1998(08)LCX0072

IN THE CEGAT, SOUTH ZONAL BENCH, MADRAS

S/Shri S.L. Peeran, Member (J) and V.K. Asthana, Member (T)

COMMISSIONER OF C. EX., BANGALORE

Versus

MAFATLAL PLYWOOD IND. LTD.

Final Order No. 1666/98, dated 21-8-1998 in Appeal No. E/493/88-D

CASE CITED

C.C.E. v. Western India Plywood Ltd. — 1997 (96) ELT 200 — Relied on                         [Para 8]

Advocated By : Shri S. Kannan, JDR, for the Appellant.

Shri C. Sampath, Advocate, for the Respondent.

[Order per : S.L. Peeran, Member (J)]. - This is a Revenue appeal against the Order-in-Appeal No. 360/87 (B), dated 30-11-1987, passed by Collector, Central Excise (Appeals), Madras holding that the Boards made for insulation purpose, though cleared in the form of Boards, are insulators and upheld the claim of the assessee for classification of such boards as electrical insulators of any material made out of wood as per specification of the buyer under sub-heading 8546.00 as against the Assistant Collector’s Classification under Heading 44.09 of the Schedule to the CET Act, 1985 as articles of densified wood. It is seen from the Collector’s order that the same is not a speaking one and neither it is in detail consideration except to hold in a small paragraph that the assessee had produced evidence of gate pass that similar boards are being classified in other Collectorates under TI 85.46. The Assistant Collector had rejected the above claim as the goods are not given the shape for use as insulators, that there is no condition that “Electric Insulators of any Material” should be in the form of direct fitment in electrical machinery. Therefore, he held even if it is held that such; insulators should be in “ready to fit” state for classification under T.H. 85.46 by virtue of Rule for Interpretation 2(a) of the Tariff, such insulating materials will have to be classified under T.H. 85.46.

2.  It is stated in this appeal that the Collector’s order suffers from basic infirmities of not observing the natural justice in as much as the order has been passed without considering the counter submission of the Assistant Collector on the submissions made by the assessee before him. It is stated that the Rule of Interpretation relied by Collector (Appeals) is uncalled for in as much as such a reference should a last resort. It is stated that Rule 1 of Rules of Interpretation of the Schedule itself provides that the classification shall be determined according to the terms of the heading and any relative section or chapter notes therefore, the Collector Appeals does not give any finding how he considered that Note 2 of Chapter 44 was not relevant to the issue. It is stated that the process of manufacture results only in densification of wood, i.e. wood is densified by way of chemical and physical treatment so it acquires the improved mechanical strength or resistance to chemical or electrical agencies. Assessee had admitted this fact in their reply to show cause notice, dated 27-2-1987 and hence, the impugned goods are nothing but densified wood. This densified wood because it has got resistance to electrical agencies will find its use in electrical goods as in insulator. But this fact did not clinch the issue in the respondents’ favour in view of Note 2 to Chapter 44 by which the impugned goods even if it is used as an insulator are not to be taken out of this chapter. It is stated that the wood by its very nature is dielectric material being a bad conductor. Regardless of the densification of the wood or chemical and physical treatment and regardless of its end application is classifiable only under 4409.00 of the CET Act by virtue of Chapter Note 2 to Chapter 44. It is stated that in terms of harmonised commodity description and coding system, the item is classified under Heading 44.13 (corresponding to Heading 44.09 pf CET Act, 1985) wherein it is stated that the densified wood is generally used in the manufacturing of gears, shuttles, bearings and other machine parts, propellers, insulators and other electrical goods, vessels for chemical industry, etc. It is stated that the harmonised coding system on which the Central Excise Tariff Act, 1985 is modelled, also classifies the impugned goods, even when it can be used as an insulator, under Heading 44.13 which corresponds to Heading No. 44.09 of CET Act, 1985. It is also stated that in terms of the principle of classification, the Heading which provides the most specific description shall be preferred to headings providing a more general description. It is stated that Heading 85.46 is a heading of general description in as much as it covers other such articles which are used as insulates regardless of the material out of which such insulates are manufactured. Therefore, it is stated that Heading 44.09 of CET Act, 1985 specifically covers densified wood and its article and the impugned article being densified could despite it, being used as an insulator by the end users, would be classifiable only under this Heading. It is also brought to notice to the respondents also manufactured “Filter Plate” which are cut out of wood which generally known as “Compreg” which is also classified under this Heading, i.e. 44.09.

