Customs, Excise and Gold Tribunal - Delhi
Cce vs Vishaagar Taluka Audyogic Sahakari ... on 11 September, 1998
Equivalent citations: 2003(159)ELT621(TRI-DEL)
ORDER A.C.C. Unni, Member (J)
1. In this departmental appeal the issue involved is the classification of decorative laminated sheets manufactured by the respondents.
2. The Assistant Collector had classified the item under Chapter sub-Heading 3920.31 as against the classification proposed by respondents in their classification list putting it under 8546.00. The Collector (Appeals) set aside Asstt. Collector's order and held that the goods were classifiable as electric insulators under Heading 8546.00 as classified by the respondents. Dissatisfied with the said order, Department has come up in appeal before us.
3. Appearing for the Revenue before us the ld. DR explained the details of the appeal and gave a brief account of the facts. The respondents are engaged in the manufacture of the product known as 'paper based plastic laminated sheets - electrical insulator'. In the classification list the respondents had classified their goods under "electrical insulators of any materials" (85.46) and described the goods "as electrical grade, industrial insulation boards, manufactured from paper by treating, impregnating and layers of such impregnated sheets, laminated/bonded together by hearing and printing in hydraulic press" in the classification list dated 22-9-1986. The goods were sheets of various sizes between 244 x 122 cms to 122 x 122 cms. The department's case before us is that the product manufactured by the respondents are not electrical insulators or insulating fittings covered under Chapter 85 but goods classifiable under sub-heading 3920.31 coming within the category of plastic laminated sheets, made of plastic and articles thereof. Ld. DR stated that insulators are used to insulate conductor from earth or from any other conductor and insulating material has been separately defined as material usually of vitieous or resinous nature which offered high resistance to the passage of electric current. He drew attention to the fact that the respondents themselves have described the product as plastic laminated sheets and were being cleared accordingly on payment of duty under the erstwhile tariff. These sheets were also required to be further fabricated before use which shows that the product, though, useable as insulating material was not a fully finished insulator. Therefore, the product in question merited classification under sub-heading 3920.31 as articles of plastic all sorts. He drew attention to the Apex Court judgment in Dunlop India Limited and Madras Rubber Factory Ltd. v. Collector of Central Excise [1983 (13) E.L.T. 1566 (S.C)] in which the Apex Court had held that for classification of a product under the CETA, the test is nomenclature in commercial parlance. Even the Explanatory Notes to the Harmonized Commodity Description and Coding System at P 1406 explains that insulators are used for fixing, supporting or guiding electrical current to conductors while at the same time insulating from each other and earth. Decorative laminated sheets manufactured by the respondents would not be classifiable as insulators as it did not fit with the definition of Explanation of insulators as given in the Explanatory Note. He also drew attention to the Tribunal decision in Nevichem Synthetic Industries, Bombay v. Collector of Central Excise, Bombay, 1984 (17) E.L.T. 460 (Tribunal) to contend that, though Item No. 15A of CET was not exactly aligned with the CCCN terminology as a result of the 1977 Finance Bill, yet the pattern followed was broadly the same, and assistance can usefully be derived from CCCN and its Explanatory Notes to understand the scope of this item. He relied on the Tribunal's decision in Meghdoot Laminart Pvt. Ltd. v. Collector of Central Excise, 1990 (49) E.L.T. 75 (Tribunal) in which paper-based decorative laminated sheets were held to be classifiable under sub-heading 4818.90 of Central Excise Tariff before 28-2-1988 and under 4823.90 from 1-3-1988. In the said case the Tribunal had held that the process of manufacture of paper-based decorative laminated sheets no doubt required chemicals, but the other important raw-material used was paper. Though chemicals are applied to the base material the process involved was only converting it into laminated sheets. Since no test report had been called for at the stage of determining the classification in this case, ld. DR pleaded for the remand of the matter to the original adjudicating authority for the correct determination of the classification on the basis of the Test Report in the light of the submissions made.
4. The ld. counsel appearing for the respondents on the other hand submitted that the impugned order had correctly decided the issue by classifying the product as electrical insulators under Heading 8546.00. He relied on the Tribunal decision in Collector of Central Excise v. Metrowood Engineering Works, 1989 (43) E.L.T. 660 (Tribunal) in which the Tribunal had held that industrial laminates are electrical insulators having insulating properties and minor fabrication like punching or drilling holes on the sheets would not alter their character and would be correctly classifiable under Heading 8546.00. The Tribunal had also held that Chapter Note 2(n) to Chapter 39 excluded electrical insulators from the said chapter. It had also rejected the contention based on the fact that IS 1885 had shown insulating material and insulators as separate items.
