TMI Blog2002 (12) TMI 546X X X X Extracts X X X X X X X X Extracts X X X X ..... red the product as Butyl Acrylate Monomer and claimed the classification under heading 2916.12. The assessments were sought by the appellants as adhesives under the DEEC licence. 2. Enquiries were initiated by the Revenue against the appellants on the belief that the product imported by the appellant was defined organic chemical and was not an adhesive and the advanced licences covering imports of adhesives submitted by the appellant for clearance of the consignments under DEEC scheme availing the benefit of customs notification were not applicable in the matter of clearance of the goods in question inasmuch as the said licences were for import of adhesives and the product was not adhesive. Accordingly searches were conducted in the offices of the appellants and their statements, etc., were recorded. The customs clearing agent was also interrogated and efforts were made to find out as to whether the product in question was used as a bonding agent or not. Shri R.K. Jain in his statement recorded during such investigations deposed that the product was used as a bonding agent and on polymerisation the same become an adhesive. The Revenue also drew the sample and sent it for testing. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the benefit of the advance licences and the notification in question was not available to the importer. Accordingly the demand of duty was confirmed by invoking the longer period of limitation in respect of 14 bills of entries on the ground that the appellants had misdeclared the product in question. 6. It was also held by the Commissioner that the goods are liable to confiscation, but inasmuch as the same were not available, no redemption fine was imposed by him. Penalty of equivalent amount was imposed upon M/s. Sanghvi Overseas. The goods covered by the bill of entry dt. 8-5-97 and 19-3-98 which were under seizure by the Revenue were confiscated with an option to the appellant to redeem the same on payment of redemption fine of Rs. 6,00,000/- (Rupees six lakhs). Further penalty of Rs. 3,00,000/- (Rupees three lakhs) was imposed upon M/s. Sanghvi Overseas in relation to the importation of the goods under the above two bills of entries. Penalty of Rs. 65,00,000/- (Rupees sixty-five lakhs) was imposed on the second appellant Shri R.K. Jain on the findings that he was the main person behind the imports which led to evasion of huge amount of customs duty and was an adviser to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... light, air and heat at room temperature, BAM starts self polymerisation and gets the property of adhesive. Chemical composition of Butyl Acrylate Monomer and Butyl Acrylate Polymer is same. To speed up polymerisation some time initiator or extra heat may be given. No process or manufacturing process is required to Polymerise BAM. (iii) It is an admitted position that the BAM when polymerised becomes adhesive. Dispute in short is whether BAM in a packed condition without opening the box can be said to be adhesive. Goods in packed condition is of no use. It can only be used when it is opened and put to use. For all practical purpose BAM is an adhesive. Word adhesive was mentioned in the ex-Bond B/E inasmuch as the appellant sought release of goods under advance licences allowing adhesive as duty free import. In any event goods were chemically tested in the Customs House and goods were cleared after satisfaction of the proper officer that BAM is adhesive. The department was very much concious that goods were claimed as adhesive and they were so satisfied after examination of the goods and deliberation made in this regard. (iv) Chemicals of similar nature such as Po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eged that for polymerization a catalyst is to be put into it. Catalyst does not react but it speeds up formation of polymerization. BAM as it is has no use as it is BAM is a condition of storate and/or static condition which is achieved by putting inhibitor to prevent self polymerization. But if the box is open and BAM comes in contact with light and heat polymerization process starts suo motu. However to speed up polymerization extra heat may be given or any initiator/catylist may be dropped into it which would speed up polymerization. (vii) Adhesive is end-use of a chemical. It is admitted in the show cause that and end-use of BAM is adhesive in leather industry. However, a mala fide distinction is sought to be made that until monomer becomes polymer, it is not adhesive. It is alleged that in Monomer from BAM is not adhesive. By such absurt interpretation attempt has been made to divest BAM from the coverage of adhesive. (viii) Chemical composition of BAM is same of Butyl Acrylate Polymer Chemical composition of monomer form all molecule subsist separately and in polymer form they link with other molecule and make a chain. To put it more lucidly if 100 student are stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ol as adhesive is annexed of the reply and marked Annexure C-1 therein. (xi) It is settled proposition of law that exemption notification are to be liberally construed. Requirement of opening of container, allowing BAM to contact with light and heat and even putting a catylist cannot detract from its being adhesive. Adhesive is not defined in the Act. It is now settled