Customs, Excise and Gold Tribunal - Delhi
Voltas Ltd. vs Collector Of Customs on 5 November, 1990
Equivalent citations: 1991(31)ECC278, 1991ECR52(TRI.-DELHI), 1991(52)ELT48(TRI-DEL)
ORDER G.A. Brahma Deva, Member (J)
1. These two appeals are filed by the appellants Voltas Limited against Order-in-appeal No. 2572/88-BCH dated 26-4-1988 passed by the Collector of Customs (Appeals), Bombay, wherein he confirmed two orders-in-original No. S/26-617/87 II B and S/26-632/87 IIB respectively passed by the Assistant Collector of Customs, Bombay. Since the issue is common in both the cases, they are, therefore, clubbed together and are being disposed of by this common order.
2. The issue involved in these two appeals is whether Isocyanate is classifiable under Heading 2929.10 or under 3909.50 of CTA, 1975.
3. The appellants imported "Suprasec DND Isocyanate" and "Daltolack 1235 Polyol" through respective bills of entry. The contention of the appellants that item Isocyanate was classifiable under Heading 2929.10 of CTA, 1985 was rejected by the Assistant Collector of Customs and held that item was classifiable under Heading 3909.50 on the ground that these two items imported by them are for the manufacture of Polyurethane. In appeal, the Collector of Customs (Appeals), Bombay, has confirmed the order passed by the Assistant Collector of Customs observing that these two items had been imported in the same container though packed separately as they were imported for the purpose of manufacture of Polyurethane. The classification was in conformity with the terms of Section Note 3 to Section VI and Note-1 to Section VII of the Customs Tariff. Aggrieved by the findings given by the authorities below, the appellants have come before us by way of these two appeals.
4. We have heard Shri Sanjay Grover, learned Advocate for the appellants and Shri V. Chandersekharan, learned SDR for the respondent.
5. Shri Sanjay Grover, appearing for the appellants, submitted that there is no dispute in respect of item POLYOL, but dispute in respect of classification of Isocyanate pertains to basic duty and not rate or quantum of auxiliary and additional duties. He contended that Isocyanate is one of the raw materials which is used for making Polyurethane. Hence Isocyanate by itself cannot be called as Polyurethane and cannot be classified under the Heading No. 3909.50. He said that Note 2(b) under Chapter 39 of the Customs Tariff specifically excludes chemically defined organic compounds falling under Chapter 29. Isocyanate is one such compound which is separately and specifically covered under Chapter 29. Further he contended that goods to be classifiable under Chapter 39 in terms of Note 3 to Section VI and Note 1 to Section VII as per the wordings used in the respective notes the goods are intended to be mixed together to obtain a product of Section VI or VII have to be understood with reference to meaning of 'Mixing' as the term Mixing has not been defined in the Tariff. He drew our attention to the definitions of Mixing and Mixture as defined in the Condense 1 Chemical Dictionary. Mixing has been defined in the Condensed Chemical Dictionary, l0th.Edition by Gessner G. Hawley, published by Van Nostrand Reinhold Company, New York, as "mixing is effecting a uniform dispersion of liquid, semi-solid or solid ingredients of a mixture by means of mechanical agitation." The definition of mixture from the same dictionary states that "the mixture is a heterogeneous association of substance, which cannot be represented by a chemical formula. Its components may or may not be uniformly dispersed and can usually be separated by mechanical means." He said that in the instant case neither they were mixed nor intended to be mixed together in the sense it was used in the respective notes with reference to the meaning of Mixing and Mixture. He said that Polyurethane is not produced by merely mixing these two items, viz., Polyol and Isocyanate but process involves chemical reaction wth the help of other items. Polyurethane is not a mixture of these two items but a chemcial compound which can be represented by a chemical formula and hence Isocyanate cannot be classifiable under the heading Polyurethane is classifiable.
Next he contended that the appellants have been importing Isocyanate in the normal course of business and Custom authorities have been accepting those subsequent consignments of Isocyanate by classifying under the Tariff Heading No. 2929.10.
