Customs, Excise and Gold Tribunal - Delhi
Collector Of Customs vs Hico Products Ltd. on 4 January, 1988
Equivalent citations: 1988(17)ECR317(TRI.-DELHI)
ORDER H.R. Syiem, Member (T)
This five-member bench was specially constituted to hear these cases as the normal bench 'C' thought that there were contradictions in a few previous decisions on the subject.
1. The subject of classification in these twelve appeals is silicone oil/fluids; the Assistant Collector gives a fuller description : methyl hydrogen polysiloxane fluid; they are silicone oils. They were assessed by the custom house under Customs tariff Chapter 39 and countervailing duty under CET 15-A. The Collector (Appeals) wrote that the imported silicone oils do not conform to any of the description in Chaptar 39 of the Customs tariff; he concluded that only silicones which have resinous or plastic properties are covered under the Chapter. Since the imported silicone oils admittedly had no resinous or plastic properties, they would not fall under Chapter 39 of the Customs tariff. For the same reason, he said that assessment to countervailing duty should be under item 68 CET. In doing so, he appeared to have relied on a decision of this Tribunal, order No. 133-134/84-C dated 29.2.1984.
2. This decision of the Tribunal was the subject of long arguments by the two sides before us. Since this is a five member bench set up to reconcile the difference of opinion and conflicts between different benches, I shall not rely on any past judgments, though I may refer to some of their contents.
3. The arguments af the department were a plain and simple one : silicones are specifically listed under Chapter 39 of the Customs tariff and Item 15-A of the Central Excise tariff and, therefore, assessment of these silicone oils/fluilds must be made under these headings. It makes no difference whether the oils have resinous or plastic properties; as long as the product is a silicone, it must be assessed under the head under which it is specified. The learned Counsel also referred to various rules of interpretation of the Customs tariff, but there is no need to reproduce them or to quote them, because I am completely in agreement that a commodity, an article, a good must always be assessed under that head which is specific to it. I further say that of two or three heads, the less specific will yield place to the more specific. This is the rule in all assessments, whether the rule is written down or is one laid down by convention. The learned Counsel made copious references and quotations from the tariff head and the definitions and head notes contents. But I find no need to repeat them, because we all know what they are.
4. The learned Counsel for M/s. Hico stressed one point very strongly --the silicone oil/fluid imported by them is not resinous or plastic in character or properties, and according to a number of judgements of this Tribunal, he said these oils cannot be assessed under heads that cover only artificial and synthetic resins. These oils cannot be moulded or formed; they Jack the properties that all synthetics resins have of taking shape when given that shape under heat or pressure or both, and to retain that shape permanently or semi permanently. These silicone oils/fluids in fact are not meant to find uses that synthetic resins find; these oils/fluids are meant to be put to uses totally unconnected with the characters and properties of synthetic resins and polymers. Their uses are as wetting agents, mould release agents, surfactants and other surface active preparations. Silicones, as observed by the Tribunal in one judgment, have many uses and many forms. They can be used as adhesives and moulding compounds etc. etc. in which case they can be said to behave like true resins. But they also find applications in which their resin qualities are not at all manifest. Such products are silicones in name only but by reason of their character and properties they will go out of the heading which embraces only synthetic resins and polymers. The learned Counsel discussed at some length the nature of the products listed in Customs Tariff Chapter 39. He pointed out that the section heading covers artificial resins and plastic materials, cellulose esters and ethers and articles thereof; rubber, synthetic rubber, factice and articles thereof and the chapter heading covers Artificial resins and plastic materials, cellulose esters and ethers; and articles thereof.
5. All the products in the midst of which silicones are mentioned all possess the qualities of mouldability; since their imported silicone oil does not behave in the same manner, it should not be assessed under the heading for such goods.
6. The argument on behalf of M/s. Hico is that silicone must be separated from other resins and plastics if it is not capable of moulding or of being moulded, or does not behave like moulding resins and synthetic polymers and has no resinous or plastic character. Such statement is relcvant only when one is talking about resins. If the resin does not behave like a resin, but has properties that a resin does not have or has application that resins do not find, it might be logical to say that that resin moves out of the family of artificial resins and plastic materials. A resinous quality or behaviour by a resin used as a resin/plastic material is a strong tecommendation for the categorisation of that resin as an artificial resin and plastic material.
