Customs, Excise and Gold Tribunal - Delhi
Paresh Products vs Collector Of Customs on 27 December, 1983
Equivalent citations: 1984(16)ELT438(TRI-DEL)
ORDER H.R. Syiem, Member (T)
1. This appeal dated 28-5-77 was filed by Paresh Products, Jamnagar against Order-in-Appeal No. S/49-2114/76. (The Order has two dates 10-3-77 and 26-3-77), passed by the Appellate Collector of Customs, Bombay. In the order referred to above, the Appellate Collector ruled that Acrylic Sheets crushed scrap was still a plastic sheet attracting CV duty. He, therefore, rejected the claim for refund of CV duty which the appellant had made.
2. At the hearing on 2-12-83, the learned counsel for Paresh Products argued that he had no submissions on basic customs duty and accepted the action of the Custom House in regard thereto. The present appeal was only in respect of refund of CV duty. He opened his arguments by saying that the Tribunal had already decided in order No. 330/83-C an exact dispute on the same goods and the same appellant, i.e., the present appellant, 'that CV duty was not leviable on acrylic crushed scrap. The Tribunal took the same decision in an earlier dispute of the very same nature in 1983 E.L.T. 845 when it held that acrylic crushed scrap was not leviable to CV duty under Item 15A of the Central Excise Tariff. He submitted that the nature of the goods is such that Item 15-A of the C.E.T. was not attracted. The goods were scrap/waste and so were not goods for purposes of assessment : hence Section 3 of the Customs Act, 1975 was not attracted and there was no manufacture as no person sets out to manufacture scrap. The Assistant Collector has treated the goods as plastic materials and he also held that in case of indigenous goods, excise duty is paid on plastic materials from which such scrap arises and, therefore, he held that the goods were plastic material and they had correctly been subjected to CV duty. The Appellate Collector said that the goods, though defective, remain within the category of sheets only since these can be used in non-critica applications. Such sheets, if cut to smaller sizes, remain within the heading of sheets, if not fabricated further. The plastic sheets crushed in smaller sizes were still plastic sheets attracting a levy of countervailing duty.
3. The intention of levy of countervailing duty was protection of indigenous industry and of goods produced and manufactured in India. Sometimes nascent industries need to be protected from foreign competition. There are many ways of doing of it, one of which is a duty levied on the imported goods that will make them uncompelitive with indigenous goods. Hence, when levy of duty under Section 3 of the Customs Tariff Act is made on imported goods, it is only in respect of goods which are also produced or manufactured in India. The imported material were scrap and scrap are not manufactured goods as no one manufacture scrap. Since CV duty is leviable only on manufactured goods, the scrap cannot be said to attract any levy under Section 3. So, the test of leviability to CV duty fails in case of these imported material. The counsel referred to the decision of the High Court of Rajasthan in 1983 E.L.T. 92 in a case of Raish Plastic and Ors. v. Union of India in which the High Court ruled that since acrylic plastic sheets/plastic bangles are manufactured out of monomer, they are not liable to excise duty under Item 15-A(2)of the Central Excise Tariff. These goods fall neither under 15-A(1) nor 15-A(2) of the ECT. If the Custom House thought they fall under 15A(2), they are exempted by Notification No. 228/76-Cus., dated 2-8-1976. In the famous Delhi Cloth Mill case before the Supreme Court in 1963, it was ruled that to become excisable goods, there must have been a manufacturing. The same view was reiterated by the Supreme Court in the South Bihar Sugar Mill in 1968. In 1977, in the Dunlop case, the Supreme Court ruled that interpretation of fiscal statutes must be given as accepted by people in the trade. In a decision in 1980 E.L.T. 99 Bombay High Court held that no excise duty can be levied on scrap, merely because scraps fetch a price. The same High Court in 1982 E.L.T. 64 ruled that if excise duty is exempted, no CV duty was leviable on like goods on import.
4. The learned counsel for the Department argued that these were no bazaar scrap but arose during manufacture of prime-sheets. This point was not taken into account in the two previous judgments of the Tribunal, Order No. 330/83-C and 1983 E.L.T. page 845. Item 15-A covers goods in any form, therefore, if they are in the form of scrap, the item was still able to attract the goods within its fold. Acrylic plastics are thermoplastic and according to 'Plastic Technology' by Brice such materials can be reformed and remoulded. The BTN in Chapter 39 fully covers waste and scrap under Artificial Resin and Plastic Materials.
