Customs, Excise and Gold Tribunal - Delhi
Hindustan Packaging Co. Ltd. vs Collector Of C. Excise on 15 November, 1994
Equivalent citations: 1995ECR245(TRI.-DELHI), 1995(75)ELT313(TRI-DEL)
ORDER P.K. Kapoor, Member (T)
1. In this case the question that arose for consideration was whether 'Aluminium Foil backed by paper and polyethylene' was classifiable under Sub-heading 7606.00 of the Central Excise Tariff Act, 1985 or as "Laminated paper" falling under Sub-heading 4811.29 of the Central Excise Tariff. The matter was originally heard by a two Member Bench. The learned Member who recorded the order held that the matter was covered by the Tribunal's order in the case of National Dairy Development Board (hereinafter referred to as NDDB) reported in 1992 (59) E.L.T. 65 in which 'Tetra pack Asceptic-Packaging material' made of paper laminated with aluminium foil and polyethylene was held as classifiable under sub-heading 4811.90. However, the second Member expressed the view that the matter needed to be referred to a larger Bench since in the case of NDDB the Tribunal had not considered the effect of definition of Toil' given in Note 1(viii) to Chapter 76 of the Central Excise Tariff Act, 1985. The point of difference between the two Members was referred by the Hon'ble President to a third Member. Thereafter, having regard to the majority opinion this Larger Bench was constituted by the Hon'ble President.
2. On behalf of the appellants Shri D.A. Dave, ld. advocate with Shri V.H. Shah, Consultant appeared before us. Shri Dave stated that in the case of NDDB the Tribunal had noted that the corstituents of the product being Base paper 265 gms. per sq. mtrs, Aluminium Foil 18 gms. per sq. mtr. and Polyethylene (LD) 103 gms per sq. mtr., its classification under Chapter 48 was not ruled out by notes I(f) and I(m) of Chapter 48 since Note (f) deals with composition of paper and plastic with predominance of plastic and Note (m) applies only when metal foil is backed with-paper or paper-board. He added that in that case the Tribunal had observed that in order to decide the question whether the goods were covered by Chapter 48 or Chapter 76 was more appropriate, it was essential to have recourse to Rule 3(a) of the Rules of interpretation of the Schedule to the Central Excise Tariff Act, 1985. He contended that the Tribunal had correctly applied Rules 3(a) in determining the correct classification of the goods since in the case of Khandelwal Metal and Engineering Works v. Union of India, reported in 1985 (20) E.L.T. 222 (S.C.) the Supreme Court had held that as per Rule 1 of the relevant Rules of Interpretation in the Import Tariff classification has to be determined according to the description of the article in the heading and if the heading or a note does not otherwise require, according to the provisions of the other rules and notes. He stated that having regard to the fact that the product in question had different materials as its constituents and the taking unto account the wordings of the relevant headings of Chapters 48 and 76 and the notes to these chapters in para 12 of the decision in the case of NDDB Tribunal had correctly concluded that the most appropriate heading for the goods in question had to be determined only by applying Rule 3 of the Interpretative Rules of the Customs Tariff Act. He submitted that paper content being 265 gms. per Sq. Mtr. as against aluminuim foil of 18 gms per Sq. mtr. and polyethylene of 103 gms. per Sq. mtr., the essential character was not on account of Aluminium and hence, the Tribunal had correctly held classification of the product under Chapter 76 was ruled out. He added that the product consisting of paper coated on one side with polyethylene and by aluminium foil sandwiched between two layers of polyethylene film on the other side could not be deemed as laminated aluminium film. He argued that under these circumstances having regard to the fact that paper was the major constituent and it provided essential character to the product, in the case of NDDB the Tribunal had correctly held that it was classifiable under sub-heading 4811.29.
