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Collector of Customs Vs. Bhor Industries Ltd. and anr. - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1985)LC363Tri(Delhi)
AppellantCollector of Customs
RespondentBhor Industries Ltd. and anr.
.....file no.5/8-147/79b in the case of bhor industries) were imported after 1-8-1978 on which date tariff heading 39.01/06 underwent a change by virtue of the customs tariff (amendment) act of 1978 which, came into force on 1-8-1978. the new entry made the heading fully aligned with the corresponding headings of the customs co-operation council nomenclature (cccn).8. shri sundar rajan then drew our attention to this tribunal's order no. c-449/1984, dated 10-7-1984 in appeal no. cd(sb)(t)a. no. 618/80-c 1980 (18) e.l.t 521 - bhor industries ltd. v. collector if customs, bombay. the product there also was "santicizer 429" as in the present proceedings relating to bhor industries. the tribunal held the product was classifiable under heading no. 38.01/19(6). the order pertained to the tariff.....
1. The present matter arose out of a show cause notice issued under Section 131(3) of the Customs Act, 1962 by the Central Government to the two afore-noted Respondents, seeking to set aside Orders-in-Appeal Nos. S/49-404/80R and S/49-431/80R, dated 23-4-1980 and S/49-958/80R, dated 30-6-1980 passed by the Appellate Collector of Customs, Bombay.

On the setting up of this Tribunal, it was transferred to the Tribunal in terms of Section 131-B of the Customs Act to be disposed of as if it were an appeal filed before the Tribunal.

2. The facts of the case, briefly stated, are that Bhor Industries imported certain consignments of a polymeric plasticizer of the trade name "Sanficizer 429". Fibre-Glass Pilkington imported another polymeric plasticizer of the trade name "Reoplex 400". The Customs authorities at the port of Bombay assessed both the goods to basic duty of Customs under Heading No. 39.01/06 of the First Schedule to the Customs Tariff Act, 1975 (Customs Tariff, for short) and to additional duty of Customs corresponding to the Central Excise duty leviable under Item No. ISA of the First Schedule to the Central Excises and Salt Act (C.E.T. for short). After clearance of the goods on payment of the duty so assessed, the importers preferred refund claim contending that the goods were correctly classifiable under Heading No. 38.01/19(6) of the Customs Tariff and Item No. 68 of the C.E.T. The Assistant Collector rejected the claim for classification under Heading No. 38.01/19(6) of the Customs Tariff. As regards classification under the C.E.T., he accepted Bhor Industries' claim for Item 68 C.E.T. but rejected the claim of Fibre-Glass Pilkington. Aggrieved with the Assistant Collector's order, the importers pursued the matter in appeal. By his impugned order, the Appellate Collector classified the goods under Heading No. 38.01/19(6). He also held that Item No. 68 C.E.T. was the appropriate heading for levy of additional duty of Customs. The Appellate Collector held that the 2 products were not similar to resols and liquid polyisobutylene even though they were artificial poiycondensation or polymerisation products and that, therefore, they were not covered by Note 2(c) to Chapter 39 of the Customs Tariff.

Accordingly, he allowed the appeals.

However, the Central Government called for and examined the records in exercise of its powers under Section 131(3) of the Customs Act and formed the tentative view that the impugned orders were not proper, legal or correct. It appeared to the Government that Heading No.38.01/19(6)-a residuary entry of a residuary chapter-included only those plasticizers which were not specified elsewhere. The goods in question appeared to be fully covered under Chapter 39 in view of Chapter Note 2. The products were polycon-densation and polymerisation products in the same manner, as resols and liquid polyisobutylene. The combined effect of Note 2(b) and (c) was to bring into the fold of Chapter 39 even those allied polycondensation and polymerisation products which do not have the apparent characteristics of artificial resin when there were 5 or more monomenc units present in the chain (the goods in question have about 10 monomeric units), in this view, Chapter 39 and not Chapter 38 was the correct classification of the goods. On the above basis, Government proposed to set aside the impugned orders and restore the Orders-in-Original passed by the Assistant Collector.

