Customs, Excise and Gold Tribunal - Delhi
Collector Of Customs vs Lakshmanan Isola Ltd. on 18 December, 1991
Equivalent citations: 1992(61)ELT315(TRI-DEL)
ORDER P.K. Kapoor, Member (T)
1. These appeals arise out of the common order passed by the Collector of Customs & Central Excise (Appeals), Madras disposing of 11 appeals. Since the issues involved in these appeals are identical, they are disposed of by this common order.
2. The facts of the case in brief are that during the period 22-9-1982 to 8-1-1986 the respondents exported 11 consignments of Mica Paper through LCD. Bangalore. The goods were charged to export duty of 10% as Fabricated Mica under Heading No. 8 of the Export Tariff read with Notification No. 329-Cus., dated 2-8-1976 as amended by Notification No. 259/84-Cus., dated 12-10-1984. The respondents paid the duty under protest and later claimed refund of Rs. 3,83,724.45 on the grounds that the Mica paper being processed Mica Powder was exempt from export duty in terms of Notification No. 259/84. In support of their claim they pointed out that in Mica paper particles of mica produced through pulverisation of mica scrap were held together purely the electrostatic force between them. The Assistant Collector received a letter dated 11-7-1986 from the Mica Trading Corporation of India Ltd. wherein it was explained that Mica Paper was a manufactured item of mica and cannot be classified as 'Fabricated Mica' since Fabricated Mica items are obtained by cutting natural mica into specific shapes and sizes by punches. However, the Assistant Collector referred to the dictionary meaning of the terms 'Fabricated' and 'Processed' and also to the relevant Export Policy and held that the distinction between 'Processing' and 'Fabrication' being extremely thin, 'Mica paper' could be deemed as 'Fabricated Mica' since it was produced through pulverisation and treatment of Mica. Being aggrieved by the order passed by the Assistant Collector the respondents filed an appeal before the Collector (Appeals) who while reversing the order passed by the Assistant Collector observed that the term 'Fabrication' implies making or constructing or putting together of different parts and its use in relation to materials such as liquids and powders would be incongruous.
3. On behalf of the Revenue we heard the learned J.D.R. Shri J.N. Nair. He stated that the only ground which the appellants would like to urge was that Mica paper being a manufactured item of mica produced out of mica waste attracted 40% duty under Heading No. 8 of the Export Tariff and was not exempt from export duty in terms of Notification No. 329/76 dated 2-8-1976. He added that this new ground which had not been raised before the lower authorities, may be admitted since it raises a purely legal issue. Shri Nair stated that the Mica Trading Corporation had confirmed that Mica paper was a manufactured product distinct from processed mica powder. He contended that Mica paper being an item of manufactured mica was chargeable to duty at 40% under Heading No. 8 of the Export Tariff upto 1-3-1987 when it was exempted from export duty through Notification No. 106/87. He pleaded that on these considerations the impugned order may be set aside.
4. On behalf of the respondents the learned advocate Shri J.B. Koshy appeared before us. He referred to enclosure to the letter dated 11-7-1986 from the Mica Trading Corporation of India at pages 27 to 32 of paper book and pointed out that even though several processes have been developed for the manufacture of Mica paper, basically all of them involve conversion Mica scrap through a series of processes into mica powder in which the particles without the use of any adhesive get bound to each other due to electrostatic force and give rise to a brittle paper like material. He stated that the Collector (Appeals) had correctly held that on the basis of the dictionary meanings of the terms 'Fabricate' and 'Process' that Mica Paper being a product composed entirely of mica powder has to be deemed as a processed item since fabrication implies cutting and putting together of different parts. He added that as held by the Collector (Appeals) the classification of any goods under the Export Tariff cannot be based on the relevant provisions of the Export Policy. He contended that in the notes to the Heading 68.15 of the B.T.N. also Mica Paper obtained through treatment of pulped mica waste has been categorised as distinct from fabricated mica. He opposed the admission of the additional ground sought to be raised by the appellants on the reasoning that it had not been pleaded before the lower authorities.
5. We have examined the records of the case and considered the submissions made by both sides. The appellants have prayed for the admission of ground No. 2 in the Memorandum of appeal, even though it was not raised before any of the lower authorities. We find that the new ground sought to be raised by the appellants can be deemed as purely legal in nature since it relates to classification of the disputed goods under the Export Tariff. It is seen that relying upon the decision of the Hon'ble Supreme Court in the case of Commissioner of Sales Tax v. Sarjoo Parsad Ram Kumar, reported in 1976 (37) S.T.C. 533 the Tribunal had held in the case of Shri Kanwal Pal Singh and Ors v. Collector of Customs, Kanpur [1988 (35) E.L.T. 725] that a purely legal ground can be raised at any stage provided it is backed by sufficient material on record. Accordingly we allow the request of the appellants and permit them to raise the new ground which occurs at serial No. 2 in their memorandum of appeals.
6. In view of the new ground urged by the appellants the only question that arises for consideration in this case is whether Mica Paper falls in the category of Manufactured Mica classifiable under Heading No. 8 of the Export Tariff or it is to be deemed as 'Processed Mica Powder' covered by exemption Notification No. 259/84-Cus., dated 12-10-1984.
7. Before discussing the rival contentions, we consider it desirable to set out the Heading relating to Mica in the Export Tariff and the relevant extracts from Notification No. 329/76 as amended by Notification No. 259/84.
The Second Schedule Export Tariff:
TABLE _______________________________________________________ Heading No. Description of article Rate of duty _______________________________________________________ 1 2 3 _______________________________________________________ ...
