1988(11)LCX0053

BEFORE THE CEGAT, SPECIAL BENCH ‘C’, NEW DELHI

S/Shri D.C. Mandal, Member (T) and G.P. Agarwal, Member (J)

AMIT POLYMERS & COMPOSITES LTD.

Versus

COLLECTOR OF CENTRAL EXCISE

Order Nos. 805 and 806/88-C, dated 30-11-1988 in Appeals No. E/54/88-C and E/407/88-C and Cross Objection No. E/Cross/126/88-C

Cases Referred

Geep Flashlight Industries Ltd. v. Union of India & Others - 1984(08)LCX0021 Eq 1985 (022) ELT 0003 (S.C.)         [Paras 4, 9]

C.C.E. Ahmedabad v. Melamine Fibre Board Ltd. & Others - 1988(04)LCX0038 Eq 1988 (036) ELT 0139 (Tribunal) [Paras 4,6,9]

State of U.P. v. Kores India Ltd. - 1977 (1) S.C.R. Page 837 (S.C.)                                      [Paras 7, 10]

Advocated By: Shri V. S. N. Subramanyam, for the Appellant.

Shri V. M. Doiphode, SDR, for the Respondents.

[Order per : D.C. Mandal, Member (T)]. - These two appeals are filed by the assessee and the Revenue against the same Order-in-appeal. Hence, they were heard together and are being disposed of by this common order.

2. The dispute in this case is the classification of laminated paper or paper board for the purpose of central excise duty. The appellants claimed classification under Heading 4818.90 of the Central Excise Tariff Act, 1985 as other articles of paper pulp, paper or paper board. The Assistant Collector classified it under Heading 3920.31 as article of plastic. On appeal, the Collector (Appeals) ordered classification of the goods under Heading 4811.39 as laminated paper or paper board.

3. The impugned order describes the process of manufacture of the appellants’ goods, which is as follows :

“Paper is passed through resin bath and is impregnated with resin (phenol formaldehyde resin) to obtain resin impregnated paper. These are used as core paper. The top papers are the design paper. After design is printed on the paper or bought as printed paper, it is passed through the resin bath and similarly impregnated (melamine formaldehyde resin). These sheets of paper are then laminated in the hydraulic press applying pressure and heat to make a laminated sheet and during the process in hydraulic press, the resin passed through the pores of paper and acts as a binder between the said paper sheets. The end-product is sold for purpose of surfacing of furniture etc. They further stated that in the finished product, 30 to 40% is represented by resin and the rest is by paper, by weight and thickness. Therefore, the paper thickness is also predominant in each layer, and also in the finished product. The top paper gives the decorative aspect of the final sheet as well as the thickness.”

4. Shri Subramanyam, for the assessee, has argued that their goods are not laminated or impregnated paper or paper board. These are articles of paper and paper board. Hence, classifiable under Heading 4818.90 of C.E.T. Act. He has ruled out classification under Heading 3920.31 in view of Chapter Note 1 of Chapter 39 of C.E.T.A. as, for the purpose of classification under Heading 39.20, the goods should be made out of the materials falling under Headings 39.01 to 39.14, which are pari materia with Item 15A(1) of the first schedule to the Central Excises and Salt Act, 1944. Sheets of plastics should be made exclusively of materials falling under Heading 39.01 to 39.14. He has relied on 1985 (22) ELT 3 (S.C.) and 1988 (36) ELT 139 (Tribunal) in support of this argument. The finished goods in this case directly emanate from impregnated paper falling under Heading 48.11, and not from the materials falling under Headings 39.01 to 39.14. He has drawn our attention to Rule 1 of the Rules of Interpretation of the Central Excise Tariff and has said that these goods being articles of paper and paper board clearly falls under the Tariff Heading 48.18. Therefore, there is no question of applying Interpretative Rules 2(b) or 3, as these Rules cannot be applied without exhausting Rule 1.

5. Shri Subramanyan has argued that the paper content in the finished product is 60-70% and hence the goods fall in Chapter 48 of the Tariff. Chapter Note 1(f) in Chapter 48 excludes from this Chapter those paper-reinforced stratified plastic sheeting, or one layer of paper or paper board coated or covered with a layer of plastics where plastics constitute more than half the total thickness. However, his contention is that laminated paper is an excisable intermediate product, but the final finished product is an article of the said laminated paper. Laminated paper is also paper. Therefore, the finished product is an article of paper, classifiable under Heading 4818.90.