3. On behalf of the respondent Shri B.K. Singh, ld. SDR stated that the appellants were mainly relying upon the order recorded by the ld. Member (Judicial) who on the basis of the Tribunal's decision in the case of NDDB in respect of a similar product had held that it was classifiable under sub-heading 4811.90. He added that the ratio of the decision in the case of NDDB was not applicable in the present case since in the order recorded by Member (Judicial) he had not taken into account the effect of Note 1(viii) to Chapter 76 of the relevant Central Excise Tariff. He submitted that in manufacturing the product in question the first step involves the printing of paper roll and lamination of the printed side with polymer. Thereafter the other side of the paper is laminated with an aluminium foil coated with polyethylene. He contended that in the manufacture of the product aluminium foil backed with polyethylene comes separately into existence. In this regard he referred to the report of the Chemical Examiner at page 181 of the paper book according to which the tested product was found to be aluminium foil backed on one side with paper and on the other side with polyethylene film. He contended that the product thus clearly fits into the definition of aluminium foil as occurring in the relevant Note to Chapter 76 of the Tariff. He stated that classification of the product in question under Chapter 39 was ruled out in terms of Note 1(f) to Chapter 48. He added that in terms of Note 1(f) to Chapter 48 of the Central Excise Tariff which corresponds Note 1(m) of Chapter 48 of the Customs Tariff discussed in the case of NDDB classification of the product under Chapter 48 has also to be ruled out. He submitted that in the case of NDDB the Tribunal had erred in interpreting Chapter Note 1(m) of Chapter 48 the Customs Tariff which did not have any provision for excluding a product by virtue of predominance of weight. He added that in para 11 of the Order in that case the Tribunal while dealing with sub-heading 76.07 of the Customs Tariff had failed to examine the implications of the definition of aluminium foil incorporated in the heading. He contended that the Tribunal had also erred in applying Rule 3(a) of the Rules for the Interpretation of the Tariff to arrive at the conclusion on the basis of predominance of paper by weight that aluminium did not impart the essential character to the product. He submitted that in that case the Tribunal had failed to consider the applicability of Rule 1 according to which classification of a product has to be determined according to the terms of the headings and any relative Section or Chapter Notes. He contended that the possibility of determining the classification of the product in terms of Rule 1 of the Interpretative Rules ought to have been explored since 'Aluminium Foil' was defined in Sub-heading 76.07 of the Customs Tariff and only if the goods were not found to be classifiable in terms of Rule 1, recourse to other Rules could be taken. In support of his contentions he cited that following case law :-
(i) Indo-International v. Commissioner of Sales Tax, U.P.; 1981 (8) E.L.T. 325 (S.C.)
(ii) Akbar Badmddin Jiwani v. Collector of Customs; 1990 (48) E.L.T. 441 (Tribunal)
(iii) India Foils Ltd. v. Collector of Central Excise; 1989 (43) E.L.T. 293 (Tribunal)
(iv) Parle Products Pvt. Ltd. v. Union of India; 1991 (56) E.L.T. 52 (Bom.).
4. We have examined the records of the case and considered the submission made on behalf of both sides. It is seen that the only question that arises for consideration in this case is whether as contended by the appellants the product made by printing of paper and coating one of its sides by polyethylene and laminating the other side by aluminium foil sandwiched between two layers of polyethylene would be classifiable under sub-heading 4811.90 or under Sub-heading 7606.00 of the Schedule to the Central Excise Tariff Act, 1985.
5. The appellants' case is that the question of classification of the product in question had been settled by the Tribunal's decision in the case of NDDB v. Collector of Customs (supra) in which imported Tetra Pack Asceptic packaging material' having composition similar to the appellants' product was held as classifiable under sub-heading 4811.29. In that case having regard to the composition of the material in question, the purpose served by each of the constituents, the relevant Notes to Chapter 48 of the Customs Tariff, the Tribunal had held that the most appropriate heading applicable to the goods was determinable in terms of Rule 3(a) of the Rules for the Interpretation of the Customs Tariff Schedule and paper being by far the major constituent in terms of weight it had to be deemed as providing the essential character to the goods. For proper appreciation of the considerations which weighed with the Tribunal in arriving at the finding that the product in question was classifiable under sub-heading 4911.29 we refer to paras 6 to 12A of the said decision which are reproduced below :-
* * * * * *
6. It is seen that there is no dispute that the product in question being a composite article of paper, plastic and aluminium and the thickness of the layer of plastic not being more than half the total thickness of the material its classification under Chapter 39 which relates to Plastic and articles thereof would be ruled out in terms of Note 1(f) to Chapter 48.
