Customs, Excise and Gold Tribunal - Tamil Nadu
Commissioner Of C. Ex. vs Bakelite Hylam Limited on 4 November, 1997
Equivalent citations: 1998(98)ELT218(TRI-CHENNAI)
ORDER
V.P. Gulati, Vice President
1. These appeals involve a common issue and are therefore taken up together for disposal.
2. The issue which falls for consideration is whether the goods in question which have been described as "Modified Maleic Resins" are assessable under Tariff Heading 3907.50 or 3907.91. The ld. Lower appellate authority has held the goods to be assessable under Tariff Heading 3907.50. The Revenue in appeal against this finding of the ld. lower appellate authority have urged that the goods would be correctly chargeable to duty under Tariff Heading 3907.91. The issue has been discussed by the ld. lower authority in the context of Chapter Notes 5 & 14 of Chapter 39.
3. The relevant tariff headings are reproduced below for convenience of reference :-
Tariff Heading 3907.50 - Alkyd resins including maleic resins and
fumeric resins
Tariff Heading 3907.91 - Other Polysters Unsaturated
4. The Chapter Notes 5 & 14 of Chapter 39 are also reproduced below for convenience of reference as under :-
"5. Chemically modified polymers, that is those in which only appendages to the main polymer chain have been changed by chemical reaction, are to be classified in the heading appropriate to the unmodified polymer. This provision does not apply to graft copolymers.
14. Within any one heading of this Chapter, copolymers (including co-polycondensates, copolyaddition products, block copolymers and graft copolymers) are to be classified in the same sub-heading as homopolymers of the predominant comonomer, and chemically modified polymers of the kind specified in Note 5 above are to be classified in the same sub-heading as the unmodified polymer, provided that such copolymers or chemically modified polymers are not more specifically covered by any other sub-heading concerned. Polymer blends are to be classified in the same sub-heading as copolymers (or homopolymers, as the case may be) of the same monomers in the same proportions."
5. The ld. original authority in page 3 of his order in this regard has observed as under :-
According to Note (5) chemically modified polymers are to be classified in the heading appropriate to the unmodified polymer. In fact, this note to the chapter 39 defines what are chemically modified polymers and goes further ahead specifying the classification of such polymers along with the unmodified polymers. In the absence of Chapter Note No. 14 the chemically modified maleic resin being manufactured by the assessees falls undoubtedly under sub-heading No. 3907.50. But that was not to be so in view of Note 14. Now I shall examine the classification of the chemically modified maleic resin with reference to Note 14, which in brief says that the chemically modified polymers are to be classified in the same sub-heading as the unmodified polymer subject to fulfilment of two conditions. The two conditions are that chemically modified polymers are not more specifically covered by any other sub-heading and that there is no residual sub-heading named "other" in the series of sub-headings concerned. The word "and" used in the proviso embedded in Note 14 implied that the chemical modified polymer has to fulfil both the conditions specified in the proviso which were narrated above. It is not in doubt that chemically modified maleic resin is not more specifically covered by any other sub-heading. But it fails to stand the test of the other condition as there is "other" in the series of sub-headings concerned. Since one of the two conditions having not been fulfilled, the product in question cannot fall under sub-heading No. 3907.50 being the same sub-heading of (Unmodified) maleic resin. To sum up, a chemically modified polymer is classifiable under a particular sub-heading which covers the same specifically of there is not such specific sub-heading the said polymer is classifiable in others if there is a sub-heading "other" in the series of sub-headings concerned. However, if there is no sub-heading "other" then the said polymer is classifiable in the same sub-heading that covers the unmodified polymer.
6. The ld. lower appellate authority however has held that the reasonings of the lower authority was defective and has incorporated the chapter note 14 differently and has observed as under in Paras 6 & 7 of his order :-
"6. Secondly, the second condition of Chapter Note 14 simply says that there should not be any sub-heading under the series of sub-headings named 'others'. But when we look at the Heading 3907 we find that it contains a sub-heading 'other polysters' which is further sub divided into unsaturated (3907.91) and other (3907.99). Thus the sub-classification 3907.91 becomes relevant only when one wants to classify 'other polysters' and not when one considers classification of maleic resins. Surely, the word 'other' used in Chapter Note 14 is different from "other polysters" used under Chapter Heading 39.07.
