Customs, Excise and Gold Tribunal - Delhi
Collector Of Customs vs Mazda Packaging Ltd. on 25 October, 1993
Equivalent citations: 1994ECR277(TRI.-DELHI), 1994(69)ELT283(TRI-DEL)
ORDER S.L. Peeran, Member (J)
1. The revenue is aggrieved with the order-in-appeal passed by 1d. Collector (Appeals), Bombay allowing the benefit of S. No. 32 of the Notification No. 125/86-Cus., dated 17-2-1986 to the goods declared in the bill of entry dated 19-10-1987 as "Multi Layer (5 layers) co-extrusion machine and spare parts thereof on the ground that what is imported is a multi-layer film blowing plant for efficient co-extruded film manufacture with enormous versatility and the whole plant cannot be brought under the purview of "multi-layer extruding machine".
2. The ld. Collector (Appeals) has held in his order as follows :
"From the catalogue produced it is seen that the sub-assemblies or parts imported are all essential parts of the 3-layer blown film line and except for die-head all parts have been imported. The die-head is the only part which is interchangeable and all other parts are specially designed for the system for production of multi-layer co-extruded film and the end-product cannot be produced without any one of these parts and these parts are not of any material use in isolation. As per Note 5 to Section XVI 'machine' means any machine, apparatus or appliance of a kind falling Under Section XVI and as per Note 3 to Section XVI composite machine consisting of two or more machines fitted together to form a whole and other machines adopted for the purpose of performing two or more complementary or alternative functions are to be classified as consisting only of that component as being that machine which performs the principal function. The impugned machine parts as a whole perform the function of multi-layer co-extruding machine and are, therefore, classifiable as such under the heading and are also eligible to benefit of Notification No. 125/86-Cus.
The appeal is accordingly allowed."
3. We have heard Shri B.K. Singh, 1d. SDR for the revenue and Shri D.B. Shroff, 1d. Advocate for the importer.
4. Shri B.K. Singh, 1d. SDR strenuously argued the case of the Revenue and has contended that the benefit of the notification in question can be granted only to an Extruder and not to a extruder plant. Taking us through the technical literature and documents relied by the importer, 1d. SDR pointed out that the importer had changed the description of the machine in the invoice and bill of entry as the bank documents show a different description. He argued that it is clear that the importer had changed the description solely with a view to take advantage of the notification. He argued that the set of machinery in the form of a plant is required to be classified as per Section Note and Chapter Note. But those Section/Chapter Notes do not apply while interpreting the benefit of the notification. In this regard, he relied on the ruling rendered in the case of Johnson & Johnson Ltd. v. Collector of Central Excise -1987 (29) E.L.T. 428 (para 16), Collector of Customs v. OEN India Ltd. - 1989 (42) E.L.T. 235. Referring to the process of the entire plant, 1d. SDR argued that the multi-layer film emerges before the other extruding processes are taken up and hence the other equipments like cooling ring, guiding unit, film collapsing unit, take-off unit, winding, slitting unit etc. are not part and parcel of the multilayer co-extruding machine. They also do not form an integral part of the co-extruding processing machine. To buttress his arguments, 1d. SDR referred to the definition of the term "Extrusion" appearing at page 283 of Mc Graw Hill Technical Dictionary Vol. 5 1982 Edition and at page 808 of Webster English Dictionary 1991 Edition. He submitted that the function of extrusion machine was only to convert thermoplastics into continuous stream of melt, and any activity beyond this would not be included in the multi-layer co-extruding machine. He also referred to the technical literature referred by the Importer including to the certificates from experts to make his point that the processes performed with these complex