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Durametallic India Ltd. Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1983)LC400DTri(Delhi)
AppellantDurametallic India Ltd.
RespondentCollector of Customs
Excerpt:
.....for half of the duty differential between the two tariff headings. we were shown samples of the subject goods as well as of seal inserts or mechanical seals manufactured out of them by the appellants.appellants'own trade catalogue and photostat copies of catalogues of m/s durametailic u.s.a. and union carbide corporation u.s.a. and of extracts from the book, 'manufactured carbon : a self lubricating material for mechanical devices' by r. robert paxton were produced before us by the appellants. the department's representative also produced photostat copy of a letter dated 8-2-1983 from m/s schunk & ebe gmbh, germany, as well as photo copy of trade catalogue of this german supplier. explanatory notes in the cccn were relied upon by the appellants. initially, the department's.....
Judgment:
1. A common issue is involved in these 17 appeals of the same appellants (vide the Annexure), they were heard together with the consent of both the sides and, therefore, this combined order is being issued in respect of all of them.

2. The question under consideration in these appeals is whether the goods described in the Bills of Entry as "Carbon Tubes" made of impervious or resin-impregnated artificial graphite and imported by the appellants for manufacture of mechanical seals, fall under Heading 38.01/19(4) of the Customs Tariff Act, 1975, which relates to "Artificial Graphite", as urged by the appellants, or under Heading 68.01/16(1) as articles of mineral substances, not elsewhere specified, as held by the Department.

3. The case was argued before us on 10th January, 21st January and 25th February, 1983. We were informed by the appellants that the Madras High Court had already granted them interim relief subject to bank guarantee for half of the duty differential between the two tariff headings. We were shown samples of the subject goods as well as of seal inserts or mechanical seals manufactured out of them by the appellants.

Appellants'own trade catalogue and photostat copies of catalogues of M/s Durametailic U.S.A. and Union Carbide Corporation U.S.A. and of extracts from the book, 'Manufactured Carbon : A Self Lubricating Material for Mechanical Devices' by R. Robert Paxton were produced before us by the appellants. The Department's representative also produced photostat copy of a letter dated 8-2-1983 from M/s Schunk & EBE GMBH, Germany, as well as photo copy of trade catalogue of this German supplier. Explanatory notes in the CCCN were relied upon by the appellants. Initially, the Department's representative questioned the relevance of these explanatory notes and insisted that the matter may be decided in the light of only what was contained in the Customs Tariff Act and the Import Schedule thereto. But later on he himself relied heavily on these explanatory notes of the CCCN. In order to facilitate a proper understanding of the issues involved, we reproduce below the relevant Explanatory notes relied upon by both sides :- "38.01. In addition to ordinary grades of artificial graphites, the heading includes : (b) Impregnated or impervious artificial graphite, that is, artificial graphite which, in order to increase its density or its impermeability to gases, has first been impregnated in a vacuum with tars or resins or with solutions of sugars or other organic products, and re-fired to graphitise the carbonaceous residues of these additives.

The impregnation process may be repeated several times to obtain a higher density (1.9 or more) or a high degree of impermeability.

Impregnated graphite may also be of nuclear grade.

Artificial graphite of this heading is usually in the form of powder, flakes, blocks, plates, bars, rods, etc. The blocks and plates are used, after cutting and high-finish machining (fine tolerances and appropriate surface finish), to make the brushes and other electrical carbon articles of heading 85.24, and parts of nuclear reactors.

The present heading also includes scrap, waste and worn out articles, suitable only for the recovery of artificial graphite.

(a)Retort carbon (or gas carbon), sometimes incorrectly called "artificial graphite" (heading 27.05), (b) "Carbon" blocks, plates, bars and similar semi-manufactures, consisting of amorphous carbon or natural or artificial graphite agglomerated with carbonaceous binders by baking at a temperature (1000 to 1200C) too low to produce true graphitisation (heading 38.19), (c) Blocks, plates, bars and similar semi-manufactures, of artificial graphite which also contain artificial resins or powders of base metals (heading 38.19) or powders of silver (heading 71.05), (d) Artificial graphite surface-worked, surf ace-finished, cut to special shapes, lathe worked, drilled, milled, etc., or transformed into articles. If of a kind used for non-electrical purposes these usually fall in Heading 68.16 (e.g. filters, discs, bearings, moulds, acid-resistant bricks, etc.); those of a kind used for electrical purposes fall in heading 85.24.

(e) Refractory goods, fired as ceramics, with a basis of artificial graphite (heading 69.02 or 69.03).

