Customs, Excise and Gold Tribunal - Mumbai
Hardware Trading Corporation vs Commr. Of Cus. on 1 December, 2005
ORDER T. Anjaneyulu, Member (J)
1. Heard both sides.
2. The appellants herein assail an order of the Commissioner of Customs (Appeals), JNCH, Nhava Sheva dated 15-2-2005 which confirms the Order-in-Original passed by the Additional Commissioner of Customs, CFS(M), Mulund (E), Mumbai.
3. The brief facts of the case are as follows -
M/s. Hardware Trading Corporation, Mumbai (Appellants) are inter alia engaged in the manufacture of chemicals, pesticides, etc. falling under Chapter 38 of the Customs Tariff Heading Act. They also engaged in trading of imported Boric Acid. The appellants imported a consignment of 20 MTs of Boric Acid. They initially filed a bill of entry for warehousing dated 29-11-04 and later on filed a bill of entry of Home consumption, seeking clearance thereof under DFRC Scheme. The eligibility for clearance of DFRC was under examination before the concerned authorities of customs. The Central Board of Excise and Customs vide Circular No. 61/2004, dated 28-10-2004 clarified that 'Boric Acid' being an "Insecticide" mentioned in the Schedule to the Insecticides Act, 1968, same would be classifiable under Heading No. 38.08. The said circular also referred to ITC (HS), wherein it is stated that Boric Acid is freely importable, if registered and not prohibited for import under Insecticides Act, 1968. The Board also clarified that in case of import of Boric Acid by traders, they would require registration with CIB and RC. In view of the circular, the Customs directed the appellants to get themselves registered with the CIB and obtain registration certificate.
4. In response to the objection that the import was not authorized, the appellants vide letter dated 20-12-2004 contended that they have imported "Boric Acid" under DFRC licence pertaining to leather products and in the said licence "Boric Acid" was indicated as 'deliming Agents' and hence the goods are in no way relating to insecticide or pesticide industry; that the Board's Circular No. 61/2004 came into operation on 28th Oct., 2004 and the import of instant consignment was effected on 5th Oct., 2004, that as per para 2(ii) of the said circular in case Boric Acid is proposed to be imported for an identified non-insecticides use, then such import must be exempted from the requirement of registration under the Act and in this case as this import is made under specific entry made under DFRC licence, it was requested not to insist upon the formalities of registration under the Insecticides Act for clearance purpose. It was further contended that, as per Customs Tariff Rules, for interpretation, the heading which provides the most specific description shall be preferred to heading providing a more generic description. Besides, it was also contended that Boric Acid is specifically mentioned in HSN Chapter 28 and the term "insecticide", mentioned in Chapter 38 is generic in nature. By applying Rule 3(a) of the said Rules, "Boric Acid" shall be eligible for classification under Chapter 28 being a specific entry. Following case laws were cited in support of the claim.
(i) VAC Met Corp. v. Superintendent Central Excise 1985 (2) E.L.T. 330 (S.C.)
(ii) Moorco v. Collector
(iii) CST v. Bansal Bottle Co.
5. The appellants further placed reliance on the judgment in case of East India Commercial Co. Ltd., Calcutta v. Collector of Customs, Calcutta and contended that if the goods were imported under a valid licence, it cannot said that the goods imported were prohibited or restricted under the Customs Act.
6. After hearing the appellants and going through the written submissions, the learned Additional Commissioner of Customs passed the order dated 28-12-2004 whereby clearance of "Boric Acid" against DFRC was denied and the said goods were held liable for confiscation and accordingly confiscated with option to redeem the same on payment of redemption fine of Rs. 2,50,000/- (Rupees Two Lakhs Fifty Thousand only). Besides penalty of Rs. 50,0007- (Rupees Fifty Thousand only) was imposed on the appellants under Section 112(a) of the Customs Act.
7. Aggrieved by the aforesaid order of the Addl. Commissioner, the appellants filed an appeal before the Commissioner (Appeals). The Commissioner (A) vide impugned Order-in-Appeal dated 15-2-2005 rejected the appeal of the appellants. Hence this appeal.