5. We have considered the submissions made by both the sides. We find that the Tribunal's decision cited on behalf of the respondents in Collector of Central Excise v. Metrowood Engineering Works, supra, covers the issue before us. Relying on authoritative technical literature such as Hawley's Condensed Chemical Dictionary, Materials Hand-Book by George S. Brady and Henry R. Clauser and Plastics Dictionary by Thomas A. Dickinson, the Tribunal had observed that an article made from materials which have electrically insulating properties can be appropriately described as an insulator. None of the authorities had stated that an insulator must invariably be cut to shape and size and ready for fitment condition. The Tribunal had also relied on the Apex Court decision in the case Atul Glass Industries and Ors. v. Collector of Central Excise and Ors., 1986 (25) E.L.T. 473 (S.C.) wherein the Apex Court had observed that the identity of an article is associated with its primary function and it was only logical that it should be so. The Tribunal had also referred to Rule 2(a) of the Rules of Interpretation of the new Tariff laying down the principle that any reference in a heading to goods should be taken to include a reference to those goods in complete or unfinished goods provided that the incomplete or unfinished goods have the essential character of the complete or finished goods. Since the laminates had electrical insulating property and have attained the essential character of insulators it would be appropriate to classify them as such. Mere cutting and making holes will not make them different from insulators. We find that the ratio of the judgment in the order referred to in Metrowood Engineering Works above would apply to the facts of the case before us.
6. As a result we find no reason to interfere with the order of the Collector (Appeals).
7. The Departmental appeal is, therefore, rejected.
Sd/-
(A.C.C. Unni) Member (J) Dated : 3-3-1997 [Contra per : S.K. Bhatnagar, Vice President], - With due respects to Hon. Member (J), my views and orders are as follows :-
8. In my opinion the submissions of the ld. DR have a lot of force. I observe that the item has been described in the classification list as follows :-
ELECTRICAL MACHINERY & EQUIPMENTS AND PARTS, THEREOF:
1. ELECTRICAL INSULATORS OF ANY MATERIALS :
(a) ELECTRICAL GRADE, INDUSTRIAL INSULATION BOARDS, FROM PAPERS, BY TREATING, IMPREGNATING AND LAYERS OF SUCH IMPREGNATED SHEETS, LAMINATED, BONDED TOGETHER BY HEARING AND PRINTING IN HYDRAULIC PRESS, IN FOLLOWING SIZES :-
1. 244 x 122 cms.
2. 153 x 092 cms.
3. 064 x 064 cms.
4. 122 x 122 cms.
The Assistant Collector has in his order mentioned that the goods have been described before him as paper based "plastic laminated sheets - "ELECTRIC INSULATORS"." The whole issue revolves around the question as to whether such an item was required to be considered as an article of plastic classifiable under Chapter 39.20 or as an electrical insulator classifiable under 85.46. The two rival entries read as follows :-
39.20 OTHER PLATES, SHEETS, FILM, FOIL AND STRIP, OF PLASTICS, NON-CELLULAR, WHETHER LACQUERED OR METALLISED OR LAMINATED, SUPPORTED OR SIMILARLY COMBINED WITH OTHER MATERIALS OR NOT.
85.46 ELECTRICAL INSULATORS OF ANY MATERIAL.
It is noteworthy that Chapter 85 covers ELECTRICAL MACHINERY AND EQUIPMENT AND PARTS THEREOF; SOUND RECORDERS AND REPRODUCERS, TELEVISION IMAGE AND SOUND RECORDERS AND REPRODUCERS, AND PARTS AND ACCESSORIES OF SUCH ARTICLES and a perusal of the Chapter as a whole read in the light of the Chapter notes shows that it covers articles which have assumed an identity different from the material of which they were made of i.e. were identifiable as, for instance, electrical machinery and equipment and parts thereof. In other words, the material or the item must have reached a stage where it could be so identified and is normally traded and commonly known w.r.t. that identity. Whereas Chapter 39 deals both with the plastics themselves as well as articles thereof. As we proceed further and examine the rival headings in this context we find that Chapter 85.46 covers electrical insulators of any material. Therefore, it is immaterial as to of which material the electrical insulators are made of but they must be clearly identifiable as electrical insulators and known and traded as such in the market. On the other hand Heading 39.20 covers other plates, sheets, film, foil and strip, of plastics, non-cellular, whether lacquered or metallised or laminated, supported or similarly combined with other materials or not i.e. it includes laminated sheets as well. There is no doubt or dispute that the item in question is "paper laminated plastic sheets' therefore, they are in the nature of articles of plastics in the form of laminated plastic sheets. It is noteworthy that this entry is not use oriented but form oriented. Further whether the matter was of the electrical grade was also required to be shown; and it was also required to be seen whether electrical grade plastic laminated sheets or boards were commonly known and traded as electrical insulators in the market. No evidence to this effect has been put forth before us.
