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Bharat Rubber Regenerating Co. Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1984)(18)ELT85TriDel
AppellantBharat Rubber Regenerating Co.
RespondentCollector of Central Excise
Excerpt:
.....notification no. 71/68-c.e., dated 1-4-1968 or it falls under item 68 of the tariff. these two tariff items read as under :- (2) plates, sheets and strips un-hardened, whether vulcanised or not, and whether combined with any textile material or otherwise. (4) transmission, conveyor or elevator belts or belting, or vulcanised rubber." 2. the appellants stated during the hearing before us that according to the encyclopaedia britannica vol. 19 page 680 there were three types of rubber :- they further quoted the following extract from the book 'rubber technology',second edition, by maurice morton : "the original definition for reclaimed rubber as written by j.m. ball in the first edition of this book will be quoted : "it is the product resulting from the treatment of vulcanised scrap.....
Judgment:
1. The dispute involved in this case is whether reclaimed rubber manufactured by the appellants in the form of plates and sheets falls under Item 16A (2) of the Central Excise Tariff and is exempt under Notification No. 71/68-C.E., dated 1-4-1968 or it falls under Item 68 of the Tariff. These two tariff items read as under :- (2) Plates, sheets and strips un-hardened, whether vulcanised or not, and whether combined with any textile material or otherwise.

(4) Transmission, conveyor or elevator belts or belting, or vulcanised rubber." 2. The appellants stated during the hearing before us that according to the Encyclopaedia Britannica Vol. 19 page 680 there were three types of rubber :- They further quoted the following extract from the book 'Rubber Technology',Second Edition, by Maurice Morton : "The original definition for reclaimed rubber as written by J.M. Ball in the first edition of this book will be quoted : "It is the product resulting from the treatment of vulcanised scrap rubber tyres, tubes and miscellaneous waste rubber articles by the application of heat and chemical agents, whereby a substantial 'devulcanisation' or regeneration of the rubber compound to its original plastic state is effected, thus permitting the product to be processed, compounded and vulcanised. Reclaiming is essentially depolymerization ; the combined sulfur is not removed. The product is sold for use as a raw material in the manufacture of rubber goods, with or without admixture with crude rubber or synthetic rubber." Coming to their own process of manufacture, the appellants stated that they purchased used and condemned tyres from the market which they melted to make unhardened plates and sheets of rubber. They sold such reclaimed rubber to re-treaders of tyres and also to tyre manufacturers like M/s. Dunlop India Limited.

3. Tracing the history of the controversy, the appellants stated that when for the first time the Superintendent informed them on 28-4-1975 that they were manufacturing rubber sheets falling under Item 16A (2), the appellants denied it by their letters dated 8-5-1975 and 12-5-1975.

The Department, however, insisted on its stand and the appellants took out an L.4 licence on 5-6-1975 under Item 16A. Six months later, they returned the said licence to the Department and asked for an L.4 licence under Item 68 which had been introduced with effect from 1-3-1975. For the next three years the appellants did not contest the classification of their reclaimed rubber sheets under Item 68 since the rate of duty under Item 68 was very low-1% to begin with and then 2%.

But when the rate of duty under Item 68 was increased to 5% with effect from 1-3-1978, the appellants contested the Department's classification of their goods under Item 68 by their letter dated 9-5-1978. The revised stand of the appellants was that their reclaimed rubber sheets fell under Item 16A(2). The Asstt. Collector rejected their claim without giving any reason except that he held the appellants' original stand of 1975 against them. The Appellate Collector rejected their appeal saying that the industrial licence held by the appellants authorised them to manufacture reclaimed rubber and hence their goods were not rubber products falling under Item 16A. The appellants argued that description of the goods in their industrial licence was not relevant for deciding classification of their goods under the Central Excise Tariff.

4. Coming to the merits of their case, the appellants stated that their reclaimed rubber was in the form of plates and sheets and it was un-hardened. It was, therefore, covered by specific wording of Item 16A(2). In support of their claim, they cited the Board's Tariff Advice No. 37/78 by which the Board had classified masticated rubber sheets under Item 16A(2). The Bench put it to the appellants that according to their own statement, as corroborated by the extract from the book 'Rubber Technology' by Morton, their reclaimed rubber was a raw material, that is, rubber only while Item 16A related to rubber products. The analogy of wheat and wheat products was mentioned by the Bench in this connection. The appellants replied that if their reclaimed rubber was 'goods' to attract levy of excise duty, it had to be a product. They maintained that their reclaimed rubber sheets were a product manufactured out of used rubber goods.