3.  We have heard Shri S. Kannan, JDR for Revenue and Shri C. Sampath, Advocate for the respondents. Ld. DR relied on the grounds mentioned in the appeal memorandum. He also relied on the judgment of this Bench rendered in the case of C.C.E. v. Western India Plywood Ltd. as reported in 1997 (96) ELT 200.

4.  Ld. Counsel submitted that Chapter Note 2 of Chapter 44 is not applicable since it does not deal with goods which has specifically principally manufactured for electrical insulation purposes. He relied on Rule 3(a) interpreted in Rules to contend that the heading which provides most specific description shall be preferred to headings providing a more general description. Rule 3(a) further states that when two or more headings each refer to part only of the materials of substances contained in mixed or composite goods or to part only of the items in a set, those headings are to be regarded as equally specific in relation to those goods, and even if one of them gives a more complete or precise description of the goods, therefore, he contended that Chapter Heading 84.46 is for classifying electrical insulators for any materials and as the main goods namely densified wood has been manufactured with specification for use as insulator which shall be classified under 85.46 only. He submits that the classification of the goods is approved by Assistant Collector by his letter, dated 4-7-1986 and subsequent letter of Assistant Collector, dated 15-12-1986 for reclassification is not sustainable. He submits that when the part of Heading 85.46 refers to electrical insulators of “any material” mean that the end use is a relative factor and therefore, when two headings are equally applicable in terms of Rule 3(c) to interpret the rules, the latter part is required to be accepted.

5.  Countering the submissions, ld. DR pointed out that Chapter Heading 44.09 refers to densified wood including articles of densified wood and the heading being more specific and Chapter Note 2 referring to the definition of densified wood to mean wood which has been subjected to chemical or physical treatment which has, thereby, acquired increased density or hardness together with improved mechanical strength or resistance to chemical or electrical agencies : means that densified wood which is being used as an item to act as a resistance to chemical agencies as insulator would be more specific for classification under Chapter Heading 44.09 only. He submits that the Headings 85.45 & 85.46 deals with general items and not with one specific entry and in view of the HSN notes which has persuasive value, hence Heading 44.09 alone is applicable.

6.  On a careful consideration of the submissions, we notice that the item under the issue has acquired resistance to electrical agencies in terms of Note 2 of Chapter 44 the definition of densified wood which is given therein in reproduced below :-

“In this Chapter, the expression ‘densified wood’ means wood which has been subjected to chemical or physical treatment (being, in the case of layers bonded together, treatment in excess of that needed to ensure a good bond), and which has, thereby, acquired increased density or hardness together with improved mechanical strength or resistance to chemical or electrical agencies”.

The item in question is supplied in the varieties viz., “Mysolamin” and “Mysopreg” and were beards, sheets and baton of laminated densified wood which are being supplied as insulation material and not provided as “insulators”. The Assistant Commissioner in the order has noted from the printed product literature brought out by the assessee company describing ‘Mysolamin’ as a non-impregnated laminated densified wood meant for transformer insulation. The Assistant Commissioner in para 2.6 and 2.7 has noted about the details of the products which is reproduced below :-

2.6.  Mysolamin :

Specially tested species of timber are selected (Vateria indica) which have high fibre strength and resin absorption characteristics. The timber is peeled into wood layers to the required sizes and all defects such as knots rots, fungus are removed. There layers are dried to minimise the moisture content to 6%. Thereafter, the dried wood layers are treated with special grade of phenolformaldehyde resin so that it picks up resin to the extent of 15-20%. The said layers are dried under critical conditions to remove moisture and volatile content present in resin. The wood layers are then assembled in different configuration to meet the properties as desired by the customers and are then densified in steam heated hot press at 145°C to obtain monolithic compact block having properties of Electrical Insulation combined with mechanical characteristics.

2.7.  Mysopreg :

This variety is also manufactured from sapwood portion of the selected species of timber whose fibrous strength coupled with resin absorption characteristics are high. The selected timber is peeled into wood layers to the required size and are devoid of defects like knots, fungus growth etc. These layers are dried to reduce moisture content to 6% in steam heated dryers. The dried layers are impregnated under vacuum and pressure with spirit soluble phenolic resin so that the layers pick up resin to an extent of 50-55% by weight. These impregnated layers are then slowly and carefully dried composite layers, are assembled to predetermined pack weight and are densified in steam heated hydraulic hot press under controlled temperature.