6. Shri Chandersekharan, learned S.D.R for the revenue, has submitted that the item in question squarely falls under the Tariff Heading 3909.50 and Chapter 39 in terms of Note 1 to Section VII of the Tariff. He drew our attention to Exhibit IX, i.e. extract from the Condensed Chemical Dictionary - 10th. Edition by Gessner G. Hawley which describes about making of polyurethane foams as under:-
"Solid Polyurethane plastic is the result of a chemical reaction between two liquid components, a di-isocyanate and a compound containing "active hydrogen" groups usually referred to as the "resin" or the "polyol". Many compounds fit this description and each one will create a solid polyurethane somewhat different from the others. The chemistry is described in more detail in the publication PU161-3E. The production of rigid polyurethane foam is industry.
However, no foam will result unless the reacting polyol/isocyanate mixture is simultaneously expanded by gas generation. This was first achieved by the reaction of isocyanate with water to generate carbon dioxide (CO2). Although this method is still practised, more foams - especially for insulating purpose - are how also blown with low boiling halogenated alkanes. Whatever the details of the chemistry, the reaction between polyol and isocyanate is exothermic and the heat generated can be used to oil the dissolved blowing agent. Such a blowing agent turns the reacting liquid mixture into a foam that solidifies as the polymerisation is completed. When the foam has a clossed-cell structure, the blowing agent remains trapped within the cells and can give a better (lower) value of thermal conductivity than is obtained in structures filled with air or carbon dioxide.
Also included in the mixture, by pre-blending in the polyol, may be." He stressed on the line. 'However, no foam will result unless the reacting polyol/Isocyanate mixture is simultaneously expanded by gas generation' and said that in view of this fact and both the products, viz. Polyol and Isocyanate were brought together with intention to mix for the purpose of manufacture of Polyurethane, the Isocyanate is correctly classifiable under Heading 3909.50. He said that if they have imported separately and exclusively, the position would have been different, but once they were brought together though they were separately packed, they were classifiable under Heading 3909.50.
7. We gave our anxious considerations to the arguments advanced on both sides and perused the records. Sri Sanjay Grover, though submitted that some of the points urged before the Collector were not considered by him in the impugned order, but he was not emphatic in requesting for remand and further we too feel that no purpose will be served in remanding the matter at this stage as the issue can be decided here itself based on available material by applying the relevant provisions of the Tariff Act.
8. In the present case, the facts are undisputed that the appellants have imported two items, viz. Polyol and Isocyanate covered by same Bill of Entry for the purpose of manufacture of Polyurethane. Both the items have been imported in the same container but packed separately. The contention of the appellants is that when they were not mixed together at the time of importation, mere mixing together would not produce Polyurethane and commodity in question being an organic compound should be classifiable under Chapter 29 as against Chapter 39. But the Department has taken the view that when they were brought together in the same container, though it was separately packed for the sake of convenience, but with intention to mix together for the manufacture of Polyurethane, the Isocyanate should be classifiable under Chapter 39 of the Tariff in terms of Note 1 to Section VII of the Customs Tariff. The relevant provision of Note 1 of Section VII is reproduced as under:-
"SECTION VII PLASTICS AND ARTICLES THEREOF: RUBBER AND ARTICLES THEREOF.
NOTES
1. Goods put up in sets consisting of two or more separate constituents, some or all of which fall in this Section and are intended to 6e mixed together to obtain a product of Section VI or VII, are to be classified in the heading appropriate to that product, provided that the constituents are:
(a) having regard to the manner in which they are put up, clearly identifiable as being intended to be used together without first being repacked;
(b) presented together; and
(c) identifiable, whether by their nature or by the relative proportions in which they are present, as being complementary one to another."
Sri Sanjay Grover has adduced sufficient evidence and literature to understand the meaning and concept of the imported products in question and their uses as well as constituents of the end product Polyurethane. But though, he vehemently argued that product in question is a separate chemically defined organic compound and is outside the purview of Chapter-39 as per Notes 2(b) to that Chapter, he had not produced any evidence or authority to show that it was chemically defined organic compound to be excluded from Chapter 39. In the absence of material evidence in this respect and on the available materials when the products were brought together with intention to mix together for the manufacture of Polyurethane, the commodity in question, viz. Isocyanate was also classifiable under Chapter 39 like Polyol, as constituent of Polyurethane in terms of Note 1 to Section VII of Customs Tariff.
