Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Hico Products Ltd. on 29 May, 1990
Equivalent citations: 1990(29)ECC292
ORDER
S.L. Peeran, Member
1. This is Revenue's appeal against the impugned order-in-appeal passed by the Collector of Central Excise (Appeals), Bombay dated 18.12.1985 by which he set aside the order-in-original dated 4.1.1985 passed by the Assistant Collector of Central Excise.
2. The respondents M/s. Hico Products Ltd. are manufacturers of the products (1) Dimethicon--20 (2) Dimethicon--350 (3) Dimethicon--2000 (4) Dimethicon--1000 and (5) Simethicon and (6) Dimethicon--100. They were filing classification list for products from Sr.Nos. 1 to 5 under tariff item 68 of CET w.e.f. 10.8.82 and for the product against Sr.No. 6, they were filing classificiation list under tariff item 68 w.e.f. 24.1.1983. On certain occasions, they have filed classification in respect of the above products under tariff item 15-A on insistence by the central excise officers and have paid duty under protest, claiming that these products are classifiable under Tariff item 68.
3. The Department, therefore, drew samples of the above products and sent the same to Deputy Chief Chemist, Bombay for chemical analysis. The report stated that the products Dimethicon--20, Dimethicon--350, Dimethicon--2000, Dimethicon--1000 and Dimethicon--100 were polysilozane compounds (silicone oils) stated to have defoaming properties and product simethicon is in form of jelly like mass and was composed of silicone oil and silicone. Therefore, the Department on receipt of the report from the Deputy Chief Chemist, Bombay issued a show cause notice dated 11.11.1984 to the respondents asking them to explain as to why the products should not be finally classified under tariff item 15-A in all those cases in which the classification had not been finalised. After taking explanation and giving an opportunity to the respondents to put forth their case, the Assistant Collector by his order-in-original held that these products in question are classifiable under tariff item 15A(1) of CET and the assessments were finalised accordingly.
4. The Assistant Collector had in his order held that the products are silicones and silicones find a specific mention in the explanation 11 (sic) of tariff item 15A. Explanation (11) (sic) of the tariff item 15-A says:
In sub-item (1) condensation, poly-condensation, 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, and
c) resoles liquid polyisobutylene and similar artificial polycondensation Or polymerisation products He further held that the products Dimethicones are prepared by hydrolysing a mixture of dichlorodi-methyl silane and chlorotrimethyl silane. The products of hydrolysis contain active silanol group through which condensation and polymerisation proceeds. By varying the preparation of chlorotrimethyl silane which acts as a chain terminator silicones of varying molecular weight may be prepared. Dimethicones can be represented by formula CH 3 (Si (CH 3) 2) Si (CH 3) 3. Simethicon is activated polymethyl silizane.
5. The Asstt. Collector noting the manufacturing process of the said products and their chemical composition, came to the conclusion that they are products of polymerisation and are silicones.
Therefore, he held that the products conform to the specification mentioned in Explanation II of tariff item 15A of First Schedule of Central Excises and Salt Act, 1944. He rejected the contention of the respondents that the silicones having properties alone can be classified under tariff item 15A on the ground that Explanation II of Tariff item 15A covers all silicones (sic). He relied upon the citation in the respondents' own case as of this Tribunal. He held that all silicones come within Tariff Item 15A He did not accept the citation relied upon by the respondents in their own case in Order No. l33-134/84-C of CEGAT Special Bench C. He found that the classification of products in that case did not relate to silicone. The Assistant Collector also rejected the other contentions raised by the respondents by giving a reasoned order. He rejected the respondents' contention that the products are of pharmacopoeial standard meant for use and consumption by human beings and manufactured under Drug Control Licence, therefore, calling for classification under tariff item 68. By relying upon the ruling of this Bench in order No. 224/84-C Dated 27.4.84 in the case of Anand Sythethom Pvt Ltd v. Collector of Central Excise, Bombay in which at par 8 and 9 it is observed as under-
The notification No. 55/75-CE under which drugs are given exemption cannot classify a substance under tariff item 68 if there is a more suitable heading for it. Sodium lauryl sulphate has a distinct surface active properties and is in fact used in patented preparations for this very property as it enables proper penetration of active therapeutic components otherwise into impenetrable tissues and areas. That it is used as a drug for healing or to aid healing may be true but item 68 is not a heading as it has no description or nomenclature (sic). It covers only goods that cannot be covered by the preceding headings. Unless the products was not classifiable under headings, it cannot fall under item 68 ibid. But Sodium lauryl sulphate has a special heading under item 15AA therefore it will be classifiable under that item.