7. Thus when classifying a PVC moulding powder, one would look about to see if there is a heading for such moulding powder. If there is one, then the moulding powder must be placed in that head or sub-head and not under the head that covers only the material from which the commodity is made. But a PVC resin finds no better accommodation than as an artificial resin of which it is made. But an engine crankshaft finds better accommodation as an engine part rather than as the steel from which it is made. For the matter of that an engine part made of polyurethane plastic is better classified as an engine part than as an article made of plastic, because after being a plastic, it has progressed further and been upgraded to the status of a machine part. Instance can be multiplied several times. Glass, cotton fabrics, paper, wood, find specialised application in various fields. In those applications they have their original homes and join the new elite groups as parts of engines, machines, automobiles, aircrafts, ships and other uses too many to mention.
8. However, if there is not a more specialised heading or a more specific heading or a more particularised heading, then naturally the product falls into the next most appropriate heading. A resin or a plastic material which is to be used or capable of being used only as such resin or plastic material will inevitably fall in the heading for artificial resin and plastic materials. A silicone product, unless there is a more specific heading for it, must fall under the head silicone. If the product is only a silicone, it must be assessed as such silicone under the head that specifies it. We can understand this from an assessment for derived products like say a sealing ring made from a silicone elastomer. That sealing ring is a silicone product made of silicone, but it will not be assessed under the silicone head, but as a sealing ring as a part of a machine. But when the unformed silicone elastomer is to be assessed, then the head under which that elastomer must be assessed obviously can be no other than the silicone head, because that is what the product is, a silicone.
9. There are various forms in which silicones occur or are produced. According to the Kirk-Othmer Fncyclopaedia of Chemical Technology, silicones are chiefly in the forms of fluids, resins and elastomers with several products. Of these fluids are dimethylsilicone made by catalyzed equilibration of dimethyl silicone stock, i.e., the crude fluid or distilled cyclic polymers, with a source of the chain terminator, (CH3)3Si00.5. Low viscosity fluids are also produced. For high viscosity fluids or gums, alkaline catalysts are used. Fluids are sometimes blended in order to make fluids of intermediate viscosities; and blending can affect physical properties appreciably.
10. The same Encyclopaedia records that dimethylsilicones are good hydrodynamic lubricants but poor for sliding friction. These silicone fluids find uses in the manufacture of greases, in textile paper and other industries and in foam control. In these uses, they are usually in emulsions with a suitable emulsifier. The emulsified silicone fluids are usually dimethyl or methylalkyl silicones, although they may also be of any type.
11. The same Kirk-Othmer Encyclopaedia begins the section on SILICONE with these words:
The name silicone denotes a synthetic polymer (RnSi(4n)/2)m where n=l-3 and m 2. A silicone contains a repeating silicone oxygen backbone and has organic groups R attached to a significant proportion of the silicon atoms by silicon-carbon bonds. Silicone has no place in scientific nomenclature, although it was originally introduced under the supposition that compounds of the empirical formula RR'SiO were analogous to ketones (1). Several decades later it was used to describe related polymers (2). In commercial silicones most of the R groups are methyl; longer alkyl, fluoroalkyl, phenyl, vinyl, and a few other groups are substituted for specific purposes. Some of the R groups in the polymer can also be hydrogen, chlorine, alkoxy, acyloxy, or alkylamine, etc. These polymers can be combined with fillers, additives, and solvents to make products that are loosely classed as silicones.
Silicones have an unusual array of properties. Chief among these are thermal and oxidative stability and a relatively mild dependence of physical properties on temperature. Other important characteristics of these materials include a high degree of chemical inertness, resistance to weathering, good dielectric strength, and low surface tension. As the general formula implies, the molecular structure can vary considerably to include linear, branched, and cross-linked structures. These structural forms and R groups can provide many combinations of useful properties that lead to a wide range of commercially important applications. Silicones include fluids, resins, and elastomers. Many derived products, e.g., emulsions, greases, adhesives, sealants, coatings, and chemical specialities, have been developed for a large variety of uses. (3).
