and, therefore, the longer period of limitation

was invocable.

6. Aggrieved by the Orders of the Commissioner (A), Assessee went in

appeal to CESTAT bearing Nos.E/1554/02, E/1553/02 and E/32/04. All

three appeals filed by the assessee were collectively heard by CESTAT and

disposed of by a common Final Order No.A/346-348/08/C-I/EB dated

21.3.08. By the said order it has been held that "Scrabble" was neither an

educational toy nor a puzzle. In other words, CESTAT has confirmed the

order of the lower authorities, hence these civil appeals filed by the

Assessee.

7. As stated above, in this batch of civil appeals we are concerned with

the classification of an item called as "Scrabble". Before entering into

dictionary meaning of the word "puzzle" we need to analyse relevant entries

in Chapter 95 of the CETA which are reproduced hereinbelow: 6

"CHAPTER 95

TOYS, GAMES AND SPORTS REQUISITES;

PARTS AND ACCESSORIES THEREOF

Heading Sub-heading No. Description of goods Rate of duty No. (1) (2) (3) (4) 95.01 9501.00 Wheeled toys designed to be NIL ridden by children (for example, tricycles, scooters, pedal cars); dolls' carriages 95.02 9502.00 Dolls representing only human NIL beings 95.03 9503.00 Other toys; reduced-size NIL ("scale") models and similar recreational models, working or not; puzzles of all kinds 95.04 Articles for funfair, table or parlour games, including pintables, billiards, special tables for casino games and automatic bowling alley equipment 9504.10 Playing cards NIL 9504.90 Other 16%

(emphasis supplied by us)

8. The said chapter refers to "Toys, Games and Sports Requisites; Parts

and Accessories thereof". Heading Nos.95.01, 95.02 and 95.03 deal with a

subject-matter, namely, "Toys" whereas Chapter Heading 95.04 deals with

"Articles for funfair, table or parlour games, including pintables, billiards,

special tables for casino games and automatic bowling alley equipment".

Broadly, therefore, we have two subject-matters, namely, Toys on one hand

and Articles meant for funfair, table or parlour games on the other hand. 7

This conclusion is arrived at by applying a rule of interpretation called as

"companion test". Within the subject-matter "toys", we find that Heading

9501 covers `wheeled toys', Heading 9502 covers `dolls' whereas Heading

9503 covers `other toys; reduced-size models; puzzles of all kinds'. In sub-

heading 9503.00, the expression "other toys" indicates that all toys other

than wheeled toys and dolls would come under sub-heading 9503.00. In a

way sub-heading 9503.00 is a residuary to sub-headings 9501.00 and

9502.00. According to the assessee, sub-heading 9503.00 in turn covers

three separate and distinct items, namely, other toys; models; puzzles of all

kinds.

9. According to the assessee, a "Scrabble" is very similar to a crossword

or jigsaw puzzle and, therefore, "Scrabble" falls under sub-heading 9503.00

which refers to "puzzles of all kinds". According to the assessee, since the

expression "other toys" in sub-heading 9503.00 is followed by a semi-colon,

the said expression "other toys" constitutes one separate and distinct class

from "puzzles of all kinds" which itself constitutes a different and distinct

class from "reduced-sized models" because, according to the assessee, each

of the three classes are followed by a semi-colon.

8

10. The key question which we have to answer is : whether "Scrabble" is

a puzzle. In our opinion "Scrabble" is not a puzzle. Let us first see how

"Scrabble" was invented and how it evolved. When the Great Depression

left architect Alfred Mosher Butts out-of-work, he decided to invent a board

game. He did his market research and produced a document entitled "Study

of Games". He concluded that there are three kinds of parlour games:

"number games", such as dice and bingo; "move games", such as chess and

checkers; and "word games", such as anagrams. He stated that "it is curious

that while two of the three kinds of table games has yielded such interesting

developments, the third has produced nothing better than anagrams". Thus

Butts wanted to create a game that combined the vocabulary skills of

crossword puzzles and anagrams, with the additional element of chance.

The game was originally named Lexico, but Butts eventually decided to call

the game "Criss-Cross Words". "Scrabble" which means "to grope

frantically", was trademarked in 1948. [See: Success at 60, letter by letter

by Oliver Burkeman at http://www.gulf-times.com].

11. The difference between a "game" and a "puzzle" is brought out by

three distinct features, viz., outcome, clue-chance and skill. In a puzzle

outcome is pre-determined and fixed. It is not so in "Scrabble". For

example, in crossword, outcome is pre-determined or fixed. In a crossword 9

puzzle, there is a grid of squares and blanks into which words crossing

vertically or horizontally are written according to clues. [See: Encyclopaedia

Britannica]. Similarly, a jigsaw puzzle is a contrivance for testing ingenuity.

