Customs, Excise and Gold Tribunal - Delhi
Asian Cables Corporation vs Collector Of Customs on 6 August, 1990
Equivalent citations: 1991ECR799(TRI.-DELHI), 1990(50)ELT530(TRI-DEL)
ORDER
G. Sankaran, President
1. These 10 appeals involve the same issue. They were, therefore, heard together and are disposed of by this common order.
2. The issue involved concerns a product called "XLPE compound HFDM-0595-BK" imported by the appellants. There is no dispute as to its classification under the First Schedule to the Customs Tariff Act, 1975, namely, Heading 39.01/06. The dispute is as to the applicability of customs Notification No. 196/84 dated 7-7-1984. The appellants contend that the notification applies. The Revenue contends to the contrary.
3. The lower authorities have held that the product is meant for semi-conductive shielding of power cables and not for insulating, impregnating or filling purposes and that, therefore, the notification does not apply. The goods were described in the covering invoices and bills of entry as "semi conductive XLPE compound HFDM 0595 BK". The Customs House laboratory report indicated that the product was a pigmented polyolefinic type synthetic resin on which also there is no dispute according to the appellant's counsel. But the Deputy Chief Chemist had opined that the product was meant for semi-conductive shielding of power cables and not for the purposes set out in the notification.
4. At this stage, it is expedient to set out the notification in question for a better appreciation of the rival contentions. It read as follows :-
"No. 196/84-Customs. GSR -
In exercise of the powers conferred by Sub-Section (1) of Section 25 of the Customs Act, 1962 (52 of 1962) the Central Government being satisfied that it is necessary in the public interest so to do, hereby exempts cable insulating, impregnating and filling compounds, falling within Chapter 38 or Chapter 39 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), when imported into India, from so much of that portion of the duty of customs leviable thereon under the said First Schedule as is in excess of the amount calculated at the rate of 40 per cent ad valorem."
5. We have heard Shri V. Sridharan, Advocate, for the appellants and Shri S. Chakraborty, D.R., for the respondent-Collector.
6. The Learned Counsel for the appellants draws our attention to the manufacturers' literature on the product. It describes under the broad head "Wire and cable compounds" the subject product as a crosslinkable polyethylene copolymer for semi-conductive shielding of power cables. Its further description reads :-
"HFDM 0595 Black is a crosslinkable semi-conductive compound formulated to meet the resistivity requirements for conductor and insulation shielding on crosslinked insulated high voltage cables. The polymer system employed in HFDM 0595 Black allows direct extrusion of this compound on copper without the excessive adhesion or staining on the metal."
Then it goes on to set out, in tabular form, typical electrical properties and physical properties of cables with conductor and insulation shieldings of the product using sound commercial fabrication practice. It adds :-
"HFDM 0595 Black provides excellent surface finish and outstanding output taken over a broad range of conditions. For optimum results, use melt extrusion temperatures in the suggested range of 120 to 130 C. However, specific recommendations for processing condition can be determined only when the application and type of processing equipment are known as Dehumidified hopper drying at 60C may be employed to remove moisture prior to extrusion.
HFDM 0595 Black may be applied as an insulation shield either in a separate operation or in triple extrusion."
The submission is that the literature would show that the use of the product is in insulation of cables,
7. Reference is also made to the "Electric Cables Handbook" edited by D.Mc Allister, formerly Assistant Chief Engineer, BICC Power Cables Limited which states that insulation of heating cables is of crosslinked polyethylene (XLPE) specially compounded for heat and abrasion resistance, of radial thickness appropriate to the mechanical duty and voltage rating (page 193).
Kirk-Othmer's "Encyclopedia of Chemical Technology, Third Edition Volume 13, at page 565, sets out the composition of typical crosslinked insulation compounds of which polyethylene is a typical ingredient. At page 564, it is stated under the head "Cross-Linked (Thermoset) Insulations" that insulation compounds based on the polyolefin elastomers, PE (polyethylene) and a couple of others, because of their moisture, heat and corona-discharge resistance, predominate in cable installations requiring the highest degree of reliability and long life.
