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Anil Plastic Corporation Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1985)LC537Tri(Delhi)
AppellantAnil Plastic Corporation
RespondentCollector of Central Excise
Excerpt:
.....a sheet and that in any case, a thermoplastic product beyond 30 mm thick should be termed as slab/block.8. the learned counsel for the department said that the action of the collector was perfectly in order. it is a self-contained judgment and needs no further argument in support. she said that in the indian.standards 2828 of 1964 glossary of terms used in plastic industry, blacks and slabs are not defined the indian standards letter quoted by apc savs that there was no available indian standard definition of slab block. the astm of 1965 part 27 general method of testing has no term as block or slab. it, however, gives sheet and sheeting, with sheeting defined as an individual piece. sheeting is a form of plastic where the thickness is very small. there is no such thing as a.....
Judgment:
1. This is an appeal dated againgt an order of the Collector of Central Excise, Baroda, No. MP/7/82, dated 31-8-1982.

2. The firm, M/s. Anil Plastic Corporation (APC) manufactures textile machinery components like pickers, lug straps, which are used in textile machines. It manufactures them from rigid plastic which it calls slabs or blocks and which the Central Excise calls sheets. The slabs/sheets are obtained from a high density high molecular weight polyethylene powder branded Hostalen GUR imported from Germany. The powder is pressed in a mould by cold press where heavy pressure is applied on the powder to get it to form the sheets/slabs of sizes 790/390 mm with thickness of about 30 mm.

3. The problems arose because the Central Excise suspected that the machinery paris like pickers which the factory manufactures were made from rigid plastic sheets became in that case they would be liable to duty and would not be entitled to exemption under Notification No.6S/71-C.E., dated 29-5-197!. A sample was examined by the Chemical Examiner at Baroda who reported that it was a thick tough plastic rectangular sheet of size 79x40x32 centimetres and was made from high density polyethylene. The Central Excise a!so took She opinion of Mr.

Ashokbhai Chinubhai Shah, a Mechanical Engineer with experience in plastic and engineering industry who wrote an opinion on 27-3-1980 saving that the product examined by him had the dimensions 800x400x30 mm and would be defined as a sheet in the trade.

4. The Central Excise took a statement from Mr. Dilip N. Hutheesing a Partner in the Corporation, on 10-10-1979. According to the show cause notice, this Partner-said that the Corporation manufactured sheets from high density high molecular polyethylene powder imported from Germany.

The sheets so manufactured were subjected to the process of fabrication for preparing articles like pickers used in the textile industry. The show cause notice said that the firm accounted for the production of the sheets in its records as slabs. These sheets/ labs were internally used within the factory for fabricating different articles and they were not sold to any outside party.

5. This appeal was heard and concluded on 26-10-1984 (part-hearings had taken place before this). The learned Counsel for the firm, M/s. Anil Plastic Corporation argued that there has been a total misreading of the facts by the Central Excise when they said that the goods manufactured by APC were sheets. He said the goods can never be sheets when they had the thickness of 30 mm. They can be blocks or slabs but never sheets. He said the Central Excise had relied on the testimony of Mr. Shah whose examination the factory had wanted during the proceedings before the Collector but he never appeared. The Chemical Examiner on whose opinion, the Central Excise relied heavily was not an expert in plastics technology, and therefore, his opinion could not be relied upon. The Central Excise also took the opinion of the National Test House, Alipore, Calcutta. In his testimony, the Assistant Director of the Test House said that the sample he tested was in the form of a thick slab. This person was a witness of the department, he said that the product was a slab not once but several times.

6. Normally, said the Counsel, a sheet is produced by extrusion; but this slab was produced in a die by means of compression moulding. There has never been and can never be a sheet of these dimensions, 30 mm thick. He produced a few. samples to illustrate the thickness. The plastic goods manufactured by APC were all of thickness 30 mm and above. The factory had produced as witness one Mr. A.S. Athaley, a plastics engineer, who studied in the United States and who is now doing consultancy work in plastics in Bombay. He was also a fellow of the Plastic and Rubber Institute, U.K. He was a person with many qualifications and possesses full and expert knowledge of plastics and plastics technology and has written a book on plastics. He gave an opinion about the products made by APC and said that the materials were processed by compression moulding process on a special type of machine designed for producing slabs. The slabs were generally in the thickness of 25 mm and above and were used for the manufacture of components of various shapes and sizes by fabrication. The material is first cold formed and then fed to the multiplaten compression pressed with a pattern size of 800 x 400 mm. By the application of temperature and pressure, the material is formed into blocks or slabs and he was of the opinion that these samples were generally referred to as slabs or blocks. They are very good engineering plastics and because of their good wearing properties they find application where wear and tear is very high. He also said during the examination that sheets were generally manufactured by extrusion and this requires a screw and a barrel for plasti izing the material and a T-die for forcing the material out from extruder to form a sheet which cannot be more than 6.5 mm in thickness. APC did not have this type of equipment for making the sheet.