In jigsaw puzzle there is a set of varied, irregularly shaped pieces, which

when properly assembled form a map or picture. These are examples to

demonstrate that in a puzzle the outcome is fixed or pre-determined which is

not there in "Scrabble". A person solving a puzzle, unlike games, does not

aim at wining by scoring more points but aims at arriving at the solution by

finding the correct answer or by putting it together properly, and winning or

losing can only come by way of time taken in solving the puzzle.

12. The other important difference is that in a "Scrabble" there are no

clues whereas in crossword puzzle, as stated above, words are written

according to clues.

13. One more distinguishing feature to be kept in mind is, in "Scrabble"

there is an element of chance and skill. The player in "Scrabble" gets

lettered tiles to create words by chance. According to The Concise Oxford

English Dictionary, Tenth Edition, Revised, "Scrabble" is defined as a board

game in which players use lettered tiles to create words in crossword

fashion. These tiles are initially kept in a pouch from which every player 10

picks up the tiles. This is pure matter of chance. Further, apart from the

element of chance there is also an element of skill involved in "Scrabble".

Each lettered tile has an assigned value and the player has to create words.

He tries to create words which attain maximum value; tries to gain

maximum value from the lettered tiles which come by chance to him. This

is where skill comes in. Each player uses his skill to achieve the highest

value. In other words, if a player has command over language, he can coin

or create words with highest maximum value. Thus, these two elements of

chance and skill are the key elements of a "Scrabble". In "Scrabble" no

clues are given as in the case of crossword or jigsaw puzzles. In "Scrabble",

outcome is not fixed or pre-determined as in the case of puzzle. The game is

essentially in the nature of anagrams played on a board (of 15 X 15 squares)

which uses the concept of a crossword only to the extent of arrangement of

words formed either vertically or horizontally. The essential characteristic

of crossword to lay down clues and having a solution is absent from

"Scrabble". Thus, "Scrabble" is an ingenious mix of anagrams, crosswords,

chance and skill. It involves a lot of luck. One of the crucial ingredients is

that you cannot know what tiles are on your opponent's rack or which you

will draw next. So, aided by artful strategy there is a good chance of beating

someone with a better vocabulary. [See: Spell Bound, by Oliver Burkeman, 11

The Guardian, June 28, 2008 at http://www.guardian.co.uk]. Hence, it is

seen that luck lacks in a puzzle unlike in the game of "Scrabble" as an

essential constituent.

14. Hence, in our view, "Scrabble" will not fall in the category or class

mentioned in sub-heading 9503.00, namely, "puzzles of all kinds".

15. Applying the dictionary meaning, "Scrabble" is a board game in

which players use lettered tiles to create words in a crossword fashion. [See:

The Concise Oxford English Dictionary, Tenth Edition, Revised].

16. Apart from the analysis of the entries in Chapter 95 and apart from the

dictionary meaning, discussed above, we may now refer to trade meaning of

the word "Scrabble" in India.

17. In the case of The Dy. Commissioner of Sales Tax (Law) Board of

Revenue (Taxes), Ernakulam v. M/s. G.S. Pai and Company - AIR 1980

SC page 611, this Court held that while interpreting the entries in Sales-tax

Legislation, it should borne in mind that the words used in the entries must

be construed not in any technical sense but as understood in common

parlance. Courts must give the words, used by the legislature, their popular-

sense meaning "that sense which people conversant with the subject-matter 12

with which the statute is dealing, would attribute to it". The word in the

entry must, therefore, be interpreted according to ordinary parlance and must

be given a meaning which people conversant with the commodity would

ascribe to it. Applying the said test of "common parlance" or trade meaning

and commercial nomenclatures, we are of the view that "Scrabble" is a

board game. If one attends any departmental store in Mumbai like Oxford

or Crossword, "Scrabble" is put in the board game section and not in the

section for puzzles. Therefore, even by the test of common parlance

"Scrabble" is not the puzzle. It is a game.

18. The word "game" in commercial sense means an article or apparatus

used in playing games. According to Words and Phrases, Permanent

Edition, the word "game" also defines, in certain context, instrumentalities

used in playing them. According to Stroud's Judicial Dictionary, a "game"

is a form of a play or sport especially a competitive one, played according to

rules and decided by skill and chance. According to Words and Phrases,

Permanent Edition, the instruments by which chance may be developed and

upon which skill may be exercised are also games - such as cards, dice,

balls, figures, letters, checks etc. Therefore in a game there is a trial of skill

or chance between two or more contesting parties according to some rule(s)

by which one may succeed or fail. It is a contest for success, for a trial of 13

chance or skill and it embraces every contrivance which has for its object

sport, recreation or amusement. These are the various dictionary meanings

of the word "game". Applying the dictionary meaning, we are of the view

that "Scrabble" is a board game. It is not a puzzle. In the circumstances, it

falls under Heading 95.04 and not under sub-heading 9503.00 of the CETA.