The Assistant Collector held that as the product is covered under Tariff item 15A of CET, the question of exemption under notification No. 104/82 dated 28.2.82 and notification No. 234/82 dated 1.11.82 was not applicable to these products.
6. The Collector of Central Excise, however, did not agree with the findings of the Asstt. Collector in order-in-original. He set aside the order on the ground that the goods conform to pharmacopoeial standards and are recognised as such and are also used as drugs. He has observed that the products are to be classified under TI 15A(1) should have plasticity and should possess a reasoned character which contention of the respondents, has not been controverted by the Asstt. Collector. He has also observed "It is also not clear whether this aspect was in fact got verified when samples were drawn for purposes of test. In the light of the above discussion, it is evident that the products under question are not liable to be classified under tariff item 15A(1) under item 68 (sic). In the circumstances, the appeal is admitted. This order however, could not bar the Asstt. Collector from drawing fresh samples and having them tested to determine whether the goods have reasoned character or not".
7. Shri S. Chakraborthy, the learned Departmental Representative submitted that the Collector in his appeal admitted, the product to be silicone oil and therefore, it was immaterial with regard to use to fall outside the scope of item 15A. He submitted that the matter had been fully discussed and fully covered by larger bench decision of this Tribunal in the respondents own case as . In conclusion, the larger Bench held that the silicone fluids imported by M/s. Hico Products shall be assessed as silicones whether under Customs Tariff 39 or Central Excise Tariff item 15A.
8. Shri S. Ganesh also with Sh. Sanjay Grover, Advocates appearing for the respondents, sought permission of the Bench to distinguish the Five Member Bench case by relying upon the large number of citations. The main arguments was that Full Bench dealt with silicones and in ordinary sense and not in the nature of pharmacopoeial or in the nature of drugs and the Full Bench decision concerned with fluids i.e. silicones in general. He submitted that before the larger Bench, no arguments were advanced that these category of drugs and classifications may be put (sic). He submitted that as a drug the product obtained a separate identity and character. He further submitted that it was manufactured under a drug licence and sold only to drug authorities. It was his contention that it has to be considered as a pharmacopoeial drug. He drew analogy that petroleum jelly being a petroleum product was considered as a drug and taken as a pharmacopoeial drug. He again submitted that bone consumption was coming under pharmacopoeial and it was taken out under 15A. He relied upon the following citations-
1. Elpro International Ltd and others v. Jt. Secy. Govt, of India, Ministry of Finance & Ors.
2. Collector of Central Excise v. Johnson and Johnson Ltd
3. J.L. Morison, Son & Jones (India) Ltd. Bombay v. Collector of Central Excise, Bombay
4. Collector of Customs, Bombay v. Dr. D.D. Tanna, Bombay 1983 ELT 1137 CEGAT.
5. Pacific Exports v. Collector of Customs, Bombay 1989 23 ECR 365 (CEGAT) : [1990] 28 ECC 412 (SB) and
6. Haresh Brothers v. Collector of Customs
7. Oil Dane Trading Pvt Ltd. v. Collector of Customs, Calcutta 1983 ECR 1207-D(CEGAT) He submitted that the Five Member Bench decision which the Revenue has relied is pending before the Hon'ble Supreme Court and as such, the Bench should consider its earlier order in view of the large number of citations relied upon by him.
9. Shri Chakraborty in his reply submitted that the citations relied upon by the learned advocate are not at all relevant to the facts in question as the citations referred to were mostly pertaining to Tariff item 11A which is residuary of Petroleum products and TI 68. He submitted the situation is quite different as far as this case is concerned, as the Larger Bench had clearly laid down that all items of silicone are covered under item 15 even if it is a drug. In this connection he relied upon the citations, Collector of Central Excise v. Jaynat Oil Mills 1989 40 ELT 287 and MSCO Pvt. Ltd. v. Union Of India and Ors. .
10. We have heard both the parties, considered the submissions carefully and gone through the citations and the orders of the lower authorities. The question before us for consideration is whether the impugned products fall under Tariff Item 15A or Tariff Item 68? The citations relied upon by the advocate mostly deal with the following items.
11. In Elpro International case (supra), the product was steel furniture-Orthopaedic and fracture tables know as Orthopoise 99. Since this product was used as X-ray protective screen, the Supreme Court held that it was classifiable as steel furniture under item 40.
12. In J.L. Morison, Son & Jones (India) Ltd case (Supra), the product was bandages and plasters-zinc oxide adhesive plasters. They were held as classifiable under 14E and not under item 60.
