Customs, Excise and Gold Tribunal - Delhi
Hico Products Limited vs Collector Of Central Excise on 28 November, 1989
Equivalent citations: 1990(29)ECC280
ORDER
D.C. Mandal, Member
1. In the Misc. Application the appellants/applicants have prayed for early hearing of their appeal on the ground that the case is covered by previous decisions of this Tribunal. After hearing both sides, we have allowed the Misc. Application. With the consent of both the parties, we have thereafter taken up the appeal for hearing on merits, alongwith the appeal No. E/1160/88-C.
2. The issue in dispute in both the appeals is the classification of silicone oil and aqueous emulsion of silicone. Brief facts of the cases covered by these two appeals are as follows:-
(i) Appeal No. E/1373/88-C. This appeal relates to order-in-original No. V(15AA)17-82/CLVC/84/ 4270 dated 27.9.85 passed by the Assistant Collector of Central Excise, Division III: Kalyan and Order-in-appeal No. AMP 597/B III - 288/87 [File No. V (15AA)263/R/86/2370] dated 15.2.88. This order-in-original of the Assistant Collector of Central Excise, Kalyan Division-Ill disposed of two show cause notices, viz., No. V(15AA)17-82/CLVC/84/8087 dated 22.12.84 and No. V(68)17-35/CLVC/ 83 dated 2.1.1985. The first show cause notice is in respect of the appellants' revised classification list No. 4/84 for their Khopoli Unit and classification lists No. 1/84, 2/84 and 4/84 for their Kharsundi Unit. In paragraph 1 of the order-in-original, the Assistant Collector has stated that the aforesaid classification lists covered the following products:-
M/s. Hico Products (Khopoli Unit):
Classification List No. 4/84: Kartrang FAR-21
-do- ER-21
-do- SD
Arkoline SS-100
Katrang ASS-100
-do- ER-21A
-do- ER-21AS
-do- VSI
-do- AF-100
BOY A-10
M/s. Hico Products (Kharsundi Unit):
Classification List NO. 1/84: Katrang ER-21
-do- ER-21A
-do- SD
Arkoline SS-100
Katrang ASS-100
-do- VSI
-do- ER-V
-do- SIH
-do- SIH-A
-do- SIH-2A
-do- SIH-3X
Classification List No. 2/84: Katrang H-SIH
-do- H SIH-2X
-do- H SIH-3X
-do- H SIH-A
Classification List No. 4/84: Katrang -PA
-do- MH-100
Paragraph-6 of the order-in-original shows that in reply to the show cause notice dated 31.12.84, the appellants stated that the aforesaid products were used in industrial process for their surface active properties. (In support of their claim, they submitted extract of Page 255 from Kirk-Othmer's Encyclopedia of Chemical Technology, Vol.18 before the Assistant Collector). It is also stated therein that the products katrang SD, katrang FAR-21 are used in pharmaceutical industries as defoamer as in the case of katrang AF-150 and the remaining products are used as water repellant agents or as mould release agents. In paragraph-14 of the order-in-original, the Assistant Collector has observed that classification of 3 products, namely, katrang SIH-A, katrang SIH, and katrang SIH-2X were already decided by this Tribunal under Item 15A(1) of the Central Excise Tariff, vide Order No. 368/83-C. He, therefore, did not pass any orders in respect of these 3 products. He has classified the remaining products of the aforesaid classification lists under Item 15AA of the Central Excise Tariff w.e.f. the dates shown against each product in the said paragraph-14 or from the payment of duty under protest under Rule 233B of the Central Excise Rules, whichever is later. In paragraph-15 of the order-in-original, the Assistant Collector has observed that under serial No. 4 of the Notification No. 101/66-CE dated 17.6.66, emulsifiers, wetting out agents, softeners and other like preparations intended for use in any industrial process were exempted from payment of duty provided that the O.S.A.A. used in the manufacture of such emulsifiers, wetting out agents and softeners are duty-paid. The Assistant Collector has observed that it is necessary to lay down that the company should prove that they fulfill all the conditions of the notification in order to avail of the said exemption and accordingly, he has held that the company should submit duly sworn affidavit from each user with respect to each individual consignment or a number of consignments put to the same use by the same user to the effect that the products covered thereby had been used as emulsifiers, wetting out agents, softeners or other like preparations in the industrial process; or are intended to be so used and shall not be diverted to any other use except by written permission from the Superintendent of Central Excise or an Officer having jurisdiction over the factory of manufacture. He has observed that in the meantime the assessments will remain provisional subject to the end use certificate and shall be governed by Rule 9-B of Central Excise Rules, 1944.