19. In the alternative, it is the case of the assessee that they are also

selling what is called as "Junior Scrabble" which is an educational toy which

falls in sub-heading 9503.00 of the CETA under the expression "Other

Toys". It is submitted that "Junior Scrabble" has an element of playfulness

and recreation. It is submitted that it is not a process but an article a child

can play and develop his word power with the scrabble. It is submitted that

"Junior Scrabble" is a pictorial dictionary and in it every child has to put the

character and arch after identifying it. We find no merit in this contention.

At the outset, it may be stated that according to the pleadings "Scrabble" is a

toy in the nature of a puzzle. This plea indicates that even according to the

appellant it is a "toy puzzle" and consequently it can only fall in the category

of "puzzles of all kinds". However, as stated above, "Scrabble" (a branded

word game) is not a puzzle as in "Scrabble" there is no fixed outcome, there

is no clue as in the case of a puzzle and there is an element of skill and

chance.

14

20. According to "The Concise Oxford English Dictionary, Tenth

Edition", a "toy" is an object for a child to play with, typically a model or

miniature, replica of something. The gadget or a machine providing

amusement is a toy. In 1914 even a car was a toy for a rich man. According

to Stroud's Judicial Dictionary, Fifth Edition, construction kits for making

model are "toys and games". According to Encyclopedia Americana

originally a "toy" was made for adults rather than children, however, by 19th

century the word came to denote a child's play-thing. According to

Encyclopedia Americana toys are tools of the human child, training him in

physical skills, developing his imagination and stimulating his thinking.

Predominantly, it is a play-thing. Toys imitate in miniature the world

familiar to children. According to Encyclopedia Americana, "educational

toys" includes kits for building structures such as bridges and geodesic

domes. Miniature railways on tracks are educational toys. However, with

the change in educational methods in the 20th century the pattern of toys has

undergone a change. Advance thinking in child welfare has influenced the

shape of toys and special standards of safety and hygiene are enforced today.

Kindergarten methods have influenced the pattern of toys and introduced

building blocks and constructor sets, colour mosaics and educational jigsaws

into the definition of the expression "educational toys". However, in 20th 15

century also soft toys remain popular like "teddy bear". In 20th century vinyl

plastic and foam rubber has revolutionized the toy industry and has

communal toys - climbing frames, splash pools and sand trays.

21. Thus, going by the dictionary meanings of the word "educational toy"

one finds that "educational toys" remain even today tools of amusement.

They remain an object for a child to play with. One needs to apply the

predominant test in such cases. Applying these tests, we are of the view that

even a "Junior Scrabble" will not fall in the category of "educational toys".

As stated earlier, the two main elements of "Scrabble" are - chance and

skill. These elements are absent in a toy. Hence even a "Junior Scrabble" is

not an educational toy. It is a game. It remains a board game and in the

context of the placement of the entries in Chapter 95 which we have

discussed above, in our view, even "Junior Scrabble" will come under

Chapter Heading 95.04 of the CETA.

22. Now, coming to the question of extended period of limitation, it is the

case of the assessee that they bonafidely believed that "Scrabble" is a toy in

the nature of a puzzle and, therefore, it was classifiable under sub-heading

9503.00 of the CETA. According to the assessee, the longer period of

limitation was not invocable under the proviso to Section 11A(1) of the 1944 16

Act as the assessee had stated in all their annual declarations that they are

manufacturing toys and puzzles classifiable under Heading 95.04 and sub-

heading 9503.90 of the CETA; particularly, when in their declarations they

had declared that they were manufacturing toys and puzzles which carried

the brand name of their licensors M/s. J.W. Spears & Sons Ltd., U.K., and

since "Scrabble" was a product of M/s. J.W. Spears & Sons Ltd., U.K., it

cannot be said that they had deliberately suppressed the fact of manufacture

of "Scrabble". We do not find merit in this submission. Firstly, as stated

above, the case of the assessee was that they had annexed a list of items

manufactured by them which included items falling under Headings 95.03

and 95.04 of the CETA. This has not been proved. The list is not there on

record. In the circumstances, the authorities below were right in rejecting

this contention of the assessee. Secondly, we find that in the declaration(s)

even though the assessee had doubts about the excisability of the said item

and even though the assessee had sought clarification as far back on 5th

September, 1994; they did not mention the word "Scrabble" in the body of

the declaration(s) filed with the Department. They did not mention the

details of the game "Scrabble". Therefore, this conduct of the assessee

clearly indicates that the assessee herein deliberately declared branded goods

under sub-heading 9503.00 of the CETA to avoid any enquiry in the matter 17

by the Department. For the above reasons, we are of the view that the

Department was justified in invoking the proviso to Section 11A (1) of the

1944 Act.

23. For the above reasons, we find no merit in the civil appeals herein and

the same are accordingly dismissed with no order as to costs.

.................................J. (S.H. KAPADIA)

................................J. (AFTAB ALAM)

New Delhi;

November 12, 2009.