8. Having regard to all this material, the Counsel submits that there can be little doubt that the subject product is an insulating compound.
9. The learned D.R. seeks to controvert the above contentions by pointing out that the baoks cited go to show that insulating compounds are made from cross linked polyethylene. The subject product, as seen from the manufacturer's literature, is not a cross-linked polymer but a cross-linkable polymer. In the condition in which it is imported, it cannot be used for insulation. And. it is the condition at the time of the import that is relevant for the purpose of classification, reliance for this purpose being placed on the Supreme Court's judgment in Dunlop India Ltd. & Madras Rubber Factory Ltd. v. Union of India and Ors., 1983 (13) ELT 1566 (S.C.). The principle applies also to notifications.
(sic) by Clifford A. Hampel and Gessner G. Hawley where at page 882, it is said that cross-linked polyethylene has found widest application as power cable insulation. The submission is that it is the crosslinked (not the cross linkable) polymer that is used in insulation. The further submission is that, if the above submission is not accepted, the same book at page 883 shows that polyethylene for semi-conductor applications is different from that for commercial power cable insulation.
Referring to the books cited by the appellants' Counsel, the D.R. submits that none of them say that before cross-linking, polyethylene is used for insulation.
10. In his rejoinder, the Counsel for the appellants submits that the subject product has got all the ingredients necessary to impart to the crosslinked product the desired insulating properties.
11. We have given out careful consideration to the rival contentions and perused the record. It is fairly obvious from the product literature produced before us that the application of the subject product is in the cable industry. It is described as a "Wire and cable compounds". Much stress is laid on the words "semi-conductive shielding of power cables" appearing in the product literature. As the book "The Encyclopedia of Chemistry" (cited by the D.R.) shows at page 883 :
"As well as compositions having excellent electrical insulating properties, cross-linked polyethylene compositions can be made having very low resistivity which may be classified as semi-conductors."
But what is the nature of the product in issue? No doubt it is described as a cross linkable polyethylene copolymer for semi-conductive shielding of power cables and as a cross linkable semi-conductive compound formulated to meet the resistivity requirements for conductor and insulation shielding on cross linked insulated high voltage cables. It allows direct extrusion on copper. The product may be applied as an insulation shield either in a separate operation or in triple extrusion. It is clear from all this that the product finds application in insulation shielding.
12. The book "Encyclopedia of Chemistry" relied on by the DR also shows that cross-linkable polyethylene compounds used for wire insulation are essentially based on low-density resins. It also shows that cross-linked polyethylene has widest application as power cable insulation. These compounds based on low-density polyethylene are well suited for most low-voltage applications such as line and building wire, service entrance cable, and similar constructions. Special cross-linkable compounds are also being introduced for higher voltage cables upto 37 KV service. The present goods, as seen from the product literature, is a cross-linkable semi-conductive compound formulated to meet resistivity requirements for conductor and insulation shielding on cross-linked iusulated high voltage cables. The product, as the literature shows, can be directly extruded on copper without excessive adhesion or straining on the metal. All this is indicative of the fact that the product is used in insulation shielding of power cables. The Chemical Examiner has not set out the basis on which he is said to have opined that the product is not an insulating (impregnating or filling) compound. The subject product evidently has to be applied on to cables and has been specially formulated for this purpose to impart the necessary properties, acquires the degree of cross-linking that is necessary to make it an effective insulation shield. We do not see why the product cannot be said to be a cable insulating compound within the meaning of the notification. In the state of the evidence on record, it is more proper, in our opinion, to conclude that the subject product is a cable insulating compound. In this view of the matter, the product is eligible for the benefit of Customs Notification No. 196/84.
13. In the result, the impugned order is set aside and the appeals are allowed with consequential relief to the appellants.