The second show cause notice No. V(68)17-35/CLVC/83 dated 2.1.85 was issued in respect of the appellants' classification list No. 6/84 for their Khopoli Unit 3nd classification lists Nos. 4/84, 5/84 and 6/84 for their Kharsundi Unit. The disputed products covered by these classification lists which are the subject-matter of this show cause notice, as stated in paragraph-16 of the order-in-original, are the following:-
M/s. Hico Products (Khopoli Unit):
Classification List No. 6/84: Katrang SM-5 M/s Hico Products (Kharsundi Unit):
Classification List No. 4/84: Silicone Tech. grade Classification List No. 5/84: Silicone oil T.O. 15 Classification List No. 6/84: Katrang 1000
-do- 100
-do- 350
-do- T.O. 14
-do- 200
-do- 1200
-do- 2000
-do- 5000
-do- 150
-do- 500 Following the orders No. S/49-1059,1060,1061 and 1062/84-CL dated 30.6.84 and No. M-1491/TH.90/ 84 dated 11.7.84 passed by the Collector of Customs (Appeals), Bombay, in the case of M/s. Hico Products Ltd. and by Collector of Central Excise (Appeals), Bombay and in the case of M/s. Reliance Silicones (I) Pvt. Ltd., Thane, respectively, the Assistant Collector has classified the aforesaid products of the appellants under Item 68 of the Central Excise Tariff.
An application under Section 35E(2) of the Central Excises & Salt Act in Form E.A.-2 was filed for the Revenue before the Collector of Central Excise (Appeals), Bombay against the aforesaid order-in-original No. V(15AA) 17-82/CLVC/84/4270 dated 27.9.85 of the Assistant Collector of Central Excise, Kalyan Division III. Following the ratio of this Tribunal's Order No. C-368/83 dated 2.12.83 in the case of M/s Hico Products, Bombay v. Collector of Central Excise, Bombay and Order No. C-485/85 dated 2.6.85 in the case of Collector of Central-Excise, Thane v. Reliance Silicone India Pvt. Ltd., the Collector of Central Excise (Appeals), Bombay vide the impugned order-in-appeal No. AMP/597/B 111/288/87 dated 15.2.88, has held that the silicone oil and silicone emulsion manufactured by the appellants are correctly classifiable under Item 15A(1) of the Central Excise Tariff. In paragraph-5 of the impugned order, Collector (Appeals) has held that since "silicone" is a generic term specified under Explanation II to Tariff Entry No:15A, silicone resins, silicone oils and silicone emulsions will all come within generic term "silicones", and accordingly, both silicone oil and silicone emulsions are classifiable under Item 15A(1). Hence, the assessee has filed this appeal.
(ii) Appeal No. E/1160/88-C relates to order-in-original No. CN/EL/HICO/15A/86 dated 30.7.86 passed by the Assistant Collector of Central Excise, Thane-IV Division and the order-in-appeal No. AMP/591/B 111-286/87 dated 16.2.88 passed by the Collector of Central Excise (Appeals), Bombay. Copies of the Assistant Collector's order-in-original and the relevant price lists have not been filed before us, but paragraph-3 of the impugned order-in-appeal indicates that the classification of silicone emulsions listed in the appellants' classification list No. 8/84 and silicone oil listed in their classification list No. 15/84 is in dispute in this case. It is stated in the said paragraph that the appellants claimed classification under Item 68 of the Central Excise Tariff on the ground that these products did not have resinous character. The details of the products and their manufacturing process, uses etc. have not been stated in the copy of the impugned order-in-appeal. The Assistant Collector approved the classification lists No. 8/84 and No. 15/84 classifying the goods under Tariff Item 15A(1) ibid. By the impugned order-in-appeal, the Collector (Appeals) has upheld this classification and has rejected the appellants' claim for classification under Tariff Item 68. Hence, this appeal before this Tribunal.
