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Miles India Ltd. Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1983)LC1535DTri(Delhi)
AppellantMiles India Ltd.
RespondentCollector of Customs
.....or allied industries, not elsewhere specified or included".4. on behalf of the appellants, shri ganesh argued that the imported material was the result of very advanced and sophisticated technology.only two manufacturers in the world were making such material.according to him, these reagent strips perform the same functions as various medical appliances such as ph meter, colorimeter and spectrophotometer. he also submitted that no substantial operation was performed on the imported material to make the reagent strips. it was merely pasted on a plastic backing and cut into strips, so that there was a small piece of the reagent material at the tip of the plastic strip, which could be dipped into the liquid to be tested. shri ganesh advanced the following further arguments :- (1).....
1. Messrs Miles India Ltd., have filed four Revision Applications (hereinafter referred to as "appeals"), which under Section 131B of the Customs Act, 1962, are to be dealt with as if they were appeals before the Tribunal. These appeals involve a common issue and were listed together, It was then observed that some of the orders-in-appeal of the Appellate Collector covered more than one order-in original. The details are set out in Annexure to this Order. Accordingly, the appellants were advised to file supplementary appeals to the Tribunal.

No such appeals have up to now been received in the Registry. This combined Order may therefore be taken as covering only four separate orders-in-appeal, arising out of four orders-in-original, whose particulars are given below :-Tribunal's File No. of Appellate No. of AssistantNo. Collector's Order-in- Collector's Order- Appeal in-Original1. 513/80 S/49-23/80 Air S/12-1036/79-80 ACU dt. 25-7-80 dt. 24-10-792. 367/80 S/49-625/79 Air S/12-1809/78-79 dt. 27-11-79 dt. 22-2-793 91/81 S/49-936/80 Air S/12-3523/79-80 ACU dt. 21-11-80 dt. 4-8-804.537/81 S/49-63/80 Air S/12-1037/79-80 ACU dt. 20-5-80 dt. 22-11-79.

2. These appeals relate to the classification under the Customs Tariff Schedule of what the appellants have called "medical reagents". For the sake of clarity, and without pre-judging the issue, it may be mentioned that the imported goods were made of filter paper which had been impregnated with various chemicals. As imported, they were in the form of sheets. These sheets were cut by the appellants and attached to thin strips of plastic. The articles thus prepared were marketed under the names of "Diastix,", "Uristix", etc. It will be convenient to refer to these articles as "reagent strips". The method of using these reagent strips would be seen from the following extract of literature filed by the appellants relating to "Diastix" : "DIASTIX is a fast, convenient way of testing urine to determine the amount of glucose present.

DIASTIX will react only with glucose, the sugar of "sugar diabetes".

DIASTIX is a resilient plastic strip with a test area made of special chemicals on one end...

The Colour developed in the reagent area at 30 seconds after wetting is compared to the Colour Chart on the bottle label. The colour blocks on the Colour Chart indicate the amount of glucose present". The directions for the use of the strips are given as follows :- 1. Dip reagent end of strip in urine specimen for 1 to 2 seconds and remove.

2. Gently tap edge of strip against side of urine container or sink to remove excess urine.

3. Exactly 30 seconds after removing from urine, compare reagent side of strip to the closest matching colour block. (Disregard colour changes that occur after 30 seconds).

3. The goods were on importation classified by the Customs authorities under Heading 48.01/21, relating inter alia to "Impregnated paper or paper board". It is the claim of the appellants that the goods should have been assessed, under Heading 90.17/18 as medical appliances, against the description "medical, dental, surgical and veterinary instruments and appliances". Alternatively, they have claimed assessment under Heading No. 38.01/19, as "chemical products and preparations of the chemical or allied industries, not elsewhere specified or included".

4. On behalf of the appellants, Shri Ganesh argued that the imported material was the result of very advanced and sophisticated technology.

Only two manufacturers in the world were making such material.