(9) Non-electrical articles of "carbon" or of natural or artificial graphite (including nuclear grade), for example : filters; discs; bearings; tubes and sheaths; worked bricks and tiles; moulds for the manufacture of small articles of delicate design (e.g coins, medals, lead soldiers for collections, etc.).

(a) Blocks, plates and similar semi-manufactures of artificial graphite or of "carbon", mainly used for cutting into electrical brushes (heading 38.01 or 38.19) see corresponding Explanatory Notes).

4. There is no dispute that the subject goods were made of artificial graphite. To begin with, the Department's representative reiterated the ground relied upon by the lower authorities, namely, that the subject goods were not chemical products, nor chemical preparations, nor a residual product of chemical or allied industries and could not, therefore, be assessed under Heading 38.01/19. The appellants replied to this argument saying that subheading (4) of this heading was specific for "Artificial Graphite".

5. The Department's representative then stated that this sub-heading covered only plain artificial graphite and the subject goods being made of resin impregnated artificial graphite, were outside the scope of this sub-heading. The appellants countered this argument saying that by virtue of Explanatory Note (b) under Heading 38.01 of the CCCN, impregnated or impervious artificial graphite remained within the scope of this heading.

6. In regard to the Department's objection that the subject goods were extruded tubes of artificial graphite and not artificial graphite in raw material form, the appellants referred to the catalogues of the two American suppliers and to the technical book by Paxton to show that the goods, though loosely termed as tubes or in tubular form, were really cylinderical blocks or blanks, that this was the conclusion of the Appellate Collector of Customs, Bombay, in his order No. S/49-1507/80 dated 29th July, 1980 passed in favour of another importer and that the letter and catalogue of the German suppliers relied upon by the Department also described similar goods as "raw materials like pre-pressed round bodies or blocks" and "blanks". They showed photostat copies of Bills of Entry of the other importer, M/s Sealol Hindustan Ltd., Bombay, in which similar goods described as "Carbon Blanks" had been assessed by Bombay Custom House under Heading 38 01/19. They added that to their knowledge the Order-in-Appeal of the Appellate Collector of Customs, Bombay, referred to above, had not been subjected to review and that Bombay Custom House continued to assess similar goods under Heading 38.01/19 during 1981 and 1982 inspite of Tariff Advice No. 6/77 issued by the Central Board of Excise and Customs and relied upon by the Department's representative. They stated that they were discriminated against by different assessment practices followed by Madras and Bombay Custom Houses. The Department's representative admitted this incongruous position but inspite of repeated directions from the Bench he did not inform us as to how these discriminatory assessment practices were allowed to continue.

7. The discussion then centred round the main argument of the contending parties, the appellants pleading that the subject goods were semimanufactures of artificial graphite and by virtue of sub-note (c) of the Explanatory Notes under Heading 38.01, they remained within Chapter 38 and the Department's representative maintaining that they were surface-worked, surface-finished and cut to special shape and had reached a stage very much close to a finished article and, therefore, by virtue of sub-note (d) ibid they were excluded from the scope of Chapter 38 and fell in Heading 68.16 of CCCN. While the Department's representative could not substantiate as to on what basis the subject goods were to be regarded as very much close to a finished article, the appellants produced the sample of the subject goods and of the finished seal inserts to prove their point. They stated that in the catalogue of M/s Durametallic, U.S.A., as well as in the catalogue and the letter of the German supplier on which the Department relied, the goods were described as "blocks" or "blanks" or "raw materials like pre-pressed round bodies or blocks". In the Bills of Entry of M/s Sealol Hindustan Ltd., Bombay, too they had been described as blanks. The finding of the Appellate Collector of Customs, Bombay, also was that the goods were cylinderical blocks. They added that a lot of machine operation such as turning, grinding, lapping, polishing etc., had to be done on the imported goods to turn them into finished seal inserts of specific dimensions required by the pump industry in the country. The value added on account of the work done, they argued, was so much that whereas one piece of the carbon block in U.S.A. would cost about $ 5, two finished seal inserts made out of it would cost $ 30 each.

8. We have carefully examined the samples, catalogues, the technical literature and all the records laid before us in this case and have given our earnest consideration to the matter. We are satisfied that the subject goods are not really tubes but only blocks or blanks of resin-impregnated artificial graphite which, according to the Explanatory Notes to the CCCN relied upon by both sides, remained within the scope of Chapter 38 CTA. The subject goods are far from being close to a finished article. At best, they could be regarded as semi-manufactures. Since even semi-manufactures of artificial graphite remain within the scope of Chapter 38, as per the Explanatory Notes to CCCN, and are excluded from Chapter 68, we hold that the subject goods are correctly classifiable under heading 38.01/19.

9. We allow these appeals accordingly with consequential relief to the appellants.


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