7. In the case of NDDB the Tribunal observed that classification of the product in question under Chapter 48 was not ruled out in terms of Note 1(m) of that Chapter since that note applies only to metal foil backed with paper or paper board. After noting that Chapter Heading 76 deals with aluminium and articles thereof and sub-heading 76.07 of the relevant Customs Tariff covers aluminium foil (whether or not printed or backed with paper, paper board, plastics or similar backing materials) of a thickness (excluding any backing) not exceeding 0.2 mm" the Tribunal observed that as between Chapter 48 and Chapter 76 for determining the more appropriate heading applicable to the goods in question it was necessary to take recourse to the provisions of Rule 3 of the Interpretative Rules of Customs Tariff Act. Thereafter on the grounds that paper constituted the major ingredient of the goods being 265 gms. per sq. mts. as against aluminium foil and polyethylene contents of 18 gms. per sq. mts. and 103 gms. per sq. mts. respectively, it was held that the classification under Chapter 76 was ruled out since the essential character of the product was not on account of aluminium. On these considerations the Tribunal upheld the finding of the Collector that the product in question was classifiable under sub-heading 4811.29 of the Schedule to the Customs Tariff Act, 1985.
8. It is seen that the case of the respondent is that in the case of NDDB the Tribunal had erred in resorting to Rule 3 of the Rules of Interpretation of the Customs Tariff since classification of the disputed product was determinable in terms of Rule 1 for the Rules for the Interpretation of the Excise Tariff in accordance with the terms of the relevant headings and relative Section and Chapter and Notes. It has been contended that having regard to Note 1(1) of Chapter 48 of the Central Excise Tariff (corresponding to Note 1(m) of Chapter 48 of Customs Tariff discussed in the case of NDDB) and the terms of Heading 76.06 and the relative Note 1(viii) of Chapter 76 of the Central Excise Tariff, the goods are correctly classifiable under Heading 76.06. In order to appreciate the point made on behalf of the Department we refer to Note 1(f) of the Chapter 48, Note 1(viii) of Chapter 76 and Heading 76.06 of the Central Excise Tariff which are reproduced below:-
"Chapter 48 Paper and Paper Board; Articles of Paper Pulp, of Paper and or of Paper Board. Notes: 1. This Chapter does not conver
(a) ...
(b) ...
...
...
(1) Metal foil backed with paper or paper board (Section XV);"
"Chapter 76 Aluminium and Articles thereof:
Notes
1. In this Chapter, the following expressions have the meanings thereby assigned to them :-
(i)...
(ii) ...
...
...
(viii) Foil:
A flat product of rectangular section of thickness excluding any backing not exceeding 0.15 millimetre/whether or not embossed, cut to shape, perforated, coated, printed or backed with paper, paper board, plastics or other reinforcing materials:"
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Heading No. Sub-heading Description of goods
No.
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76.06 7606.00 Aluminium foil
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9. It is seen that the production of the disputed product involves printing of paper followed by coating of the printed side with polyethylene and laminating of the other side with a combination consisting of aluminium foil sandwiched between two layers of polyethylene. Evidently the product in question can also be described as consisting of aluminium foil reinforced with plastic material (polyethylene) and backed with paper paper-board. Under these circumstances and in view of the fact that it has not been claimed by either side that the thickness of the aluminium foil in the goods (excluding any backing) exceeds 0.15 mm, in our view the product in question has to be deemed as 'Aluminium foil' conforming to the definition "Foil" incorporated in Note 1(viii) of Chapter 76 of the Central Excise Tariff and accordingly its classification under Chapter 48 would be ruled out in terms of Note 1(1) to Chapter 48 and it would be correctly classifiable as "Aluminium Foil" under Heading 76.06.