According to him, these reagent strips perform the same functions as various medical appliances such as pH Meter, Colorimeter and Spectrophotometer. He also submitted that no substantial operation was performed on the imported material to make the reagent strips. It was merely pasted on a plastic backing and cut into strips, so that there was a small piece of the reagent material at the tip of the plastic strip, which could be dipped into the liquid to be tested. Shri Ganesh advanced the following further arguments :- (1) The product at the time of importation is capable of performing the same function as the product which leaves the appellants' factory after being attached to a plastic sheet which is cut into strips; (2) The imported goods are comparable to the medical appliances mentioned above, and should, therefore, be regarded as medical appliances in themselves; (3) Shri Ganesh quoted from the work "Diagnostic Aids in the Practice of Veterinary Medicine" by Harry H. Bewier. The above work contains the following passage :- "Urinalysis by the clinician can be performed very quickly and easily, thanks to the developers of tablet and dip and read test. If the clinician does not take full advantage of these important diagnostic tools he is missing much helpful information".

Shri Ganesh referred to the expression "diagnostic tools" in the above extract. According to him, this expression is akin to the word "appliance"; (4) Shri Ganesh also quoted GRADHWOHL'S CLINICAL LABORATORY METHODS AND DIAGNOSIS in which there is the following statement : "A use of special tablets stix and tapes is available for extremely sensitive and rapid analysis of many constituents in urine and other fluids (Table 362)"; (5) Shri Ganesh also referred to dictionary definitions of the word "appliance". He quoted the Shorter Oxford Dictionary, which contains the definition "A thing applied as means to one end" and Webster's III New International Dictionary "A tool, instrument or a device specifically designed for a particular use". He submitted that the goods were devised for the specific task of giving information regarding blood and urine; (6) Shri Ganesh submitted that the Registrar of Trade Marks had classified their product as "chemical preparation for diagnostic purpose and laboratory use" ; (7) No doubt one of the ingredients of the imported material was filter paper. However, it was subjected to highly complex and sophisticated processes, which were a trade secret. It would not commerically or technically be thought of as paper, nor did it retain the characteristics of paper.

5. Shri Ganesh stated that when the matter earlier came up before our predecessor Bench he had been asked for details of the manufacturing process. He stated that the manufacturers had been approached in this regard and they were sending a letter under their seal and signature which he would file as soon as it was available. He was, however, aware of the contents of this letter. It would show that the goods were manufactured in a plant costing $ 3.5 million, and highly qualified persons were employed for this purpose. The letter would also show that the value of the paper in the goods would come to only 15%.

6. Reliance was also sought to be placed on three affidavits filed by clinical pathologists. These affidavits were in identical terms and stated that the medical reagent strips imported by the appellants were used for analysing and testing various substances in blood and urine, and that such analysis and testing was similar to the laboratory testing and analysis by the help of medical appliances such as pH Meter, Colorimeter and Spectrophotometer. As such, according to the deponents, they would fall under the category of medical appliances and devices.

7. Shri Ganesh argued that in the construction of the Customs Tariff the more specific item should be preferred to the less specific one. He also argued that meanings given to articles in a fiscal statute must be as people in trade and commerce understand them. In this connection, he cited the judgment of the Supreme Court in the case of Union of India v. MMTC (AIR 1972 SC 2551) and another judgment of the Supreme Court in the case of Dunlop India (AIR 1977 SC 597). He also referred to an order of the Tribunal in the case of Delhi Surgical and Dressings, reported in 1983 ELT 575.

8. Shri Ganesh also referred to certain judgments in regard to sales tax, reported in AIR 1977 SC 32; 33 STC 333; and 31 STC 625.

9. Shri Ganesh also argued that prior to the introduction of the new Tariff through the Customs Tariff Act, 1975, the appellants had been importing the same "chemical reagents". According to him these were being classified under Item No. 28 of the old Tariff as contained in the Indian Tariff Act, 1934, as "chemicals, drugs and medicines, all sorts not otherwise specified". He argued that this would justify the assessment of the goods under the new Tariff within Heading No.38.01/19.

10. Opposing the appellants' stand, Shri Kunhikrishnan pointed out that they had themselves referred to the goods as "raw materials" in their memorandum of appeal. It could also be seen from the article imported, which was in the form of sheets, and from the article finally marketed, which was in the form of a plastic strip with a small piece of the imported material at the tip, that there was a substantial difference between the two. Whatever might be the strength of the claim of the article as marketed to be considered as an appliance, this could not apply to the goods imported.

11. Shri Kunhikrishnan pointed out that Heading 48.01/21 of the Customs Tariff Schedule specifically covered impregnated paper or paper board.

