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M.C. Mody and Bros. Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1989)(44)ELT484TriDel
AppellantM.C. Mody and Bros.
RespondentCollector of Customs
Excerpt:
.....by varnishing kraft paper with insulating varnish. the period of dispute was 1969 -1975 when the paper tariff item 17 did not have a specific entry for all king of treated papers. the tribunal, after observing that all the merits were on the side of categorising the product as insulating material and not as paper, set aside the order of classification under item 17(4) ("all other kinds of paper and paper board, not otherwise specified"), giving the excise authorities liberty to classify the goods under any other appropriate tariff item. the paper tariff had undergone a drastic change in 1976, taking within its sweep all kinds of treated papers. this apart, the goods in the present case are composite goods. we think the basant pran case also has no application.17. it remains for us to.....
Judgment:
1. This appeal arises out of Order No. S/49-11/81-LC dated 22-4-1981 passed by the Appellate Collector of Customs, Bombay. M/s. Mody and Brothers (hereinafter referred to as the appellants) filed a revision application to the Central Government against the said order. On the setting up of this Tribunal, the revision application was transferred to it is terms of Section 131-B of the Customs Act, 1962 for disposal as if it were an appeal filed before the Tribunal.

2. The facts of the case, in brief, are that the appellants imported a consignment of E-Class Electrical grade paper which was assessed under Heading No. 39.01/06 to basic customs duty (the duty leviable under the First Schedule to the Customs Tariff Act, 1975) at 100% ad valorem plus auxiliary duty at 20% ad valorem. The duty so assessed was paid by the appellants vide Bill of Entry cash No. 4856, dated 28-9-1977. On 3-2-1978. The Assistant Collector of Customs issued a notice in terms of Section 28 of the Customs Act alleging that duty amounting to Rs. 14,525.29p. was short-levied on the goods since they were liable to be charged to additional (countervailing) duty of customs at the rate of 33% ad valorem corresponding to the Central Excise duty leviable under Item No. 17 (2) of the First Schedule to the Central Excises and Salt Act, 1944 (GET). After considering the submissions of the appellants, the Assistant Collector of Customs confirmed the demand. On appeal, the Appellate Collector held that having regard to the fact that the essential character of the subject goods which were comprised of a sheet of paper laminated with polyester film was derived from the paper component, the correct classification of the composite goods was as paper under Chapter 48 of the Customs Tariff Schedule applying Interpretation Rule 3(b) He further held that the correct classification under the Central Excise Tariff Schedule was Item No.17(2) for the purpose of levy of additional duty of customs. The Appellate Collector, by his order dated 22-4-1981, rejected the appeal.

In this order, he observed that the reason why neither importers nor the Customs House bothered about the correct classification of the goods under the Customs Tariff Schedule i.e. Chapter 39 or Chapter 48 was perhaps because the rate of duty was always the same until Notification No. 37/78, dated 1-3-1978 came to be issued.

3. Despite the notice of hearing, the appellants were not represented in the Court when the appeal was taken up for hearing on 15-3-1985.

However, the appellants submitted through their Counsel Shri S.D.Nankani, their written submissions and stated that they would not be appearing for the hearing. We, therefore, decided to hear Shri A.S.Sundar Rajan, Departmental Representative and proceed to dispose of the appeal.

4. At the outset, Shri Sundar Rajan raised a preliminary objection that the appeal could not be heard without the appellants making prior deposit of the duty demanded in terms of the Orders of the lower authorities. The Bench over-ruled this objection since, at the relevant time i.e. at the time of filing the revision application (transferred to us for disposal as an appeal), the law did not require prior deposit of the duty demanded as a condition precedent to the hearing and disposal of the revision.

(i) At the material time it was the practice of the Customs House not to levy additional duty on identical goods as per Tariff Advice No. 25 issued under Trade Notice No. 19, dated 14-12-1976. The said Tariff Advice has a binding effect on the Department and the impugned short-levy demand is, therefore, bad in law.

(ii) It appears that the demand was issued in pursuance of Tariff Advice No. 1 of 25-1-1978. A demand based on a Tariff Advice is illegal, null and void. Past assessments based on established practice cannot be re-opened on the basis of Tariff Advices issued on later dates.

(iii) In any view of the matter the goods in question are not classifiable under Item No. 17(2) but under Item No. 68 of the CET, since they were composite in nature In support of this stand, the following two decisions of this Tribunal have been cited :-Collector of Customs, Bombay v. Wash Udyog Sawantwadi -1987 (31) E.L.T. 73 (Tribunal) andSunrise Electric Corporation v. Collector of Customs, Bombay - 1983 (14) E.L.T. 2465 (Cegat).