law that the words and expressions, unless defined in the statute have to be construed in the sense in which persons dealing with them understand i.e. as per trade and understanding and usage. Case made in the show cause notice resemble story of Merchant of Vanice where pound of flesh is demanded but objection was raised on out come of blood. (xii) It is admitted position in the show cause notice that Butyl Acrylate Polymer is an adhesive. BAM polymerises readily on heating or when it comes into contact of air or light. Monomer is a condition of storage and polymer is a condition of application. The Butyl Acrylate cannot be kept in a storage condition in a polymer form. The learned Adjudicator held the goods not adhesive just because of the reasoning given in paragraph 118 of the order that inasmuch as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly. The issue required to be decided in the present case is as to whether the Butyl Acrylate Monomer is an adhesive or not for the purposes of allowing the duty free clearances against advanced licences issued under DEEC scheme. If the answer to the above question is in the negative then the valuation dispute is also required to be solved. A further question as to whether the demand is barred by limitation or not is also involved. 12. We find from the impugned order that the Commissioner has observed that on the issue as to whether BAM is adhesive or not, voluminous technical literature has been produced by both the investigating agency and the noticee concerned. He has observed that on careful examination of the literature brought on record by both the sides, it is seen that BAM in monomer and inhibited form does not have any adhesive properties and this position has been accepted by the appellants also. As such he has gone by the fact that it is the form in which any material is imported, which is to be considered relevant for the purposes of classification. Inasmuch as BAM is a separate chemical defined compound it has been correctly classified under the Customs Tariff Heading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the preparation of acrylic polymers. The principal markets for aqueous dispersion polymers made by emulsion polymerisation acrylic esters were the paint paper adhesive, textile, floor polish and leather industries where they were principally used as coatings or binders. Copolymers of either ethyle acrylate or butyl acrylate with methyl methacrylate were most common and such industrial acrylic emulsion polymerisation were usually carried out by Batch processes in jacketed stainless steel or glass lined reactor fitted with various equipments. In normal practice, inhibitors such as Hydroquinone (HQ) or the Mono methyl either of Hydroquinone (NEHQ) were added to acrylic monomers to stabilize them during shipment and storage. Also value-wise, prices of Acrylic Polymers were generally one and one half to these time the monomer costs. Acrylic emulsion and solution polymers from the basis of a variety of adhesive tapes principal use was in pressure sensitive adhesives where a film of very low Tg (- 20 C) polymer or copolymer was used on the adherent side of the tape. (Based on Encyclopaedia of Chemical Technology by KIRK OTHMER, Fourth Edition) 57. As per Hawley s Condensed Chemi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he esterification of Acrylic Acid and butyl alcohol. Butyl Acrylate was used to make solution polymers for imparting flexibility, tackiness and water resistence, in paint adhesive, leather and paper quotings . Manager of the said organisation Shri D.K. Chattopadhyay in his letter dt. 26-9-98 informed the Revenue that Butyl Acrylate Monomer, as it was could not be used as adhesive. Similarly ICI (I) Ltd. opinion was obtained which is to the effect that the chemical in its monomer form could not be considered to have adhesive property and adhesives could be prepared from this Monomer by polymerising them usually via suspension or emulsion, polymerisation into low molecular weight oligomers. This requires the presence of initiator and some energy inputs, usually in the form of heat or light. 14. The opinion of Dr. N. Krishnamurthy, Head and Deputy Director, Organic Quotings and Polymers Division, as given vide his letter dt. 20-7-98 is as follows :- (i) Adhesive in any natural or synthetic polymer which could bond two surfaces which might be of absorbing nature. (ii) Butyl Acrylate Monomer itself was not an Adhesive. But it could be polymerised or co-polymerised to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution in its Monomer form can be considered as an adhesive or not. According to the appellant it is not practical and feasible to import the product in its polymerised form and the same is always stored in its Monomer form. In fact inhibitors are added to avoid self-polymerisation of the product during storage. Taking an example from our day-to-day life, we are all aware that adhesives, as long as they are in a tube or container are in liquid or semi-liquid form, but when the same are taken out of the tube for the purposes of utilisation they become hard on coming in contact with air and are required to be used immediately otherwise they become brital and hence waste. This obviously reflects that on coming in contact with the environment i.e. air, heat or light, the chemicals turn into adhesives and binds the two or more