7. APC made a reference to an internationally known institute, the American National Standards Institute of New York (ANSI) for help in defining their product. In a letter dated 17-1.2-1982, the institute said that the definition of a sheet is an individual piece of sheeting.

Sheeting is a form of plastic in which the thickness is very small in proportion to length and width and in which the plastic is present as a continuous phase, with or without filler. The Institute went on to say that APC's product was too thick to be called a sheet even though the definition did not include specific dimensions. It said that the terms block, slab and sheet were not terms limited to plastic, but were more general and referred to many products made of steel, other metals, wood, rubber, and that therefore, a dictionary definition would apply.

Based on the dimension provided by Anil Plastic Corporation, the term slab would be appropriate to their product. He showed an illustrated catalogue of block and rod produced from the imported high density polyethylene. These blocks and rods, he said were used for fabrication of machine components by machining. A book printed by Hoechst, the German manufacturers of the polyethylene Hostalen the raw material used by APC illustrates the various uses to which this high density polyethylene powder is put. Some of the uses are manufacture of conveyor screws and chain wheels, gear wheels and bevel gears, conveyor star feed wheels as well as textile machinery components like pickers, striker bars, etc., etc. The APC factory manufactures textile machinery components like pickers, etc., from the blocks. The factory has no machinery for the manufacture of sheets. Nor does it have any machinery for reducing the thickness of the blocks so that they can approximate the description of sheets. There is no allegation that any of the blocks have been sold out. of the factory. All the productions are used by the factory in producing machinery components; and there is no dispute about these machinery components. The Collector had no firm basis for his action. He depended on the statement given by Mr.

Hatheesing. This statement does not really strengthen the Central Excise case. On the other hand, the Indian Standards Institution gave them a letter dated 18-7-1984 in which it said that thermoplastic product beyond 20 mm in thickness should not be called a sheet and that in any case, a thermoplastic product beyond 30 mm thick should be termed as slab/block.

8. The learned Counsel for the department said that the action of the Collector was perfectly in order. It is a self-contained judgment and needs no further argument in support. She said that in the Indian.

Standards 2828 of 1964 Glossary of Terms used in plastic industry, blacks and slabs are not defined The Indian Standards letter quoted by APC savs that there was no available Indian Standard definition of slab block. The ASTM of 1965 Part 27 General method of testing has no term as block or slab. It, however, gives sheet and sheeting, with sheeting defined as an individual piece. Sheeting is a form of plastic where the thickness is very small. There is no such thing as a plastic block or slab in plastics technology; because a plastic product is thick cannot mean it cannot be a sheet. Indian Standard 6307 of 1971 is meant for a thermoplast manufactured by calendering, lamination. Mr. Athaley is not an independent person because he was associated with APC as a Consultant. His opinion, therefore, cannot be treated as an independent opinion. The Partner, Mr. Hatheesing's statement calls the product a sheet and a rigid one. The learned Counsel for the department referred to the book on Plastics by Dubois and Fredric in support of her arguments.

9. She said that the factory never applied for a licence for manufacturing the sheets and the goods were excisable even if they claim exemption; no declaration had been given under Notification No.111/78-C.E. Therefore, the wilful statement is borne out. She referred to a decision 1983 E.L.T. 17 (Patna) and said that in this present case there was intentional evasion. APC argued that the Central Excise did nothing for a long time. Obviously, there cannot be a dispute until a notice is issued. So, the argument that the Central Excise did nothing is not relevant. She also quoted AIR 1980 S.C. 346 and argued that if there has been an unintentional lapse or omission it may be possible to say the factory was guiltless but it had not taken a licence and this proved the mind of the factory was not innocent. These rigid sheets do not enjoy exemption from licensing control under Rule 174A of the Central Excise Rules.