10. It is seen that the above finding that the disputed product would be classifiable as 'Aluminium Foil' under Chapter 76 and not as an "Article of paper/paper board" under Chapter 48 is supported by the Tribunal's order in the case of India Foils Ltd. v. Collector of Central Excise, reported in 1989 (43) E.L.T. 293 in which it was held that 'Aluminium Foil' whether with a single lamination or with multiple lamination of polyester /paper /polythene etc. was classifiable under Tariff Entry 27(c) in which incorporated a definition of aluminium foil similar to the definition in Note 1(viii) of the Chapter 76 of the Central Excise Tariff which reads as "Aluminium foils, whether or riot embossed, cut to shape, perforated, coated, printed or backed with paper or other reinforcing material, of thickness (excluding any backing) not exceeding 0.15 mm". Paras 4 and 10 of the Tribunal's order being relevant are reproduced below :--
* * * * * *
11. It is seen that our finding that "Aluminium foil" even when reinforced or backed by materials such as paper and plastics continue to be treatable as 'Aluminium foil' for the purpose of classification under the Central Excise Tariff is also supported by the judgment of the Bombay High Court in the case of Park Products Pvt. Ltd. v. Union of India reported in 1991 (56) E.L.T. 52. The High Court while examining the question whether the appellant company was liable to pay duty under Tariff Item No. 27(c) once again in respect of the process of backing of duty paid aluminium foils with plain or printed paper, held that backing of aluminium foil with printed paper is carried out only to make it more attractive for packing and does not result in any distinct or different article.
12. It has been held by the Tribunal in the case of Rajasthan Synthetic Industries Ltd. v. Collector of Central Excise reported in 1989 (42) E.L.T. 24 that in terms of the Rules of Interpretation of the Excise Tariff Schedule classification has to be determined according to the terms of the headings and relative Section or Chapter Notes and the Rules of interpretation can come into play and can be invoked if only the classification cannot be determined according to the terms of the headings and any relative Section or Chapter Notes and provided such headings or Notes do not otherwise require. Para 19 of the said order being relevant is reproduced below : -
"19. According to Rule 1 of the Rules for the Interpretation of the Excise Tariff Schedule, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the provisions in the said Rules. Thus, it is clear that the Rules for Interpretation will come into play, and can be invoked, if and only if the classification cannot be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Chapter Notes do not otherwise require. In other words, if the headings read in the light of the Section or Chapter Notes, are clearly determinative of the classification, the Rules for Interpretation cannot be invoked. We have to see whether the present case, the classification can be determined having regard to the headings and the relative Section and Chapter Notes."
12A. As discussed above the disputed product consisting of aluminium foil reinforced with plastic material (polyethylene) and backed with paper/ paper board is treatable as 'aluminium foil' classifiable under Heading 76.06 in terms of the definition in Note 1(viii) of Chapter 76 and will be excluded from the purview of Chapter 48 of the Central Excise Tariff since the classification of the product in question is determinable as provided in Rule 1 of the Rules of Interpretation of the Central Excise Tariff in terms of the relevant headings of the tariff and the relevant Section or Chapter Notes, the other Rules of Interpretation cannot come into play. For these reasons we are inclined to agree with the Ld. Sr. Departmental Representative that in the case of NDDB the Tribunal had erred in invoking Rule 3 of the Interpretative Rules of Customs Tariff Act for determining the classification of goods in question.
13. In view of the foregoing we hold that the disputed product comprising of aluminium foil backed with paper and polyethylene as correctly classifiable under Heading 7606.00 of the Central Excise Tariff and reject the appeal.
Sd/- Sd/- Sd/- Sd/-
(K.S. Venkataramani) G.P. Agarwal Harish Chander P.K. Kapoor
Member (T) Member (J) President Member (T)
S.K. Bhatnagar, Vice President
14. With due respects to the Hon'ble Member (T) & the Hon'ble President my views and orders in the matter are as follows :-
15. I observe that the material in question is admittedly intended for making Tetra Pack containers. Since it is a composite article consisting of multiple laminations including paper board and aluminium foil it can be looked upon in two ways : (1) an article of paper/paper board laminated with polythene and aluminium foil or (ii) an article made of aluminium foil laminated with polythene and paper board.
16. Under the circumstances we are required to refer to the chapter notes and headings as well as interpretative rules. The headings and relative section or chapter notes are of course required to be considered in the first instance but where a problem of interpretation arises the rules of interpretation can, my opinion, be simultaneously invoked. It is noteworthy that these rules are called general rules for the interpretation of this Schedule - and the Schedule includes sections, chapters, headings and sub-headings. In fact there is no alternative but to invoke them particularly in case where goods are prima facie classifiable under two or more headings.
17. However, it is nobody's case that these rules of the interpretation cannot be or should not be invoked or applied in this case (and apart from referring to the headings and the relevant notes) the contending parties have mainly argued for or against the applicability of Rule 1 vis-a-vis Rule 3.
