TMI Blog1996 (7) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... /85-C C/1991/85-C. The outlines of these appeals are as under : A. No. C/1/69-C This appeal has been filed by Nirlon. They had filed revision application dated 1-9-1969 for refund of excess duty amounting to Rs. 2,31,552/- on 400 drums of caprolactam polymer nylon chips. The Bill of Entry was filed on 20-7-1968, and the order was passed by the Appellate Collector of Customs, Bombay, on 23-8-1969. The appellants had submitted that the goods imported should not attract countervailing duty under Item No. 15-A of the Central Excise Tariff. It was found from the test report that the goods in question were synthetic resin in the form of chips. A. No. C/123/76-C This appeal has been filed by Modi Pon against the Appellate Collector of Customs, Bombay, order dated 16-10-1975. The order-in-original of the Assistant Collector of Customs is dated 21-7-1973. The matter relates to the 100 drums of Poly-caprolactum high dull chips imported. The Bill of Entry is dated 17-9-1970, and in the Bill of Entry the goods have been referred to as Poly-caprolactum high dull chips. The import licence was for caprolactum monomer - Poly-caprolactum high dull chips. The duty was paid under protest, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ips semi-dull. In the Invoice No. 8483, dated 15-7-1970, the goods were described as plastic materials - polyester chips VFR 3638-B semi-dull. They claimed re-assessment under Item No. 87 of the Customs Tariff without the levy of countervailing duty. The original classification was under Item No. 82 (3) of the Customs Tariff read with Item No. 15-A of the Central Excise Tariff. The goods were found to be polyester synthetic resin. The impugned order is, dated 24-2-1972 of the Appellate Collector of Customs, Bombay. A. No. C/56/76-C This appeal has been filed by J.K. . Originally they had filed revision application, dated 25-6-1976 for refund of customs duty and C.V. duty. The Bill of Entry was, dated 31-12-1973. The amount involved was Rs. 1,35,758.35 in respect of the 591 bags. The order of Appellate Collector of Customs, Bombay, is, dated 3-1-1976. As per the order-in-original the claimant had failed to produce the documents called for. The claim was rejected as unsubstantiated. As per the test report, the goods were nylon synthetic resin in the form of granules and chips, correctly classifiable under Item No. 82(3) of the Customs Tariff. The appellants had claimed the benef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or refund of customs duty and countervailing duty paid in respect of the 500 bags of the goods which they had claimed to be nylon waste. The Bill of Entry is dated 15-3-1974 and the amount involved is Rs. 1,22,422.51. Their import licence was for importing nylon waste to recover caprolactum. As per the laboratory test report, the sample was composed of nylon synthetic resin in the form of granules, and was classifiable under Item No. 82(3), as against Item No. 87 of the customs tariff as claimed by the importers. As per the order-in-original, the claimants had failed to produce the documents called for. The claim was rejected as unsubstantiated. The other details of the appeal are the same as in the Appeal No. C/54/76-C. A. No. C/165/76-C This is an appeal filed by Modi Pon. Originally they had filed revision application dated 24-8-1977. The Bill of Entry is dated 4-4-1974, and the Appellate Collector of Customs, Bombay, order is dated 31-12-1976. The goods were nylon chips (Ultra Mid BS 403, from West Germany). The appellants had contended that the nylon chips imported could not be treated as plastic material or synthetic resin as they were of spinnable grade. Nylon chips of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C/1990/85-C This appeal is filed by Shree Synthetics, and the Bill of Entry is dated 22-6-1982, and the amount involved is Rs. 6,41,540/-. The Collector of Customs, Bombay, under his common order dated 31-5-1985 had rejected the refund claim on the ground that the goods were polyester synthetic resin. A. No. C/1991/85-C This appeal is filed by Shree Synthetics, and the Bill of Entry is dated 7-8-1982, and the amount involved is Rs. 4,27,685/-. The impugned order-in-appeal is dated 31-5-1985, and the other details are as in Appeal No. C/1988/85-C. All these 14 appeals involved common issues for consideration; they were heard together and are being disposed of by this common order. 2. The appellants had imported polyester polymer chips and polyamide chips for manufacturing polyester yarn and nylon yarn. The chips were imported in these proceedings during the period 1968-1982. On import, additional duty equal to central excise duty leviable on such polyester polymer/polyamide chips under Item No. 15-A of the Central Excise Tariff [called countervailing (CV) duty] was levied and paid. Section 2A of the Indian Tariff Act, 1934 provided for levy of countervailing duty. It provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucts and were not plastics. 