1.The question that falls for decision in this case is whether the goods described in the import invoice as "Special Coated Tissue for Stencils" fell, for the purpose of countervailing customs duty, under Item 17(2) of the Central Excise Tariff (Paper and Paperboard) or under Item 68 thereof (All other goods, not elsewhere specified). The appellants stated at the very outset during the hearing before us today that as the rate of basic customs duty was the same under all the three Customs Tariff headings [Headings 48.01/21(1), 39.01/06 and 39.07] considered in the proceedings at different stages, they would not press for re-classification of the goods for basic customs duty purposes.
2. A sample of the subject goods imported by the appellants was available in the appeal file. The appellants stated that the goods were subjected to test by the Custom House Laboratory. The test report stated that the sample was composed of a thin plastic polyvinyl chloride tissue and a thick paper which was coated on one side with carbon, the two held together at one end by a paper pasted on them.
Further, it is on record in the impugned order that the goods were specially designed for electronic stencil cutting machines and they could not be used on ordinary typewriter. The appellants submitted a write-up at the time of assessment in which they stated that the goods were a paper tissue product. The Appraising Assistant Collector consulted the Chemical Examiner with reference to, this write-up. The Chemical Examiner opined that the thin film did not contain paper and that the item should be regarded as a composite one of paper to which a plastic film was attached. On the basis of the test report, the Appraising Assistant Collector considered that classification under Heading 39*01/06 C.T.A., without any countervailing duty would be appropriate. But, nevertheless, he ordered assessment under Heading 48.01/21(1) C.T.A. read with Item, 17(2) C.E.T. on the ground that the appellants had stated in their write-up that the goods were basically a paper product. Before the Appellate Collector, the appellants stated that their said write-up had been prepared in a hurry on the basis of the information then available and was incorrect in describing the goods as composed of paper tissue, They requested for classification under Heading 39.01/06 C.T.A. without countervailing duty. The Appellate Collector held that the goods fell under Heading 39.07 C.T.A.but gave no reasons for it. For the purpose of countervailing duty, the Appellate Collector classified them under Item 17(2) C.E.T. on the ground that the wording of this Tariff item covered treated papers also.
3. Coming to the merits of their case, the appellants argued, by reference to the test report as well as by showing the sample of the goods, that they were a composite product. They stated that stencil was cut on the P.V.C. tissue or plastic film but the thick paper backing to the film also played a functional role inasmuch as it provided support to the thin plastic film and prevented it from being wrinkled or ruptured during handling in the electronic stencil cutting machine. In the circumstances, argued the appellants, the principle of classification of such composite articles for the purpose of countervailing duty as laid down in the orders of this Bench in the cases of M/s. Yash Udyog [1983-E.C.R.-U27 (CEGAT)] and M/s. Sunrise Electricals [1983 E.L.T.-2465 (CEGAT)J should apply and the goods should be assessed under Item 68 C.E.T. No countervailing duty would actually be payable for the present consignment cleared on 3-1-1977 as goods falling under Item 68 C.E.T. were totally exempt from payment of countervailing duty at that time by virtue of Notification No.364-Customs, dated 2-8-1976.
4. The Department's Representative stated that it was the plastic film which gave the goods their essential character and, therefore, according to the ratio of the earlier Bench Order No. 128/1983-C, dated 20-4-1983 passed in Appeal No. 134/79-C of M/s. Indian Telephone Industries Limited (earlier to this Bench orders in the cases of M/s.
Yash Udyog and M/s. Sunrise Electri-talsj, the goods should be held to fall under Item 15A C.E.T. (as articles of plastic) for the purpose of countervailing duty. He conceded, however, that this Item of the Tariff involved payment of higher amount of duty by the appellants and since the Department had not taken up review of the impugned appellate order nor filed any cross-appeal, the Department would not be entitled to collect any differential duty for the past period. He stated that Special Bench 'B' of the Tribunal had passed an order on these lines in the case of M/s. Dharangdhara Chemicals 1983 E.L.T. 553 (Tribunal). His alternative plea was that classification under Item 17(2) C.E.T., as ordered by the Appellate Collector may be maintained since at least one of the constituent materials of the goods was paper. At this time the Bench noticed that in their Tariff Advice No. 25/81 dated 27-2-1981 (as printed on page 329 of the CENCUS Central Excise Tariff, 1983-84) the Central Board of Excise & Customs had stated that duplicating stencil paper, which was a composite article consisting of coated tissue paper, carbon paper and backing paper with a head strip and also printed scale and other instructions on the stencil indicating its use itself; was correctly classifiable under Item 68 of the C.E.T. Attention of the Department's Representative was drawn to this Tariff Advice. He stated that he had no comments to make on it.
5. In a brief rejoinder, the appellants stated that the Dharangdhara Chemicals' case was distinguishable in that the goods involved in that case were made of plastic and the non-plastic ingredients therein were fillers or inert materials while in the present appellants' case both the plastic film and the thick paper backing had a functional role to perform. In addition to the Board's Tariff Advice referred to above, they cited the Orissa High Court judgment in State of Orissa v.Gestetner Duplicators (P) Ltd.-[1974 33-S.T.C-333 (Orissa)], in which it was held in a Sales Tax case that stencil paper was not paper.
Finally, the appellants stated that even under Item 15(2) C.E.T., their goods were exempt from payment of countervailing duty under Notification No. 228-Customs, dated 2-8-1976 as this notification exempted all articles of plastics excepting the few specified therein and that their subject goods did not figure among the excluded articles.
6. We have carefully considered the matter. After seeing the sample and the test report thereon, we find that the goods are neither an article of plastic nor an article of paper. They are a composite product consisting of both plastic film and paper backing and both these materials have a functional role in the use of the goods. If such composite articles are not specifically listed in an entry of the Customs Tariff, the Interpretative Rules applicable to the Customs Tariff required that they should be classified according to the constituent material which gives the composite goods their essential character. The said Interpretative Rule does not apply to the Central Excise Tariff and the Central Excise Tariff itself has no provision corresponding to that rule. We, therefore, hold that the subject goods, not being specified in any entry of the C.E.T., should rightly fall under the residuary Item No. 68 of the said Tariff. We order accordingly. Since, by virtue of their classification under Item 68 C.E.T., the goods were entitled to exemption from CV duty under Notification No. 364-Customs dated 2-8-1976, the refund due to the appellants should be given to them.
7. Accordingly, we allow the appeal in respect of the countervailing duty but dismiss it as not pressed for so far as the basic customs duty is concerned.