3. It is to be noted that the show cause notice did not, in terms, discuss classification of the goods under the C.E.T. for levy of additional duty of Customs.

4. Both the Respondents filed replies to the notices, denying all the allegations.

5. We have heard Shri A.S. Sundar Rajan, DR, for the appellant, Shri V.N, Desbpande, Advocate, for Bhor Industries and Shri V.J.Taraporewala and Shri R. J. Majra, Advocates, for Fibre-Glass Filkington.

6. At this stage, it is expedient to deal with a preliminary objection raised by Bhor industries in their reply to the Government's show cause notice. It is that the orders ought to be reviewed are dated 23-4-19&0 (despatched on 28-4-180). The show cause notice is, however, dated 17-9-1981. Section 131(4)(b) of the Customs Act requires the notice to be served on the affected person within one year of the order sought to be reviewed. As such, the notice is barred by limitation. Shri Sundar Rajan drew our attention to the Supreme Court decision in the Geep Flashlight case reported in 1983 E.L.T. 1596 in which the Court held that the limitation in Section 131(5} ibid (the relevant provision here) would not hit a notice in a case where the refund in pursuance of the order sought to be reviewed bad not, in fact, been paid. Shri Deshpande, for the Respondent, confirmed that the refund in pursuance of the impugned order had not been paid. Therefore, the preliminary objection falls to the ground.

7. Shri Sundar Rajan stated that all the consignments covered by the present proceedings bar the one covered by Bill of Entry No. 2850, dated 27-5-1978 (covered by the Assistant Collector's File No.5/8-147/79B in the case of Bhor Industries) were imported after 1-8-1978 on which date Tariff Heading 39.01/06 underwent a change by virtue of the Customs Tariff (Amendment) Act of 1978 which, came into force on 1-8-1978. The new entry made the heading fully aligned with the corresponding headings of the Customs Co-operation Council Nomenclature (CCCN).

8. Shri Sundar Rajan then drew our attention to this Tribunal's Order No. C-449/1984, dated 10-7-1984 in Appeal No. CD(SB)(T)A. No. 618/80-C 1980 (18) E.L.T 521 - Bhor Industries Ltd. v. Collector if Customs, Bombay. the product there also was "Santicizer 429" as in the present proceedings relating to Bhor Industries. The Tribunal held the product was classifiable under heading No. 38.01/19(6). The order pertained to the tariff entry prior to 1-8-1978. Therefore, the Department had no case in so far as the pre-1-8-1978 importation (Bill of Entry No. 2850, dated 27-5-1978) was concerned, 9. Next, the Departmental Representative referred to the Appellate Col lector's Note dated 1-4-B80 to the Deputy Chief Chemist, Bombay and the latter's note of 21-4-1980. In his note, the Deputy Chief Chemist had opined that Chapter 39 would cover even those allied polycondensation, polyaddition and polymerisation products which did not have the apparent characteristics of artificial resins and that the present product, "a polymer having about 10 monomeric units in its chain, would fall under Chapter 39. The Appellate Collector, said Shri Sundar Rajan, had gone wrong in saying that since the goods were out of the purview of Item No. 15A, C.E.T., they would go out of the purview of Chapter 39 of the Customs Tariff as well.

10. Shri Deshpande, Counsel for Bhor Industries, referred to the CCN General Explanatory Notes on page 568 according to which artificial resins and plastic materials had the capability of being formed under external influence, usually heat and pressure, if necessary with a solvent or plasticizer. It was, therefore, clear, said Shri Deshpande, that plasticizers were different from plastics. The Deputy Chief Chemist also did not say in his opinion that the present goods were plastic materials. He then referred to the Heading of Section VII of the Customs Tariff (containing Chapter 39) which read " Artificial resins, Plastic materials" etc. Plasticizers would not, therefore, fall under this Section. "Santicizer 429" was neither an artificial plastic nor resin nor silicone. It was not similar to Resol or liquid polyisobutylene. Chapter 39, Note 2 did not, therefore, apply and classification under Chapter 39 was to be ruled out. Tribunal Order No.449/84 1984 (18) E.L.T. 521 had settled the issue. Concluding, the Counsel said that the amendment of 1978 did not make any difference to the situation since Chapter Note 2 did not undergo any change.