There is no doubt that all silicones i.e. silicone resins, silicone elastomers and silicone fluids are synthetic polymers and there has been no dispute over this. M/s. Hico's arguments were not that their silicone fluid is not a synthetic polymer, but that it has no resinous properties and cannot be formed like artificial resins. That it is a synthetic polymer finds support from the submissions by M/s. Hico dated 19.12.1984 before the Assistant Collector of Customs (Refund), Bombay Custom House, Bombay, where they described silicone oils as low polymerisation condensation products produced by hydrolysis in contradistinction to silicone resins which are high polymerisation products. There is, therefore no doubt that silicone fluids are polymers just like resins, even though they are low polymerisation products. And to prove that the silicone oil is a silicone fluid, we have the written submission filed on behalf of M/s. Hico products. I reproduce these sentences: "It also needs to be noted that there is a clear line of distinction which is drawn in all the technical books on the subject, including also the Encyclopaedia of Polymer Science and Technology (volume 12) between silicone fluids (which include silicone oils) on the one hand and silicone resins on the other.'' This is evidence that in science, fluids are regarded as including oils.
12. The learned Counsel for M/s. Hico submitted lengthy arguments on how to interpret the tariff items and that if the items are interpreted properly, silicone fluids would not be assessable with the resins and other high polymers, especially in respect of assessment under the Central Excise tariff item 15-A. They say that the silicone fluids are not silicone resins and cannot find a place in heading that houses resins. I am afraid, however, that this is not a proper understanding of the item, Before and after its amendment in 1982, item 15-A of the Central Excise tariff always carried the list which includes silicones as one of the products and silicones include resins, elastomers and fluids; and fluids in turn include oils whose derivation 1 have briefly shown by a reference to the Kirk-Othmer book. I am unable to understand or to appreciate the argument that because of any fancied definition or any perceived difference between the fluids and resins, fluids must be taken out from the family of silicones, a family that finds specific coverage under the heading 15-A. The exclusion would be possible, of course, if one is to accept that the fluids would not be assessable with resins and elastomers simply because they are not mouldable and has no resinous properties. But there is nothing in the tariff that a fluid must have resinous properties or plasticity. Only a resin is required to have this property.
13. There is, of course, the fact mentioned by the learned Counsel that their silicone oils were not classified by the excise authorities under 15-A before the 1982 amendment and that the central excise authorities issued a trade notice that only silicone resins being condensation products fell under Tariff Item 15-A CET, and that silicone fluids being low polymerisation products, physically and chemically distinguishable from silicone resins were not classifiable under 15-A. It is not possible to comment on this trade notice or the authority behind it; but I am certain that it is not a technologically correct notice. For all the arguments that have been presented before us, 1 have heard no authoritative statement that a silicone fluid because it is a low polymerisation product should not fall with resins and elastomers for the purpose of assessment. There is no disputing the fact that the silicone fluids are produced by polymerisation in a process of chemical synthesis. There is no disputing the fact that silicone fluids are silicones and, whether one defines the process of its production or not, it is always a polymerisation product derived by chemical synthesis. Its physical characteristics are certainly different from those of the silicone resins; but this is only to be expected since it is not a resin and is going to find uses in ways that need certain characteristics that are not needed in the resin. Since it will not be subjected to forming or moulding processses like a resin, a fluid state is enough and in this state it finds use as a wetting agent, as a lubricating agent, as antiflatulant medicines etc, That it is a synthetic polymer has not been questioned by anybody and 1. know of no one who will accept any question on that score.
14. We have already seen that the Kirk-Othmer Encyclopaedia defines a silicone i.e. fluid, resin or elastomer, as a polymer. If the fluid has no plasticity or resinous properties, 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 or item 15-A. If the fluid is a silicone product, it must be assessed as a silicone under its head and I can see no need for further argumentation and dissertation.
15. But let us see how leading authorities classify them. The CCCN under Chapter 39 under SILICONES has these sentences:
The silicones of this heading are non chemically defined products containing in the molecule more than one silicone-oxygen-silicon linkage, and containing organic groups connected to the silicone atoms by direct silicon-carbon bonds.
They have a high stability and may be either liquid, semi-liquid or solid. The products include silicone oils, greases, resins and rubber.
16. The Harmonised Commodity Description and Coding system carries this heading in respect of silicones. SILICONES IN PRIMARY FORMS:
The silicones of this heading are non-chemically defined products containing in the molecule more than one silicon-oxygen-silicon linkage, and containing organic groups connected to the silicon atoms by direct silicon-carbon bonds.
They have a high stability and may be either liquid, semi-liquid or solid. The products include silicone oils, greases, resins and elastomers.