3. We have heard Shri S.R. Tamhane, learned consultant for the appellants and Shri A.S. Sunder Rajan, learned DR for the respondent. Shri Tamhane has argued that the Five-Member Bench of this Tribunal classified silicone oil in primary form under Chapter 39 of the Customs Tariff Act, 1975 and for CV duty under Item 15A of the Central Excise Tariff in respect of imported silicone oil. It was observed by the Tribunal that silicones include resins, elastomers and fluids; and fluids in turn include oil. There is nothing in the tariff that a fluid must have resinous properties or plasticity. Only a resin is required to have this property. If the fluid has no resinous properties or plasticity, it is only because of its low degree of polymerisation; but there is nothing in the law that a low polymerisation product is not classifiable under Chapter 39 of Customs Tariff Act or Item 15A of Central Excise Tariff. If the fluid is a silicone product, it must be assessed as silicone under this head. The fluid/oil imported by M/s Hico Products Ltd. was nothing but a silicone polymer. Whatever uses it may be put in preparation, compounds etc., when it was imported it was a silicone fluid and must be assessed accordingly under Chapter 39 of the Customs Tariff Act/Item 15A of Central Excise Tariff. Shri Tamhane has stated that the Tribunal's decisions on the silicone oil were in favour of the Revenue. He has further argued that the Tribunal in its decisions (Hico Products Ltd., Bombay v. Collector of Central Excise, Bombay) - (Five Member Bench) (Collector of Central Excise, Bombay-Ill v. Auxichem) and [Precise Impex (P) Ltd v. Collector of Customs] has held that silicone in primary stage was classifiable under Item 15A(1) of the CET whereas a preparation containing silicone in emulsion form would not merit classification under Tariff Item 15A(1). He has argued that the appellants' products, according to the test reports of the Customs House, are aqueous emulsion of silicone oil which is not in primary form but in secondary form. Therefore, according to him, These silicone emulsions are not classifiable under Tariff Item 15A(1), but would fall under Item 15AA read with notification No. 101/66-CE dated 27.6.66.
4. Arguing for the respondent Shri Sunder Rajan has stated that the test reports of the Customs House on test of the sample of the appellants say that the products are "aqueous emulsion of silicone oil". Copies of the test reports are at pages 164-179 of the appeal paper-book. He has argued that these products of the appellants are in primary form and hence following the ratio of the Tribunal's decision relied on by the learned consultant for the appellants, the same should be classified under Tariff Item 15A(1). He has argued that in the case of Hico Products Limited, Bombay v. Collector of Central Excise, Bombay, decided on 2.12.83, , this Tribunal held that silicone oil is a product of chemical synthesis and is a polymerisation product. Silicone oil would attract duty under the said item as a polymerisation product answering to the description of "silicone". Further, Explanation III provides that Item 15A(1) of Central Excise Tariff is to be taken to apply to materials in certain specified forms only and one such form is "liquid or pasty (including emulsions, dispersions and solutions)". Thus, silicone oils in emulsion form are classifiable under Item 15A(1) by virtue of Explanations II and III, below Tariff Item 15A. It was held by the Tribunal in that case that Explanation II to Item 15A only explains "condensation, polycondensation, polyaddition, polymerisation and co-polymerisation products" and silicone oil in emulsion form comes within the mischief of the Explanation III. The two Explanations together bring silicone emulsion within the mischief of Item 15A of Central Excise Tariff. He has also relied on the judgment of the Five Member Bench of this Tribunal in the case of M/s. Ceat Tyres of India Ltd, Bombay v. Collector of Customs, Bombay, decided on 5.1.88, . Classification of silicone fluid was in dispute in that case. The said silicone' fluid was used as a mould release agent by the importers during the manufacture of tyres. It was observed by the Tribunal in that case that silicone oil may be a lubricant, but it was a silicone and in that capacity it was listed in Chapter 39; and furthermore it was also a polymerisation product produced by chemical synthesis, in a reaction that will satisfy the definition of Chapter 39 of the Customs Tariff. It was also held by the Tribunal in that case silicone in primary form should be classified under Heading 39.01/06 of the First Schedule to the Customs Tariff Act, 1975 and not under Heading 34.01/07 ibid mainly for the reason that silicone as distinct from a preparation containing silicone is by name specified in Heading 39.01/06 and Note 2(b) of Chapter 39. Shri Sunder Rajan has argued that the silicone oil and silicone emulsions are specifically covered by Item 15A(1) read with Explanations II and III below that Tariff Item. He has also argued that the three decisions of the Tribunal relied on by the learned consultant in support of his argument that their products should be classified under Tariff Item 15AA as organic surface active agents, dealt with silicone preparations, which are not primary product(s). In the present case the impugned products are not silicone preparations but they are silicones in primary form. Therefore, according to him, those decisions are not applicable to the present case.