10. The learned Counsel for APC said that the Patna High Court judgment quoted by the learned Counsel for the department was not relevant because the manufacture was known to Central Excise for a long time and this proved there was no intention to defraud. It needs to be noted that the Collector's order does not discuss the fraud and he does not show that a fraud. if any, had been committed.

11. The disagreement that needs to be decided by us here is whether the Article produced by APC is a sheet as claimed by the department or a block/slab as claimed by APC. In his order, the Collector himself quotes the Whittington's Dictionary of plastics to show that a web 10 mils and over in thickness is usually called a sheet. A sheeting is also said to be most commonly made by extrusion, casting and calendering. The Collector quotes Indian Standards 2828--1964 on Glossary of Terms used in the plastic industry which defines sheet as a piece of plastic sheeting produced as an individual piece rather than in a continuous length, or cut as an individual piece from a continuous length. He relied heavily on the Chemical Examiner, Baroda's report that the product was a tough plastic rectangular sheet. He discarded the evidence of Shri Ghosh, Assistant Director of the National Test House because he did not furnish any technical information in support of his conclusion that the product was a slab, and because he did not cite any recognized authority in confirmation of his views. He quoted the statement of Mr. Hatheesing the Partner that they had obtained the product in the form of a sheet at the intermediate stage. He came to the conclusion, therefore, that the product was in a form of a sheet.

12. But the Collector himself does not quote any authority for his opinion. On the defence side, there is a very instructive letter written by American National Standards Institute, New York, dated December 17, 1982 to APC. This letter says- 'The definition of a sheet is an individual piece of sheeting (ANSI-ASTM D 883). Sheeting is a, form of plastic in which the thickness is very small in proportion to length and width and in which the plastic is present as a continuous phase, with or without filler (ANSI-ASTM D 883). Your product is too thick to be called a sheet even though the definition does not include specific dimensions. The terms, "block", "slab" or "sheet" are not terms limited to plastics but are more general and refer to many products made of steel, other metals, wood, rubber, etc. Therefore, a dictionary definition would apply.

Based on the dimensions you provided, I believe the term "slab" would be appropriate.' 13. Mr. A Ghosh, Assistant Director, National Test House was examined before the Collector. Below are some of the questions he was asked and his answers to them : Ques. You have stated in reply to a question in examination in-chief that you had conducted a test on a product of plastic which was sent to you for test by some officer from Ahmedabad. You identified the product in your report as it was described by the officer in his report. Is it correct Ans. The identification in my report for the sample was ultra high density high molecular weight polyethelene slab, green colour.

Ques. I put it to you that even though you had 1963 Edition with you. You did not conduct tests in accordance with the procedure in that standard. Is it correct Ques. The Notification No. 198/78 requires testing of the material at 23C and 50% relative humidity. How did you inquire these specifications at the time of Test? Ans. Our testing laboratory is airconditioned for maintaining the temperature and humidity.

Ques. I put it to you that because it was not necessary to test the stiffness of the product and also to test the tensile properties of the product under the notification, and therefore, you had not applied the standards as prescribed in D474-63 and D638-64T. Is it correct Ans. In the notification four standards are referred. It is not obligatory to follow all these standards. The value of modulus of elasticity may be determined by any of the four methods. So 1 consider I followed the notification correctly.

Ques. What made you to decide that ASTM Designation D790-63 was the best method and not others Ans. It appeared to me from the nature of sample I received. Since it was a slab, D790 was considered to be best suited method for conducting the test.

14. In his examination in-chief and before cross-examination by APC's Counsel, Mr. Ghosh submitted preliminary identification of himself in which he said he remembered that the sample he tested was a polyethylene slab, repeating this a few sentences later to say that the sample he tested was in the form of a thick slab.

15. This was a witness of the department. There is nothing in the proceedings to show that this testimony of Mr. Ghosh has been shaken by the department 16. During the hearing, it was submitted by the appellant, APC, that the products which it calls blocks or slabs were manufactured moulding in a mould. A sheet is manufactured generally by extrusion. Samples were also shown of the product and the Department's Counsel agreed that the samples represent the products made by the factory. Some products can be made with a thickness of over 30 mm, though 30 mm was the minimum thickness. It does not appear reasonable to us to hold that a product if this thickness can be a sheet. It looks more like a block/slab to us. Although there is no hard and fast definition of what a sheet would be, one generally associates it with a web of continuous length with a very small thickness a dimension that is almost negligible compared to length and width. It has been truly stated that sheets of plastics are generally made of extrusion. Although casting is not unknown, and, indeed, sheets can be cast provided the right technology is available, this is not to say that sheets are ordinarily cast : the favoured process is extrusion.