(1) Silicone oils and greases are used as lubricants remaining stable at high or low temperatures, as water-repellant impregnating products, as dielectric products, as foam inhibitors, as mould release agents, etc. Lubricating preparations consisting of mixtures containing silicone greases or oils fall in heading 27.10 or 34.03 as the case may be (see corresponding Explanatory Notes).
(2) Silicone resins are used mainly in the manufacture of varnishes, insulating or waterproof coatings, etc., where stability at high temperature is required. They are also used in the preparation of laminates with glass fibre, asbestos or mica as the reinforcing material, as flexible moulds and for electrical encapsulation.
(3) Silicone elastomers, although not covered by the definition of synthetic rubber in Chapter 40, have some extensibility which is not changed by high or low temperatures. This property renders them suitable for manufacture into washers or other packings for appliances submitted to high or low temperatures. An application in the medical field is the manufacture of automatic brain valves used in cases of hydrocepnalus.
17. It is clear from these two authoritative nomenclature systems that silicone oils which are included in silicone fluids/liquids are silicone in primary forms and are to be classified with silicone resins, solid form or powder .form. The understanding of experts in the fields who drew up these two nomenclature system, as well as explanations in the technical dictionaries I have referred to show that silicone fluids go with silicones, whether resins or elastomers, and that the fluid form is one of the primary forms of the polymer. It is necessary to distinguish the primary form because preparations containing silicones may not be classed with silicones as they have more specific entries and since silicones form only one of two or three ingredients of the preparation, and have frequently been given for the specific purpose additives, extenders, fillers, emulsifiers etc, etc. Such preparations would obviously not be silicones, because they are not silicones in primary form but only compounds and preparations containing the primary silicones, whether fluid or resins.
18. The fluid/oil imported by M/s. Hico is nothing but a silicone polymer. Whatever uses it may be put to in preparations, compounds etc., when it was imported, it was a silicone fluid in primary form and must be assessed accordingly. I might draw attention here to an observation that I made in order No. C-485/85 re : M/s. Reliance Silicones in paragraphs 15 and 16:
Only "other materials specified below" can be accommodated. Thus some materials like resols and chlorinated rubber, vulcanised fibre having been specified below, are also to be accommodated. Similarly, silicones specially some of the fluid forms may need specific inclusion to be able to enter. A silicone fluid if it is not a high polomer will not ordinarily, find a place in item 15-A; but this is overcome by the specific inclusion of "silicones"; and let it be noted by the heading clause "other materials" though not on its own, but working in tandem with the other clause "specified below" which limits and restricts the first clause to only those materials listed in the heading. And we must not forget that while there are differences, all the substances that go in item 15-A, fluids, resins, resols resinoids, have much in common, the chief being the manner in which they are formed and the manner in which they behave.
The assessment of silicone fluid under item 15-A is quite correct and need not be questioned. The Appellate Collector was wrong when he seemed to suggest that only substances that are mouldable under heat and/or pressure can be assessed under this bead.
19. I would like to repeat what I said then.
20. I will, therefore, end by a direction that the silicone fluids imported by M/s. Hico shall be assessed as silicones whether under the Customs tariff Chapter 39 or the Central Excise tariff item 15-A. Sd/- (H. R. Syiem) Sd/- (G. Sankaran) Sd/- (K. Prakash Anand) M(T) Sr. Vice President M(T) S.D. Jha Vice President (J)
21. While I agree with Brother Syiem's conclusion that silicone oil which is silicone in primary form as distinct from a preparation containing silicone would merit classification for basic customs duty under Heading 39.01/06 and for additional duty under Item 15-A of Central Excise Tariff primarily for the reason that silicone is specifically by name mentioned therein, 1 must, however, express my reservation as to use of Harmonised Commodity Description and Coding System and CCCN for interpreting Central Excise Tariff so far as it is material for the present appeals in view of the observations of the Hon'ble Supreme Court in Atul Glass Industries Ltd. and Ors. v. Collector of Central Excise and Ors. . In my view, a product included in Chapter 39 or Tariff Item 15-A by name and otherwise meriting classification under the Heading and the Item would not go out of the same for the mere reason that it does not have resinous or plastic character.
Sd/- (S.D. Jha) Vice President (J) V.T. Raghavachari Member (J)
22. I agree that the proper classification of the product in issue would be under Chapter 39 of the Customs Tariff and Item 15-A of the Central Excise Tariff. The appeal is, therefore, allowed and the order of the Collector (Appeals) is set aside, restoring the order of the Assistant Collector.