The Explanatory Notes to the relevant Heading 48.07, at page 679, gave as examples indicator paper such as litmus and pole-finding papers.

12 Reference had been made to some assessments made under the old Tariff as contained in the Indian Tariff Act, 1934. Shri Ganesh had stated that some consignments had been assessed under Item 28 of that Tariff, which related to "chemicals not otherwise specified". This would not carry any weight regarding classification under the present Tariff, because the alternative Item 44 under the old Tariff, referred to "paper, all sorts, not otherwise specified". In contrast, coated and impregnated papers were specifically mentioned in the new Tariff in Heading 48.01/21.

13. Shri Kunhikrishnan also referred to the Interpretative Rules.

According to him, the case was covered by Rule 2(b), which provides that any reference to a material or substance shall be taken to include a reference to mixtures or components with other materials or substances. Failing this, Rule 3(a) would be applicable, according to which the Heading which provides the most specific description shall be preferred. If this Rule also was not decisive, recourse should be had to Rule 3(b), according to which mixtures and composite goods shall be classified as if they consisted of the material or component which gives the goods their essential character. According to Shri Kunhikrishnan, each of these Rules would yield the same result and point to the classification of the goods under Heading 48.01/21.

14. Shri Kunhikrishnan then referred to the alternative claim for classification under Heading No. 38.01/19. He pointed out that in their original claim the appellants had not invoked this item. Accordingly, the Appellate Collector had not touched on it. In any case, the goods were squarely covered by Heading No. 48.01/21.

15. Shri Kunhikrishnan cited the judgment of the Supreme Court in the case of Chemicals and Fibres India Limited, reported in 1982 ELT 917, for the proposition that when dealing with products which are highly technical and scientific in character, the words used in the Statute would have to be given only their technical or scientific meaning. In this case the goods were of a technical nature and therefore one should not go by trade terminology.

16. Shri Kunhikrishnan also referred to the three affidavits filed by the appellants. These were from three pathologists. He pointed out that all the three affidavits were in identical terms and were evidently given at the request of the appellants. He submitted that while a competent technical authority could testify through an affidavit, the contents must be within the field of his competence. The pathologists who had given these affidavits were not competent to suggest what the tariff classification should be, as the last sentence of each affidavit purported to do. He further submitted that the contents of the affidavits were basically relevant to the final product and not to the goods imported.

17. In reply, Shri J.R. Cama argued that Heading No. 48.01/21 might include impregnated and coated paper. These expressions should, however, be taken as covering cases where the impregnation did not change the essential character of the paper. According to him, the goods imported no longer had the essential character of paper.

18. We have carefully considered the question regarding the proper classification of the goods imported. We would like to stress that the question relates to the goods as they are at the time of importation, and not to the goods as subsequently marketed by the appellants. (For convenience we refer to these as "marketed goods"). The appellants have adduced evidence to show how useful the marketed goods are for the purpose of a quick estimation of various factors in urine, blood, etc.

We have no reason to doubt the usefulness of the marketed goods for this purpose. However, as pointed out by Shri Kunhikrishnan, the issue has to be considered with reference to the goods as imported. At that stage they are in the form of sheets which, judging from the samples produced before us, have the form, appearance and feel of blotting paper or thick paper akin to blotting paper. (The sample shown to us was light blue in colour, but blotting paper also is known to come both in white and in colours such as pink). As explained by the appellants, and as seen from the samples submitted, the imported paper in the shape of a square of about 1/2 cm. side is attached to the tip of a thin plastic strip about 7 1/2 cms. long by 1/2 cm. wide. It is this strip which, as explained in para 2 above, is dipped in the urine or other specimen which is to be tested so that the imported material gets immersed in the specimen. The imported material then undergoes a change in colour which depends on the concentration of glucose or other substance which is to be measured. The changed colour of this material has then to be compared with the different shades of colour shown in the Colour Chart on the label of the bottle in which the strips are contained. Each colour block will correspond to a different percentage of glucose, etc., and therefore by matching the colour on the strip with one of those on the label of the bottle it would be possible to read off at least approximately the concentration of glucose, etc., contained in the specimen.

