1997(04)LCX0121

IN THE CEGAT, SOUTH ZONAL BENCH, MADRAS

S/Shri V.P. Gulati, Vice President and T.P. Nambiar, Member (J)

COMMISSIONER OF CUSTOMS, MADRAS

Versus

SPIC LTD.

Order Nos. 1169 to 1173/97, dated 7-4-1997 in Appeal Nos. C/Cross/1 to 5/97 & C/R-310 to 315/96/Md.

Advocated By : Shri Victor Thyagaraj, SDR, for the Appellant.

Shri K.R. Natarajan, Advocate, for the Respondent.

[Order per : V.P. Gulati, Vice President]. - These appeals and cross appeals arise out of the same orders of the authorities below. In the appeals filed by the Revenue, the issue relates to the classification stainless steel screws which have plastic washers. The learned lower appellate authority has held the same to be assessable under Tariff Heading 7318.15 while the revenue seeks the assessment of the same under Tariff Heading 3907 in terms of Section 19 of the Customs Act, 1962 inasmuch as the goods are imported in sets and the assessment would be at the highest rate applicable to any of the items of the sets. The importer Appellant/Respondent in Cross appeal seeks the benefit of Notification 133/86 Excise for CV duty purposes in case of Polyol.

2. In regard to the assessment of the screws with plastic washers, the learned SDR for the Department Shri Thyagarajan pleaded that Tariff Heading 7318.15 covers only articles of iron and steel and both screws and washers are covered separately under Heading 7318 and in case Screws are imported with their Washers, the same would be covered under this heading and for assessment under this both the items have to be of iron and steel. He has pleaded since both the Screw and Washer form a set and are made of different material, the Screw with washer is required to be assessed either under interpretative Rule 3(b) of the Rules of Interpretation of the Customs Tariff or in terms of Section 19 of the Customs Act, 1962. He pleaded that Interpretative Rule 3(b) will come into play only when the goods are put in sets for retail sale and which is not so in the present case and, therefore, only avenue open for assessment is under Section 19 of the Customs Act, 1962 under which the assessment has to be at the highest of the rates applicable to any of the items of the set which in the present case is the rate applicable to Plastic Washer i.e. under Tariff Heading 39.07.

3. The learned Advocate for the respondents on the other hand urged for assessment under 7318.15 and pleaded for application of interpretative Rule 3(b) of the Rules and interpretation under the Customs Tariff and adopted the reasoning of the learned lower appellate authority for assessment of the goods under Tariff Heading 7318.15. His reasoning in this regard is as set out in Para 14 of his order as under :

As regards classification of stainless steel screw with plastic washers, sub-heading 7318.15 clearly covers screws of iron or steel whether or not with nuts or washers. Therefore, the presence of washers would not make any difference so far as classification of screws is concerned. The impugned screws with plastic washers were, therefore, correctly classifiable under sub-heading 7318.15 only and not under Chapter 39. In any case, Section 19 of the Customs Act, 1962 is not invocable in the matter of classification of composite goods or articles. The order of the Lower Authority in regard to classification of stainless steel screw with plastic washers is, therefore, not maintainable.

4. The issue that arises for consideration in the appeals is whether the Stainless Steel Screw with Plastic Washers imported can be treated as set of articles and if so taking into consideration the interpretative rules, for interpretation of the tariff, and Section 19(b) of the Customs [Act], 1962, and the description of goods under Tariff Item 7318.15 the same can be assessed under Chapter 39 or Tariff Heading 7318. We observe that the two items are imported together and the Plastic Washers imported is intended to be used along with Stainless Steel Screw. The two items, therefore, have to be considered as set of articles inasmuch as Stainless Steel Screw and the Washers as such carry different descriptions and perform different functions. Washers perform a supplementary function for which Stainless Steel Screw is used. Under Tariff Heading 7318 as it is, Steel Screw and Steel Washers have been specified separately. We, are therefore of the view that the goods imported have to be treated as set of articles. Set of articles therefore, imported have to be assessed either based on the various provisions as are contained in the interpretative rules under the Customs Tariff Act or under Section 19(b) of the Customs Act, 1962 read with tariff headings of Chapter 73 and Chapter 39. Description of Tariff Heading 7318 and sub-heading 7318.15 reads as under :

5. A harmonious reading of the tariff heading with the description under sub-headings 7318.15, 7318.16 and 7318.21 shows that the range of products sought to be covered under these headings are only those which are made of iron and steel. If Stainless Steel Screw and Washers made of iron and steel were imported separately, the two items will get assessed separately under Tariff Heading 7318.15 and 7318.21 or 22. We observe that when a heading is specifically covering articles made of a certain materials notwithstanding the fact that articles form a set with one of the items not covered under that heading it would not be covered under that heading.

6. In the present case, since the screw is made of stainless steel and washer is made of plastic material, in view of the specific coverage of goods made of iron and steel, the set as imported cannot be assessed under Tariff Heading 7318. Having ruled out the classification under 7318.15, we have to consider as to whether the assessment would be in terms of interpretative Rules 3(b) of the rules of interpretation under the Customs Tariff Act, 1962 for interpreting tariff entries in the first schedule. Rule 3(b) of the said Rule reads as under :

3. When by application of Rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows :

(a) .........................

(b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.

