TMI Blog1983 (12) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... that the products, being silicone emulsions, were still classifiable under Item 68 CET and accordingly filed classification list in respect of these products; (iii) On 19-6-1981, the Supdt. of Central Excise issued a notice to HICO stating that Katrang -- SI HA SI 40 SI H SI H 2X merit classification under Item 15A(1) CET after 28-2-1982; that HICO had contravened Rules 173B and 173C of the Central Excise Rules (to be referred as Rules hereafter) and asking HICO to show cause why the differential duty amounting to ₹ 3,04,127.26 (basic) and ₹ 20,631.75 (Special) should not be demanded from them; (iv) In adjudication, the Assistant Collector held that the subject goods which were admittedly silicone emulsions liable to duty under Item 15A(1) CET; (v) The appeal against this order was rejected by the Collector (Appeals); (vi) It is against this order of the Collector the HICO is now before us. 3. Pendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for HICO made the following submissions : (i) The levy of additional duty of customs on the imported silicone oils with reference to Item 15A CET was not disputed. The imported oil merely underwent a change in form from liquid to emulsion. The process of emulsifying the oil did not amount to a process of `manufacture and the resultant product, silicone emulsion, did not attract excise duty again under Item 15A(i) CET. (ii) Even if it was felt that there was `manufacture , the emulsion was not leviable to duty a second time. (iii) The imported silicone oil was covered by Explanation II to Item No. 15A CET as a poly-condensation product produced by chemical synthesis. What was produced by HICO was not a poly-condensation product produced by chemical synthesis. HICO merely mixed the imported silicone oil with an emulsifier and water to produce silicone emulsion. (iv) The ratio of the decision of the Supreme Court in the Dunlop case reported in AIR 1977 S.C. 597 and that of the Tribunal in the case of Golden Paper reported in 1983 E.L.T. 1123 applied to the present case. The said ratio of these decisions would apply to the present appeal notwithstanding the fact that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was a product distinct from silicone oil in its name, character and use. (vii) The ratio of the Supreme Court decision in the Tungabhadra Industries case would not apply to the present case since that decision pertained to a sales-tax matter and the sales-tax law was not pari materia with Central Excise Law. (viii) Explanation II to Item No. 15A CET was independent of the Explanation III. Unless poly-condensation came into being, Explanation III did not come into play. (ix) In the circumstances, the appeal should be rejected. 7. In reply, Shri Taraporewala said that Explanation II and Explanation III to Item 15A CET should be read together. Explanation II was not attracted in the present case. The ratio of the Tribunal decision in 1983 E.C.R. 552D on zinc calots would not apply in the present case. 8. We have carefully considered the submissions of both sides. 9. HICO imported Silicone oil which was levied with additional duty of Customs with reference to Item No. 15A CET. There is no dispute about this. The said duty-paid imported silicone oil was intimately mixed with excise duty-paid emulsifier and water by HICO in their factory. It is nobody s case that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation II. - In sub-item (1), condensation, polycondensatic poly addition, polymerisation and co-polymerisation products are to be taken to apply only to goods of a kind produced by chemical synthesis answering to one of the following descriptions :- (a) artificial plastics, including artificial resins; (b) silicones; (c) resols, liquid polyisobutylene, and similar artificial polycondensation or polymerisation products. Explanation III. - Sub-item (1) is to be taken to apply to materials in the following forms only :- (a) liquid or pasty (including emulsions, dispersions and solutions); (b) blocks, lumps, powders (including moulding powders), granules, flakes and similar bulk forms; (c) waste and scrap. 12. At the outset, it needs to be mentioned that the words used in Item 15A, CET have to be interpreted with reference to their technical or scientific meaning and not popular meaning. This has been clearly laid down by the Bombay High Court in the case of Chemicals and Fibres India Ltd. v. Union of India Others - 1982 E.L.T. 917 (Bom.). 13. Now, silicones is specified in terms in Item 15A(1), CET. The scope of Item 15A, as the very op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sation product. Explanation II to Item 15A(1) CET (see para 11 supra) squarely comes into play. Thus silicone oil would attract duty under the said item as a polymerisation product, answering to the description `silicone . Suppose, it is produced in an integrated factory where silicone oil is not cleared as such but after it is converted into silicone emulsion. Explanation III (see para 11 supra) provides that Item 15A(1) CET is to be taken to apply to materials in certain specified forms only and one such form is liquid or pasty (including emulsion., dispersions and solutions) (underlining ours). We thus see that silicone oils in emulsion form fall for classification under Item 15A(1) CET by virtue of the combined operation of Explanations II III. It is not correct to contend that one explanation should be read independently of the other. There can be no manner of doubt that both are to be read together. 