Customs, Excise and Gold Tribunal - Delhi
Shriniwas Synthetic Packers Pvt. Ltd. vs Cce on 23 September, 2003
Equivalent citations: 2003(158)ELT729(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. The issue involved in these two appeals is whether the Aluminium foil/strips backed on both sides with plastics and stainless steel foils/strips backed with plastics on both sides are classifiable under Sub-heading 7607.00 and 7220.90 respectively of the Schedule to the Central Excise Tariff Act as claimed by the Appellants or under Sub-heading 3920.30 of the tariff as classified by the Commissioner, under the impugned order.
2.1 Shri L.P. Asthana, learned Advocate, submitted that whenever electrical signals are transmitted through Jelly Filled Telecommunication cables (JFTC), electromagnetic filed is generated around the cable which causes interference in electrical signals being transmitted through other neighboring cables and distorts the signals; that JFTC cables are provided with metallic covering over the cable core to prevent distortion of electrical signals by surrounding electromagnetic fields; that Department of Telecom has specified that this screening material should be alumirium foil of 0.2 mm thickness backed on both sides with polyethylene; that plastic backing is used only to improve to bonding of the metallic screen with plastic jacket of JFTC cable and to seal the longitudinal edge of aluminium tapes; that plastic does not play any role in the basic function of avoiding distortion in electrical signals; that aluminium part dominates over plastic part in the composite plastic backed tape in terms of thickness, bulk, weight as well as value.
2.2. He, further, mentioned that copolymer backed stainless steel tape (foil), is used in optical fibre cables to provide armour to make the cable rodent and termite proof; that stringent specifications are laid down for plastic backed steel tape to ensure electrical continuity, corrosion resistance, redial and compressive strength etc.; that these properties can only be attributed to steel portion of the copolymer backed steel tape and no plastic tape can achieve them; that here also steel portion dominates plastic portion in terms of thickness, bulk weigh and value in the composite tape.
3.1 He submitted that by application of Rule 1 of the General Interpretative Rules, the impugned goods are classifiable under heading 76.07 and 72.02 respectively; that even if Rule 3(b) is applied, the classification is justified since the essential character is given by the mental portion of the products and the use of plastic is only for bonding purposes. He, further, mentioned that the classifications have been approved by the Larger Bench of the Tribunal in the case of Hindustan Packaging Co. Ltd. v. CCE, Vadodara 1995 (75) ELT 313 (T). It has been held by the Tribunal by majority that aluminium foil backed by paper and polyethylene is classifiable under sub-hading 76.06; that the appeal filed against the decision was withdrawn by the Appellants as reported in 1998 (97) ELT A-139. Reliance has also been placed on the decision in the case of India Foils Ltd. v. CCE, Calcutta-II, 1998 (99) ELT 101 (T) wherein it has been held that aluminium foil pouch for containing tobacco is classifiable under Heading 76.12 as the essential characteristic is of aluminium content in the shape of aluminium foil and being backed by plastic does not take it away from the category of aluminium foil. He also relied upon the decision in the case of CCE, Calcutta-I v. India Foils Ltd. 2001 (132) ELT 737 (T) wherein the Tribunal classified the aluminium foil backed on one side with printed polyester film and on the other with High Density Polythene (HDPE) Film under Sub-heading 7607.60 and not under Sub-heading .
3.2 The learned Counsel fairly mentioned that a different view has been taken by Mumbai Bench of the Tribunal in the case of Sharp Industries Ltd v. CCE, Mumbai-III, 2000 (120) ELT 825 (T) by classifying aluminium foil sandwiched between films of polyester and polyethylene under Chapter 39. He, however, submitted that the same Bench immediately thereafter in the case of Betts India Ltd. v. CC, Goa, 2002 (144) ELT 588 (T) has classified the plastic laminated films containing two layers of plastic followed by aluminium foil and thereafter plastic films under Heading No. 76.07 of the Customs Tariff instead of Heading 39.20 observing that the decision in Sharp Industries Limited is not being followed "because it lacks evidence which is present in this case". He finally relied upon the decision in the case of CCE, Delhi-II v. R.T. Packaging Ltd., Final Order No. 59/2002-B dated 12.2.2002 wherein the Tribunal has held that aluminium foil backed on one side with printed polyester film and on the other side with high density polyethylene film is classifiable under Heading 7607.60 of the Central Excise Tariff; that the appeal filed by the Revenue has been dismissed by the Supreme Court after condoning the delay (Civil Appeal No. 5148 of 2000 dated 24.2.2003).