8. The authorities below relied upon the Board Circular No. 61/2004, dated 28-10-2004 in rejecting the claim of the appellants. It is a contention of the appellants that no reasons have been given for classifying the imported Boric Acid under Heading 38.08 of the Customs Tariff as well as under the ITC-HS. Further, their contention is that the Board Circular is not binding on them to contrary to the Customs Tariff Act. The Boric Acid is multi-furious use and in this regard they have relied upon the Kirk Othmer's Encyclopedia of Chemical Technology, 4th Edition, Vol. 4, the relevant text is extracted as under:
USES .-
(i) Boric acid has surprising variety of applications in both industrial and consumer products (6.57). It serves as a source of B2O3 in many fused products, including textile fiber glass, optical and sealing glasses, heat-resistant borosilicate glass/ceramic glazes, and porcelain enamels (see ENAMELS, PORCELAIN AND VITREOUS). It also serves as a component of fluxes for welding and brazing (see SOLDERS AND BRAZING ALLOYS: WELDING).
(ii) A Number of boron chemicals are prepared directly from boric acid. These include synthetic inorganic borate salts, boron phosphate, fluoborates, boron trihalides, borate esters, boron carbide, and metal alloys such as ferroboron (11108-67-1).
(iii) Boric acid catalyses the air oxidation of hydrocarbons and increases the yield of alcohols by forming esters that prevent further oxidation of hydroxyl groups to ketones and carboxylic acids (see HYDROCARBON OXIDATION).
The bacteriostatic fungicidal properties of boric acid have led to its use as a preservative in natural products such as lumber, rubber latex emulsions, leather, and starch products.
(iv) NF-grade boric acid serves as a mild, monirritating antiseptic in mouthwashes, hair rinse, talcum powder, eyewashes, and protective ointments (see DISINFECTANTS). Although relatively non-toxic to mammals (58), boric acid powders are quite poisonous to some insects. With the addition of an anticaking agent, they have been used to control cockroaches and to protect wood against insect damage (see INSECT CONTROL TECHNOLOGY).
(v) Inorganic boron compounds are generally good fire retardants (59). Boric acid, alone or in mixtures with sodium borates, is particularly effective in reducing the flammability of cellulosic materials. Applications include treatment of wood products, cellulose insulation, and cotton batting used in mattresses (see FLAME RETARDANTS).
(vi) Because boron compounds are good absorbers of thermal neutrons, owing to isotope 10 B, the nuclear industry has developed many applications. High purity boric acid is added to the cooling water used in high pressure water reactors (see NUCLEAR REACTORS).
9. Further their contention is that the Boric Acid correctly falls under Heading 28.10 of the Customs Tariff/Excise Tariff/ITC-HS as it specifically covers boric acid by description.
(i) Sub-heading 281000.20 of the Customs Tariff by name, specifically covers boric acids.
(ii) Similarly, sub-heading 2810.00 of the Excise Tariff also covers by name, boric acids.
(iii) Chapter 28 of both Customs Tariff and Excise Tariff are aligned with Harmonised System of Nomenclature (HSN). HSN Explanatory Notes to Heading 28.10 provide as under:
BORIC ACIDS:
(i) Boric acid (orthoboric acid) (H2BO3) is obtained either by acid decomposition of natural borates, or by physico-chemical treatment of crude boric acid.
(ii) It exists in the form of powder or small scales, micaceous flakes or vitrified lumps, with transparent edges, ash-grey or bluish (crystallized acid). It is odourless, greasy to the touch.
(iii) Its uses include: as an antiseptic (boracie water): for the manufacture of borosilicate glass (low coefficent of expansion), vitrifiable compounds, Guighnet's green (hydrated chromic oxide), artificial borates (borax), hydroxy-and amino-anthraquinones; for impregnating candle wicks; for fire-proofing cloth.