5. We have considered the records of the case and the arguments of both sides. We have also perused the decisions cited by Shri Tamhane and Shri Sunder Rajan. In the case (supra) classification of the appellant's own product "katrang AF-150" was in dispute. This product was used as defoamer or anti-foaming agent in the manufacture of pharmaceuticals as it inhibits the formation of bubbles in the liquid by reducing its surface tension during agitation in the manufacturing process. The Tribunal held that since it was a product/preparation containing silicone, but neither silicone itself nor a silicone in emulsion form for use as a synthetic resin it was not classifiable under Tariff Item 15A, even after its amendment on 1.3.82. Tribunal held that it was correctly classifiable as a surface-active preparation under Tariff Item 15AA. In the case of M/s. Auxichem, , M/s Auxichem manufactured silicone AU 331, Auxichem 831 and silicone softener 662, the Tribunal observed in paragraph-11 of the order that the products were not silicones but preparations containing silicone for use in textile processing. It was also observed that their properties as a textile processing preparation would govern its assessment. It was held in that case by the Tribunal that the products being preparations containing silicone would merit classification under Tariff Item 15AA and not under Item 15A ibid.
In the case of Precise Impex (P) Ltd. v. Collector of Customs (supra), , the appellants imported a product called "Stabilizer OS 25". The goods were described by the foreign manufacturer as foam stabilizer. It was a water soluble polymeric complex organic compound based on silicone and it possessed surface active property. The Tribunal held that since the product was not silicone in any of their primary stages but a silicone-based complex organic compound having surface active property, the correct classification was under Heading 34.01/07(03) of the Customs Tariff Schedule for basic customs duty and Item 15AA of the CET for additional duty of customs.
6. In view of the decisions discussed above it is required to be seen whether the disputed products of the appellants before us are silicones in primary form or they are preparations based on silicone. In ground "h" of the grounds of appeal in appeal No. E/1373/88-C the appellants have stated that the products mentioned in Explanation II below Tariff Item 15A are products manufactured by emulsion polymerisation process method in which monomer is emulsified and then polymerisation process is carried out and thus polymer is produced or formed in emulsion form. They have stated that their emulsions of silicone oil are merely compounded products which contain silicone oil polymer and are not produced by emulsion polymerisation process in emulsion form as contemplated in Explanations II & III to Item 15A of Central Excise Tariff. In ground (i) they have also stated that they produce silicone oil by chemical synthesis from basic chemical dimethyl di-chlorosilane in a reactor. The silicone oil thus produced is stored within the factory and thereafter is used for the manufacture of preparations after payment of duty as applicable to Item 15A(l) of the CET during the relevant period. The preparations are made by mixing the silicone oil with duty-paid emulsifier and water in another vessel called homogenizer. As a result of the above process, distinct manufactured product comes into existence and therefore it cannot be said that the silicone in emulsion form is produced by them so as to be covered by Tariff Item 15A In ground (j) they have further stated that all the subject preparations are mixtures of silicone oil, emulsifier and water. These are compounded products containing silicone oil as one of the ingredients. The said products are not produced by chemical synthesis by any of the processes such as condensation, polycondensation and polymerization etc. listed in the main tariff description or Explanation II below Item 15A of the CET.