4. The learned Advocate finally contended that the entire demand for the period from November, 1996 to February, 200 is time barred as the show cause notice was issued on 29.11.2001 beyond the normal period of one year specified in Section 11A(1) of the; that Targer period of limitation cannot be invoked as they have been classifying the impugned goods under Sub-headings 7607.60 and 7220.90 and have been regularly filing RT-12 returns; that along with their classification lists and declarations, the Appellants have also submitted details of the manufacturing process; that the process clearly shows that aluminium foil is laminated on both sides with plastic. He also showed us the verification report of the Superintendent recorded on classification declaration effective from 23.7.96 which clearly mentions that "I have visited the assessee manufacturing unit on 9.8.96 and verified the description of the products, studies the manufacturing process and have satisfied myself about the correctness of the classification and applicability of exemption notification declared here-in-above." He, therefore, contended that it is not correct to say that the fact of foils being laminated on both sides with plastic was suppressed is not sustainable; that moreover it is an intricate question of classification and they reasonably believed that the goods were classifiable in chapters 76 and 72, the extended period of limitation cannot be applied in the light of various decisions of the Supreme Court.
5. Countering the arguments, Shri D.N. Choudhary, learned SDR, submitted that aluminium foil which is backed by material, on both sides by plastic is nothing but a product of plastic films/Sheets, separated by a layer of aluminium foil; that in the Explanatory Notes of HSN under the Heading "Combination for plastics and materials" other than Textiles, it is clearly mentioned that products consisting of plastic plates, sheets, etc. separated by a layer of another material, such as metal foil, paper board, etc. are covered by Chapter 39 provided that they retain the essential character of articles of plastics; that in the present matters, it is not in dispute that the impugned goods are used for telecommunication purpose to avoid distortion in transmission of telecommunication signals; that the cables (JFTC or Optical fibre cables) are laid underground and during transmission of telecommunication signals, electromagnetic field is also generated in other cables which are laid side by side; that the plastic being poor conductor of electricity, is applied over JFTC/Optical fibre cables to prevent distortion in the signals; that thus the impugned products are insulating materials and essential character is imparted by the plastic; that the application of metallic strip is only to give strength to the plastic film applied on the cable and if base plastic film is applied it would get destroyed. The learned SDR referred to the Book "Tata McGraw Hill Distionary of ......... wherein it is mentioned that "synthetic polymers such as polyethylene, polypropylene, polystryrene, polytetrafluoroethylene, polyvinyl chloride, polymethyl methacrylate, polyamide and polymide have become important" industrial dielectric materials in addition to the traditional materials such as oil impregnated paper. He, further, submitted that all the decisions relied upon by the learned Advocate pertains to packaging materials and accordingly are not applicable to the facts of the present matteRs. He thus emphasised that plastic provides the essential characteristics to the impugned goods. He relied upon the following decisions :
(i) Shivaji Works Ltd. v. CCE, Aurangabad, 1994 (69) ELT 674 (T) wherein it has been held that functional test is the correct test for determining the character of a product. Function of a product is determined by the "mental association in the mind of the customer between the article and the need it supplies in his life".
(ii) Atul Glass Industries Ltd. v. CCE, 1986 (25) ELT 473 (SC) wherein it has been held that the identity of an article is associated with its primary function. IT is functional character of the article which identifies it in his mind.