plants were beyond the stage of the machine described in the notification. Referring to the quotation of Klockner Windsor India Ltd., the supplier, Shri Singh argued that the description of the plant and the details furnished indicated that the equipment did not cover the description in the notification. He made a point that technically as well as commercially in trade parlance, the entire plant imported do not come with the ambit of extruder machine. He relied on the ruling rendered by Tribunal in the case of Asian Cables Corporation v. Collector of Customs, 1993 (63) E.L.T. 640, wherein it has been held that Notification No. 40/78-Cus., dated 1-3-1978 applied only to plastic extruder 152 mm sq. diameter and not to Electrical Control drives and ancillary equipment and spares, imported alongwith the said plastic extruder 152 mm sq. diameter. In support of his argument that notification requires to be strictly construed, Shri Singh relied on the following rulings :
1. Quality Steel Tubes (P) Ltd., Kanpur v. Collector of Customs, Bombay - 1987 (30) E.L.T. 447
2. Indye Chemicals, Ahmedabad v. Collector of Central Excise, Ahmedabad - 1986 (25) E.L.T. 318
3. Nayek Associates v. Collector of Central Excise, Calcutta -1985 (21) E.L.T. 819
4. Collector of Central Excise, Baroda v. Sarangpur Cotton Mills, Ahmedabad -1988 (33) E.L.T. 470 As regards, his plea pertaining to commercial parlance, he has relied on the following ruling
1. Plasmac Machine Co. Pvt. Ltd. v. Collector of Central Excise - 1991 (51) E.L.T. 161 (SC)
2. Collector of Central Excise v. Dowell's Electric Works -1990 (45) E.L.T. 96
5. Shri Shroff, 1d. Advocate arguing for the Importer submitted that the extruder alone does not bring in multi-layer plastic film and it is the entire composite plant which ultimately produces the multi-layer plastic film and therefore, the 1d. Collector after a very careful consideration of both the technical literature and the expert's evidence has held that the equipments form integral part of the extruder. Referring to the 'Extruder Die', Shri Shroff argued that this item converts thermoplastics into a continuous stream of melt which is then shaped by an extrusion die into a uniform cross-sectional shape but it does not produce multi-layer plastic film. He referred to entire expert's opinion and the technical literature and explained that the thermoplastics is required to be blown, cooled, nipped, slit and wound and only thereafter, the multi-layer plastic film is produced and for these processes the entire plant becomes an integral part of the multi-layer extruder. The 1d. Counsel submitted that Tribunal in the case of Asian Cables Ltd. had overlooked the decision rendered in the case of Industrial Cables (India) Ltd. v. Collector of Customs as reported in 1990 (46) E.L.T. 357, in which, the Tribunal had held that the benefit of Notification 40/78-Cus., dated 1-3-1978 was applicable to plastic extruder 15 mm sq. diameter and also to electrical control drives and ancillary equipment and spares. The Tribunal has also held that in any event the Accessories (Condition) Rules, 1963 also granted the benefit to the imported item.
As regards the SDR's argument regarding applicability of Section Notes and Chapter Notes, while interpreting the notification, 1d. Advocate submitted that Section Note 5 of Section XVI defined machine to include a plant also. He referred to Section 20 of General Clauses Act, which stated that words used in a notification should have the same meaning as given in the statute. In this context he relied on the ruling rendered in the case of Onkarlal Nandlal v. State of Rajasthan as reported in AIR 1986 SC 2146 para 8 at page 2151.
He pointed out that the benefit is even otherwise available as per Accessories (Condition) Rules, 1963 and in this context relied on the ruling rendered in the case of Industrial Cables India Ltd. (supra) and that of Tata Sons Ltd. v. Union of India and Ors. -1982 (12) E.L.T. 53 para 8 (Bombay).
6. We have carefully considered the submissions made by both the sides and perused the documents, technical literature, expert's opinion and the citations relied before us.