7.  From the processes noted above it is clear that the item has satisfied the term of densified wood in terms of Note 2 of Chapter 44. The question that falls for consideration is whether the end users of the product which is ultimately used as insulator would merit classification under Chapter Heading 85.46 which is for electrical insulators of any material as against Heading 44.09 which is for densified wood, in blocks, plates, strips or profile shapes including articles of densified wood. It is well settled that the classification has to be in terms of chapter notes and HSN notes and end use is not the criteria for classification. In terms of Rules 3(a) of Interpretative Rules, the heading which provides the most specific description shall be preferred to providing to mere general description. Therefore, when a heading with Chapter Note 2 of Chapter 44 clearly indicates that densified wood which has been subjected to chemical or physical treatment and, thereby, has acquired increased density or hardness together with improved mechanical strength or resistance to chemical or electrical agencies, then the item satisfying the same is required to be classified thereunder. The appellants admitted that the item is densified wood, if that be so, the articles of densified wood would clearly fall under Chapter Heading 44.09 as against Chapter Heading 85.46 which covers electrical insulators of any material. The item in question are purchased by several industries for converting the same into electrical insulator as it satisfies the criteria of raw-material required for use as electrical insulator. It has been certified by Electrical Private Ltd. by their letter, dated 6-1-1987 for Mysolamin is in the form of boards, strips, battens, yoke plates, rings, segments, pressure pieces, supports and in other component form which are used in Transformer for fixing, supporting or guiding of electric current conductors besides insulating them electrically from each other and from earth. All of them have easy electrical resistance properties, but Chapter Note 2 of Chapter 44 clearly shows that such an item would be classifiable only as a densified wood under Heading 44.09. It is also seen from HSN Notes at Page 633 under Chapter Heading 44.13, which is identical to 44.09 that densified wood used as insulators and other electrical goods would fall under the said heading. The details given by HSN Explanatory Notes under this heading is reproduced below :-

44.13.  DENSIFIED WOOD, IN BLOCKS, PLATES, STRIPS OR PROFILE SHAPES.

Densified wood covered by this heading has been chemically or physically treated to increase its density or hardness and improve its mechanical strength or resistance to chemical or electrical agencies. Such wood may be solid or consist of several layers bonded together, in the latter case the treatment applied being in excess of that required merely to produce a good bond between the layers.

Two main processes, impregnation and densification are used to produce the products of this heading. These processes may be used separately or together.

In impregnation the wood is deeply impregnated, usually with thermosetting plastics or with molten metal.

Impregnation with thermosetting plastics (e.g. amino-resins or phenolic resins) is more often applied to very thin veneers built up into laminated wood than to solid wood, since penetration is, thereby, facilitated.

Metallised wood is obtained by plunging pieces of solid wood, previously heated, into a bath of molten metal (e.g., tin, antimony, lead, bismuth or their alloys) under pressure in a closed vessel. The density of metallised wood generally exceeds 3.5 g/cm³.

Densification has the effect of contracting the cells of the wood; this may be done by transverse compression by means of powerful hydraulic presses or between rollers or by compression in all directions at high temperature in an autoclave. Densified wood may have a density as great as 1.4 g/cm³.

Impregnation and densification may be carried out simultaneously by glueing very thin sheets of wood (usually beech) with thermosetting plastics under heavy pressure at a high temperature so that the wood is deeply impregnated and compressed as well as bonded.

Densified wood is generally used in the manufacture of gears, shuttles, bearings and other machine parts, propellers, insulators and other electric goods, vessels for the chemical industry, etc.

8.  The HSN Explanatory Note is having a persuasive value in view of the item being classified under Chapter Heading 44.13 of HSN Notes which is identical to 44.09, the item is required to be classified under this heading only and not in a general Heading under 85.46 which is for electrical insulator for any material. The item is only in the form of boards, plates, strips, battens, yoke plates, etc. which satisfy the description given in 44.09 and hence by applying the Note 1 and Note 3(a) of Interpretative Rules, the appropriate Heading being 44.09 is required to be preferred to Heading 85.46. It is also seen in the case of C.C.E. v. Western India Plywood Ltd., the item densified wood used in electrical insulation purpose has been held to be classifiable under 44.09 and the classification under Heading 85.46 has been ruled out. This judgment is directly applicable to the facts of this case and we notice that the item is identical. We are not persuaded to take a different view from the view already expressed by the Tribunal in the cited case. In that view of the matter, the appeal of Revenue is required to be accepted by setting aside the impugned order, which is ordered accordingly.

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Equivalent 1999 (106) ELT 508 (Tribunal)

Equivalent 1998 (029) RLT 0813