Customs, Excise and Gold Tribunal - Delhi
Ceat Tyres Of India Ltd. vs Collector Of Customs on 5 January, 1988
Equivalent citations: 1988(35)ELT635(TRI-DEL)
ORDER G. Sankaran, Sr. Vice-President, H.R. Syiem (T) and K.P. Anand (J), Members 1. 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. There are two orders-in-appeal impugned before us, both of them passed by the Collector of Customs (Appeals), Bombay; one order is order No. S-49/1482/82R date of issue 31.12.1982 and the other order No. S-49/900/83R date of issue 20.10.1983. The goods were described as Silicone Oil Dow Corning (R) 200 Fluid 350C3, and Silicone Fluid SF-96-350 CST, the importers M/s. CEAT Tyres. In both the orders, the Collector (Appeals) assessed the goods to customs duty under Chapter 39 of the Customs tariff. 2. The learned counsel for M/s. CEAT Tyres, Mr. Lakshmi Kumaran said that this assessment was wrong, because the Silicone Fluid was used as a mould release agent by the importers during the manufacture of tyres. Apart from the fact that the oil had no resinous or plastic nature, its use was as a mould release agent, a lubricating activity, to prevent the moulded tyre from adhering to the mould. The oil was quite different from silicone and cannot be assessed with it in the same heading. It is not correct to say that the silicone fluid they imported was specifically included in Chapter 39 of the Customs tariff, because a mould release agent has a more specific heading in Chapter 34. Silicone oil is a low polymerisation products and cannot be in the same category and find the same classification as resins which are high polymerisation products. The silicone fluid imported by them has undergone only a low degree of polymerisation and has not acquired the characteristic of resins. 3. In the appeal certain other arguments were advanced. They say, for example, that, according to the Chamber's Dictionary, lubricate means to make smooth or slippery, and this was the very thing which a mould release agent does. Therefore, it was wrong for the Collector (Appeals) to hold that the silicone fluid acts only as an anti-sticking agent and is not covered by the description lubricating preparation. 4. The learned counsel for the department, Mr. Sundar Rajan, vigorously opposed the submission. In brief, his argument was that the silicone oil must be assessed where it is listed by name, and it is listed by name only in Chapter 39. Reference of this chapter will find silicones in company with other products all of which have more or less the same characteristics. 5. It is not necessary to reproduce all the lengthy arguments of the two learned counsels, because in order to decide this matter only scientific and technological facts are relevant. Even the learned arguments advanced by the two sides regarding the scope of the words and phrases employed in the chapter are not going to help us much, the facts being known and these being that silicones are a product of polymerisation and are produced in a chemical synthesis which results in radical groups being attached to silicon atoms by silicon-carbon bends. 6. The importers and their learned counsel contend that though silicone may be a polymerisation product, it has undergone a low degree of polymerisation and, therefore, has not acquired the resinous character or plasticity of silicone resins. By reason of this low degree of polymerisation, M/s. CEAT Tyres argue that silicone oils should not be classed together with resins under a head that is specially carved out for such products. 7. The answer to this is that Chapter 39 covers synthetic polymers, i.e. goods produced by chemical synthesis of the kind called condensation, polycondensation, polyaddition, polymerisation and co-polymerisation. Furthermore, the chapter in a note, specifically names silicones as a product produced by these processes, and covered by the heading, viz., heading 39.01/06. Another note in the same chapter lists the variety of those same products in liquid or pasty forms, as well as other forms. The meaning of this is that if a product named and listed in the heading is either in liquid form or is a paste, it would be covered just as well as if it had been a block, a powder, or a granule etc. The argument of the importers that needs to be dealt with in order to settle the dispute, therefore, is only whether the liquid silicone or silicone oil which they imported must be called and classified as a silicone. They say it is not, as it is a mould release agent and is used by them for mould release in their tyre manufacturing activity. They claim that the correct heading for such goods is Chapter 34, since it is used as a lubricant i.e. as a mould release agent. They quote extensively from Chapter 34 of the Customs tariff and from the BTN to point out that lubricating preparations consisting of mixtures containing silicone grease or oils fall within heading 27.10 or 34.03, as the case may be; silicone oil was not considered as covered by Chapter 39. They also referred to CCCN heading 34.03 which reads : LUBRICATING PREPARATIONS, AND PREPARATIONS OF A KIND USED FOR OIL OR GREASE TREATMENT OF TEXTILES, LEATHER OR OTHER MATERIALS, BUT NOT INCLUDING PREPARATION CONTAINING 70% OR MORE BY WEIGHT OF PETROLEUM OIL OR OF OILS OBTAINED FROM BITUMINOUS MINERALS According to their interpretation, mould release agents like the silicone oil they have imported, should fall under Chapter 34 as lubricating preparations. 8. The error of this argument is that silicone oil is not a lubricating preparation, but is itself a silicone fluid. It is true that it finds use as a lubricant/mould release agent, but it is not a preparation. Reference to the CCCN will clarify the meaning of this. Under Chapter 39, the Nomenclature describes silicone oils and greases as being used as lubricants remaining stable at very high or low temperatures, as water repellent impregnating products etc. etc. In the same paragraph, however, it separarately distinguishes lubricating preparations consisting of mixtures containing silicone greases or oils and discriminates them as goods falling under Chapter 27 or Chapter 34. This note includes in Chapter 39 silicone oils, but severs lubricating preparations containing silicone oils out of the Chapter. 