7. The goods in question is described in the Bill of Entry as "Multi-layer (5 layer) Co-Extruding Machine". While the quotation of Brimco Plastic Machinery (P) Ltd. dt. 1-6-1989 describes the machinery as "Brimco multi-layer BRCE-5/MF Plant for the production of five layer co-extruded film with polymer technology Inc USA 5 Layer Die", the quotation of Klockner Windsor India Ltd., dt. 18-5-1992 described the goods as "Klockner Windsor Multi-layer Film Plant". The Id. SDR has relied on these descriptions in the invoices and has argued that this is a sufficient proof of market/trade parlance and commercial understanding to indicate that the goods are not satisfying the description of S. No. 32 of Notification No. 125/86-Cus., dated 17-2-1986, which reads "Multilayer Coater/Extruding Machine". The definition of 'Extruder' as appearing at page 808 of the Webster's Dictionary is also relied, alongwith the definition as appearing at page 283 of McGraw Hill Dictionary, to support his argument that the term "Extruder" has to be strictly understood and applied, while interpreting the notification. It is his further argument that the Section Note definition of Customs Tariff of the term 'machinery' cannot be imported for interpreting the terms of the notification. Let us examine these two contentions of 1d. SDR before adverting to other pleas raised by him. The word "Extruder" at page 808 of the said Dictionary reads "one that extrudes, specify a machine that shapes materials by the process of extruding".
'Extrude' is defined as "to thrust, push - more at THREAT;
(1) to thrust out : cause to protrude : stick out (an insect extruding its proboscis) (2) to cause to emerge by or as if by squeezing out : Press out (mollusks extruding fecal pellets): cause to move to or appear at the surface or the outside (a land upheaval that extruded molten rock) b: to cast out or get rid of forcibly or violently by or as if by pushing or shoving: throw out : EJECT, EXPEL (the offender...is extruded as unworthy of an honourable calling - R.M. Maclver) 2 : to shape (as metal, plastic, rubber by forcing through a specially designed opening often after a previous heating of the material or of the opening or of both -compare DRAW : to jut out as or as if a result of being extruded; PROTRUDE, PROJECT (land masses extruding into the sea) : to move to or appear at the surface or the outside : EMERGE (lava extruding from early fissures) : to undergo shaping done by the process of extruding (a material that does not well) 'Extruder' One that extrudes : specify a machine that shapes materials by the process of extruding 'Extrusion' is defined as "the act or process of extruding by the fact of being extruded: subjection to the act or process of extruding : an article or product (as of metal, plastic, rubber) made by the process of extruding : something (as lava or mud) forced out (as through a fissure) upon the earth's surface.
The definition of "Extrusion" as appearing at page 283 of McGraw Hill is also reproduced herein below:
"Extrusion" the forcing of solid metal through a suitably shaped - orifice under compressive forces. Extrusion is somewhat analogous to squeezing toothpaste through a tube, although some cold extrusion processes more nearly resemble forging, which also deforms metals by application of compressive forces. Most metals can be extruded, although the process may not be economically feasible for high strength alloys".
8. The 1d. SDR has emphasised that by these definitions, the entire plant is excluded and the benefit cannot be granted. This argument would have been very much appealing and acceptable, if the notification had restricted the description to extruding machine only. In the context of the description as appearing in Notification 40/78-Cus., dated 1-3-1978 which reads "Plastic Extruder above 150 mm sq. diameter," the Tribunal in the case of Asian Cables Corporation, has held that the notification's description being restrictive, the "electrical control drives ancillary equipment and spares" could not be said to be covered by the description of the notification. Therefore, this ruling relied by the 1d. SDR is not applicable to the facts of the present case, in the context of the description being different in the notification. Ld. Advocate, pointed out that the Bench had taken a different view on this aspect in the case of Industrial Cables (India) Ltd. (supra). As we are not dealing with this controversy pertaining to the description of Notification No. 40/78, it is not necessary for us to pronounce any finding on this aspect of the matter.
The ld. SDR's next submission is that the trade understanding is that the "extruder" does not refer to multilayer coater/extruding machine. We do not see any force in this argument. The quotations of two suppliers refer to the 'plant' while in the Bill of Entry the word 'machine' has been used. Merely by this change of words, nothing much can be inferred on trade parlance test, as this was neither the case of department nor any allegation of misdeclaration having been brought out against the importer. The classification of the goods is not in dispute. For the purpose of classification the Section note 5 of Section XVI has been adopted, which reads "For the purposes of these Notes, the expression 'machine' means any machine, machinery, plant, equipment, apparatus or appliance cited in the headings of Chapter 84 or Chapter 85."