6. In reply, the learned Advocate mentioned that it was not the case of the Revenue in the show cause notice not in the impugned Order that the impugned products are insulating materials. He also referred to the use of the impugned goods as described by the customers of the Appellants. According to M/s . Shriniwas Synthetic Packers (P) Ltd., copolymer backed stainless steel tape is used in optical fibre cables to provide armout to make the cable rodent and termite proof; that stringent specifications are laid down for plastic backed steel tape to ensure electrical continuity, corrosion, resistance, radial and compressive strength, etc.; that similarly M/s . Paramount Communication Ltd. have mentioned that polyethylene backed aluminium tape is applied over cable cores of JFTC cables to provide a screen to avoid distortion in transmission of telecommunication signals and plastic does not play any role in the basic function of avoiding distortion in electrical signals.
7. We have considered the submissions of both sides. the allegation of suppression of facts by the Appellants is not sustainbale in view of the fact that it has not been disputed by Revenue that the Appellants had filed classification list declaration in which they had clearly mentioned the impugned products as under :
"(7) Aluminium foil/strips backed with plastics of a thickness (exceeding any backing) not exceeding 0.20 mm)"
"(9) Stainless steel foil/strips backed with plastic"
It is thus apparent that the Appellants have delcared the products manufactured and cleared by them. They have specifically mentioned that the products are backed with plastics. It the proper officer wanted to ascertain as to whether the products are backed on both sides or only one side, nothing prevented him to check the facts from the Appellants. Nothing has been brought on record before us to show that such a query was even raised by the Revenue from the Appellants. It cannot be claimed by the Revenue that there was any suppression of fact as the classification declaration contained full description of the goods. Moreover, we find that there is and endorsement on the classification declaration to the effect that manufacturing process had been studies and correctness of the classification has been satisfied. Accordingly the extended period of limitation as provided in proviso to Section 11A(1) of the Central Excise Act for demanding the duty is not invokable and the entire demand is hit by time limit specified in section 11A(1).
8.1 On merits, the contention of the learned SDR is that the essential character of the impugned goods is imparted by the plastic as the products in question are nothing but insulating materials. On the other hand, the contention of the learned Advocate is that aluminium tape covers JFTC cable core to prevent distortion of electrical signals by surrounding electromagnetic fields and plastic backing is used only to improve bonding of the metallic screen. He has also submitted that copolymer backed stainless steel tape is used in optical fibre cable to provide amount to make the cable rodent and termite proof. These contentions of the learned Advocate have not been rebutted successfully by the Revenue. Heading 76.07 applies to "Aluminium foil (whether or not printed or backed with paper, paper board, plastic or similar backing materials) of a thickness (exceeding any backing) not exceeding 0.2 mm whereas Heading 39.20 reads as under :
"Other plastes, sheets, film, foil and strip, plastics, non-cellular, whether lacquered or materialised or laiminated, supported or similarly combined with other materials or not."
8.2 From the description of the rival Headings, it is clear that that the aluminium strip backed with plastics on both the sides is appropriately covered by heading 76.07 only. This view has been confirmed by the Supreme Court as the appeal filed by M/s . Hindustan Packaging Co. Ltd. against the Tribunal's decision [1995 (75) ELT 313] classifying the product under Heading 76.06 was dismissed as withdrawn as reported in 1998 (97) ELT A-139. Moreover the learned counsel has succeeded in showing that the essential character to the products is imparted by the metal part and applying Rule 3(b) of the Rules for Interpretation of the Schedule to the Central Excise Tariff, composite goods consisting of different materials shall be classified as if they consisted of the material or component which gives them their essential character. We, therefore, hold that the impugned products are not classifiable under Heading 39.20 but are classifiable under Heading 76.07 (Aluminium foil backed with plastic and Heading 76.02 (Stainless steel strip backed with plastic) of the Central Excise Tariff. Accordingly, we set aside the impugned Order and allow both the appeals.
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