9. Chapter 34.03 carries a note on mould release preparations as being, among other things, mixtures containing silicone greases or oils. This heading takes in only mould release preparations containing silicone oils but it does not cover silicone oils in the primary form. The same heading of the CCCN clarifies that some synthetic lubricants include greases based on silicones and jet lube oils; such lubricants based on silicones are not themselves silicones. These lubricants or rather lubricating preparations fall outside Chapter 39 and into Chapter 34. 10. Chapter 39 of the CCCN in the description of Silicones says that silicones "have a high stability and may be either liquid or semi-liquid or solid. The products include silicone oils, greases, resins and rubber." The proximity in this explanatory note of the primary forms like silicone oils, greases, resins and rubber, to lubricating preparations containing silicone greases and oils have a significance that cannot be missed. The Nomenclature clearly distinguishes the primary silicone products like silicone oils, greases, resins from silicone-based preparation containing the primary products form like oils and greases. 11. We will get strong confirmation of the above if we refer to the Harmonised System heading 39.10. This Code is, of course, more elaborate and the heading is one for Silicones in Primary Forms, and the products in these forms include silicone oils, greases, resins and elastomers. The heading furthermore excludes lubricating preparations consisting of mixtures containing silicone greases and oils. These are shown as falling in Chapter 27 or 34. Chapter 34 makes the same arrangements as the CCCN. 34.03 carries an indication of the kind of lubricants and lists mould release preparations based on lubricants, used in various industries, such as mixtures containing silicone greases or oils. 12. Heading 39.10 of the Harmonised Code is reproduced here : 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-repellent 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 hydrocephalus. The matter, I believe, is clear now and beyond any further need for disputation. The silicone oil may be a lubricant but it is a silicone and in that capacity, it is listed in Chapter 39; and furthermore it is also a polymerisation product produced by chemical synthesis, in a reaction that will satisfy the definition of Chapter 39 of the Customs tariff. To take it out of Chapter 39 will require more than we have been furnished. 13. There may be a little question that the silicone oil should not be classed as a fluid. After all, silicones generally occur in the forms of fluids, resins and elastomers. A man can argue that even though oil is a fluid, it is not necessarily a fluid in the primary form, and so would call for its classification with the fluid contemplated by the chemistry of silicones. This, however, would be a misconception. We have the authority of the CCCN and the Harmonised Code both of which are works by experts in the fields and both of which are framed with great care to nominate and classify goods under clearly defined groups. If the CCCN and the Harmonised Code list oils and greases in the same class as liquid, semi-liquid and solid, then we can be confident on the authority of people who know the subject that that is how oil are to be regarded and understood. There is little doubt that the oil is a fluid and one of the primary forms in which the silicones to be classed in Chapter 39. A lubricating preparation containing silicone though a liquid will not be a silicone in primary form, because it is a silicone that has been compounded and mixed, blended etc. However, one more authority will- do no harm. In the Encyclopaedia of Polymer Science and Technology, we are told that silicone fluids include silicone oils, and that the two are distinct from silicone resins. A fluid includes an oil, so an oil in a fluid and for that reason falls in Silicones heading, not in silicones preparation heading. And though a low polymerisation product, there is nothing in the Indian tariff, the CCCN or the Harmonised Code to exclude or shut a silicone fluid out of Chapter 39. 14. A note of caution I think would be sufficient here. As someone said it would not do to bring into the tariff entry every member of the cast of the silicone tribe. The vastness can be understood when we remember that silicone finds uses in antithetical manners - as bending agents as well as parting agents; as lubricating preparation, as surfactants, as wetting agents, coatings and more uses than one can list. And as the Kirk-Othmer Encyclopaedia tells us, these polymers can be combined with filler, additives and solvents to make products that are loosely classed as silicones. But the same mistake can be made in reverse as the present appellants M/s. CEAT Tyres have made. Because the silicone oil they imported is a lubricant, they find its assessment under Chapter 3* more appropriate than under Chapter 39 which specifically lists silicones. This is perhaps the result of the versatility, as well as the looseness with which silicones are classified, called and listed and designated. It is as easy to call a primary silicone fluid a lubricating preparation, as to call a mixture or a preparation containing silicone a silicone classifiable in Chapter 39. We have to tread and proceed warily in a subject as treacherous and slippery as silicones, but we have to proceed, because the problem will be with us for a long long time and possibly will outlast any of us. 15. For reasons I have detailed above, I pronounce the assessment of the silicone oils imported by M/s. CEAT Tyres as classifiable under Chapter 39 as silicones. S.D. Jha, Vice-President 16. Though I have reservations about Brother Syiem's observation in para 5 of his order, I agree with his conclusion that silicones in primary form should be classified under Heading 39.01/06 of the First Schedule to CTA 1975 and not 34.01/07 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; while Heading 34.01/07 described the goods by their functional character and not by name, Heading 39.01/06 and Chapter Note 2 specified silicone by name. The classification, therefore, in absence of anything definite to Rule out classification of silicone under its proper name under Heading 39.01/06 should be preferred to classification under Heading 34.01/07 claimed by the appellants. V.T. Raghavachari, Member (J)
17. I agree that the proper classification of the product in issue is under Chapter 39 of the Customs Tariff Act. The appeal is, therefore, dismissed.