18. In my opinion, in view of the nature of the product and particularly the multiple laminations of different materials the headings and relative section and chapter notes are not a sufficient guide and we have to resort to rules for arriving at a correct classification. Further in the above circumstances Rule 1 is not of much help and it is Rule 3 which is relevant and has to be resorted to.
19. Having said so I do not agree with the view expressed in the case of NDDB that Rule 3(a) is applicable and predominance of an ingredient by way of weight is required to be taken into consideration in such a case as the present one.
20. I consider that it is the essential character criterion mentioned in Rule 3(b) which is more appropriate in the present case.
21. I have already had an occasion to observe that it is upto the Parliament to create a legal fiction and in cases where a definition is specifically provided or there is a heading note or chapter note specifically applicable then it will take precedence over even common parlance, for common parlance test is only an aid to interpretation.
22. But, in the present case the presence of an aluminium foil of less than 0.15 mm is an admitted fact. It is also admitted that it plays an important role inasmuch as due to its presence the shelf life is increased. It is also admitted that there are two types of tetra-packs one containing the aluminium foil and the other without such a foil. All the same it has not been proved beyond doubt that it is the aluminium foil which imparts the essential character to the product; and in the proposed order the observation of the Tribunal in the case of NDDB to the effect that the essential characteristic of the product is not aluminium has not been demolished. There is also nothing to indicate that there was legislative intent to the contrary. In the circumstances the common parlance test could be applied. This material is for manufacture of tetra-packs with are basically containers of the type of paper board cartons or similar thereto. The presence of an aluminium foils does enhance the value and add to their quality but does it change the basic fact that they are essentially articles of paper board as commonly understood and as they look like? The fact of the matter is that each material of which the article is composed including the laminations of polythene and aluminium as well as the paper board contribute to some quality or property of the product. As rightly observed in the case of NDDB and reiterated before us "the aluminium foil laminate is used to achieve : (a) A gas barrier towards oxygen and water vapour; (b) High light barrier; (c) Use of induction heading for transversal sealing. The foil is laminated to the paper and coated with polyethylene."
23. At the same time technical literature further discloses that polythelene is applied for any of the following reasons :-
(i) to protect paper and alufoil from outside moisture and product
(ii) to bond alufoil and paper/paper board
(iii) to produce a liquid tight seal for example longitudinal or transfer seal on a pack.
(iv) to act as a barrier against bacteria and on the basis of the technical literature the appellants have contended there the goods were asceptic packaging material.
24. The fact that paper/paper board provided the bulk support is also not in doubt or dispute. The department has not produced any technical or other literature to show that of the three materials of which the article is composed of, the aluminium is the most important/or provides the essential character although Ld. D.R. has vehemently argued in favour of this consideration. His arguments have undoubtedly helped in focussing attention on the relevance and importance of this criterion but it is only that far that it takes us.
25. In this connection it may also be mentioned that admittedly there are more than one type of tetra pack containers, some of them may contain aluminium foil and others may not; depending upon the material of which they are made of. Similarly, it is conceivable that they will be tetra pack made of packaging materials containing ingredients or components of different quality (as distinct from quantity or dimensions) depending upon the purpose for which they are intended i.e. the type of material which the tetra pack is required to contain and the purpose and period for which it is required to be so contained. In other words different laminations can play different role of varying importance and it is the lamination which provides the essential character which will be the determining factor for the purposes of classification.
26. In view of the above discussion while agreeing with the Ld. D.R. that in the NDDB's case the Tribunal had erred in applying Rule 3(a) and taking the relative grammage of contents into account I do not agree with the observations in the proposed order which imply that they had erred in referring to the interpretative rules. However, I consider that the material placed before us by the department is not sufficient to agree with its contention that it is the aluminium which provides the essential character. The tetra pack containers are to my mind articles of paper/paper board containing multiple laminations, with or without a metal (aluminium) foil forming one such lamination and their essential function is to contain and preserve the required material for various purposes and to varying extent. Hence, the article in question will not be covered by Chapter 76 but by Chapter 48 in spite of presence of an aluminium foil lamination which merely improves the quality but does not provide the essential character.
27. Hence, with due respects the article is classifiable under Chapter 4811.90
28. The reference is answered accordingly.