3. All the appeals were heard, on 8-2-1996, when Shri Ravindra Narain, Advocate with Ms. Sonu Bhatnagar, Advocate and Shri M.R. Gupta, Advocate, appeared for M/s. Nirlon and J.K.; Shri Vivek Gambhir, Advocate, appeared for Shree Synthetics; Ms. Malini Sud, Advocate, appeared for Modi Pon. The Revenue was represented by Shri G.D. Sharma, JDR, in all the cases. 4. Shri Ravindra Narain, Advocate, briefly traced the history of the cases and referred to the decisions of the Bombay High Court and that of the Delhi High Court. He also referred to the Divisional Bench decision of the Bombay High Court wherein two earlier decisions had been noted and discussed. In the Divisional Bench decision, the appellants contention that for CV duty purposes, the goods were not classifiable under Item No. 15-A of the Central Excise Tariff had been negatived. He further submitted that the matters are presently lying with the Hon ble Supreme Court, but there was no stay and he was not in a position to say as to when the decision by the Hon ble Supreme Court could be expected. He submitted that there was no illegality in proceeding with the cases by the Tribunal. Taking up t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es India Ltd. v. Union of India, 1982 (10) E.L.T. 917 (Bom.) was in favour of the Revenue. In that Division Bench decision dated 25-6-1982 which is latter than the decisions of the Single Judge of the Bombay High Court and Single Judge of Delhi High Court, it has been held that polyester polymer or polymer chips fibre grade were synthetic resins liable to duty under Item No. 15-A of the Central Excise Tariff. They are a poly-condensation product and will technically and chemically fall within sub-clause (1) of Item No. 15-A of the Central Excise Tariff. The learned advocate, however, pleaded that the decision of the Division Bench should not be accepted as the decision had been rendered on different grounds. With regard to the appeal by J.K., it was submitted that the total exemption was provided under Notification No. 38/73-C.E., dated 1-3-1973 and that their end use was for Nylon yarn. With regard to Modi Pon, it was submitted that they have L-6 licence and Notification No. 244/67-C.E. was applicable in their case. Similar arguments were adopted for other appellants by other counsels. In support of their respective contentions, reliance was placed on a number of decisions t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poly-caprolactum which is also described as polyamide chips. In the process of polymerisation the monomers are grouped together to obtain a polymer. The bulk of the manufacture of caprolactum is via cyclohexanone and cyclohexanone oxime. Cyclohexanone is normally prepared either from phenol or from cyclohexane. The phenol route is a two stage process. In the first stage, phenol and hydrogen are reacted in the presence of a nickel catalyst at about 180 C to form cyclohexanol. This hydrogenation stage is followed by a de-hydrogenation stage in which the cyclohexanol is reacted in the gaseous phase at about 400 C in the presence of a copper catalyst to yield the cyclohexanone. The alternative route involves the air oxidisation of cyclohexane and proceeds via the production of a mixture of cyclohexanol and cyclohexanone. The conversion of cyclohexanone to cyclohexanone oxime is brought about by the use of hydroxylamine sulphate. The sulphuric acid is neutralised with ammonia to ammonium sulphate and this is separated from the oxime. In the presence of oleum, the oxime undergoes the process known as the Beckmann re-arrangement to yield the crude caprolactum. After further neutralisati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tificial or synthetic resins and plastic materials and articles thereof. It covered various artificial or synthetic resins and plastic materials in any form whether solid, liquid or pasty or as powder, granules or flakes or in the form of moulding powders. The Tariff Entry was again substituted by Finance Act, No. 2 of 1971 and further amended in the years 1977 and 1982. It will be seen that the Tariff Entry as existing from 1964 did not refer to the plastic as was the case in the years 1961 and 1962. The entry in the year 1964 referred to artificial or synthetic resins and plastic materials and articles thereof. 