17. We were told by both sides that these products are used for the manufacture of textile machinery components like pickers/lug strap and the process by which such components are made is machining. The only machining that sheets can withstand are processes like cutting, trimming and drilling. They cannot be machined to new forms, contours, shapes; they cannot be threaded. A book presented by the firm to the Bench show that machinery parts that can be made from the product obtained from Hostalen GUR include gear wheels and they find applications in textile industries, mining, construction, coal industry, etc. It is clear that the mechanical properties of the blocks, slabs are high enough to withstand the stress of machining. We have not yet heard of a sheet of plastic that can withstand machining of this order or that can be manufactured into machinery parts of the kind that are made out of these products manufactured by APC.18. An idea of how thick 30 mm can be is given below :- __ 19. The above figure shows the actual thickness of a 30 mm slab to scale. There can be little doubt in anybody's mind that this cannot be the thickness of a sheet. It is significant that at the time of testing, the Assistant Director of the National Test House who tested it under ASTM D790, determined the modulus of elasticity in flexure to be 5906 kgs cm2. The flexure value given under the Notification 68/71-C.E. is "not over 700 kgs per sq. cms at 23C and 50% relative humidity". It is no wonder that the flexure magnitude sample was as high as 5906 Kgs because a flexure of not over 700 Kgs is associated with articles of plastics which have flexibility, or can have flexibility. A modulus of elasticity is defined as "the ratio of the increment of some specified form of stress to the increment of some specified form of strain. A flexure is : any deformation of an elastic body in which the points originally lying on any straight line are displaced to form a curve.

20. It was suggested by the learned counsel for the department during the arguments that the products manufactured by APC can be sliced or sheared to produce sheets. Quite possibly such a thing can be done but the point is whether it was done We were not told that it was done by APC. Nor were we told that they succeeded in producing thinner articles or products than the ones they are admitted to have, been manufacturing to qualify as producers of such thin sheet-like products.

21. There has been no very clear (definition anywhere of what a block or a sheet or a slab can be, We have seen the ANSI saying that the terms "blocks", "slabs" and "sheets" are applicable to metals also, including steels. They are equally applicable to wood and stones as when we speak of a block of wood or a sheet of plywood or a block of stone or a sheet or plate of marble and a sheet of steel and a block or bloom of steel. There are no definitive distinction between a block/slab, a sheet, a strip and a plate but generally speaking, a block or a slab would not be classed together with sheets, plates and strips Sheet and plate have lengths and widths many times the thickness, whereas in blocks and slabs the thickness is a Definitive dimensional proportion with the width and the length. At times, the thickness can be equal to the length and width in which case the block becomes a cube. Even in rectangular blocks and slabs the thickness is sizable in proportion to the length and width. It will be interesting to see what the dictionaries say about these terms. . ."A wide, thin, and usually flexible piece of material, such as paper or metal, which is thinner than plate.""A large wide expanse or thin piece; a large broad piece of paper" (Chambers 20th.Century Dictionary)."A relatively thin piece of considerable breadth of a malleable, ductile or pliable substance." (Shorter Oxford English Dictionary)."A log of wood; a large solid piece of wood; any solid mass of matter with an extended surface." (Shorter Oxford English Dictionary)."A mass of wood or stone, etc., usually flat-sided : a piece of wood or other material used as a support or as a mould or for printing from, or as a toy." (Chambers 20th Century Dictionary)"A flat broad and comparatively thick piece or mass of anything solid." (Shorter Oxford English Dictionary)"A piece of metal, intermediate between ingot and plate, with the width of at least twice the thickness.""A plane sided plate; a large thick slice of cake, outer plank sawn froma log " (Chambers 20th Century Dictionary).