surfaces together by surface attachment. This happens because the adhesives, on evaporation of the solvents or water leaves a continuous films/residue between the surfaces to be bonded and these films/residue holds the substance together. Similarly in the present matter if the polymerisation takes place inside the container itself, the substance may not be of any u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sification. Availing of benefit of a notification, which the Revenue subsequently might find was not available, cannot lead to the charge of misdeclaration or misstatement, etc. And even if an importer has wrongly claimed his benefit of the exemption, it is for the department to find out the correct legal position and to allow or disallow the same. Their contention is that inasmuch as in the present matter the customs authorities have allowed the clearance of the goods by extending exemption under the notification and have debited their advanced licences accordingly, the confirmation of demand by invoking longer period of limitation was not justified. They have also contended that there had been earlier cases also of duty free importation of the same item and as such there can be no mala fide on their part to misdeclare the goods. 20. We find that the Commissioner in his impugned order has observed that under normal circumstances, it is not possible for the customs officers who daily assess a large number of bills of entries to initiate detailed investigation unless suspicion/specific intelligence triggers of such investigation. We do not appreciate the above reasoning of the adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The classification of the goods i.e. BAM under Chapter 2916.12 of the Customs Tariff is also not found to be under challenge or incorrect on the into-bond or and ex-bond bills of entries filed for clearance of the goods. The dispute is on the eligibility of the warehoused BAM to the benefit of Notfn. No. 79/95-Cus. on basis of the DEEC Licences/TRA produced and allowed. (b) Section 15(1)(b) of the Customs Act provides that in case of goods being cleared from a warehouse under Section 68 the rate of duty and Tariff valuation, if any, applicable would be the rate or and Tariff valuations, applicable on the date of actual physical removal of such goods from the warehouse. This section does not provide for re-classification and or re-valuation of the goods which have been warehoused. (c) The application of the rate of duty on production of DEEC advance licence or a Tariff Release Advice (TRA) and benefit of Notfn. No. 79/95-Cus. could be granted, if the goods being cleared from the warehouse conform to the conditions of the said exemption notification. It is nobody s case that the other condition of the Licence or the notification are not satisfied. The dispute is limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Ganguli contended, that an assessee claiming relief under an exemption provision in a taxing statute has to show that he comes within the language of the exemption. But, in trying to understand the language used by an exemption notification, one should keep in mind two important aspects : (a) the object and purposes of the exemption, and (b) the nature of the actual process involved in the manufacture of the commodity in relation to which exemption is granted. The same is also to be considered in the interpreting this exemption notification, as also to follow the observation of the Apex Court in the case of Bombay Chemicals - 1995 (77) E.L.T. 3 (S.C.) :- Interpretation of exemption notification - Expression therein when to be interpreted in broad or narrow sense - Exemption notification to be strictly construed only when a particular article is capable of falling in one or the other category specified in the notification but once it falls under the exemption notification it has to be construed broadly and widely - Once an article is found to have satisfied the test by which it falls in the exemption notification then it cannot be excluded from it by construing the exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no reason why BAM which on similar acqueous dispersion even if classified under 2916.12 and can thereby function and used as a binder in Leather Industry as per this authoritative Encyclopaedia on Technology, should be denied the benefit of considering the same as adhesives. When import of Adhesives which are not defined or restricted classification in the Licence. No doubt, technical experts have opined that polymerisation of BAM takes place at elevated temperatures and imports it Adhesive qualities, yet none of these experts have denied that acqueous-dispersions of BAM Emulsions, would not result in importing adhesives/binder capacities of BAM properties to the emulsions emerging. Polymerisation of BAM can even take place by photo-chemical reactions radiations and induced by exposure to Oxygen in Air, as per this Chemical Encyclopaedia. The crux of the issue is that for Leather Industry employs, aqueous polymerised BAM and that material is sufficient for allowing the import of adhesive. The licence and the notification as observed, do not prescribe the total extent of polymerisation for such synthetic imported BAM. (g) When it is found that the BAM under import a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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