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Collector of Customs Vs. Indian Cable Company - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1985)LC550Tri(Delhi)
AppellantCollector of Customs
RespondentIndian Cable Company
Excerpt:
.....of "hypalon 40" at the port of calcutta. the customs authorities assessed the goods to basic customs duty under heading no. 39.01/06 of the first schedule to the customs tariff act, 1975 (cta 1975), and to additional (countervailing) duty of customs corresponding to the excise duty leviable under item no 15a(1) of the first schedule to the central excises and salt act, 1944 (cet). the goods were treated for the purpose of classification under both the schedules as artificial resins or plastic materials. after clearance of the goods on payment of the duty so assessed, the respondents applied for refund of the excise duty allegedly collected in excess from them on the ground that the goods were synthetic rubber classifiable under heading no. 40.01/04 of c.t.a. 1975 and under item no......
Judgment:
1. The captioned appeal has its genesis in the show cause notice F. No.380/76/81-Cus II dated 7-9-1981 issued by the Central Government to the respondents proposing to re view the impugned order. O.i the setting up of this Tribuaa!, it was transferred to the Tribunal in terms of Section 131B of the Customs Act, 1962 to be disposed of as if it were an appeal filed before the Tribunal.

2. The respondents imported two consignments of "Hypalon 40" at the Port of Calcutta. The Customs Authorities assessed the goods to basic customs duty under heading No. 39.01/06 of the First Schedule to the Customs Tariff Act, 1975 (CTA 1975), and to additional (countervailing) duty of Customs corresponding to the excise duty leviable under Item No 15A(1) of the First Schedule to the Central Excises and Salt Act, 1944 (CET). The goods were treated for the purpose of classification under both the schedules as artificial resins or plastic materials. After clearance of the goods on payment of the duty so assessed, the respondents applied for refund of the excise duty allegedly collected in excess from them on the ground that the goods were synthetic rubber classifiable under heading No. 40.01/04 of C.T.A. 1975 and under Item No. 16AA of the C.E.T. By two separate orders, the claims were rejected by the Assistant Collector of Customs, Madras, holding that the classifications made by the Customs Authorities were correct. The matter was pursued in appeal. The Appellate Collector of Customs, by his impugned order, set aside the Assistant Collector's orders and/upheld the respondents' claim. He held that Hypalon 40 was nothing but a synthetic rubber. He took note of the fact that the Import Trade Control Policy recognised it as a synthetic rubber, the substance was known as synthetic rubber in trade parlance and the Appellate Collector at Madras had taken a similar view in another matter. The Govern-ment-of India, after perusing the records of the case, formed a tentative view that the Appellate Collector's order was not correct. It appeared to the Government that.Hypalon 40 was internationally known not as synthetic rubber but as synthetic resin. The Customs Co-operation Council Nomenclature (CCCN) classified it as a synthetic resin. Hypalon 40 did not satisfy the conditions laid down in Note 4 to Chapter 40 of the C.T.A., 1975 which defines "Synthetic Rubber". It was a polymerisation product and was more appropriately classifiable as synthetic resin as originally assessed; by the customs authorities. The Import Trade Control classification was not relevant for the purpose.

Based on these considerations and its tentative view, the Central Government, in exercise of its powers under Section 131(3) of the Customs Act, 1962 (as it stood then), issued a notice F. No.380/76/81-Cus. If, dated 7-9-1931 to the respondents calling upon them to show cause why the impugned order should not be set aside and the Assistant Collector's orders restored.

3. We have heard Shri A.S. Sundar Rajan, Departmental Representative for the department and Shri N. Das Gupta, Advocate for the Respondents.

4. Shri Sundar Rajan relied upon this Tribunal`s Order No. 112/83 dated 12-4-1983 in Appeal No. 599/80-C filed by Elpro International Ltd., Pune in which it was held that Hypalon 45 was appropriately classifiable under Chapter 39 and not Chapter 40 of C.T.A. 1975. The commercial parlance, test was not relevant in the present case since "Synthetic Rubber" was defined, in Chapter 40 and Chapter 39 was also worded in scientific and technical terms. Shri Sundar Rajan also relied upon the Tribunal's Order No. 320/1983-C dated 8th, June, 1983 in an Appeal.filed by M/s. Kirti Rubber Works, Bombay, in which also it was held that Hypalon 45 was classifiable as resin or plastic material_and not as synthetic rubber. This decision related to an import at a time when the Indian Tariff Act, 1934, was in force. He also relied upon the technical opinion dated 26-6-1981 furnished by the Deputy Chief Chemist of Calcutta, in which he had held that the subject, goods, namely, Hypalon 40 was appropriately classifiable as chlorinated sulphonated polyethylene under heading 39.01/06 and not as Synthetic Rubber under Chapter 40 of the C.T.A. 1975.