In these decisions the Tribunal has held that 'E' Class Press Pahn Paper is correctly classifiable under Heading No. 39.01/06 of the Customs Tariff Schedule read with Item No. 68 CET.6. Opposing the appeal, Shri Sundar Rajan, Departmental Representative, submitted that for a long time there was no dispute regarding the correct classification of the goods under the Customs Tariff Schedule since the rate of duty under Chapter 39 or Chapter 48 was the same. It was only on issue of Notification No. 37/78-Cus., dated 1-3-1978, exempting electrical grade paper falling under Chapter No. 48 from basic duty in excess of 75% ad valorem, that the issue of the correct classification assumed significance. The rule of interpretation 3(c) was amended on 1-9-1978 and from then onwards the Custom House resorted to Rule 3(b) instead of 3(c) and started classifying the subject goods under Heading No. 39.01/06 and thus the benefit of the exemption notification was not extended to the goods.

The Wash Udyog case (supra) classified similar goods under Heading 39.01/06 of the Customs Tariff Schedule and Item No. 68 of the CET. In the Sunrise Electric Corporation case (supra) it was held that electrical grade insulating paper comprised of paper and plastic material was classifiable under Heading No. 39.01/06 of the Customs Tariff Schedule and Item No. 68 CET.7. Continuing, Shri Sundar Rajan submitted that the question for determination here was whether the aforesaid classification under Item No. 68 CET would apply to the present case. On 17-3-1976 the wording of Item No. 17(2) CET underwent a drastic change and in the light of the revised wording the subject paper would fall under Item No. 17(2), since all treated paper was covered by that item. This was the ratio of the decision of the Tribunal in the Golden Paper Udyog case -1983 E.L.T. 1123, and Uma Laminated Products case -1984 (17) E.L.T. 187. In support of his submission that Item No. 17(2) was the appropriate entry for the goods, Shri Sundar Rajan relied upon the Tribunal's Order No.885/84, dated 20-11-1984 in East India Industries, Madras v. Collector of Central Excise, Madras - Appeal No. ED (SB)(T) A. 921/80-C and the Tribunal's Order in Bhor Industries Ltd. v. Collector of Central Excise, Bombay 8. Shri Sundar Rajan contended that the decision in the Yash Udyog case would not apply to the present case. If, however, the Bench was inclined to follow the Yash Udyog case, this would result in a contradiction in the matter and, therefore, should have to be referred to a Larger Bench.

9. We have carefully considered the submissions of both sides. The appellants have adopted a rather strange and self-contradictory stand.

In one breath they say that the subject goods were being assessed in accordance with Tariff Advice No. 25 (Trade Notice No. 19, dated 14-12-1976) which had a binding effect on the Department. According to them, the impugned demand was, therefore, bad in law. In the next breath they say that the impugned demand was apparently issued pursuant to Tariff Advice No. 1 dated 25-1-1978 and it was illegal, null and void because the Tariff Advice amounted to merely an administrative direction and could not be the basis for a demand. We would say that in the present case the orders of the 2 lower authorities do not talk about any Tariff Advice. The status of Tariff rulings or Tariff Advices, as they are now called, and other administrative directions has been settled by the Supreme Court in the Orient Paper Mills Ltd. v.Union of India (1978 (2) E.L.T. (J 382) where the Court held that quasi-judicial authorities cannot be controlled by any such rulings, advices or instructions of any authority, however high they may be in the administrative heirarchy. The Court further observed that when assessing authorities and appellate authorities are called upon to decide disputes arising under the Act (Customs Act), they must act independently and impartially. This is precisely what the Appellate Collector has done in the present case. We have, therefore, to arrive at the classification of the subject goods without reference to either of the Tariff Advices based on the merits of the dispute.

10. In the Sunrise Electric Corporation case -1983 (14) E.L.T. 2465 (Cegat), Special Bench 'D' of this Tribunal had to decide the classification of 'E' class electrical grade insulating paper comprised of paper and plastic material. The goods in the present case are similar. The Bench held that the plastic component was functionally more important than the paper component and, applying interpretation Rule 3(b), it classified the goods under Heading No. 39.01/06 negativing the claim of the assessee to classification under 48.01/21.