10. The goods under consideration are the polyester, polymer chips and polyamide chips. They were produced from DMT and caprolactum. They were used for producing polyester/nylon fibre, filaments and yarns. The Revenue had classified them as Item No. 15A while the appellants had contested that the goods imported were neither plastic nor resin. Item No. 15A covered artificial or synthetic resins and plastic materials. They could be in any form. A very wide coverage was given to these products in the Tariff Entry. As commonly understood plastics and resins are identifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... force streams of the chemicals through tiny holes. The streams hardens into filament fibres that are wound onto spools or cut into staple lengths ........................... Synthetic fibres are manufactured from chemicals. Most synthetic fibres are stronger than either natural or re-generated fibres. Synthetic fibres as well as the re-generated fibre acetete are thermo plastic (softened by heat). Manufacturers are able to shape these fibres at high temperatures adding such features as pleats and creases. These fibres also will melt if touched with too hot on iron. The most widely used kinds of synthetic fibres are : (1) Nylon polyamide fibres (2) Polyester fibres (3) Acrylic fibres and Olefine fibres . 12. The Division Bench of the High Court of Judicature at Bombay in the case of Chemicals and Fibres India Ltd. v. U.O.I. Others - 1982 (10) E.L.T. 917 (Bombay) had observed in Para-25 of their decision as under :- Even a cursory reading of Item 15A of Schedule-1 to the Excise Act will show that it is not restricted to any one particular item, but it refers to a class of products such as artificial or synthetic resins and plastic materials. This is further clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) Ltd. v. State of Haryana reported in 42 STC 433, the Hon ble Supreme Court had observed that in interpreting word in an entry one should bear in mind that it does not embody a static concept. It is the skin of a living thought and may change its hue with new developments in technology and emergence of new items and processes. A term in a fiscal legislation should be interpreted having regard to new developing materials, methods, techniques and processes. With reference to the concept of textiles , the Hon ble Supreme Court held that a new kinds of fabric may be invented which may legitimately without doing any violence to the language be regarded as textiles . 15. In the case of Collector of Customs Central Excise v. Lekhraj Jessumal Sons - 1996 (82) E.L.T. 162 (S.C.), the Hon ble Supreme Court had observed that it was un-reasonable to give a static interpretation to words used in a Tariff Schedule ignoring the rapid march of technology . Paras-3 and 4 from that order are extracted below :- Para-3 : The High Court in the impugned order noted that the stand of the Customs authorities was that the words switches, miniaturised as component parts of hearing aids shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (refer Supreme Court s decision in the case of Eskeyef Ltd. v. CCE - 1990 (49) E.L.T. 649 (S.C.), it is a fact that exemption granted could be taken into consideration for interpreting the scope of the Tariff Entry. Under Notification No. 244/67-C.E., dt. 4-11-1967, the Central Government exempted polyamides chips falling under Item No. 15 A from so much of the duty of excise leviable thereon as was in excess of 20% Adv. subject to certain conditions. It shows the Govt s understanding that polyamide/polyester chips were classifiable under Item No. 15A of the Central Excise Tariff. In J.K. Steel Ltd. v. U.O.I. - 1978 (2) E.L.T. (J 355) (S.C.) = AIR 1970 S.C. 1173, the Hon Supreme Court had emphasised the importance of exemption thus (Heading Note). In the case of fiscal statutes it may not be in-appropriate to take into consideration the exemptions granted in interpreting the nature and scope of the impost. Hence, for finding out the scope of a particular levy, notifications issued by the executive Government providing for exemption from that levy can be looked into as they disclose the overall scheme. The Hon Supreme Court further held in Para-38 on the game page (Heading N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o appreciate the contention, it is necessary first to make reference to the ingredients used in the manufacture of phenolic resin in the form of moulding powder. The list of ingredients is annexed as Exhibit A to the petition. Phenols are reacted with formaldehyde and thereafter mixed with catalysts like Oxalic Acid, Hydrochloric Acid, Sulphuric Acid, etc. The other ingredients used are hardners, neutralizer, accellerator, colouring matter, lubricants, fillers and plasticizers. The manufacturing process of phenolic moulding powder is set out in Ex. B annexed to the petition. Phenol and Formaldehyde are charged along with the catalyst, like Oxalic acid in Reactors. After the required extent of reaction, water is removed by distillation. In order to prepare various suitable types of Phenolic resins in form of moulding powders, depending upon various end applications, this finally ground resin is intimately combined with ingredients like fillers, colouring matters, hardners in Ball Mills. Since the expressions plastics or Plastic materials or phenolic moulding powder have not been defined by the Act, nor by any Rules framed thereunder, it will be necessary to refer to some s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms are used indiscriminately with respect to synthetic products. It is worthy of note, however, that general usage refers to cellulose derivatives as plastics and not as resins; and conversely, the synthetic resinous products, particularly those entering into the surface-coating field, are referred to as resins and not plastics. Doubtlessly, this distinction is again based on usage, since products of the resin class were primarily employed in the surface-coating field and the plastic characteristics were achieved by solution rather than by heat. The articles called plastics generally require shaping by heat during their fabrication by moulding or extrusion. Since the newer synthetic products can frequently be used inter-changeable as coatings or as mouldings, the distinction between resins and plastics becomes less pronounced. Moreover, modern technology shows that the materials which are designated as rubber, fibres, resins and plastics are of a similar molecular structure, and by appropriate chemical and physical treatment it is possible to inter-convert any one of these materials. It follows that certain structural features are common to all these products, and, being common, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at this stage can be dissolved in various organic liquids; such solutions are employed for laminating and impre-gnating purposes. The structure can be represented schematically as follows : To make the moulding compound, the resin is ground and mixed with the appropriate filler, lubricants and dyes. To render the combination as homogeneous as possible, the mixture is milled and then ground. For general use, wood flour is the preferred filler, but where heat resistance, impact strength, or electrical characteristics are involved, other fillers such as cotton flock, asbestos and chopped fabric are used. The resin, because of its excellent insulating characteristics, is used in manufacturing radio parts such as sockets, binding parts, knobs, and dials and in the electrical system of automobiles. From the above passages, it is clear that though the expression plastic is generically broader than the expression resin , both terms are used indiscriminately with respect to synthetic products and the modern technology has shown that the materials which are designated as rubber, fibres, resins and plastics are of the similar molecular structure, and by appropriate chemical and physi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that judgment proceeded on the footing that the Department itself has treated the two expressions synthetic resins and plastics as interchangeable and the Court was concerned with the question as to how the expression plastics or plastic material was understood by commercial persons who deal in it. The view taken in that case was that caprolactum polymer chips of the spinning grade obtained by the company for the manufacture of nylon yarn were not regarded as raw material for the manufacture of plastic goods or plastic articles and were not commercially known as plastics. Having regard to the view which we have taken of the nature of the items covered by Item 15A(1), the decision in Nirlon Synthetic Fibres Chemicals Ltd s case cannot be of any assistance to the petitioners. (43) We need not refer in detail to the decision of the Delhi High Court in J.K. Synthetic Ltd. v. The Collector of Central Excise in which the relevant Item No. 15A, which fell for consideration, was as it was in 1962 and the question was whether polymer chips were plastics within the meaning of Item 15A. 23. The ld. Advocates had cited a number of decisions in support of their contention that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary Section of the Customs Tariff. 26. J.K. Synthetics had claimed that the goods imported by them were waste and were eligible for exemption under Notification No. 26 B/72 C.E., dated 18-3-1972. They had not elaborated as how the goods imported were waste and what was the nature and the character of such waste. On the ground that the goods imported were used for the recovery of caprolactam, it could not be said that the goods imported were waste. As per laboratory s Test Report, the goods were found to be synthetic resin in the form of granules. The goods were cleared on payment of appropriate duty as leviable on artificial or synthetic resins and plastic materials in any form, under Item No. 82(3) of the First Schedule to the Customs Tariff, read with Item No. 15A of the Central Excise Tariff. Subsequently, the importers had filed the refund claims. The original authority called for certain documents which the appellants failed to produce. The refund claim was rejected by the original authority as un-substantiated . 