7. Shri Sunder Rajan has drawn our attention to the test reports at pages 164 to 179 of the appeal paper-book. We have gone through these copies of the test reports. Those reports described the result of test in respect of various products of the appellants as follows:-
Katrang ER 21 Page No of
Paper-Book
"Aqueous emulsion of complex polyorgano
Silicone compound" 164
"Sample is white coloured aqueous emulsion
of silicone oil" 171
Katrang ER 21A
"An aqueous emulsion of complex polyorgano
silicone compound (silicone oil)" 168
Katrang SD
"Aqueous emulsion of complex polyorgano
silicone compound" 165
"Sample is white coloured aqueous emulsion
of silicone oil" 169
Katrang FAR 21
"Sample is an aqueous paste and is mainly
composed of silicone oil and small percentage
of additives." 166
Katrang ASS 100
"Sample is an aqueous emulsion of complex
polyorgano silicone compound (silicone oil)." 167
Katrang VS 1
"Sample is white coloured aqueous emulsion of
silicons oil." 170
Katrang PA
"The sample is in the form of colourless liquid
It is composed of silicone oil and mineral solvent." 172
Katrang- SIH - 2x
"The sample is aqueous emulsion of Silicone oil." 173
Katrang - SIH - 3X
"The sample is aqueous emulsion of silicone oil". 174
Arkoline - SS 100
"Sample is aqueous emulsion of silicone oil." 175
Katrang H - SIH - 2x
"Sample is aqueous emulsion of silicone oil." 176
Katrang H - SIH A
"Sample is aqueous emulsion of silicone oil." 177
Katrang H - SIH - 3X
"Sample is aqueous emulsion of silicone oil." 178
Katrang H-SIH
"Sample is aqueous emulsion of silicone oil." 179
The appellants have contended that their products are not single substance, but mixture of three substances, viz., silicone, emulsifier and water. The department has not controverted this contention regarding composition nor the process of manufacture stated by the appellants in the grounds of appeal, which have been indicated in paragraph-6 of this order, has been disputed by the Revenue. The learned DR has argued that the products of the appellants are in primary form and not preparations containing silicone oil.
8. A decision of Five Member Bench of this Tribunal vide order No. l44/88-C dated 18.2.88 has been relied on by the appellants in support of their contention that their products do not fall under Item 15A(1), but they are correctly classifiable under Tariff Item 5AA of the CET as surface active agents. The aforesaid decision of the Larger Bench is (Collector of Central Excise, Bombay v. Auxichem). In the said case the respondents manufactured (i) silicone AU 331, (ii) auxichem 831 and (iii) silicone softener 662 which were classified under Central Excise Tariff Item 15AA before 28.2.82. After the amendment of Tariff Item 15A in the Budget of 1982-83, the Department came to the view that as the said products were based on silicone they should be classified under Tariff Item 15A(1). A demand show cause notice was issued to the respondents in August, 1982 to recover duty on clearances made from 28.2.82 to 31.7.82. The Assistant Collector decided that the goods were classifiable under Tariff Item 15A(1) and he asked the assessee to pay the duty accordingly. The assessee appealed against that decision to the Collector of Central Excise(Appeals), Bombay, who set aside the decision of the Assistant Collector and held that the products were classifiable under Tariff Item 15AA. In the said case M/s. Auxichem mixed silicone oil with water and some emulsifying agents to produce the textile processing products. In paragraph-9 of the said order, the Tribunal has observed that [the] only silicones that are assessable under Item 15A are the synthetic polymers, the first stage when the silicone product undiluted, unmixed silicone polymer, is produced by synthesis. Generally speaking the states in which silicone appears are fluids, resins and elastomers. From these three primary silicones, a number of derived products like sealants, rings washers, adhesives, surface active preparations, encapsulation cements etc. are obtained. Many of these preparations are in emulsions. All these emulsions have other materials, additives, emulsifiers etc, added to aid and help in the use of the preparations in the desired industrial application. In paragraph-10 of the Tribunal's order, it has been observed that "only an emulsion of a silicone such as silicone in its primary state or one of its primary states, will be covered. A preparation containing silicone in emulsion for specific uses as in wetting, mould release, lubrication, will not be that emulsion; it is only an emulsion preparation used as wetting, mould release or lubricating preparation otherwise all goods containing polymers or synthetic resins will have to be assessed under Item 15A Thus paints, lubricants, adhesives, to name only a few, all contain varying amounts of synthetic polymers in mixtures or emulsions. Silicones find uses even in medicines as antiflatulents. In all these preparations, mixtures, compounds, it is the synthetic polymers that give the products their active, distinctive qualities and properties." It has been held by the Tribunal that M/s. Auxichem' products cannot be assessed under Item 15A as they are not silicone, but only preparations of silicone. It has been held that the said preparations are properly classifiable under Item 15AA.