19. It will be seen, therefore, that in order to carry out the test, while the imported material is no doubt very important, it is not by itself sufficient. It is necessary to attach it to a plastic strip so that it can be conveniently dipped inside the specimen, without wastage. The strips are contained in a bottle which contains a desiccant to absorb moisture, and to preserve the sensitive strips from contamination. It is also essential to have a Colour Chart with the aid of which the concentration of glucose, etc., can be read. Thus, the plastic strip with the imported material at the tip, the bottle, and particularly the Colour Chart affixed to the bottle, without which the percentage of glucose, etc., cannot be determined, form a set of components each of which is necessary for the test to be carried out.

It is in this form that the goods are finally marketed, and it is in this form that they are suitable for the purpose for which they are marketed. There could be a case to argue that the entire set of articles as marketed would constitute a diagnostic or medical appliance. But this does not mean that the imported material in the form of sheets is itself a diagnostic or medical appliance. All that can be done with this material is to dip it in a specimen, when it will no doubt undergo a colour change. But without the other accompanying articles, and particularly the Colour Chart, it would not convey anything to the person who wishes to use it. Even if one takes the word "appliance" by itself, it does not appear an appropriate term to use for some thing which is akin to a sheet of paper. In regard to words of this nature having a wide scope, it would be possible, by referring to different dictionaries, to find various meanings, and to select one which would suit a particular context. However, since the claim is for assessment under Heading 90.17/18 of the Customs Tariff Schedule, it would be useful to look at Heading No. 90.17 of the CCCN, to which it is related, and which covers "Medical, dental, surgical and veterinary instruments and appliances". The Explanatory Notes to the CCCN give very elaborate lists of the articles covered by this description. What comes closest to the present context would be those covered by the ^description "Special diagnostic instruments and apparatus" (it is found that the words "apparatus" and "appliances" are used almost interchangeably). The instruments and apparatus which are listed under this Heading are the following-:- "Stethoscopes, instruments to measure rate of breathing (to determine basal metabolism); sphygmomanometers; tensiometers and oscillometers (to measure blood pressure); spirometers (to assess lung capacity); cephalometers; pelvimeters and other special measuring instruments, diagnostic apparatus incorporating an automatic data processing machine for processing and visualising clinical data, etc." A comparison of this list with the goods under consideration would show that there is a clear distinction between them. They are all finished articles, most of them fairly complex in nature and thus deserving the appellation "appliances" or "apparatus", and complete in themselves. In the light of these examples it is obviously quite inappropriate to call the imported material as an "appliance".

20. Most of the arguments advanced by Shri Ganesh are based on the use of the marketed goods, and, in the light of the analysis given above, they are not of assistance in classifying the imported goods. The classification given or accepted by the Registrar of Trade Marks in a different context obviously cannot determine the classification of the goods under the separate and self-contained scheme of the Customs Tariff Schedule.

21. The same observations would apply to the affidavits on which the appellants have relied. What these affidavits go to show is that the marketed goods would be very useful for the purposes of analysis and diagnosis. They do not carry any authority in the matter of classification for Customs Tariff purposes of the imported goods.

22. Shri Ganesh had also referred to a letter from the foreign manufacturers which he said was on the way to them, and whose contents he indicated. He stated that this was in response to a query from our predecessor Bench (vide para 5 above). From the record, we do not find that a specific query in this regard was addressed to Shri Ganesh when the matter came up before them on 22-6-83. The record shows that Shri Ganesh sought permission to file a paper book, which would include copies of show cause notices and replies as also copies of the memoranda of appeal. While allowing him to file the paper book, it was recorded that the question of admissibility of the documents which were not already on the Revenue records would be considered at the time of hearing. We find that the letter now being referred to is an altogether new document, and at the time of hearing it was not yet available. We do not think it would be proper to take this letter into consideration.

In any event, it would appear to contain very little that has not already been placed before us. The only new point is the statement that the value of the paper in the imported material comes to about 15%.

Apart from the fact that a factual point of this nature cannot appropriately be introduced at this late stage, we do not think it would itself make, any material difference .to the case, even if found to be factually correct, as will be seen from what follows.