23. The above dictionary meanings establish as strongly as anything can that a sheet will be thin and flexible whereas a block or a slab will have the advantage of solidity and will be inflexible in a way that no sheet can be. A Section of steel 30. mm thick can be bent if sufficient force were applied; indeed, steel sections thicker than this can be bent. But that will not make the steel Section flexible. A rigid plastic block can still be bent or broken and a plastic sheet will be, relatively speaking, "rigid" when compared to a film. But when we speak of solid objects, we understand them to be have the shape retention capacity that non-solids are not traditionally expected to have. Thus, a rigid plastic sheet is almost as incomprehensible as a rigid film. If an object has a rigidity of the order of these products (these products have a flexure modulus of over 5000 kg/cm2) then it is highly inappropriate to think of it as a sheet.

24. This product made from a high molecular artificial resin made by the well-known firm of Hoechst's is capable of being made into a number of machine parts like conveyor screws, pickers, sear wheels etc.

illustrated 25. There is hardly anything to be said in favour of the viewpoint that these are sheets, considering the kinds of things to which these products can be machined and made into. We are not convinced with the department's case that these can be called sheets. The opinion given by the Chemical Examiner, Baroda is really no opinion. It suffers from the same weakness that the Collector found in the testimony of the Assistant Director, National Test House, and that is, that it is not based on any authority. The statement given by Mr. Hatheesing, the partner of APC, does indeed speak of the firm having manufactured sheets; but the statement also says that the products could be called tablets, and they were accounted as slabs. This partner gave the thickness of the sheets/slabs as 30 mm to 70 mm. We have not been able to convince ourselves that a product or a rectangular piece with this thickness can ever be a sheet. It can only be a block or a slab as the firm declares. The learned counsel for the APC was mistaken when he claimed that the product was not rigid and would not, therefore, attract any mischief under the exemption notification. If the product is a slab or a block it has to be rigid otherwise it would not be a slab or a block. The claim of the appellant about rigidity is self-contradictory. In any case, we are not convinced by the case of the department that the manufacturer's product can be sheets. The department has not given sufficient authority for calling the goods "sheets"; we are ourselves of the opinion that the goods should be more correctly termed "slabs" or "blocks".

26. In quoting the IS : 2828 of 1964 on Glossary of Terms used in the plastic industry, the Collector reproduced the definition of FILM and SHEET, This Glossary defines a sheet as a piece of plastic sheeting, either produced as an individual piece or cut as an individual piece from a continuous length. We can by no stretch of the imagination call these 30 mm thick products sheetings. The very notion is inconceivable.

He also reproduced the definition of sheet in Whittington's Dictionary of Plastics thus- Sheet: (Sheeting) sheets are distinguished from films in the plastics and packagings industry only according to their thickness.

A web under 10 mils (.010") thick is usually called a film, whereas one 10 mils and over in thickness is usually called a sheet.

Sheeting is most commonly made by extrusion, casting and calendering.

27. Evidently, the passage about a sheet being over 10 mils and over in thickness weighed heavily with him.

28. But it would be a mistake to deduce from this that anything 10 mils thick and over is a sheet, otherwise a shape 1 m x 1 m and 500 mm thick will then be a sheet, because it is over 10 mils thick. The dictionary only placed a measurement distinction between a film and a sheet : it does not define a sheet as anything that is 10 mils or more thick.

29. And now one sentence from the order which, in our opinion, throws the light that dispels the darkness. The Collector says in paragraph 15 of his order, "However, there does not appear available any literature in the case of polyethylene and polypropylene sheets can be made from blocks also" (sic). If this means that these are blocks and that sheets cannot be made from them, then the department's case is over. But if the sentence means these are still considered sheets, then the question of making sheets from them cannot arise. The more logical reading, therefore, is the first.

30. For various reasons we have written and explained above, we adjudge these products to be slabs or blocks. The manufacturer, Anil Plastic Corporation's products were charged in the show cause notice as not being entitled to exemption from duty, either wholly or in part, under notification No. 68/71-C.E. The Collector held the goods were rigid sheets. We have found the goods are not sheets and so the assessment under Notification No. 68/71-C.E. denied by central excise on the ground that the goods are rigid sheet is set aside. We direct assessment to be made by not denying the exemption as the goods are not sheets, but slabs or blocks. We also set aside the order of confiscation of goods valued at Rs. 12,700/-, and remit the penalty of Rs. 100,000/-. We forbid the recovery of duty on the goods worth Rs. 4,567,934.96/- mentioned in Para 9(iii) of the show-cause notice, as such recovery is not in accordance with Notification No. 68/71-C.E.


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