13. In Collector of Customs, Bombay v. D.D. Tanna (Supra) the item pertained to bone cement which was held as dual polymer formulation of rigid quality standards required for use in the human body and therefore, could not be regarded as synthetic resin or plastic material falling under heading 39 or heading 90.19 of Customs Tariff as medical appliances. Since bone cement is akin to dental cement, it was classified under heading 30.04/05 of Customs Tariff Act.
14. In Pacific Exports Case (Supra), the product was paraffin oil of IP/USP/BP grade which was used as a medicament for laxative purposes and hence was not considered for the purpose of countervailing duty. It was classifiable under heading 3003.20. In the same case, the liquid paraffin was held as not to be lubricating oil in view of its end use. It was also held that liquid paraffins, not being patent or proprietory goods, are classified as medicaments under heading 3003.20 CET.
15. In Haresh Brothers case (Supra) the classification of paraffin liquid was considered under tariff item 68 as the product being or pharmacopoeial grade and non-proprietary goods as drugs.
16. In Oil Dale Trading Pvt. Ltd case (supra) the white petroleum jelly of USP grade were correctly classified for countervailing duty under item 68 of CET Schedule.
17. In Johnson and Johnson Ltd case (Supra) the classification of coated surgical pink cloth not adhesive tape was considered and found classifiable under item 14E and not under item 60.
18. The larger Bench decision as reported in the case of Collector of Central Excise v. Hico Products relied by the Revenue dealt with silicone oil, silicone fluid in primary form and as noted by us, in para 8 of the order, it has been held that resin or a plastic material which is to be used is capable of being used only as such (sic). Resin or plastic material will fall under heading for ordinary resin and plastic materials. It was also held that silicone product, unless there is a more specific heading for it, must fall under heading silicone. If the product is only a silicone, it must be assessed as silicone under the heading that specifies it. The citation of MSCO Pvt Ltd's relied upon by Sh. Chakraborty deals with stainless plates sold to industrial users which are not liable to duty under heading 73.15 of Customs Tariff Act and not exempted under Notification dated 15.7.77. As such, the notification covers stainless steel plates sold to industrial units. We do not find this citation of any help in dealing with this case.
19. As can be seen from the Larger Bench case of Ceat Tyres India Ltd v. Collector of Central Excise, Bombay , the question of classification of silicone fluid used as a "mould used agent" by importers during the manufacture of tyres was considered. The question of silicone fluid was in dispute in that case. It was observed by the Tribunal in that case that silicone oil may be a lubricant but it was a silicone and in that context it was listed under chapter 39; and further the Tribunal held that it was (a) polymerisation product produced by chemical synthesis and hence will satisfy the definition of Chapter 39 of Customs Tariff.
20. It was also held by the Tribunal in that case that silicones in primary form should be classified under heading 39.01/06 of First Schedule to Customs Tariff Act, 1975 and not under Heading 34.01/87 merely for the reasons that silicone was distinct from a preparation containing silicone as silicone by name is specified in heading 39.01/06 and not under heading 2(b) of chapter 39.
21. In Hico Products case , this Tribunal held that silicone oil is a product of chemical synthesis and a hydrogenous product. The silicone oil would attract duty under the said item as polymorisat and fulfill the description of silicone. Further explanation (iii) provides that item [15?] A(1) of Central Excise Tariff 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. Thus silicone oil in emulsion form are classifiable under 15A(1) by virtue of explanation (ii) and (iii) below Tariff Item 15A. It was held by the Tribunal in that case that explanation II [to] item 15A only explains condensation, poly-condensation, polymerisation, co-polymerisation and silicone oil in emulsion form comes within the mischief of this explanation 3. Two explanations together bring silicone, emulsion within the mischief of item 15A of Central Excises Tariff.
21. A In Precise Impex Ltd case , the Tribunal held that silicone in primary stage was classifiable under Item 15A(1) of the CET whereas a preparation containing silicone in emulsion form would not merit classification under TI 15A(1). This was the same view as taken in the case of Hico Products v. C.C.E. as . The Larger Bench decision of this Tribunal in Collector of Customs, Bombay v. Hico Products Ltd was also pertaining to this issue of silicone fluid in primary form and also dealt with silicone including resins, elastomers and fluids and fluids in turn includes oil. It had further held that there is nothing in the Tariff that a fluid must have resinous properties or plasticity. Only a resin is required if fluid has no resin or plasticity; it is also because it has a degree of polymerisation. But there is nothing in the law that a low polymerisation product is not classifiable under chapter 39 of Customs Tariff Act or item 15A of CET. If a fluid is a silicone product, it must be assessed as silicone in its heading. The larger Bench found that fluid/oil imported by M/s. Hico Products is nothing but a silicon polymer and therefore, held that whatever uses it may be put to in preparation, contents etc., the fact is that when it was imported, it was a silicone fluid in primary form and must be assessed accordingly under chapter 39 of the Customs Tariff Act/item 15A of Central Excise Tariff.