The Bench also held that since the Excise Tariff Schedule did not have interpretation rules and since the composite article was neither paper nor plastic material, it was correctly classifiable under Item No. 68 CET. In arriving at this decision, the Bench followed its earlier decision on similar goods (class 'E' other high temperature insulating paper) in the Yash Udyog case -1987 (31) E.L.T. 73 (Tribunal).

11. Shri Sundar Rajan referred to the amendment of interpretation Rule 3(c) w.e.f. 1-3-1978. In the present case, the duty was paid on 28-9-1977 We, therefore, do not see the relevance of the amendment to Rule 3(c) insofar as the present case is concerned. In the Sunrise Electric Corporation case as well as the Yash Udyog case, the Bench had arrived at its decisions after considering the applicability of Rule 3(b).

12. Shri Sundar Rajan, however, contended that in the present case Item 68 would not be appropriate because, at the relevant time, the Central Excise item relating to paper all sorts, namely, Item No. 17 covered all sorts of treated and laminated paper as held by the Tribunal in the Golden Paper Udyog case and the Uma Laminated Paper case. It is his contention that the classification under Item 68 given in the earlier cases should not be followed and if the Bench is inclined to follow those decisions, hen, reference to a Larger Bench may be considered. In the case of Yash Udyog and Sunrise Electric Corporation, the Bench considered that since the goods were a composite material (paper and plastic), they were neither paper (Item 17, CET) nor plastic (Item 15A, CET) but more appropriately "articles not elsewhere specified" (Item 68, CET).

13. In the East India Industries case (supra), the goods were two sides paper lined hessian (bitumenised), obtained by hessian being bonded on both sides with layers of paper, using bitumen as the bonder. The claim was that the goods fell under Item 22A or 68 CET, otherwise under 17(2). The Bench observed that hessian gave paper strength and increased its burst factor while bitumen performed the role of only a bonding agent. In other words, the role of hessian and bitumen were only to increase or improve the wrapping and packing properties of paper. Taking these factors into consideration, the Bench held that the goods were paper and must be assessed as paper.

14. This decision does not, in our opinion, have any relevance to the present case. In the Yash Udyog case, the Bench concluded, after considering the material before it, that the high degree of insulation in "E Class" material (as in the present case) came only from the plastic film portion of the goods even though impregnated presspahn paper or board, by itself, was also an insulating material. The essential character was derived from the plastic portion and the goods being composite material, Item 68 was more apt than 15A or 17, CET.15. In the Bhor Industries case -(supra), the goods were PVC plastic coated paper. The discussion centred round whether such paper was entitled to the benefit of Notification No. 68/76-C.E. The classification of the coated paper was not the theme of the discussion.

We do not think that this Order has any relevance to the present case.

16. In the Basant Pran Electric Co. case -1984 (17) E.L.T. 499, the goods were electric insulating varnished paper, manufactured by varnishing kraft paper with insulating varnish. The period of dispute was 1969 -1975 when the paper Tariff Item 17 did not have a specific entry for all king of treated papers. The Tribunal, after observing that all the merits were on the side of categorising the product as insulating material and not as paper, set aside the Order of classification under Item 17(4) ("all other kinds of paper and paper board, not otherwise specified"), giving the Excise authorities liberty to classify the goods under any other appropriate Tariff Item. The paper Tariff had undergone a drastic change in 1976, taking within its sweep all kinds of treated papers. This apart, the goods in the present case are composite goods. We think the Basant Pran case also has no application.

17. It remains for us to consider the Golden Paper Udyog case and the Uma Laminated Paper case relied upon by Shri Sundar Rajan. In the former case, the goods were bitumenised kraft paper. In the latter, they were polyethylene coated/sandwiched paper. In both cases, the Benches held that the classification was under 17(2) CET but differed on the question whether the products made out of duty-paid base paper could be charged to duty under the said item. The latter aspect is not relevant for our present purpose since we are not dealing with levy of excise duty but of additional duty of Customs on an imported article which must be looked at in the condition in which it is imported. If the ratio of these decisions is applied to the present case, the goods must be held to fall under Item 17(2) CET. However, since the very product, viz. "E class insulating paper" has been considered by the Tribunal in the Yash Udyog and Sunrise Electric Corporation cases, we would prefer to follow the decisions in these cases and hold that the correct classification is under Item 68 CET. The appeal is allowed with consequential relief to the appellants.

18. In the present case, we are not called upon to pronounce on the classification of the goods under the Customs Tariff Schedule. For, the dispute is about levy of additional duty.


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