9. So far as the products covered by the show cause notice No. V(15AA)17-82/CLVC/84/8087 dated 22.12.84 are concerned, the department has not disputed the fact that the said products are mixtures of silicone, emulsifier and water. As already stated in paragraph 6 ante, in ground No. (i) of the appeal, the appellants have stated that they produced silicone oil by chemical synthesis and stored it in their factory. After paying duty under Item 15A(1) of the Central Excise Tariff, they used the said silicone oil for the manufacture of the aforesaid preparations by mixing the silicone oil with water and duty-paid emulsifier in another vessel called homogenizer. In the circumstances, duty could not be charged again under Item 15A(1) of central excise tariff. Following the decision of the Larger Bench in the case of M/s. Auxichem (supra), we, therefore, hold that the appellants' disputed products, except the three products which were already classified by this Tribunal under Tariff Item 15A(1) vide order No. 368/83-C, were not classifiable under Item 15A(1).
10. It is stated that the appellants' disputed products covered by the aforesaid show cause notice dated 22.12.84 are used in industrial process for their surface active properties. It is also stated that katrang SD and katrang FAR-21 are used in pharmaceutical industry as defoamers. Similar goods were classified by this Tribunal under Tariff Item 15AA in the decisions reported in 1985(19) ELT 214 (Supra) and 1984(34) ELT 637 (supra). Following those decisions, we hold that the products (except the three products mentioned earlier) covered by show cause notice dated 22.12.84 should be classified under Item 15AA Exemption notification No. 101/66-CE dated 17.6.66 should be allowed, if the conditions mentioned in columns 2 and 3 against Sri. No. 4 of the said notification are duly fulfilled.
11. The products covered by show cause notice No. V(68)17-35/CLVC/83 dated 2.1.85 covered by appeal No. E/1373/88-C and those covered by Appeal No. E/1160/88-C are silicone oil and silicone emulsions. So far as silicone oil is concerned, it has been held by this Tribunal in the case at M/s. Hico Products, Bombay v. Collector of Central Excise, Bombay, , that silicone oil is a primary product and it is classifiable under Tariff Item 15A(1). In the case of CEAT Tyres of India Ltd, Bombay v. Collector of Customs, Bombay, , it has been held by this Tribunal that silicone fluid falls under Tariff Heading 39.01/06 of the Customs Tariff Act, 1975 and not Heading 34.01/07. In the case of M/s. Auxichem (supra), the Larger Bench of this Tribunal has held that silicone in primary form is classifiable under Item 15A(1) and the preparations containing silicone oil is not classifiable under this Tariff Item. The ingredients, and the exact properties and uses etc. of the products covered by classification lists No. 8/84 and No. 15/84 (the subject matter of appeal No. E/1160/88-C) are not available before us. From the facts of the case, we find that the products covered by show cause notice dated 2.1.85 were classified by the Assistant Collector of Central Excise under Item 68 of the Central Excise Tariff, but the Collector (Appeals), by the impugned order, has classified the same under Item 15A(1). Both silicone oil and silicone emulsions covered by classification lists No. 8/84 and 15/84 (Appeals No. E/1160/88-C), have been classified by the Assistant Collector under Tariff Item 15A(1), which has been upheld by the Collector (Appeals). In the absence of the details regarding ingredients, exact properties and uses of the products in question, we are not in a position to give our findings regarding appropriate classification of there products. We, therefore, direct the Assistant Collector of Central Excise having jurisdiction over the appellants' factories to decide the correct classification of the products involved in the show cause notice dated 2.1.85 and those involved in Appeal No. E/1160/88-C, keeping in view the Tribunal's earlier decisions and also our present order.
12. In the light of our above discussions, the appeals are partly allowed and partly remanded.