Customs, Excise and Gold Tribunal - Delhi
J.K. Synthetics Ltd. vs Collector Of Customs on 13 July, 1992
Equivalent citations: 1992(40)ECC455, 1992(62)ELT323(TRI-DEL)
ORDER P.K. Kapoor, Member (T)
1. The appellants are engaged in the manufacture and sale of Nylon and Polyester yarn. They imported 930 MT of Polyester chips (Polyethylene Terephthalate) falling under Customs Tariff Heading No. 39.01/06 at Bombay from Yugoslavia. The goods were warehoused at Kota against Bond Bill of Entry No. 77/86, dated 25-11-1986. On 3-6-1986 in respect of Polyester Chips cleared against 10 Ex-Bond Bills of Entry during the period 30-11-1985 to 17-2-1986 the appellants filed a claim for refund of Customs duty amounting to Rs. 29,46,143.81 on the ground that the goods being Polyester Resins are against basic customs duty of 100% levied on the goods in terms of Notification No. 341/76 (which exempted goods of Yugoslavia origin from basic duty in excess of 50% of the standard rate of duty) the basic duty of customs leviable was only 75% in terms of Notification No. 36/83, dated 1-3-1983 (as amended) read with Notification 341/76. The Assistant Collector rejected the appellant's claim on the ground that the item of 'Polyester Chips' had been specifically excluded from the purview of Notification No. 36/83, dated 1-3-1983 (as amended). Being aggrieved by the order passed by the Assistant Collector the appellants preferred an appeal before the Collector (Appeals), who confirmed the order passed by the Assistant Collector. The present appeal arises out of the order passed by the Collector (Appeals).
2. On behalf of the appellants we heard the learned advocate Shri Ravinder Narain. He stated that in the case of Chemicals and Fibres India Limited v. Union of India, reported in 1982 (10) E.L.T. 917 the Bombay High Court had held that 'Polyester Chips' were covered by the item "Artificial or Synthetic Resins". He added that in view of the finding of the Bombay High Court even though Polyester Chips had been specifically excluded from Serial No. 4 of the table annexed to Notification No. 36/83-Cus., dated 1-3-1983 (as amended by Notification No. 219/83, dated 2-8-1983), being 'Synthetic Resin' they would still be eligible for the benefit of the exemption under the said Notification since they would be covered by Serial No. 1(iv) of the statement annexed to the notification which reads as "Polyester Resins". Shri Ravinder Narain also referred to the Delhi High Court judgment dated 28-8-1970 in the appellants own case in writ petition No. CW/15-D/63 wherein it was held that 'Polyester Chips' being plastic materials' were covered by Item 15A(iii) of the Central Excise Tariff. He contended that the said decision was not relevant to the issue involved in this case since the question that came up for examination by the High Court was whether Polyamide or 'Polymer Chips' which are used for the manufacture of 'Nylon" were covered by the item of 'Plastics' under Item No. 15A(iii) of the Central Excise Tariff as it was worded prior to the amendment in 1964. The learned counsel stated that in paras 27 and 28 of the decision of the Bombay High Court it had been held that Polyester being product of polycondensation or polymerization had to be deemed as 'Artificial or Synthetic Resins'. He also referred to the contents of paragraph 34 of the judgment wherein the High Court had observed that separate listing of polyester chips of textile grade and polyester resins in the relevant Import Policy was not relevant for deciding the question as to whether they were covered by Item 15A of the Tariff. The learned counsel reiterated his stand that 'Polyester Chips' being 'Synthetic Resins' they were covered by the entry reading "Polyester Resins" against Serial No. 1(iv) of the table annexed to the Notification No. 36/83-Cus., dated 1-3-1983 (as amended by Notification No. 219/83-Cus., dated 2-8-1983. On these grounds, he contended that the impugned order rejecting the appellants' claim for refund was not sustainable. Shri Ravinder Narain pointed out that in the judgment in the case of Chemicals and Fibres India Ltd. v. Union of India (supra) the High Court had also observed that the single judge decision of the Bombay High Court in the case of Nirlon Synthetic Fibres and Chemicals Ltd. relating to the classification of 'Polymer Chips' was also not relevant to the question which was before the High Court.