9. Looking at the problem from a slightly different angle, we find that Heading 85.46 of HSN is pari material with the Central Excise Heading 85.46 and reads as follows :
"ELECTRICAL INSULATORS OF ANY MATERIAL"
The explanatory notes under this heading reads as follows :-
85.46 - ELECTRICAL INSULATORS OF ANY MATERIAL Insulators of this heading are used for the fixing, supporting or guiding of electric current conductors while at the same time insulating them electrically from each other, from earth, etc. The heading excludes insulating fittings (other than insulators) for electrical machinery appliances or equipment; these fittings fall in Heading 85.47 if they consist wholly of insulating material (apart from any minor components of metal incorporated during moulding solely for purposes of assembly).
Usually there is a relation between the size of the insulator and the voltage (large for high voltages, smaller for low voltages). Similarly the shape of the various types of insulators is influenced by electric, thermic and mechanical considerations. The external surface is very smooth in order to prevent the formation of deposits of non-insulating materials, such as water, salts, dusts, oxides and smoke. Insulators are often given bell, accordion, petticoat, grooved, cylinder or other shapes. Certain types are constructed in such a way that when in position they may contain oil to prevent contamination of the surface by conducting materials.
Insulators may be made of any insulating material, usually very hard and non-porous, e.g., ceramic material (porcelain steatite), glass, fused basalt, hardened rubber, plastics or compounded insulating materials. They may contain fixing devices (e.g. metal brackets screws, bolts, clips, laces, slings, pins, cross pieces, caps, rods, suspension or carrying clamps). Insulators equipped with metal horns or guard shields or other devices to form lightning arresters are excluded (Heading 85.35).
Insulators are used on outdoor cables e.g., in telecommunications, power networks, electrical traction systems (railway, tramway, trolleybus, etc.), and also for indoor installations or on certain machines and appliances.
The insulators of this heading include :
(A) Suspension Insulators such as:
(i) Chain suspension insulators
(ii) Other suspension insulators (B) Rigid insulators (C) leading-in insulators
10. This also shows that the heading covers readymade articles (and parts thereof) which can be straightway identified as electrical insulators and are known and traded as such. In other words it does not include the material from which such insulators or their parts are made and in fact this heading expressly indicates that it is immaterial what was that material of which the electrical insulators are made of but as aforesaid they must be identifiable as such.
11. In view of this position, the department's contentions appear to be correct. The department has also relied on the fact that even technical dictionaries such as that of Chambers distinguishes between insulators and insulating material, the insulator term being used for appliances used to insulate. Again the ISI also defines insulators as an element used to insulate conductor or apparatus and also defines the insulating material separately. This along with the submission by the ld. DR that the item requires further processing or fabrication before use, also supports the department's contention. ld. DR has however stated that the matter may be remanded but in view of the above clear position I don't think any order of remand is called for because it is immaterial in the above context whether the sheets were of electrical grade or not for the purposes of classification; although it may be material for the purpose of valuation (but that is not the issue before us). I may also clarify that here we are not concerned with decorative laminated sheets (and therefore, the case law cited w.r.t. the same is not relevant and is of no avail and incidentally it may be mentioned en passe here that the controversy on classification of such products has since been set at rest by the Supreme Court judgment but since we are not concerned with that issue the point need not be laboured further). The case of Wood Polymers - 1990 (47) E.L.T. 595 cited before us is also of no help as the appeal was dismissed at the threshold as time barred and there is no finding on merits. The Tribunal's order in the case of Pratap Rajasthan Copper Foils and Laminates Ltd. -1989 (44) E.L.T. 775 is also not of much help as in that case the Tribunal observed that a plastic sheet as such does not come into existence in the process and the article was a paper based or glass fabric based industrial item treated as copper clad laminates classifiable as copper foil and the case was therefore distinguishable on facts. Of course the Tribunal's order in the case of Metro Wood Engg. Works (supra) supports the respondent's view in the matter but with due respects, I difer from the same in view of the reasons recorded above. The paper laminated sheets which according to the respondents were of electrical grade and meant for insulation purposes, could only be considered as materials for utilisation in manufacture of insulators but could not be considered as insulator or parts thereof in the absence of any evidence to that effect. I, therefore, consider that in view of the Tribunal's order in the Metro Wood case and for the reasons recorded above the matter was required to be referred to a Larger Bench.