5. The Encyclopaedia of Polymer Science and Technology also says the same thing. He also brought to the notice of the Bench that the 1983 E.L.T. 845 decision was based on wrong assessment that the scrap was not capable of direct moulding. The decision of the Tribunal in Order No. 330/83-C was also erroneous because Item 15-A was very wide and easily cover waste and scrap. The learned counsel referred to Order No. 222 to 229/83-C. In this decision, the Tribunal held that cellulose acetate scrap was appropriately assessable under 15-A(1). In a decision in 1983 (1983 E.L.T. 292) it was ruled by the Delhi High Court that brass scrap falling under heading 74.01/02 was leviable to customs duty. It was ruled by the High Court that waste and scrap has potential of another article as it is for recovery of the metal which is excisable. The court also held that since brass scrap comes into existence after manufacturing activity, it cannot be said that it was not leviable to duty, and since excise duty was validly leviable on brass scrap, duty under Section 3 of the C.E.T. was automatically leviable. He then quoted a number of decisions 1983 E.L.T. 564. 1983 E.L.T. 99 regarding the validity of Section 3 of the Central Excise Tariff 1975.
6. In A.I.R. 62 S.C. 53, the Supreme Court held that in matters of taxation, there was no res judicata. Here additional facts, not known before, are being brought before the Bench. These facts show that acrylic sheets were capable of being directly moulded.
7. In reply, the learned counsel for the appellants says that the principle of res judicata discussed in the Supreme Court was in respect of changes that take place in the laws relating to the assessment. There was no change in central excise law; only 'waste or scrap' were added to Tariff Item No. 15-A in 1982. The authorities quoted are, therefore, largely irrelevant. Decisions given by the Tribunal should conform to one another and there should be no conflict. A clarification said to have been given by the Government of India cannot bind the Tribunal. The decision in Order 222 to 229/83-C given by the Tribunal was about classification. There has been no challenge from the appellant to Section 3 of the C.T.A. '75 and, therefore, the authorities quoted by the Department in this connection are irrelevant.
8. In referring to the previous judgments of this Tribunal, the learned counsel for the Department held out the arguments that the Tribunal was not perhaps aware of the fact that there are two kinds of resins (1) thermoplastic resins and (2) thermosetting resins. Thermoplastic resins can be formed under heat and pressure and after they are formed, can be reformed with the application of external heat and pressure. Thermosetting resins cannot be reformed once they have been formed from the resins state and they have set into articles. Acrylic plastics are polymethyl methacrylate and are thermoplastic resins i.e., they can be formed and reformed even after they have been moulded and set. The acrylic sheet crushed scrap can be directly moulded to form articles. We are not aware of any authority for saying that crushed sheets can be directly moulded to form articles. It is a fact, however, that formed articles made of thermoplastic resins are susceptible of having their mouldable resins recovered by such processes as depolymerisation. But we are aware of no authority that says that crushed scrap obtained from formed articles can be directly moulded to form new articles even with the aid of heat and pressure.
9. The learned counsel for the Department refers to the BTN which covers waste and scrap. He argues that Item 15A(1) of the C.E.T. was wide enough to cover mouldable or formable scrap. The learned counsel, however, argued that Item 15A(1) of the C.E.T. which covers resins and plastic materials can cover waste and scrap of the type imported by the appellant. Since the crushed scrap can be moulded, there is nothing to prevent it from being assessed to countervailing duty under Item 15A(1). This is, however, to assume that Item 15A(1) at the material time was designed to cover waste and scrap also. The item was enlarged in 1982 specifically to include waste and scrap but before that waste and scrap were not included. The learned counsel for the Department made the suggestion that the inclusion in 1982 of waste and scrap makes no difference because waste and scrap were already covered by the item and what was done in 1982 was merely clarificatory in nature and makes no new law. However, when we read the records we see that the CV duty as assessed in these cases under sub-item (2) of Item 15A C.E.T. This sub-heading covered articles of plastics made from resin moulding materials that fell under sub-item (1) of the same Item. The goods were all classified by the Custom House as sheets. This is clear from Order-in-Appeal No. S/49-27/78R, dated 2-3-1978 passed by the Collector of Customs (Appeals) Bombay. In other Orders-in-Appeal the lower authorities merely speak of CV duty under 15A C.E.T. being correctly leviable; but even in these, it is not in doubt that the levy was in accordance with sub-item (2) of Item 15A C.E.T.
10. We are unable to agree that the crushed scrap can be called sheet. No body can think of using them as sheets. Their utility as sheets was destroyed when they were crushed to sizes of 1"X 1* or less. Except in a purely theoretical interpretation, a scrap 1'X l* of plastic cannot be seriously accepted as a sheet of plastic and there is no knowing how many of the pieces are smaller than even 1" x 1".