It is seen that this rule applies in respect of goods, which are made of different components or inputs the goods are put up in sets for retail sale and which cannot be classified with reference to the other Rule 3(a). Rule 3(a) is applicable in case of composite goods and assessment has to be based on the material component which gives the item its essential character. In the present case, the goods imported consists of sets. Admittedly, there is no plea from the respondents, that the form in which the goods have been imported was such that they had been put up in sets for retail sale. The goods have been imported in bulk as such. Rule 3(b), therefore, would not come into play for assessment of the goods in question. Therefore, the assessment will have to be considered under Section 19(b) of the Customs Act, 1962. Section 19 reads as under :

19. Determination of duty where goods consist of articles liable to different rates of duty. - Except as otherwise provided in any law for the time being in force, where goods consist of a set of articles, duty shall be calculated as follows :

(b) articles liable to duty with reference to value shall, if they are liable to duty at the same rate, be chargeable to duty at that rate, and if they are liable to duty at different rates, be chargeable to duty at the highest of such rates;

Since in the present case, we have ruled out the assessment of the goods under Heading 7318.15 or 16 as also in terms of interpretative Rules 3(b) of the Rules of interpretation under the Customs Tariff Act, the assessment has to be therefore done in terms of Section 19(b) as above. The assessment will have to be done at the highest rate applicable to one of the items in the set which in the present case is that applicable to plastic washers. In the above view of the matter, we accept the plea of the Revenue for assessment of the goods in terms of this Section 3926.90. We, therefore, set aside the orders of the lower authority and allow the appeals of the Revenue.

Cross Appeals

7. In the cross appeal filed by the respondents, the issue regarding classification of the goods have been urged. The lower appellate authority has upheld the classification of the goods i.e. Polyols under Heading 3907.99 of the tariff and he has held that the appellant to be eligible for the benefit of Modvat. The learned Consultant for the appellants/respondents pleaded that while they accept the classification of the goods under 3907.99, they should be given the benefit of Notification 133/86. In this regard he referred us to the reasoning of the lower authority as set out in Para 13 which is reproduced below :

13. Regarding applicability of CEN 133/86, I find that goods falling under CEN 3907.20 were not covered by the aforesaid notification. However, polyester resins falling under sub-heading 3907.99 were covered by the said Notification and the effective rate of duty applicable was l5% only as against the tariff rate at 60%. The question that has to be addressed in this regard is whether polyester polyols and polyester resins are synonymous. The answer is obviously in the negative. In technical terms polyester polyols and polyester resins are two distinctive products and cannot be treated as one and the same. Obviously, therefore, the impugned polyols were not eligible for the concessions under CEN 133/86. However, CEN 14/92 was clearly applicable to the impugned polyols whether the same were classifiable under 3907.20 or 3907.99, and the effective rate of duty was 40% under the said notification (reference Sl. No. 43 of the table). Thus, even assuming that the goods in question were polyester polyols and not polyether polyols, the same were assessable to C.V. duty at 40% only, read with CEN 14/92. Once it is established that the appellant were not eligible for any other notification other than CEN 14/92, surely the Lower Authority cannot be blamed for extending the benefit of the aforesaid notification though the same was not referred to in the show cause notice.

The learned Consultant referred us to Sl. No. 10 in the Notification 133/86 under which the rate of duty has been provided for the goods answering to the description of polyester resins. He has pleaded that since the goods had been assessed under 3307.99, the appellants’ goods should be allowed the benefit of this Notification under Sl. No. 10 for items falling under Tariff Heading 3307.91 or 3307.99. In this connection he was asked to explain whether the goods i.e. Polyols answered to the description Polyester resins and the learned Advocate could not furnish any technical literature or evidence to establish that the goods imported by the appellants were Polyols resins.

8. The learned SDR for the Department, Shri Victor Thyagaraj, has pleaded that the benefit under Notification 133/86 as amended from time to time was applicable in respect of the goods which answered to the description of Polyester resins. He pleaded that the appellants have not established that the appellant’s goods were resins as above, and, therefore, the appellants would not be entitled to the benefit of the notification as claimed.

9. We have considered the pleas made by both the sides. We observe that the appellants are not disputing the classification of the goods under Tariff 3307.99. Their only plea is that since Tariff 3907.99 figures under Notification 133/86, as amended, the appellants should be given the benefit of exemption notification by reason of the goods falling under this tariff heading. We observe that Tariff 3907.99 figures under main description under Tariff 3907 which carries the following description :

It is seen that the range of products covered under this is vast and among other items, artificial resins are covered. Polyols is separately covered and so also Polyester resins. Some of the goods under this groups are resin while other are not so. The legislature in its wisdom has extended the benefit of the notification only in respect of Polyester resins i.e. one of the items covered under tariff Heading 3907.99 figuring at Sl. No. 10 of the notification. Therefore, amongst the range of items covered by the two headings at Sl. No. 10, unless it can be shown that the appellants’ goods answer to the description of Polyester resin set out under Sl. No. 10, the benefit cannot be allowed. There is no claim from the respondents that Polyol imported by them can be considered as Polyester resin. As it is, the Polyester resin has been described as under in the Mac Graw Hill dictionary :

Polyester Resin :

A thermosetting or thermoplastic synthetic resin made by esterification of polybasic organic acids with polyhydric acids; examples are Dacron and Mylar; the resin has high strength and excellent resistance to mixture and chemicals when cured.

There is nothing to show that the item are resinous in nature and that of Polyester variety. In view of the above, we hold that the lower appellate authority’s order is well reasoned and the appellant’s plea for benefit under Notification 133/86 cannot be allowed. The Cross appeals of the appellants are, therefore dismissed.

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Equivalent 1998 (97) ELT 137 (Tribunal)