5. Appearing for the Respondents,Shri Dass Gupta, Counsel, pointed out that in the appeals of Elpro International Ltd., and Kirti Rubber Works,, no material had been placed on record by the appellants to show whether the goods were unsaturated substances. While agreeing with Shri Sundar Rajan that the Import Trade Control Policy classification was not relevant for settling the present dispute, Shri Dass Gupta relied upon a technical opinion dated 12-7-1982 furnished by the Indian Institute of Technology, Kharagpur, after conducting certain tests on the product, and submitted that Hypalon 40 was vulcanisable with sulphur and that Hypalon 40 was an unsaturated substance though the degree of unsaturisation was low. Shri Dass Gupta contended that the product, therefore, satisfied the requirement laid down in Chapter 40 of the C.T.A. 1975. The onus to show that Hypalon 40 was a saturated substance and that the requirements of Chapter 40 were not satisfied lay on the department. The Deputy Chief Chemist's opinion was silent on the question of unsatura-tion whereas the respondent had produced the Indian Institute of Technology's opinion. On the issue of additional duty, it was stated that the import took place prior to the 1981 budget when "synthetic rubber" was defined in the Central Excise Tariff Schedule as in the Customs Tariff Act. Since the goods were synthetic rubber, it would be classifiable as synthetic rubber under Item No.16AA, CET, for the purpose of additional duty irrespective of its classification under the Customs Tariff Schedule.

6. The Departmental Representative, in his reply, stated that while the substance was known as Synthetic Rubber in commerce, it did not conform to the statutory requirements laid down. The opinion of I.I.T. was incomplete since the Institute's report of 1-6-1982 referred to therein was not available on record and the opinion on record did not specifically say whether Hypalon 40 was a saturated or unsaturated substance.

7. We have considered the submissions of both sides. The question which arises for determination in this case is whether Hypalon 40 is classifiable under heading No. 39.01/06 of the C.T.A. 1975, read with Item No. 15A of the C.E.T., as claimed by the appellant or under Heading No. 40.01/04 of the C.T.A. 1975 read with Item No. 16AA of the CET as claimed by the respondents.

8. There is little doubt, on the basis of the material placed before us, that Hypalon 40 is recognised by industry and trade as synthetic rubber. The manufacturer (Du Pont's) literature on hypalon states that hypalon is the registered trade mark for a series of chlorosulfonated polyethylene synthetic rubber manufactured by Du Pont. Vulcanizates of Hypalon are highly resistant to the deteriorating effects of ozone, oxygen, weather, heat, oil and chemicals. Hypalon resists discoloration or exposure to light, and is widely used in light-coloured vulcanizates. It can be compounded to give excellent mechanical properties-for example, high tensile strength and abrasion resistance.

Several types and grades of Hypalon are available for a variety of end-use requirements.

The Condensed Chemical Dictionary by Gessner G. Hawley (page 554 10th Edition) supports this. It states that Hypalon is a trade mark of Chlorosulfonated polyethylene, a synthetic rubber. It gives the uses for hypalon as insulation for wire and, cable ; shoe soles and heels ; automotive components, building products ; coatings, flexible tubes and hoses, seals, gaskets, diaphragms.

9. The question, therefore, arises whether Hypalon 40 is classifiable under heading 'No. 40.01/04 of the Customs Tariff Schedule which covers inter alia natural or synthetic rubber. This question has, in the context of the Customs Tariff Schedule to be answered not by reference to the commercial or trade understanding of the product but with reference to the definition of the expression "synthetic rubber" contained in statutory Note 4 to Chapter 40. This definition prescribes certain parameters regarding the products' extendability and its behaviour when the extending force is removed. But the prime stipulation is that the expression "synthetic rubber" is to be taken to apply to unsaturated substances. Unless this test is satisfied, the product cannot come within the scope of Chapter 40. On this point, the Deputy Chief Chemist in his opinion dated 26-6-1981 has stated that Hypalon is a saturated substance as indicated in ASTM-D/418-1961- and that unsaturation results during the curing processes. The respondents have furnished the technical opinion of the Indian Institute of Technology, Kharagpur to the effect that the product possesses limited unsaturation during the process of vulcanisation. In the matter of assessment of goods to customs duty, it is the nature and character of the goods as imported that is material. The Deputy Chief Chemist has cited the authority of ASTM Designation 418 of 1964 ("ASTM" stands for American Society for Testing and Materials) in support of his statement that Hypalon as such is saturated and that unsaturation results during the curing process. I.I.T., Kharagpur also says that unsaturation results during the vulcanization process. It is, thus, clear that Hypalon 40 is, as such and by itself, a saturated substance. Because of this it does not satisfy the primary condition in statutory Note 4 to Chapter 40, namely, that a product to be called "Synthetic Rubber", it should be an unsaturated substance. In this view of the matter, it is not necessary to go into the question whether Hypalon 40 satisfies the other parameters set out in the statutory Note 4.

10 The result is that Hypalon 40 does not fall within the scope of heading No. 40.01/04 as a synthetic rubber. Having regard to its chemical composition and its properties it is a polymerisation product falling under heading No. 39.01/06 of the Customs Tariff Act, 1975.

11. As regards additional duty of customs, both the consignments have been imported prior to 1-3-1981 when the Central Excise Tariff Item No.16AA did not contain a statutory definition of "synthetic rubber". The item itself covered Synthetic Rubber without any explanation of the expression. Since Hypalon 40 is a synthetic rubber (though not conforming to the requirements of Note 4 in Chapter 40), it is a Synthetic Rubber falling under Item No. 16AA GET. The respondents are entitled to the refund of the excess additional duty collected.

12. In the result, the appellants' claim that the product Hypalon 40 is classifiable under Heading No. 39.01/06 of the C.T.A. 1975 is upheld.However, it shall be classified under Item No. 16AA CET as a Synthetic Rubber and the excess additional duty collected shall be refunded.


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