16. What is the situation if silicone oil is cleared on payment of duty and then converted into emulsion? The learned counsel for HICO contends that there is no manufacture involved in the process of conversion and that even if it is held that there is `manufacture , the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate viscosity, with goods shelf stability and resistance to phase separation. It is thus apparent that silicone emulsion is not a simple mixture of silicone oil, water and emulsifier. It is a fine, stable, intimate dispersion of silicone oil in water with the aid of an emulsifier. 18. Silicone emulsion, thus, is not the same thing as silicone oil. The emulsions again to refer to page 557 of the Encyclopaedia of Polymer Science and Technology are for use primarily as anti-foaming agents and as release agents. The features which make the use of emulsions desirable include non-flammability, compatibility with aqueous systems, ease of dilution, and effectiveness of these highly dispersed forms of silicone in applications where surface properties are important . When emulsions are, by virtue of Explanations II and III of Item 15A(1), CET, brought specifically within the ambit of the said Item, there is no scope for the argument that the process of conversion of silicone oil into silicone emulsion is not manufacture within the meaning of Section 2(f) of the Act read with Section 3 ibid (see 1980 E.L.T. 735). 19. the learned Counsel for HICO referred to the Supreme Court d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raw oil, rendering the oil content 100 per cent. For this reason, the Court held that the refined oil continues to be groundnut oil within the meaning of the relevant Sales Tax Rules notwithstanding that such oil did not possess the characteristic colour, or taste, odour etc. of the raw groundnut oil. The relevant rules talked of groundnut oil without any qualifying words. The Court held that the term would take in not only raw but also refined groundnut oil. This decision, in our respectful opinion, is not relevant or applicable to the facts of the present case where we have no interpret a complicated tariff entry employing scientific or technical terminology and the entry has built-in explanations, as we have already seen. The two laws are not similar nor are the two situations. Hence, the Tungabhadra case ratio is of no help to HICO. 24. Likewise, we consider that there is no substance in HICO s contention that even if it is held that silicone emulsions fall under Item 15A(1), CET, they cannot be charged to duty again under the said Item. This contention presumably stems from the concept that there can be no double taxation on the same goods. Silicone emulsion is different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in nature, use, class or general nomenclature]. It has always been my belief that once an article, product, substance, has been identified with a description of an item of the tariff, and has paid the duty leviable under that item, it cannot be taxed again with the same duty under that same item or sub-item. [The grouping of descriptions by which this discussion will proceed is the smallest or most subordinate grouping, if there are such smaller groupings or sub-groupings, and the duty is to be understood as the duty on the sub-grouping, if there is one. Where there is no sub-grouping but only main group under the item, the duty is the duty for that main group or item]. This is because the group is taxable with a duty : That duty has been paid and, therefore, that liability has been discharged and so extinguished. A liability of this kind having been discharged, it cannot be revived again : Nor does the law allow it. When the law wants to impose duties for each change of product description, it imposes different liabilities. This is done by giving different duties to different product description under different items and/or sub-items. Thus, articles made of artificial resins are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bout ease of application, consistency of results in the end-product, prevention of settling out and itself has obvious advantages. That is why emulsifiers are sometimes added, as and when longer storage becomes necessary. But it will not be a correct interpretation to say that emulsification of an existing resin liquid or oil is equivalent to production of a new resin in emulsion assessable, again, under 15A. Whether the levy was a countervailing duty or Central Excise duty, the principle is the same, and when we are dealing with imported goods and these goods have borne countervailing duty equal to duty of a Central Excise tariff item, it cannot again be made to pay Central Excise duty under the same Central Excise item. 33. For more reasons than one therefore, the levy of Central Excise duty on the silicone oil after emulsification was not correct. It is not, as has been argued by the appellant, that there has been no manufacture : It is because though emulsions are excisable under Item 15A, they are one form of several, in which the resins can be levied but not a form which, if given to a duty paid resin that was not previously an emulsion, must attract fresh 15A duty to it ..... 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