3. On behalf of the Department we heard the learned Jt. CDR Shri K.K. Bhatia. He stated that "Polyester Resins" and "Polyester Chips" were not one and the same item. In support of his arguments he referred to the table annexed to Notification No. 36-Cus. dated 1-3-1983 wherein the items 'Polyester Resins' and 'Polyester Chips' were listed separately at Sr. Nos. 1(iv) and 3 respectively. He added that as a result of the amendment carried out to Notification No. 36/83 by Notification No. 219/83 dated 2-8-1983 the item of 'Polyester Chips' at Serial No. 3 of the table annexed to the Notification was deleted and entry at Sr. No. 4 reading as 'All others' was amplified to read as "All others except polyester chips". Shri Bhatia argued that having regard to the fact that in Notification No. 36/83, dated 1-3-1983 and also in the relevant Import Policy, items of Polyester Chips' and 'Synthetic Resins' were separately listed and through Notification No. 219/83 the entry against Serial No. 4 of the table annexed to the Notification No. 36/83 was amended to read as "All others except polyester chips" it was evident that the two items were distinct and after amendment of the notification the concessional rate of duty was no longer available in respect of polyester chips. Shri Bhatia further contended that the Bombay High Court's decision in the case of Chemicals and Fibres India Limited v. Union of India (supra) cannot be of any assistance to the appellants since it related to classification of polyester chips under Item 15A of the Central Excise Tariff.
4. We have examined the records of the case and considered the submissions made on behalf of both sides. It is seen that the short point that arises for consideration in this case is whether Polyester Chips (Polyethylene Terephthalate) imported by the appellants from Yugoslavia could be deemed as covered by the entry 'Polyester Resins' against Serial No. 1(iv) of the table annexed to the Notification No. 36/83-Cus. as amended by Notification No. 219/83-Cus., dated 2-8-1983.
5. It is seen that Notification No. 36/83-Cus., dated 1-3-1983 exempted certain goods falling under Heading No. 39.01/06 of the First Schedule to the Customs Tariff Act, 1975, specified in column 2 of the table annexed to the Notification when imported into India from the payment of duty of Customs in leviable thereon specified in the First Schedule as was in excess of the amount calculated at the rate specified in the corresponding entry in column 3 of the said table. The table annexed to the Notification No. 36/83-Cus., dated 1-3-1983 was amended by Notification No. 219/83, dated 2-8-1983. In order to appreciate the rival contentions we consider it desirable to reproduce below the tables annexed to Notification No. 36/83, dated 1-3-1983 prior to and after the amendment by Notification No. 219/83, dated 2-8-1983.
TABLE
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Sl. No. Description of goods Rate of duty
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1 2 3-------------------------------------------------------------------------------
1. The following goods including moulding powders thereof, namely :-
(i) Phenol formaldehyde resins 150 per cent
(ii) Urea formaldehyde resins ad valorem
(iii) Melamine formaldehyde resins
(iv) Polyester resins
(v) Epoxy resins
(vi) Nylon resins
(vii) Polymethyl methacrylate
(viii) Polyphenylene oxide
(ix) Polybutyl terephthalate
(x) Polysulphones
(xi) Polystyrene resins
2. Polyvinyl Chloride resins 150 per cent
ad valorem
3. Omitted
4. All others except polyester chips 100 per cent
ad valorem
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(Notification No. 36/83-Cus., dated 1-3-1983 as amended by Notification No. 219/83-Cus., dated 2-8-1983).