8. Mica, including fabricated 40% mica _______________________________________________________ Notification No. 329/76 as amended by Notification No. 259/84 and Notification No. 106/87.
"Partial exemption to Micanites Mica etc.:- In exercise of the powers conferred by Sub-section (1) of Section 25 of the Customs Act, 1962...in Column (3) of the said Table"
TABLE _________________________________________________ Sr. No. Description of goods Rate of duty _________________________________________________
1. Micanite Nil
2. Fabricated mica 10% Ad valorem
3. Processed mica powder Nil ...
11. Mica paper Nil _________________________________________________
8. From the records of the case we find that the Mica Trading Corporation of India Limited, a Government of India undertaking concerned with the development of mining, production and export of mica, had addressed a letter dated 11th July, 1986 to the Collector of Customs, Bangalore pointing out that Mica Paper is a manufactured mica item, involving sophisticated technology which was not available in India till the recent past. It was also clarified that Mica Paper cannot be classified as an item of Fabricated Mica which includes items obtained by cutting natural mica into specific shapes and sizes by means of dies and punches. An extract from the note describing the various technologies employed for the manufacture of Mica Paper which was enclosed with the Corporations letter dated 11th July, 1986 is reproduced below :-
"Mica Paper is manufactured from Mica Scrap. Several processes of manufacturing Mica paper from Mica Scrap have been patented all over the world. Of all the process patented, only three have been commercialised. These processes are generally known by the following names :
(1) Thermo-Chemical Process (2) Calcination Process (3) Mechanical Disintegration Process.
A brief description of each of the process is given below. (1) Thermo-Chemical Process Mica Scrap is cleaned to eliminate the impurities like stone powder, iron particles, wood chips etc. and is subjected to size gradation. Cleaned Mica Scrap of required size is collected and calcined at a high temperature of about 900°C for a short while in rotary kilns. During this process, mica loses a part of its molecular water and the blocks of mica scrap would expand. Hot mica is quenched in an alkaline medium, directly from the kiln, during which process, the material becomes soft and fluffy. The quenched mica is drained off, for excess alkaline solution and is then reacted with an acid solution. During this process, the material gets neutralised. The neutralised material is washed in specially designed equipment like rifflers or hydra-pulpers etc. and is disintegrated into fine flakelets by using other high pressure water jets or mechanical sirrers. These fine flakelets are again subjected to size gradation either in automatic seives or by a process of levitation. The selected mass of flakelets, known as pulp in the bulk form, is mixed in water in definite proportions to obtain a slurry which is fed into custom made paper mills, where pulp is converted into paper. It is 100% mica sheet bonded by Vauderwaal's forces, which is known as mica paper or technically re-constituted mica.
Mica paper could be manufactured in different thicknesses and substance values. Each application would require different thicknesses and substance value."
9. From the information given by the Mica Trading Corporation a body intimately connected with the various aspects of Mica trade, it follows that Mica Paper which is a manufactured mica item, produced through deployment of sophisticated technology cannot be categorised as an item of Fabricated Mica which includes items which are obtained simply by cutting natural mica into specific shapes and sizes by means of dies and punches.
10. The respondents case is that Mica Paper has to be deemed as Processed Mica Powder covered by Serial No. 3 of Notification No. 329-Cus., dated 2-8-1976 (as amended) since it consists purely of mica particles held together by electrostatic force. In this regard on reference to the note enclosed by the Mica Trading Corporation with their letter dated 11th July, 1986 addressed to the Collector of Customs we find that Mica Paper is manufactured out of Mica Scrap which after extensive processing assumes the shape of pulp which is fed into mills for being converted into plapers of various thicknesses. Thus in the case Mica Paper neither the raw material nor the final product which emerges in the form of thin sheets, is in the form of powder. Evidently Mica Paper which is a manufactured item produced through deployment of sophisticated technology and does not emerge in the form of a powder, is an item distinct from Processed Mica Powder. This view also finds support from the following extracts from the notes to the Heading 68.15 of the B.T.N. according to which Mica Paper and Powdered Mica are classifiable under different headings :
"68.15 - WORKED MICA AND ARTICLES OF MICA, INCLUDING BONDED MICA SPLITTINGS ON A SUPPORT OF PAPER OF FABRIC (FOR EXAMPLE, MICANITE AND MICAFOLIUM) :
...
...
Thin sheets of mica may also be obtained, without employing a binding agent, by submitting powdered and pulped mica waste to a thermal, chemical and mechanical process similar to that used for making paper (reconstituted mica).
This heading further excludes:
(a) Powdered mica and scrap mica (heading 25.26).
(b) ...
(c) ...
(d) ...
(e) ..."
11. Under these circumstances we are unable to accept the respondents claim that Mica Paper could be considered as Processed Mica Powder which was exempt from payment of export duty under Notification No. 329-Cus., dated 2-8-1976(as amended). In view of the finding that Mica Paper is a manufactured or reconstituted mica item it has to be held that it was covered by Heading No. 8 of the Export Tariff. The finding that Mica Paper and Processed Mica Powder are distinct commodities and Mica Paper being a manufactured item of Mica was classifiable under Heading 8 of the Export Tariff finds confirmation from the amending Notification No. 106/87-Cus., dated 1-3-1987 which was issued to extend the exemption from payment of export duty to Mica Paper falling under Heading No. 8 of the Second Schedule to the Customs Tariff Act, 1975.
12. In view of the above discussions, the impugned order is set aside and the appeals are allowed.