27. Under Exemption Notification No. 26B/72-C.E., dated 18-3-1992, wastes of polyamide (Nylon) fibre and yarn falling under Item No. 18 was exempted from cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applied to imported goods. Under Notfn. No. 38/73-C.E. polyester polymer chips falling under T.I. No. 15A were exempted from the duty unconditionally. Exemption in favour of polyamide chips was however, subject to the condition, that such polymer chips were used in the manufacture of nylon yarn. Further, where such use was elsewhere than in the factory of production, the exemption was allowable only if the procedure laid-down in Chapter X of the Rules was followed. With regard to the applicability of this exemption notification, the appellate Collector of Customs, Bombay had observed that Notification No. 38/73-C.E. was applicable only to indigenous goods under the Act and that it had no relevance in the context of the Customs Act, 1962 or the Indian Tariff Act, 1934 under which the imported goods were to be assessed. 30. Under Section-2 of the Indian Tariff Act, 1934 read with Section-12 of the Customs Act, 1962, customs duty was payable on the importation of the goods in India at the rates specified in Schedule to Section-2 of the Tariff Act. Under Section 2A of the Tariff Act, an additional duty on imported goods was levied. The said section insofar as material deserves to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds thus :- Rule 192. - Application for concession. - Where the Central Government has, by notification under Rule 8, sanctioned the remission of duty on excisable goods other than salt, used in a specified industrial process, any person wishing to obtain remission of duty on such goods, shall make application to the Collector in the proper form stating the estimated annual quantity of the excisable goods required and the purpose for and the manner in which it is intended to use them and declaring that the goods will be used for such purpose and in such manner. If the Collector is satisfied that the applicant is a person to whom the concession can be granted without danger to the revenue, and if he is satisfied, either by personal inspection or by that of an officer subordinate to him that the premises are suitable and contain a secure store-room suitable for the storage of the goods, and if the applicant agrees to bear the cost of such establishment as the Collector may consider necessary for supervising operation in his premises for the purposes of this chapter, the Collector may grant the application, and the applicant shall then enter into a bond in the proper form with a sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f goods required as well as the manner and purpose of their use and give a declaration that they will be used for the specified purpose. Thereupon the Collector, if satisfied that the concession can be granted without danger to the revenue may grant the application subject to the conditions set out in the section. He may grant a licence in form L-6 in appropriate cases and, in others, direct the grant of a certificate in Form CT-2. The possession of the licence or the production of the CT-2 certificate enables the applicant to secure the necessary concession. A similar question has been dealt with by the Hon ble Supreme Court in the case of Thermax Pvt. Ltd. v. Collector of Customs, Bombay New Customs House - 1992 (61) E.L.T. 352 (S.C.) = 1993 AIR SCW 509. Paras-11, 12 and 13 from that decision are extracted below :- 11. It will at once be seen that there is nothing in the scheme of the rule which makes it inapplicable to an importer of goods. The assessee here has imported the goods and is selling them for use in a factory, a use which qualifies for the concession under the S. 8 notifications. The types of use specified in the concessions notified could be of any kind and, ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Chapter X of the Rules cannot be complied with in such cases is correct, the exemption under the notification cannot be denied. He relied, in support of this submission on a letter of the Central Board of Excise Customs (F. No. 332/65/86 TRU, dated 27-7-1987) the relevant portion of which runs as under : The Board is of the view that it would legally not be correct to levy additional (countervailing) duty is actually payable in respect of such goods when manufactured in India (sic). It follows therefore, that when there is no excise duty, there can be no additional (countervailing) duty. The condition in the relevant Central Excise Notifications that in respect of use of the material elsewhere than in the factory of manufacture, the procedure set out in Chapter X of the Central Excise Rules should be followed is condition relating to procedural requirement which obviously cannot be satisfied by the imported goods. In view of the above, it would not be correct to deny the benefit of exemption notification to imported goods only because the procedural condition in the notification is not satisfied by the imported goods. It has therefore, been decided that wherever the in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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