11. The question debated before us was whether the scrap can be directly moulded and so qualify for assessment as a resin under sub-item (1) of Item 15A C.E.T. The learned counsel for the Department argued hard that the explanation to Item 15A which says that sub-item (1) should include waste and scrap should be understood to mean that these re-mouldable scraps must find a place in that sub-item. He held the orders of the lower authorities were correct and that the appeal needed rejection. But rejecting the appeal will not yield the result the learned departmental counsel is looking for, because the scraps were assessed under sub-item (2) and wastes and scraps will not come into this sub-item. [The Custom House did not dispute the goods were scraps]. The note about waste and scrap explains only sub-item (1). Obviously, therefore, when goods are in the form of wastes and scraps, they do not fall in sub-item (2), otherwise the explanatory note would not have confined itself only to sub-item (1).
12. We should go back here a little. The goods had been cleared on payment of CV duty of 531/3% (The bills of entry do not record the C.E. item). The Assistant Collector rejected the refund claims by saying the goods were plastic material and so had been correctly assessed to CV duty. In none of the orders of the Assistant Collector is the C.E. Tariff Item mentioned. When the appeals went before the Appellate Collectors, they (the appeals were heard by 2 or 3 different officers) held the crushed scrap to be still sheets. In 3 or 4 appeal orders, the Appellate Collector even said the goods were assessable under 15A(2). In one appeal order (S/49-558/77R, S/49-560/77R dated 27-1-1978 passed by Shri B.K. Doshi) the sentences themselves defy total comprehension, but the little sense that does emerge seems to imply that the adjudicator wanted to say that crushing large sheets to smaller sheets does not make the sheets less sheets. Here is a sample; "thus by converting large sheets to that of lower dimensions does not make the same article of plastic crushed sheet scrap is, therefore, covered by Item 15A of C.E.T. and not fall in exempted category vide Notification No. 228/76". [Notification 228/76 exempts plastic articles, except sheets, rods, tubes etc. from CV duty]. Evidently for him the goods were plastic sheets (and so not exempted under 228/76). In appeal order S/49-1426/76R, dated 27-11-76, the same Appellate Collector says "hence when an article became classified under Item 82(3)(e) I.C.T. it cannot escape the levy of CV duty in terms of the said notification. [Here the notification he was alluding to was 28/64 which also exempted plastic articles (but not plastic sheets) from CV duty].
13. Therefore, we can see that the Custom House at the Appellate Collector's level, assessed the goods as sheets liable to CV duty under Item 15A(2). So the endeavours of the department to oppose the appellant by saying that the crushed scrap is capable of moulding directly will avail it nothing. For our part, we are unable to agree that pieces of 1" by 1" can qualify as sheets under Item 15A(2). Such small pieces can never be sheets and can by no stretch of the imagination ever serve as sheets. The dimensions are said to be 1" X 1" or less ; a good proportion will be of dimensions much smaller than l"x l". The assessment to CV duty under Item 15A(2) must, therefore, be held to be wrong and cannot be sustained. It deserves to be struck down and we order so.
14. The learned counsel for the department had quoted authorities that he said supported his view that acrylic crushed scrap can be directly moulded. One is Acrylic Resins by Milton B. Horn (Rheinhold Publishing Corporation, New York). The sentence he points out to as relevant to his purpose is at p. 84 and runs thus "the bulk polymer was ground into small granules which used as a moulding powder". This sentence, however, speaks of only bulk polymer of acrylic resins being ground into smaller grannules suitable for moulding, not of formed sheets being directly moulded, like polymer resins. Another book relied upon by the learned counsel is Modern Plastic by Harry Barren (Chapman & Hall London), and here is the portion he quoted about handling of methacrylete sheet : "There is a good deal of activity in the preparation of shaped and curved products based on this material, for having Thermoplastic, it can be softened, shaped and allowed to set once again" (page 528). This quotation deals with the susceptibility of a shaped or curved product being re-shaped/recurved once again after it is softened. This is not the same thing as moulding/shaping/working/extruding a primary resin/ polymer plastic material of the type covered by Item 15A(1) of the C.E.T. We are not aware of any process by which say a formed sheet (of thermoplastic material) can be directly moulded/extruded into a different article such as a rod, a tube, a film, a can etc.
15. However, we have seen that the Appellate orders assess the product under 15A(2) not under 15A(1) and so the discussion about mouldability becomes irrelevant. While assessment under 15A(2) is incorrect there is no case for assessment under 15A(1) for various reasons we have already recorded above and because such an assessment was no longer in existence when the appeal came before us. We, therefore, have to set aside the order of the Appellate Collector. The Custom House can, if it wishes, re-examine whether the crushed sheet scrap can be re-assessed to CV duty under any other suitable item of the C.E.T. That, however, is a matter that will have to be decided upon by the Custom House alone.
16. All the above 8 appeals are disposed of in the above manner by this order.