11. On behalf of Fibre Glass Pilkington, Shri Taraporewala said he adopted all the arguments of Shri Deshpande. He emphasised that Chapter Note 2(c) spoke of Resols, liquid polyisobutylenes and similar (not other) artificial polycondensation or polymerisation products. The Department had not led any evidence to show that the product was similar to Resols or liquid polyisobutylene.

12. In reply, Shri Sundar Rajan, D.R., stated that Chapter 39 covered also non-resinous or non-plastic materials answering to the description of polycondensation products etc. specified in the headings. The amended entry did not speak of artificial resins, unlike the pre-1-8-1978 entry.

13. We have carefully considered the submissions of both sides. We have set out the rival contentions at length because the Tribunal's Order No. 449/1984 1984 (18) E.L.T. 521 was in relation to a pre-1-8-1978 importation. Leaving . side the amendment of 1978 for the nonce, the order discussed the issue at length, referred to technical authorities and finally concluded that plasticizers were not resins ; they were added to resins to impart better flexibility or plastic properties to the latter. They were not plastic materials by themselves. "Santicizer 429"-a plasticizer-was, therefore, held to be not falling under Heading 39.01/06 of the Customs Tariff Act as it stood at the relevant time, i.e. prior to the 1978 amendment.

14. Now, let us look at the 1978 amendment and its effect. The pre-amendment heading read: "39.01/06-Artificial resins such as condensation, polycondensation, polyaddition, polymerisation and copolymerisation products, Artificial Plastic Materials,..."." The Amendment Act of 1978, which came into force on 1-7-1978, inserted a new entry, more closely aligned with the Headings 39.01 to 39.06 of the CCCN. It reads : "39.01/06-Condensation, polycondensation and polyaddition products, whether or not modified or polymerised...; polymerisation and co-polymerisation products..." There is thus an important difference between the two nomenclatures.

The words "artificial resins such as" do not qualify "condensation ...

etc." products in the new entry. We have, therefore, to see the effect of this difference on the classification of plasticizers such as "Santicizer 429". We have already seen that the Tribunal held in its Order 449/84 1984 (18) E.L.T. 521 that plasticizers are not resins or plastic materials. The key to the solution lies in Chapter Note 2 to Chapter 39. The note reads.

"2. In Heading No. 39.01/06 "condensation, polycondensation, polyaddition, polymerisation and co-polymentation products" are to be taken to apply only to goods of a kind produced by chemical synthesis answering to one of the following descriptions : (c) Resols, liquid polyisobutylene and similar artificial polycondensation or polymerisation products." It is noteworthy that the above chapter note did not undergo any change even when, in 1978, the tariff entry itself underwent revision.

15. We have already seen plasticizers are not resins or plastics materials. Order No. 449/1984-C. 1984 (18) E.L.T. 521, after discussing the scope of "Resols" and "Polyisobutylene" with reference to standard technical authorities, concluded that "Santicizer 429" was not similar to resol or polyisobutylene. And unless a product is similar to resol or polyisobutylene, it would not attract the mischief of Chapter Note 2(c). No material has been placed before us by the Department necessitating a change in the aforesaid conclusion. Thus, Heading 39.01/06 is to be ruled out. Not being a separately defined chemical compound, it would not fall within Chapter 28 or 29. Since it is not specified elsewhere, the appropriate classification would be under Heading No. 38.01/19(6) as "Plasticizers, not elsewhere specified".

16. The product involved in the proceedings relating to Fibre-Glass Pilkington is "Reoplex 400". This is a polymeric plasticizer of polyester type like "Santicizer 429". The technical leaflet on the product says that it is a plasticizer for PVA. The discussions and the conclusion on "Santicizer 429", therefore, apply with equal force to "Reoplex 400".

17. In the result, we hold that both the products fall under Heading No. 38.01/19(6). The show cause notice is vacated and the appeal is dismissed.

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