TABLE
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Sl. No. Description of goods Rate
-------------------------------------------------------------------------------
1 2 3-------------------------------------------------------------------------------
1. The following goods including moulding powders thereof, namely:-
(i) Phenol formaldehyde resins
(ii) Urea formaldehyde resins
(iii) Melamine formaldehyde resins
(iv) Polyester resins
(v) Epoxy resins 150 per cent
(vi) Nylon resins ad valorem
(vii) Polymethyl Methacrylate
(viii) Polyphenylene Oxide
(ix) Polybutyl terephthalate
(x) Polysulphones
(xi) Polystyrene resins
2. Polyvinyl Chloride resins 150 per cent
ad valorem
3. Polyester chips 140 per cent
ad valorem
4. All others 100 per cent
ad valorem
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[Notification No. 36-Cus., dated 1-3-1983]
6. The appellants' case is that even after the amendment of the table annexed to Notification No. 36/83-Cus. by Notification No. 219/83 resulting in deletion of Serial No. 3 relating to 'Polyester Chips' and amendment of Sr. No. 4 to provide for exclusion of 'Polyester Chips' the benefit of the Notification could not be denied to them since 'Polyester chips' being 'Polyester resins' were covered by Serial No. 1(iv) of the table annexed to the Notification and attracted the concessional import duty of 150 per cent ad valorem and only 75% ad valorem in respect of goods of Yugoslav origin in terms of Notification No. 341/76, dated 2-8-1986. As against this the respondents have claimed that deletion of the separate entry relating to 'Polyester Chips' in the table annexed to Notification No. 36-Cus., dated 1-3-1983 and the amendment of the entry against Serial No. 4 of the table by Notification No. 219/83-Cus., dated 2-8-1983 were indicative of the fact that 'Polyester Chips' and 'Polyester resins' were not one and the same. In this regard we find that in the case of Chemicals and Fibres India Ltd. v. Union of India (supra) the Hon'ble Bombay High Court has held that "Polyester Chips" of textile grade have to deemed as covered by the item 'Artificial or Synthetic resins'. Paragraphs 40 to 44 of the said judgment being relevant are reproduced below :-
"40. The entire argument of the learned Counsel for the petitioners is founded on the basis that synthetic resins must be construed as synonymous with plastic materials. It is no doubt true that this contention finds some support from the Chapter on "Plastics and Resins" in Encyclopaedia Britannica, Vol. 14, where it is observed as follows :-
"Plastics, in the modern meaning of the word, are synthetic materials that are capable of being formed into usable products by heating, milling, moulding, and similar processes. The term is derived from the Greek plastikos, "to form". By some interpretations of the word, rubber and other natural products are said to be plastic, but the modern definition, especially in relation to industry, excludes natural rubber and also such other natural products as wood, leather, and metals. Resins are both natural and synthetic. Natural resins range from pitch and asafetida to frankincense, myrrh and amber. Synthetic resins are the basis of an enormous range of products the growth of which shows no signs of abating.
The distinction between plastics and resins is at best arbitrary, since many of today's synthetic materials can properly be called both resins and plastics. Historically, it appears that the term resin was applied to those products primarily used as substitutes for the natural product in coating compositions, whereas the term plastic was applied to designate those compositions that involved a moulding operation in their fabrication."
We have, however, earlier reproduced an extract from the Condensed Chemical Dictionary in which a clear distinction has been made between synthetic resin and plastic by stating that whereas synthetic resin is polymer itself, plastic is polymer plus such additives as fillers, colorant, plasticizers, etc.
41. A reference to Fibres, Films, Plastics and Rubbers by Roff and Scott will show that there is an independent Chapter on Plasticisers (Section 56) and a plasticiser is described as a substance added to a high polymer to reduce brittleness or impart flexibility, or to increase flexibility especially at low temperature. It acts like a solvent, penetrating the polymer and lowering the inter-molecular cohesion.
