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Collector of Customs Vs. Swastik Rubber Products Ltd. - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1985)LC588Tri(Delhi)
AppellantCollector of Customs
RespondentSwastik Rubber Products Ltd.
Excerpt:
.....chemical dictionary by gessner hawley (9th edition) describes a synthetic resin as a man-made high polymer resulting from a chemical reaction between two or more substances, usually with heat or a catalyst. this dictionary describes a high polymer as a organic macromolecule compound of a large number of monomers, the molecular weight ranging from 5000 into the millions. we see from this that a synthetic resin will be a high polymer that can have high molecular weight, the dividing line between low and high polymers being between 5000 and 6000 molecular weight. the article on "high polymer" in the same dictionary has this sentence : "synthetic high polymers (or "synthetic resins") include a wide variety of materials having properties varying from hard and brittle to soft and.....
Judgment:
1. This appeal arose from a notice F. No. 38O/25/8O-Cus. II issued in August 80 (no date) under Section 131(3) of the Customs Act, 1962 by the Government of India asking M/s. Swastik Rubber Products Limited, Pune, why the order of the Appellate Collector of Customs, Bombay No.S/49-1035/79 R dated 3-10-79 should not be reviewed and set aside as it thought that it (order) was improper, incorrect and illegal.

2. In his order of 3-10-79, the Appellate Collector ruled that Hycar 4021 imported by M/s. Swastik Rubber Products and described in the bill of entry as a polyacrylic synthetic rubber was a synthetic rubber assessable under heading 40.01/04 of the Customs Tariff and not under heading 39.01/06 as assessed by the Assistant Collector.

3. The learned counsel for the department Mr. A.S. Sundar Rajan, argued that the Appellate Collector was mistaken to hold that Hycar 4021 was assessable under heading 40.01/04 merely because the invoice read 'synthetic rubber, (polyacrylic type) Hycar 4021,' and because the packing was 22 bags of 50 lbs. each, forming a pallet. The Appellate Collector also said that the product indicated every possibility that the assessment claimed by the importer was correct. He was furthermore led by the assessment to countervailing duty under Item 16AA Central Excise Tariff into believing that the assessment to customs basic duty should be congruent with that assessment which was for synthetic rubber.

4. The learned counsel argued that Note 4(a) of Chapter 40 of the Customs Tariff excludes synthetic rubber unless they are unsaturated synthetic substances which can be irreversibly transformed into non-thermoplastic substances by vulcanization with sulphur. Hycar polyacrylic elastomers are described by the manufacturer BF Goodrich as "chemically saturated" rubbers made from acrylic acid esters like ethyl acrylate. This was enough to disentitle Hycar 4021 from assessment under Chapter 40. He said the Tribunal had already decided in order 112/83-C dated 12-4-83 that for a product to be classifiable under Chapter 40 it must be an unsaturated substance vulcanizable with sulphur. The Appellate Collector did not pass a speaking order. It was not enough that there was a possibility that the assessment asked by the importer was correct. There must be a reasoned finding that it was correct. Anything less than this will not serve.

5. The learned counsel for Swastik Rubber Products Mr. Aggarwal argued that Hycar 4021 was a synthetic rubber and this has not been disproved.

Nor has the department provided any basis for holding that Hycar 4021 was a condensation, polycondensation, polyaddition, polymerisation and copolymeri-sation product in accordance with Note 2 of Chapter 30.

Until a product is proved to be one of these, it cannot be assessed under Chapter 39 as an artificial resin and plastic material.

Commercial practice recognises Hycar 4021 as a synthetic rubber. In nature and behaviour, it was most akin to rubber. The learned counsel for Swastik Rubber ended by saying that if Chapter 40 was thought not to be correct, he would advocate assessment under Chapter 38.

6. We should record here that the learned counsel for Swastik made a preliminary objection before the arguments began that as the refund ordered by the Appellate Collector had not yet been paid, the appeal should not be heard. He based his objection on Section 129E, Customs Act, 1962, according to which, the person desirous of appealing against a decision or order has to deposit with the proper officer pending the appeal, the duty or penalty levied. The counsel said that since assessees have to make deposit of the duty pending appeal, the department also should pay the money adjudged due by the Appellate Collector pending this appeal.

7. The Bench rejected this demand as it is not contemplated by any law.

Nor can Section 129E justify such a payment.

8. The learned counsel for the department Mr. A.S. Sundar Rajan was correct when he said Hycar 4021 was not known to be a substance that qualified under Chapter 40 because this heading has a note which requires that for a "synthetic rubber" to fall under it, it must be only one of those "unsaturated synthetic substances which can be irreversibly transformed into non-theremo-plastic substanccd by vulcanisation with sulphur...".