9. In the view we have taken, we are not inclined to interfere with the findings given by the authorities below and accordingly, these to appeals are dismissed.
S.L. Peeran, Member (J)
10. In this appeal, the question that arises for consideration is as to whether "Suprasec DND Isocyanate" is classifiable under heading 2929.10 of CTA 1985 or whether it has to be classified under heading 3909.50 of CTA in terms of Section note 3 to Section VI and Note 1 to Section VII of the Customs Tariff Act on the ground that the item 'Isocyanate' had been imported alongwith 'Daltolack 1235 Polyol' for manufacture of Polyurethane.
11. The learned Member has held in the main order that the Counsel for the appellants, had not produced any evidence or authority to show that 'Isocyanate' was a separate chemically defined organic compound to be excluded from Chapter 39 and as the item isocyanate was brought together with polyol with intention to mix together for the manufacture of Polyurethane, the impugned item isocyanate was held classifiable under Chapter 39.
12. I notice that this matter is covered by an order of this Bench in the case of Polyfoam Industries v. Collector of Customs as reported in 1990 (47) 427 (Tri.) pertaining to the same issue and wherein the Bench after considering the C.B.E.C. Circular No. 2/89-CX-3 issued under F. No. 93/22/88-CX dated 4-1-1989 and also examining the Section Note (2) of Section VI and Section Note 1 of Section VII of new CET, had held that the item isocyanate was classifiable under Heading 2929.10 of CTA. I am of the considered opinion that the ruling as given in Polyfoam Industries case (supra) apply directly to the facts of this case. There is no reason to differ from the same.
13. Further, there is no dispute with regard to the item Isocyanate being a separate chemically defined organic compound. The appellants have produced the extract from 'The Condensed Chemical Dictionary', Ninth Edition revised by Gessner G. Hawley to show that the item 'Isocyanate' is a separate chemically defined organic compound. The item Isocyanate is specially covered by Customs Tariff Heading 2929.10. Note 2(b) under Chapter 39 of the Customs Tariff specifically contemplates that the chapter docs not include separate chemically defined compounds falling under Chapter 29. Isocyanate is one such compound which is separately and specifically covered by the Heading 2929.10 under Chapter 29.
14. The appellants have contended that the imported items Polyol and Isocyanate are not merely mixed to produce Polyurethane. They have contended that the two items viz. Polyol and Isocyanate are not mixed but they are subject to a process with the help of other items like Catalyst, Cross linking agents, Surfectants, Fire retardants and blowing agents. By appropriate inter-action with various other elements, polyurethane is produced. Referring to Chapter Note 1 Section VII, the appellants have contended that it contemplates that the products have to be brought in sets and by mere mixing, it should result in a different identifiable and marketable commodity. It is the appellants' case that note 1 to Section VII is not satisfied in this case at all, as the final product has not been obtained by mere mixing and that the items have not been brought in sets. 1 find lot of force in the appellants' contention. The note 1 of Section VII states, "goods put up in sets consisting of two or more separate constituents, some or all of which fall in this Section and are intended to be mixed together to obtain a product of Section VI or VII, are to be classified in the heading appropriate to that product, provided that the constituents are -
(a) having regard to the manner in which they are put up, clearly identifiable as being intended to be used together without first being repacked;
(b) presented together; and
(c) identifiable, whether by their nature or by the relative proportions in which they are present, as being complementary one to another".
A reading of this chapter note clearly discloses that the mixing together of the constituents should result in a product falling under Section VI or VII and in that case, they are to be classified under the heading appropriate to that product.
15. In this case, as stated by the appellants, the constituents are not merely mixed together to obtain the product but the constituents are subject to a process with the help of other items like Catalyst, Cross linking agents, Surfectants, Fire retardants and Blowing agents which is not denied by the Department. Therefore, the conditions stipulated in Section note 3 to Section VI and note 1 to Section VII of the Customs Tariff Act are not satisfied in this case for the purpose of classifying the item Isocyanate under CTA Heading 3909.50. Hence, I classify Isocyanate under Heading 2929.10 of CTA, 1975 applying the ratio of the ruling in the case of Polyfoam Industries case (supra).