Sd/-
(S.K. Bhatnagar) Vice President Dated: 21-3-1998 DIFFERENCE OF OPINION In view of difference of opinion between Hon. Member (J) and the Vice President the matter is submitted to the President for reference to a third Member on the following point :-
"Whether in view of the Tribunal's order in the case of Metro Wood Engg, Works 1989 (43) E.L.T. 660 the department's appeal was required to be rejected or in view of the reasons recorded by the Vice President, the matter was required to be referred to the Larger Bench."
Sd/- Sd/- (A.C.C. Unni) (S.K. Bhatnagar) Member (J) Vice President Dated : 4-3-1998 Dated : 21-3-1998
12. [Order per: K. Sankararaman, Member (T)]. - The difference of opinion matter has been referred to me as the Third Member in view of the difference of opinion between Member (Judicial), Shri A.C.C. Unni and Vice President, Shri S.K. Bhatnagar on the question of the classification of paper based insulators. The first order in this reference matter which is by Member (Judicial) favoured classification of the product under Heading 85.46 of Central Excise Tariff. In the view he took, he followed inter alia, the Tribunal decision in Collector of Central Excise v. Metrowood Engineering Works reported in 1989 (43) E.L.T. 660 (Tribunal). Vice President, Shri S.K. Bhatnagar disagreed with this view and held that the goods in question could only be considered as material for utilisation in manufacture of insulators but not insulators themselves or parts thereof. On that basis, he had recommended that the matter requires to be referred to a Larger Bench as his finding ran counter to the earlier decision of the Tribunal.
13. When the matter came up for hearing today before me, Shri H.K. Jain, Learned Sr. Departmental Representative and Shri J.S. Vyas, Learned Counsel for the respondent stated that the Supreme Court has subsequently decided this issue in Collector of Central Excise v. Bakelite Hylam Ltd. reported in 1997 (91) E.L.T. 13 (S.C.) and in Collector of Central Excise v. Wood Polymers Ltd. reported in 1998 (97) E.L.T. 193 (S.C). In the circumstances, Shri H.K. Jain left the matter for decision by the Bench. Learned counsel submitted that the issue no longer survives in view of the Supreme Court decision on the very product.
14. I have taken note of the submissions. I have gone through the record and the Supreme Court judgments cited. In Bakelite Hylam Ltd. case, it was observed by the Supreme Court that industrial laminated sheets used in electrical insulation were covered by sub-heading 8546.00. It was also observed that Note 2(n) to Chapter 39 excluded such goods from the scope of that chapter. It was held that these sheets having insulating properties cannot be taken out of the category of electrical insulators just because they are required to be cut in the requisite shape and for punching of holes in them before being fitted as insulators. It was also held that mere cutting or punching of holes in the sheets did not amount to manufacture. This judgment in Bakelite Hylam Ltd. case was followed by the Supreme Court in the later decision in Collector of Central Excise v. Wood Polymers Ltd. referred to above. In this judgment, the Tribunal's decision in Collector v. Metro Wood Engineering Works reported in 1989 (43) E.L.T. 660 has been referred to in para 2 of the report. The reference to this order of the Tribunal in the Supreme Court judgment is in the context of the Tribunal following it while taking the decision which was challenged before the Supreme Court. The challenge was by the Collector of Central Excise. The Tribunal decision was upheld and appeal was dismissed holding that paper based insulators are classifiable under Heading 85.46. It is noteworthy in the present context that it is this decision of the Tribunal in Metro Wood Engineering Works that has been followed by Member (Judicial) in his order. His finding derives support by the Supreme Court decision cited above. I, accordingly, agree with the submissions of the learned counsel that the issue is no longer res integra in view of the Supreme Court judgments referred to above. I, accordingly, agree with the view expressed by Member (Judicial) recommending dismissal of the department's appeal. The papers may now be placed before the concerned Bench for passing the order in accordance with the majority view.
Sd/-
New Delhi (K. Sankararaman)
Dated : 27-8-98 Member (T)
In view of the majority opinion, the appeal is dismissed.
Sd/-
(A.C.C. Unni)
Member (J)
Dated : 11 Sept., 98