41A. In Encyclopaedia of Basic Materials for Plastics also, there is a Chapter on Fillers, and Fillers are defined as comminuted solid materials which occupy a volumetric proportion of a plastics composition as discontinuous phase and it is stated that some fillers are used primarily for reducing the cost of plastic. There are organic and inorganic fillers. But from the nature of the chemical difference between a synthetic resin simpliciter and a plastic resulting from addition of fillers, colorant, plasticisers, in our view, it will be wholly impermissible to equate synthetic resins with plastic. It is also necessary to point out that Item 15A does not refer to 'plastic' as was done in the 1961 or the 1962 item in the Schedule to the Excise Act. The entry now is "Artificial or synthetic resins and plastic materials and articles thereof." It is also necessary to point out that in sub-item (2) of Item 15A specific reference is made to articles made to plastics and under the explanation it is clarified that for the purpose of sub-item (2) 'plastics' means the various artificial or synthetic resins or plastic material included in sub-item (1). The effect of the Explanation is that articles made of artificial or synthetic resin is now equated with plastics only for purpose of sub-item (2) of Item 15A. When the Legislature has used the words "Artificial or synthetic resins" and has separately used the words "plastic materials" and further the word 'plastics' has been specifically used in sub-item (2). It would be wholly improper to proceed to decide the scope of the products covered by Item 15A by equating artificial synthetic resins with plastics. We must, therefore, reject the argument advanced on behalf of the petitioners that artificial or synthetic resins must be taken to have been used synonymously with plastics. In view of this, the further contention that the plastics are materials which can be moulded or made into films and that the polyester chips in question cannot be moulded or that they are unsuitable for making films because of the addition of delustrants is not required to be considered.
42. It is no doubt true that in the Nirlon Synthetic Fibres & Chemicals Ltd.'s case, a contention was raised that polymer chips in that case could not be known and are not known as plastics or plastic materials to the traders, dealers and consumers in plastic industry and as such would not fall within unamended or amended Item 15A and this contention was upheld. But a reading of that judgment will show that judgment proceeded on the footing that the terms used in Items 15A(1) were not scientific or technical terms and the true criterion would be whether these words and expressions are well-known to and are freely used by manufacturers, traders and dealers in that line as if they have become common place words of every day use with them and that these words will have to be understood in the sense which persons dealing with or commercially conversant with those substances would attribute to them. It appears that judgment proceeded on the footing that the Department itself has treated the two expressions "synthetic resins" and 'plastics' as interchangeable and the Court was concerned with the question as to how the expression "plastic or plastic material" was understood by commercial persons who deal in it. The view taken in that case was that caprolactam polymer chips of the spinning grade obtained by the company for the manufacture of nylon yarn were not regarded as raw material for the manufacture of plastic goods or plastic articles and were not commercially known as plastics. Having regard to the view which we have taken of the nature of the items covered by Item 15A(1), the decision in Nirlon Synthetic Fibres & Chemicals Ltd.'s case cannot be of any assistance to the petitioners.
43. We need not refer in detail to the decision of the Delhi High Court in J.K. Synthetic Ltd. v. The Collector of Central Excise in which the relevant Item 15A which fell for consideration, was as it was in 1962 and the question was whether polymer chips were plastics within the meaning of Item 15A.
44. In the view which we have taken that the Polyester chips in question are covered by the item "Artificial or synthetic resins" and the petitioners were liable to pay excise duty, it is strictly not necessary for us to decide the contention of the respondents that there has been a delay in the filing of the petition and that the petition must, therefore, be dismissed on the ground of delay and secondary that any order for refund made would result in unjust enrichment of the petitioners because, according to the learned counsel for the respondents the burden of excise duty must have been passed on by the petitioners to the consumers or the purchase of the fibre. We will, however, proceed to deal with this contention because a decision on the question as to whether the petitioners would be entitled to any refund would become necessary in case we are wrong in our view that there was no invalidity or illegality in the recovery of excise duty."
7. On the ratio of the Bombay High Court judgment quoted above, we are of the view that even after the amendment of Notification No. 36/83-Cus., dated 1-3-1983 'Polyester Chips' had to be deemed as covered by the entry reading as 'Polyester resins' against Serial No. 1(iv) of the table annexed to the Notification. In our view 'Polyester Chips' of textile grade are a particular variety of 'Polyester resin' and the amendment of Notification No. 36/83-Cus., dated 1-3-1983 by Notification No. 219/83-Cus., dated 2-8-1983 to delete the entry against Serial No. 3 in the table annexed to the Notification and also exclude the item of 'Polyester Chips' from the scope of the entry against Serial No. 3 of the table annexed to the Notification only resulted in the withdrawal of the larger concession that was available on this particular variety of 'Synthetic resins' against Srl. No. 3 and the ruling out of the possibility of such resins being cleared against Serial No. 4 of table annexed to the notification.
8. In view of the above discussion we set aside the impugned order and allow the appeal, with consequential relief to the appellants.