9. The description given in the advertisement about the properties and uses of Hycar Polyacrylic rubber show that it was chemically saturated.

Sulphur is used for vulcanising unsaturated polymers, while saturated polymers take metallic oxide vulcanising agents. Though Hycar 4021 has characteristics of a synthetic rubber and, in our opinion, there can be no serious doubt that it is a synthetic rubber, the Customs Tariff heading 40 accommodates only certain specified types of synthetic rubber. It is well known that there are several varieties of synthetic rubber, with various properties and qualities. Some have applications that the others do not have because of their different behaviours under different conditions. By compounding, the desirable properties of plasticity, elasticity, toughness, abrasion resistence, resistence to hydrocarbons and heat etc. etc can be achieved. Within this wide variety, rubbers, all of which need vulcanization, are cured by different agents. Some rubbers take sulphur, others thiuram disulfieds, p-quinone dioxime and so on. But whatever their properties and qualities, the rubber must be an unsaturated substance capable of vulcanisation with sulphur if it is to earn coverage under Chapter 40.

Therefore, the rubber-like character of Hycar 4021 is not enough because it is not unsaturated and hence was not vulcanized with sulphur.

10. The learned counsel for Swastik Rubber Products produced an affidavit sworn by Dr. S.P. Potnis, an expert on plastics and rubber technology. The affidavit affirms that Hycar 4021 is a rubber and we agree. However.it also says that Hycar 4021 is not a synthetic resin as per accepted definition of synthetic resin according to which it is a chemical compound with high tack, low molecular weight, low melting point and which usually fractures conchoidally.

11. "Synthetic resins" are not easily defined. Their behaviour, structure and range are so varied that, perhaps, the only thing one can be definite about them is that they are extremely complex as the following lines from Morrell's Synthetic Resins and Allied Plastics quoted by Doctor Potins so powerfully bear witness : "Difficult as is the task of giving a close definition of a resin, meaning thereby a natural resin, that defining the term synthetic resin is till more difficult. But it may be considered as a complex, amorphous organic solid or semi-solid material, usually a mixture of substance. It is built up by chemical reaction and in respect of its lustre, fracture and comparative brittleness at ordinary temp, closely simulates the natural resins." The CONDENSED CHEMICAL DICTIONARY by Gessner Hawley (9th Edition) describes a synthetic resin as a man-made high polymer resulting from a chemical reaction between two or more substances, usually with heat or a catalyst. This dictionary describes a high polymer as a organic macromolecule compound of a large number of monomers, the molecular weight ranging from 5000 into the millions. We see from this that a synthetic resin will be a high polymer that can have high molecular weight, the dividing line between low and high polymers being between 5000 and 6000 molecular weight. The article on "high polymer" in the same Dictionary has this sentence : "Synthetic high polymers (or "synthetic resins") include a wide variety of materials having properties varying from hard and brittle to soft and elastic." The authors of this dictionary disfavour the word "resin" because it is too broadly based as to be almost meaningless. They propose restricting its application only to "natural organo-soluble, hydrocarbon-based products derived from trees and shrubs". They suggest that "synthetic polymer" would be a more precise terminology than "synthetic resin".

{See article on "synthetic resia").

12. We have to understand the term artificial resin or "synthetic resin" in this sence-a synthetic polymer. Synthetic high polymer have properties varying from hard and brittle to soft and elastic. And elastomers having properties of extensibility and elastic recovery are all high polymers.

13. A synthetic resin is nothing but a synthetic polymer. Is Hycar 4021 a synthetic polymer The BF Goodrich publication provides the answer.

14. It presents this polyacrylic rubber as a polyacrylate elastomer, a copolymer having two major components : the backbone, comprising 95 to 99 percent of the polymer; and the reactive cure-site, comprising 1 to 5 per cent of the polymer. The copolymers have high molecular weight; around 100000 Mn (viscosity-average molecular weight). There can be no further doubts after this about Hycar 4021 being a synthetic high polymer.

15. Now, Hycar 4021 is excluded from Chapter 40 as it is a chemically saturated rubber. Chapter 38 asked by the learned counsel is unsuitable because it is a chapter that covers : Chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products) not elsewhere specified or included; residual products of the chemical or allied industries, not elsewhere specified or included.

Unless the goods can be housed in no other headings/chapter, they cannot be accommodated in this chapter. Chapter 39 which covers : artificial resins and plastic materials, cellulose esters and ethers; articles thereof.

is a head which suits Hycar 4021 more accurately than Chapter 38 since Hycar is a synthetic thigh polymer. Hence Chapter 38 is ruled out.

16. We set aside the Appellate Collector's order and direct assessment under Chapter 39.01/06. For countervailing duty, Item 10 AA Central Excise Tariff is the only suitable heading and this duty should be assessed under this item.


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