(iv) Crude natural boric acid falls in Heading 25.28 when containing not more than 85% of H2BOs3 calculated on the dry weight, when the H2BO3, content exceeds 85%, the acid is classified in this heading. Metaboric acid (HBO2)n is also classified here.
This heading does not include:
(a) Tetrafluoroboric acid (fluoroboric acid) (Heading 28.11)
(b) Glyceroboric acid (Heading 28.20)
10. The HSN Explanatory Notes does not say that boric acid is also used as insecticide or pesticide, presumably because boric acid is predominantly used as raw material.
11. The Supreme Court in the following cases has held that HSN Explanatory Notes are safe guide for interpreting the Tariff Entries (both under the Central Excise Tariff and Customs Tariff):
(a) CCE, Shillong v. Wood Craft Products Ltd.
(b) CC, Bombay v. Business Forms Ltd.
(c) CCE, Hyderabad v. Bakelite Hylam Ltd.
12. The General Rules for the Interpretation of the Custom Tariff or Excise Tariff provide as under:
Classification of goods in this Schedule shall be governed by the following principles:
1. The titles of Sections, Chapters and sub-chapters are "1. provided for ease of reference only; for legal purpose, 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.
13. Since Heading 28.10 specifically covers boric acid by name, irre- spective of the end-use, the imported boric acid will fall under Heading 28.10 only.
14. There is no dispute that boric acid is specified in the Schedule to the Insecticide Act and for the purposes of Insecticide Act, 1968, boric acid is an insecticide.
15. The CEGAT in CCE v, Essen Synthetics Pvt. Ltd. , held for construing the expressions "Insecticides, Pesticides, Weedicides and Fungicides" at Serial No. 18 of Notification No. 55/75-C.E., as under:
9. Following the decision supra, we hold that the Insecticides Act, 1968 or the Schedule thereto would not govern the meaning of expressions in Serial No. 18 of the notification supra.
16. Heading 38.08 reads as under:
Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant-growth regulators, disinfections and similar products, put up in forms or packings for retail sale or as preparations or articles (for example, sulphur-treated bands, wicks and candles, and fly-papers).
17. HSN Explanatory Note to the products of Heading 38.08 can be divided into the following groups:
(I) Insecticides.
Insecticides include not only products for killing insects, but also having a repellent or attractant effect. The products maybe in a variety of forms such as sprays or blocks (against moths), oils or sticks (against mosquitoes), powder (against ants), strips (against flies), cyanogens gas absorbed in diatomite or paperboard (against fleas and lice).
18. A perusal of HSN Explanatory Notes to Heading 38.08 clearly shows that boric acid will not fall under Heading 38.08 as an insecticide. The boric acid as imported by the appellants in capable of killing any pest.
19. As per the technical books, boric acid with the addition of anti-caking agents, is capable of killing cockroaches. Therefore, the boric acid in the form in which it is imported, will not fall under Heading No. 38.08 insecticide.
20. The Id. Commissioner of Customs (A), Nhava Sheva, rejected the appeals filed by the appellants for not producing the end-use certificate from the concerned Ministry and classified the Boric Acid under Chapter Heading No. 38.08.
21. After going through the record, the Board Circular dated 28-8-2004, encyclopedia of the Chemical Technology and HSN notes, we are of the considered opinion that the Boric Acid is classifiable under Chapter Heading No. 28.10 of the HSN, but not under Chapter Heading No. 38.08. First "of all, we have to stale that the Boric Acid is normally used as raw material in the industry. Heading No. 38.08 covers those goods which are insecticides. The Boric Acid imported in the form is incapable of killing pests. The authorities below have failed to consider the contentions put forth in the right prospective. They ought to have considered the contents of the letter dated 20-12-2004 and should not have insisted upon the formal registration by the appellants and production of end-use certificate. Therefore, we find the impugned order is erroneous and liable to be set aside. Accordingly, the same is set aside,
22. In the result, appeal is allowed with consequential reliefs.
(Pronounced in Court)