22. In the case of Hico Products v. Collector of Central Excise, Bombay , the question of appellants own product "KATRAG 150" was in dispute. This product was used as defoamer or anti-defoaming agent in the manufacture of pharmaceutical product as it inhibits the formation of bubbles in the liquid by reducing its surface tension during agitation in the manufactur ing process. The Tribunal held that since it is a product/preparation containing silicone, but neither silicone itself nor a silicone in emulsion form used as synthetic resin, it was not classifiable under TI 15A even after its amendment on 1.3.82. The Tribunal held that it was correctly classifiable as surface active preparation under TI 15AA.
23. In the case of Hico Products v. Collector of Central Excise, Bombay in order No. 719-720/89-C dated 28.11.89 reported in [1990] 29 ECC 280 (SB), the question of classification of silicone oil came up before this Bench where one of us was a Member. This Bench viewing all the citations relied up the advocate, came to the conclusion that silicone oil is classifiable under TI 15A(1). But, however, it has found that ingredients and properties and uses of the product in dispute was not available before the Bench and hence the matter was remanded to the Asstt. Collector of Central Excise for determining the correct classification of the products involved in that case in the light of the Tribunal's earlier decisions.
24. Coming to the facts of this case, the Dy.Chief Chemist, Bombay in his reports has submitted that the product in question is polysiloxane compounds (silicone oils) stated to have defoaming properties and the product viz. simethicon is jelly like mass composed of silicone oil and silica. On the basis of this report of Dy.Chief Chemist and in view of rulings of this Tribunal, the Asstt. Collector in the order-in-original, had reclassified the products under TI 15(A)(1) of CET. The Collector (Appeals) in the impugned order, however, as observed by us, had held that the products in question conform to pharmacopoeial standards and are recognised as drugs. He had observed that the Asstt. Collector had not gone into this question and therefore, he had directed the Asstt. Collector for drawing fresh samples and haying them tested to determine whether the goods have resinous character or not. It is curious to note that when the Collector (Appeals) has given such a direction to the Asstt, Collector, then it is surprising as to why he allowed the appeal and classified the products under TI 68 without waiting for the finding from the Asstt. Collector with regard to the pharmacopoeial standards of the products.
25. The respondents have contended basing on the technical literature produced by them that the products in question are drugs. The respondents' contention is that the products confirms to pharmaceutical standards and therefore it is a drug and entitled for exemption under notification No. 55/75 dated 1.3.75 superseded by notification No. 234/82 dated 11.1.82. They have referred to us one letter dated 30.8.83 from the Superintendent, Central Excise who has referred to the samples drawn by Test Memo No. 42/82 dated 31.1.83. Misc 43/83 to Misc 50/83 dated 14.3.83 by which the Superintendent of Central Excise has stated that Dimethicone 100, Dimethicone 350, Dimethicone 2000, Dimethicone 1000 and Dimethicone 20 are poly silicone compounds (silicone oils) stated to have defoaming properties. Simethicone is in the form of jelly like mass and is composed of silicone oil and silica. Dymethylamine ethane product is organic chemical/compound having multifarious uses and hence may not be considered as drug intermediate. Procaine hydrachloride solution is stated to have anaesthetic properties.
26. From the foregoing material on record, it is apparent that the product under consideration is silicone in primary form. It is immaterial whether the product is used as a drug, so long it is silicone in primary form, it is classifiable under item 15A(1) as held by the larger Bench of the Tribunal in the case of Hico Products (Supra). We have no reason to differ from these findings. Accordingly, we allow the appeal and set aside the impugned order and restore the order-in-original.
27. Before parting with this matter, we consider it necessary to mention the learned advocate Shri Ganesh's argument to keep the decision of the Tribunal in abeyance till the decision of the Supreme Court in their appeal before that Court in their own case. On a query from the Bench whether the Supreme Court has stayed the Tribunal's order, Sh. Ganesh replied in the negative. Accordingly we are not impressed by his plea of keeping this matter in abeyance. Hence the decision as aforesaid.