7. Thirdly, the Assistant Commissioner's contention that the chemically modified polymers fall under 3907.91 is not in confirmity with what the HSN has to say on the subject of classification of modified polymers. At page 556 of HSN Explanatory Notes it is classified (para 2 to c) I quote "Chemically modified polyethers (other than polyacetals) are to be classified in sub-heading 3907.20 because there is neither a more specific sub-heading nor a residual sub-heading 'other' to cover them". Applying the same logic one can see that maleic resins are covered under Chapter sub-heading 3907.50. Since chemically modified resins are neither covered under any other sub-heading (the Assistant Commissioner admits this position) nor is it covered under a residual sub-heading under that sub-heading it has to necessarily be classified under chapter sub-heading 3907.50. I may point out that what is relevant to "other polyethers" under chapter sub-heading 3907.20 is relevant to goods falling under 3907.50 as both HSN and the Schedule to Central Excise Tariff Act have the same entry in so far as the entry 'other polysters' is concerned, If what the Assistant Commissioner observes is correct the HSN explanatory note could have also stated that chemically modified polyesters would fall under 3907.91."
7. The Revenue in the Grounds of Appeal has urged as under :-
(i) As per Chapter Note 14 of Chapter 39, the "Chemically Modified Polymer" can be classified in the same sub-heading as the unmodified polymer provided that there is no residual sub-heading named 'other' in the series of sub-headings concerned. Now under Chapter Heading 3907 which covers Maleic Resin has 9 other sub-headings viz.; 3907.10; 3907.20; 3907.30; 3907.40; 3907.50; 3907.60; 3907.70; 3907.80 and 3907.90. Therefore, if any of these sub-headings have 'other' then there is no chance of classification of "Chemically Modified Maleic Resin" in the parent unmodified Maleic Resin which is covered by 3907.50. But there exists a sub-heading 3907.90 which covers the 'others' and is a last entry of the series of the sub-headings concerned which should rightly cover "Chemically Modified Maleic Resin".
(ii) The Commissioner (Appeals) observation in Para 6 that the product Maleic Resin is not Unsaturated Polyester, has to be examined in the light of the Chemical Examiner's report who reported the goods to be unsaturated polyesters.
(iii) The Chapter sub-heading 3907.20 comparison with 3907.50 may not be appropriate in so far as the Chapter sub-heading 3907.20 itself speaks about "Other Polyethers".
(iv) The Commissioner (Appeals) Hyderabad's observation that the Schedule does not contain a residual sub-heading under sub-heading 3907.50 is incorrect in as much as there cannot be a sub-heading under a sub-heading but only a sub-classification under a sub-heading.
(v) The assessee claimed the product chemically modified maleic resin as unsaturated polyesters falling under 3907.91 during the year 1991-92 vide R. Cl. No. 13/91, dated 26-7-1991.
In view of the above read with Chemical examiners report the product merits classification under 3907.91:
8. The ld. SDR for the department has reiterated the grounds of appeal. He has pleaded that going by the reading of the Chapter Notes 5 & 14 together only conclusion that follows is that the goods will be classifiable under Tariff Heading 3907.91.
9. The ld. Advocate for the respondents referred us to the Assistant Commissioner's order and pointed out that the respondents' goods were originally assessed provisionally and have paid the duty "under protest" under the Tariff Heading 3907. He has pleaded that the similar product of the respondents was earlier the subject matter of dispute regarding classification and benefit of another notification and the Tribunal in their decision reported in 1991 (56) E.L.T. 685 has clearly held that the appellants' goods namely Hylack Polyester Resins were modified Maleic Resins. He has pleaded that in terms of Chapter Note 5, the modified Maleic Resins would fall under the same heading as Maleic Resins. Since the Maleic Resins are covered under the Tariff Heading 3907.50, the respondents' goods therefore get assessed under the same heading. He has pleaded that the Tribunal came to its conclusion after taking into consideration the evidence of the expert which was placed before them. He has pleaded therefore no different view as such could be held now in view of the Tribunal's decision.