Ld. SDR states that this Section Note cannot be applied to the interpretation of the notification. The description used in the notification is "Multilayer coater /extruding machine". The definition of machine as given has been adopted to mean it includes 'plant' also. This adoption of the meaning of the term machine to mean plant, by itself cannot mean that the imported item has by itself satisfied the description of the notification. Even, if the Section Note 5 had not defined the term "machine" even otherwise, while 'interpreting a 'word' or a 'phrase', it is now well settled that resorts to the dictionary, and technical meaning, as also the meaning attached in common usage to such words are to be taken into consideration.
9. The learned Advocate pointed out to Section 20 of General Clauses Act, which reads as follows :
"20. Construction of notifications etc. issued under enactments - where, by any (Central Act) or Regulation, a power to issue any (notification) order, scheme, rule form, or bye-law is conferred, then "expressions" used in the (Notification) order, scheme, rule, form or bye-law, if it is made after the commencement of this Act, shall unless there is anything repugnant in the subject or context, have the same respective meanings as in the Act or Regulation conferring the power."
10. Therefore, even going by this plea of ld. Advocate, the specific provision of Section 20 of General Clauses Act, it can be fairly held that for interpreting any expression used in a notification, the legislative meaning, besides dictionary & technical meaning and the words as understood in common usage can be adopted, to interpret the said word or expression or phrase. The description in the notification is "Multilayer coater extruding machine". These words have to be understood in the manner in which it is understood technically as well as in trade. If the understanding in the trade, as well as in technical sense is to mean that the machine includes, a whole lot of interconnected components and parts, to form an integrated plant; as is in the present case; then, it follows that the term "machine" defined in the Section Note, is also a pointer to such an understanding, having been adopted by the legislature.
10A. Now, let us examine as to whether the imported item satisfies the description in the notification. The Appellant stated that the multi-layer co-extruded machine is a machine which manufactures multi-layer plastic film by the co-extruding process. The raw material is extruded by five extruders which feed the die to form liquid film which is further cooled by a cooling ring, and guided by a guiding unit, a film collapsing unit. This extruder can only extrude the plastic resin in a liquid form. This liquid has got to be further processed so as to convert the same into film so that the same can be sold in the market. The winding unit is required to pull and found the film as the liquid polymer comes out of the die. Without the winder, the film formation does not take place, and a lump of plastic scrap is the only thing that can be produced. Without the slitting unit, winding cannot be done owing to air entrapment. They have also submitted that all the aforesaid units collectively consist of an equipment which constitutes a complete and indivisible unit for producing a multi-layer packing film and therefore only the entire unit can be considered or classified as a machine. In this regard they have relied on the certificate issued by Dr. S.P. Potnis, Director and Professor of Polymer Technology, University of Bombay. In this certificate the Dr. S.P. Potnis has stated that the five line extruder together with cooling ring, take off system, winder, treater, Guide, slitting mechanism, etc., which follow the extruder lines, all constitute complete and indivisible unit for producing multi-layer packaging film and the total unit has to be classified as machine. The Victoria Jubilee Technical Institute has also given a certificate. In this certificate it is stated that cooling ring, take off winder etc. that are the components after the die, are essential for functioning of the machine. It further, states that continuous formation of the film and controlling its thickness is effected by these elements, and therefore the above mentioned parts are part and parcel of the machine and cannot be considered as accessories. There is also technical report given by Mr. A.S. Athalye. The said report is noted herein below :
"The process for the conversion of plastics by extrusion where a film produced has more than one layer of similar or dissimilar polymers, plasticized from different Extruders on coming out as a Multilayer Laminated Film through a downstream equipment upto winding comprises the co-extrusion equipment. For a 5-layer film, there are 4 or 5 Extruders depending on the supplier and each extruder is designed for processing a set of polymers. All the materials plasticized by these extruders get laminated while coming out of a common die-head through which a Multilayer Film comes out, is cooled by means of cool air from a Cooling Ring is further supported for a vertical take-off formed by means of adjustable-collapsible boards, drawn by NIP Rollers located at the top of the take-off tower, treated, slit open into two separate parts and wound as separate films on two winders.