5. The Department's Representative referred to the letters dated 8-5-1975 and 12-5-1975 of the appellants in which the appellants had admitted that their reclaimed rubber sheets were purely a raw material, that a calendering machine was required to manufacture rubber sheets, that they had no such machine ; that no sheet as such was manufactured by them and that reclaimed rubber was just given a shape for packing purposes. The Department's Representative argued that there had been no change in this position and the appellants had submitted no technical data or opinion to justify classification of their goods under Item 16A(2). Item 16A of the Tariff related to rubber products. The expression "Rubber products" had a definite connotation in the context of the Central Excise Tariff. In this connection, the Department's Representative cited example of Tariff Item 1C- Food Products and the old Tariff Item 26AA-Iron or Steel Products and argued that wheat products and milk products covered under Item 1C were the products made out of milk and wheat and not milk and wheat themselves. Similarly, the old Item 26AA covered products made out of iron or steel and not iron or steel themselves, iron and steel as such were covered by separate Tariff Items 25 and 26. The process of manufacture of the appellants was only a reclaiming process which reinstated the rubber to its original position so that further products could be made out of it. All the products described in Item 16A, such as, latex foam sponge, piping and tubing and belts or belting were finished or semi-finished products made out of rubber. So was the case with plates, sheets and strips of rubber falling under Item 16A (2) also. They too had to satisfy the primary condition of the tariff description that they should be rubber products. It was put to the Department's Representative that reclaimed rubber sheets of the appellants continued to contain sulphur and carbon and whether this would not make them rubber products and not just rubber. He stated in reply that the comparative quantities of sulphur and carbon present in the reclaimed rubber sheets were not known but it was clearly known from the appellants' own statements on record that their reclaimed rubber sheets were only a rubber raw material which their customers purchased for manufacturing rubber products by blending the said reclaimed rubber with virgin natural or synthetic rubber.

6. We have carefully considered the matter. We agree with the appel-lants that classification of their goods cannot be decided just by holding their old stand against them. The basis for such a decision has to be the nature of the goods and the tariff description. It does not, however, mean that pertinent facts which the appellants gave in the past to explain the nature of their goods have also ceased to be relevant. We find that in their two letters dated 8-5-1975 and 12-5-1975 addressed to the Department, the appellants stated that Item 16A related to rubber products, that their reclaimed rubber sheets were purely a raw material for manufacture of rubber sheets, that they were nowhere used or utilised as a rubber product, that they did not manufacture any rubber sheets, that manufacture of rubber sheets required a calendering machine which they did not possess, that rubber sheets were used by consumers and they had to be vulcanised while their reclaimed rubber sheets were not vulcanised and they were used by manufacturers of rubber products, that they gave the form of sheets to their reclaimed rubber for packing purposes, that even natural rubber was sold and delivered in sheet form, that natural rubber was sold at about Rs. 9,000/- per M.T., the price of rubber sheets was between Rs. 10,000/- to Rs. 12,000/- per M.T. and that the price of their rubber was only about Rs. 2,500/- per M.T. and that according to their industrial licence they were "not supposed and competent to manufacture the rubber sheets, which is a different and independent item of the rubber product well-known in the world". They stated emphatically that they had consulted the rubber experts and other rubber manufacturers and they were also of the opinion that the reclaimed rubber manufactured by the appellants did not fall within the category of sheets. There is nothing on record to show that the basic facts as given above by the appellants have undergone any change.

7. The Department's Representative is right in saying that for the purpose of Item 16A (2) of the Tariff, it is not enough if the goods are in the form of plates, sheets and strips, un-hardened. They have first to be a rubber product as per the governing words of Item 16A. It is, no doubt, true that reclaimed rubber sheets of the appellants have come out of a definite process of manufacture or production and they are, therefore, a product in their own right. But when the tariff item talks of "Rubber Products", the expression acquires a definite connotation. Milk is a product but when we talk of 'milk products', we do not include therein milk itself but only the products made out of milk. Similarly,'wheat products' include bread, biscuits, etc. made out of wheat but not wheat itself although wheat is also a product.

'Steel'is a generic word but when we talk of steel products, we think of articles made out of steel and not steel as such. The same is the case with rubber. Though rubber is also a product, the expression "Rubber Products" would include products made out of rubber and not rubber as such. For rubber as such, the tariff has a separate entry- 16AA, which relates to synthetic rubber. In contradistinction to that, the entry 16A covers "Rubber Products". According to the appellants' own statements, backed by the technical literature produced by them and the trade opinion elicited by themselves, their reclaimed rubber sheets are purely a rubber raw material and not a product made out of rubber.

The reclaimed rubber sheets cannot, therefore, fall under Item 16A.Since there is no separate tariff entry for reclaimed rubber (though there is entry 16AA for synthetic rubber), we hold that re-claimed rubber sheets are correctly classifiable under the residuary Item 68 of the Tariff.


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