10. He has also pleaded that Chapter Note 14 would not come in the way of assessment under the Tariff Heading 3907.91. He has pleaded that the ld. lower Appellate authority has given correct conclusions after taking into consideration the HSN Notes and scope of Tariff Headings 3907.50 and 3907.91 read with Chapter Notes 5 & 14.
11. We have considered the pleas made by both the sides. We observe that under Chapter Heading (sic) 3907.50 the Maleic Resins are specifically covered. The ld. Original authority has entered a clear finding that but for Chapter Note 14, the appellants' goods would get classified under Tariff Heading 3907.50. He has further classified the goods under Tariff Heading 3907.91 holding that the requirement of Chapter Note 14 were not fulfilled. There is no challenge from the Revenue that the goods cannot be considered as Modified Maleic Resins and therefore we are not called upon to go into the nature of the goods as manufactured by the respondents.
12. We observe that Tariff Heading 3907 covers a large range of goods and going by different names and under Tariff Heading 3907.50 Alkyd Resins including Maleic Resins and Fumeric Resins are covered. Going by the Tariff description, it is clear that the appellants' product stands covered under the Heading 3907.50 and there is no dispute in this regard. Under, Chapter Note 5 which has been reproduced above Chemically modified polymers, where the appendages to the main polymer have been changed by chemical reaction, are to be classified in the heading appropriate to the unmodified polymer. Since there is no dispute that the respondents' goods are not modified polymer of the type mentioned in Chapter Note 5, going by this note, same would have been automatically classified under Tariff Heading 3907.50 as Maleic Resins are covered under this heading. However, Chapter Note 14 also deals with the Chemically Modified Polymers of the types specified in Chapter Note 5 and this note envisages that these are to be classified under the same heading as the unmodified polymers provided that these are not specifically covered by any other sub-heading and that there is no residual sub-heading named "Other" in the series of sub-headings concerned.
13. So far as the first condition is concerned, the ld. Original authority has also entered a finding that there is no heading specifically covered the respondents' goods. However, he has held that under Tariff Heading 3907, there is a Heading 3907.91 - "other polyesters" in the category of "others" as set out under Chapter Note 14. We observe what has to be seen is, as held by the ld. lower appellate authority, whether in terms of Note 14 i.e. in the series of sub-heading, there is a category of "others" mentioned. What it implies is that if under a particular tariff heading, there are sub-headings and if after the series of the sub-heading there is a heading "others", then the goods would get classified under that heading. We have to therefore examine the scheme of 3907. After the main description under Tariff Heading 39.07, we have Tariff Heading 3907.10 which covers Polyacetals, Tariff Heading 3907.20 which covers "other polyethers", Tariff Heading 3907.30 - Epoxide resins, Tariff Heading 3907.40 - Polycarbonates, Tariff Heading 3907.50 - Alkyd resins including maleic resins and fumeric resins, Tariff Heading 3907.60 - Polyethylene terephthalate, Tariff Heading 3907.70 - Diallylphthalate resins and Tariff heading 3907.8.0 which covers Polybutylene terephthalate.
14. All these sub-headings pertain to different categories of Resins and after Tariff sub-heading 3907.80, we have another category of resins which are of polymer variety which are different from the variety of Resins Polymers which are mentioned up to 3907.80 and there is separate sub-heading which is provided after the Heading 3907.80 namely "other Polyesters" and under this heading, separate two sub-headings have been provided i.e. 3907.91 - "Unsaturated" and 3907.99 - "others". The question is whether the term "other Polyesters" can be taken to be covering "modified maleic resins" of unsaturated variety. There is no plea from the Revenue that this can be done. Under the heading "other polyesters", the varieties are unsaturated variety and other than unsaturated variety. It cannot be therefore said that in terms of Chapter Note 14, the goods could travel beyond the sub-heading 3907.50. As it is, we find one of the products of the respondents has been held to be maleic resins by the Tribunal vide their order reported in 1991 (56) E.L.T. 685 (Tribunal) after taking into consideration the evidence on record and this finding of fact is not withheld. We, therefore, in the circumstances, hold that the ld. lower authority's order is sustainable in law.
15. The appeal is therefore dismissed.