The extrusion die is a speciality highly skilled, high technology engineering product and as such most of the manufacturers of extrusion equipments buy a Die from parties specialising in die manufacturing and quite often, give a option to their customer to buy a Die of his choice from any source of his choice.
In fact, even in India, manufacturers of Extrusion equipment like Kolsite and Windsor, do import a T-Die for the production of flat films or lamination even though they have more than 20 years experience in the field of manufacture of processing equipments.
Even though Die/Moulds form an important part of plastics processing Equipments, being an interchangeable item of a machine, is treated separately even for the purpose of classification and Import Duty.
For example, Injection Moulding Machine, Blow Moulding Machine, RIM Machine, Thermoforming Machine and Sintering Machine, which cover the entire range of processing equipments in the field of plastics, are all supplied without moulds/dies by all the reputed suppliers in all parts of the world.
The major application of such Barrier Films is the packaging of various kinds of food products ensuring long shelf-life and consumer protection."
11. The ld. Advocate has also produced technical literature in support of their contentions besides the certificates produced from the experts. At page 197 of Wiley Encyclopedia of Packaging Machinery, the process equipment is described as follows:
"A tubular coextrusion process fundamentally consists of the extruders, die, air ring, collapsing mechanism, haul-off, and winder. These elements are similar to those of single-layer film extrusion except for the die, which must contain more than one flow manifold, i.e. layer channel, for extrusion (see Fig. 1),"
The Modern Plastics Mid-October Encyclopedia issue at page 281 describes Blown film extrusion. The same is noted below :
"Blown extrusion is a continuous process where the molten tube is simultaneously axially drawn and radially expanded from an annular slit die. The hot tube is cooled by an annulus of high-speed air from an air ring on the outside : sometimes it is cooled on the inside of the tube as well. Although some processes use a horizontal configuration or are vertically down and most are configured vertically upward.
The cooling occurs on the expanding tube, which usually is 1.2 to 4 times the die diameter. At a point above where the polymer is cooled below its melting range, the tube is squeezed by two opposing flat surfaces to collapse the bubble before it enters the primary nip rolls at the top of the tower structure. The cooled, collapsed layflat tube transported on idler rolls down the tower by the secondary tension-controlled nip and then wound onto cores to make film roll stock. The tube also can be sent to an inline scaling machine to make bags.
Polyolefins (LDPE, LLDPE, HDPE) are the most frequently used polymers, although ethylene copolymers, PVC, nylon, TPUS, elastomers, nitrites PETG and polycarbonate are sometimes used to make blown film. Homo-polymer (Polypropylene) needs a special water or mandrel quench process.
Major markets are bags for trash, lawn clean-up, and kitchen. Blow film is also used for T-shirt grocery sacks and dry cleaning and baked goods bags. A large amount of film is used in agricultural and construction applications such as ground cover for mulch and fumigation and for water and wind burners. Coextruded blown film in 3 to 5 layer structures is used for snack food, cereal, meat and other food packaging.
Process Melted polymer supplied by the extruder(s) is formed into a very thin wall. Upward flowing annulus by the die and exits into an annular cooling air stream supplied by the air cooling ring. Air also is fed through a hole in the die to inflate the tube and expand it to the desired diameter. Once the process is stabilized, the inside air is stagnant and no more inflation is needed (unless internal cooling is also used). The balance of the polymer flow and cooling air flow maintains the proper position of the maximum expansion zone of the bubble above the die. Because the film is unsupported in the cooling stream, resins most frequently used are more viscous, and melt temperatures are kept low to maintain melt strength. These factors, coupled with the need to form the polymer to a uniform flow very-thin-walled annulus, create higher extrusion pressure than what is encountered in other processes."
At page 281 of the said issue describes the equipments for the set has been film extrusion. The same is noted below :
"Equipment The equipment normally used in a blown film line has an extruder and screen change or more than one if coextruded film is made a die block with oscillator, a tubular die air cooling ring : a tower structure : collapse and primary nip : surface treater : second nip : and winder(s)."
12. From the perusal of the above literature along with the expert's opinion, it is very clear that for the purpose of production and manufacture of "Melt/layer extruder extruding Machine" as described in the notification, the entire equipment as imported by the appellant is required. Therefore, it is an integrated plant as held by the Id. Collector.