23. Heading No. 90.17/18 being ruled out, the question remains whether Heading No. 48.01/21, as adopted by the Customs authorities, was appropriate. It has already been seen that this Heading covers inter alia impregnated paper or paper board. It is an admitted fact that the imported material consists of filter paper which has been impregnated with different materials of secret composition, and adapted for estimating different substances like glucose, etc. The Explanatory Notes under the relevant Heading No. 48.07 of the CCCN, relating to "impregnated paper and paper board" give as examples "indicator papers such as litmus and pole-finding papers". Though the imported material appears to be of a more sophisticated nature than litmus paper, it would equally appropriately be covered by the description of "impregnated paper". In this context the value of the paper in relation to the value of the impregnating substances does not appear to be material, so long as the goods recognisably have the appearance and feel of paper. It may be relevant to mention that the next Chapter of the Tariff Schedule, namely, Chapter 49, also falls within the same general section of the Schedule, namely Section X, which has the genera] heading "Paper making material; paper and paper board and articles thereof". It hardly needs saying that in the case of text books and the like the value of the paper may be only a small part of the value of the book. This does not, however, prevent books, etc., from being classified under the generic description given above. So also, since the imported goods are basically and recognisably of paper, they could without doing any violence to language be said to be covered by the description "impregnated paper or paper board".

24. Shri Kunhikrishnan referred to different Interpretative Rules which might apply to the goods, and argued that whichever one was invoked, the appropriate description would be as "impregnated paper". We do not think that either Rule 2(b) or Rule 3(b), invoked by Shri Kunhikrishnan, would apply to this case. It appears to us that since we have to choose between the expression "medical...instruments and appliances" and "impregnated paper or paper board", the choice is clearly determined by Rule 3(a) of the Interpretative Rules, which states that the Heading which provides the most specific description shall be preferred. We have no doubt that of the two the more specific description is the latter one.

25. Shri Ganesh had drawn our attention to the Tribunal's Order in the case of Delhi Surgical & Dressings, reported in 1983 ELT 575. In that case the goods consisted of "Blood counting chambers" and "Pipettes".

It was held that the blood counting chambers could not be treated as "laboratory glassware" because they were not plain glass slides but made by fusing into the polished surface of the counting areas, a very thin semi-transparent layer of Rhodium with greatest precision. The lines were ruled through this metal layer and appeared under the microscope as a net of very bright radiant lines. Therefore, it was held that they were highly specialised appliances to be employed for the specific purpose of blood counting, and made to definite specifications. So far as the pipettes were concerned, it was found inter alia that they were not wholly of glass and almost half was of transparent plastic tube. In coming to the conclusion that these were not "laboratory glassware", the Bench took into account the Explanatory Notes to the CCCN which showed that the expression "hygienic and pharmaceutical glassware" would refer to articles of general use not requiring the services of a practitioner. These, on the other hand, were highly specialised items to be read with the aid of a microscope, by qualified pathologists.

26. The above case can be clearly distinguished from the one before us.

In the first place, it relates to a different tariff heading. Secondly, in that case neither of the articles was made wholly of glass. Each of them, and particularly the glass slides, had special and distinctive features making them particularly suitable for use by a qualified pathologist. They could be used repeatedly and over a period of time and were in the nature of permanent equipment. On the contrary, in the present case, the goods as imported cannot be used at all. As marketed, they can be used by any intelligent layman. They are consumable in nature and can be used only once. In view of the several significant differences, the abovementioned decision does not help the appellants' case.

27. Shri Ganesh had also referred to certain decisions in regard to sales tax (vide pare 8 above). These relate to specific enactments on sales tax, and to specified articles such as filter paper and stencil paper. He himself conceded that the sales tax tariff schedules was not identical to the Central Excise Tariff Schedule, but claimed that these decisions had general relevance to the issue before us. Since those decisions were with reference to other enactments and other articles, and Shri Ganesh did not cite from the judgments any passage of general applicability which would govern the present case, we do not find anything in them to lead us to a different conclusion.

28. As regards the alternative classification suggested by Shri Ganesh, namely, under Heading 38.01/19, as "chemical products...not elsewhere specified", it is not necessary to go into great detail, because the specific description in Heading 48.01/21 as "impregnated paper" must prevail over a nonspecific Heading such as 38.01/19. Any assessment under Item 28 of the old Tariff Schedule cannot have much weight, since there are substantial differences between the old and the new Tariff, and the latter contains the specific description "impregnated paper and paper board".

29. In the result, we find that the imported goods were correctly classified under Heading 48.01/21. We accordingly reject these appeals.

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