13. In a similar matter coming before the Tribunal with the case of Collector of Customs, Kandla v. Purity Flex Pack Ltd. as per Order No. C/117/93-B2 dated 12-10-1993. The Revenue was aggrieved with classification of "Extrusion Lamination Plants and Accessories". The importer has emphasised that the said amount is essentially for manufacture of "Aseptic Packaging Materials for Food Industries". They also had stated that the process involved is of coating of extrusion. It was their, however, contention that under Notification No. 250/88-Cus., dated 16-9-1988 multilayer coater/Extruder Machine is also covered under Notification No. 355/85 dated 6-12-1985. The Collector on examining the technical literature has held that in the intermediatory stage of the manufacturing process (after web passes through the anchor ceater unit and drying unit) molder LDPG and other lamination is extruded on the web in the form of sheet from the T-Die of the extruder unit. Therefore, the extrusion is only ancillary function in the Lamination Machine. The importer had further stated that the essential character of the machine is lamination and not that of extruder and hence claimed classification under Chapter 8479.89 of CTA 75 and not under 8477.20. The Collector after careful consideration had upheld the importer's claim. The Revenue were aggrieved with the said order and appealed before the Tribunal. The Tribunal held in paras 5 to 9 as follows :
"5. The question to be considered is whether the "extrusion lamination" and accessories, imported by the respondent are classifiable under Heading 8477.20 as claimed by the importer, or under Heading 8479.89 as held by the learned Adjudicating Authority, and further whether the benefit under Notification No. 250/88-Cus., as a Multi-layer cooler/extruder machine is admissible to the same. Alternatively whether the benefit under Notification No. 125/86-Cus., dated 17-2-1986/355/85-Cus., dated 6-12-1985 as Aseptic packaging material is admissible to them.
6. As per the Department the machine is essentially a laminator and "extruder" is only a part of the same. As per the appellant the machine is essentially a multi-layer coater/extruder which is envisaged under the said Notification No. 250/88-Cus., dated 16-9-1988 and the so-called "lamination" function is not strictly a lamination function, but is covered by the term "extrusion coating".
7. In support of the said plea the appellants have quoted extensively from the book "The Wiley Encyclopedia of Packaging Technology."
As seen from the said book page 289 "Extrusion coating is a process in which an extruder forces melted thermoplastic through a horizontal slot die ... onto a moving web of material". The said chapter entitled "Extrusion coating" further speaks of "Equipment for extrusion coating and lamination lines" and also "in extrusion laminating, 9 film of molten polymer is deposited between two moving webs in a nip created by a rubber pressure roll and a chrome-plated steel roll. In this continuous operation, rolls of material are unwound, new rolls are automatically sliced on the fly, and the surface of the substrate is prepared by Chemical priming or other surface treatment to make it receptive to the extrusion coating,"
(Emphasis supplied) Thus the word "lamination" used in conjunction with "extrusion coating" is different from the conventional "lamination".
This is made all the more clear from the Chapter "Laminating Machinery" in the said book.
"Much flexible packaging laminating today includes an extrusion process, which is not covered here."
(i.e. the Chapter "laminating machinery's) "See Extrusion coating; Multilayer Flexible packaging."
8. It is well settled that in interpreting the words in a taxing statute the regard has to be had not to the technical meaning of the terms ("lamination" in the present case") but as to how it is understood by those conversant with the trade.
9. As seen from the extracts quoted above, "The lamination" in the present case is a part and parcel of "Extrusion coating". On this view of the matter, the impugned goods are covered by the term "Multilayer coater/extruder machine" used in the Notification No. 250/88-Cus., dated 16-9-1988. (In view of this the alternative plea regarding "Aseptic packaging material" covered by Notification No. 125/86-Cus., (355/85-Cus.) does not have to be considered)."
The above observation of the Tribunal's order has also a bearing on our findings and the same is also taken note of.
In the result we do not find any merits in this appeal and we dismiss the same by confirming the order of Collector (Appeals).