6. Shri Doiphode for the Revenue has pleaded for classification under Heading 3920.31. He has argued that the characteristic of the finished product is resin and not paper. Paper is a filler in this case and it gives strength to resin. According to Interpretative Rule 3(b) classification of this product should be governed by the essential characteristic, i.e. resin. He has also argued that plastic laminates have been defined in “Materials Handbook” by George S. Brady and Henry R. Clauser, Eleventh Edition, at page 597 of the books as follows :

“Plastic Laminates. Resin-impregnated paper or fabric, produced under heat and high pressure. Also referred to as high-pressure plastic laminates. Two major categories are decorative thermosetting laminates and industrial thermosetting laminates. Most of the decorative thermosetting laminates are a paper base, and are known generally as papreg. In thickness of about 1/16 in., around 1/2 billion sq. ft. of papreg are used annually for doors, walls and tops for counters, tables, desks, and other furniture. Decorative laminates are usually composed of a combination of phenolic and malamine - impregnated sheets of paper. The final properties of the laminate are related directly to the properties of the paper from which the laminate is made.”

Shri Doiphode has further argued that the Heading 39.20 covers “similarly combined with other materials”. Tariff Item 15A(1) did not cover articles “similarly combined with other materials”. For this reason, he has argued, the Tribunal’s decision reported in 1988 (36) ELT -139, which dealt with T.I. 15A(1), is not applicable to the present case.

7. Regarding Tariff Headings 48.11 and 48.18, Shri Doiphode has argued that these headings are exclusive items. Heading 48.11 covers, inter alia, coated and impregnated paper and paper board, other than the goods falling under Heading Nos. 48.03, 48.09,48.10 or 48.18. The Heading 48.18 covers, along with others, articles of paper. He has stated that what is paper has been explained by the Supreme Court in the case of State of U.P. v. Kores India Ltd., reported in 1977 (1) S.C.R. Page 837 (S.C.). It was held therein that “The word ‘paper’ is understood as meaning a substance which is used for bearing, writing or printing, or for packing, or for drawing on, or for decorating, or covering the walls.” The finished product in this case is not used as paper. It cannot, therefore, be classified under Heading 48.11 as impregnated paper as it is not paper. According to him, Heading No. 4818.90 is also not correct in view of the description of entry 3920.

8. In reply to Shri Doiphode’s argument that essential characteristic of these goods is resin, Shri Subramanyam has stated that paper gives thickness and colour. Without paper core cannot be formed. Resin acts as a binding agent. The glaze does not take away the characteristic of paper.

9. For proper appreciation of the dispute in classification in this case, we consider it necessary to reproduce below these three contested Headings of the Tariff :-

Chapter Note 1 in Chapter 39 of the Schedule to the Central Excise Tariff Act says that the expression plastics means those materials of Heading Nos. 39.01 to 39.14 which are or have been capable, either at the moment of polymerisation or at some subsequent stage, of being formed under external influence (usually heat and pressure, if necessary with a solvent or plasticiser) by moulding, casting, extruding, rolling or other process into shapes which are retained on the removal of the external influence. Headings 39.01 to 39.14 describes various types of resins. For the purpose of classification of the goods under Heading 39.20 (articles of plastics) the same should be made of plastics. Plastic sheets, plates, film, foil and strip, which are lacquered or metallised or laminated, supported or similarly combined with other materials are also covered under this Heading. The impugned goods are paper impregnated with plastic, in which paper constitutes the core and resin acts as binding agent. Admittedly, paper constitutes 60 to 70% of the finished product by weight as well as thickness and balance 30 to 40% is resin. The question to be decided is whether it should be classified under Chapter 39 as an article of plastics or under Chapter 48. There are two decisions, which have been cited before us by Shri Subramanyam, viz., judgment of Supreme Court in Geep Flashlight Industries Limited v. Union of India and Others, reported in 1985 (22) ELT 3 (S.C.) and a decision of this Tribunal, reported in 1988 (36) ELT 139 (Tribunal), in the case of Collector of Central Excise, Ahmedabad v. Melamine Fibre Board Ltd. and Others. Both these cases have dealt with classification under the First Schedule to the Central Excises and Salt Act, 1944. The question of classification of plastic torches for the purpose of central excise duty was considered by the Supreme Court in the first mentioned case. The Hon’ble Supreme Court held in that case that “Articles of Plastics” did not mean articles made from plastics alongwith other materials. Accordingly, it was held by the Supreme Court that Plastic torches were classifiable under Item 68 of the Central Excise Tariff and not under Item 15A(2) ibid. In the case of Melamine Fibre Board Ltd. and Others (Supra), the issue before this Tribunal was classification of laminated paper, in which paper content was 70% and resin 30% of the finished product by weight. The paper formed core of the sheet and plastic was a binding Agent. It was held by the Tribunal that the goods were correctly classifiable under Tariff Item 68 and not Item 15-A ibid. It has been argued before us by the learned S.D.R. for the Revenue that a product combined with other materials was not classifiable under erstwhile Tariff Item 15A and hence the aforesaid two decisions are not applicable to the facts of the present case as, under the new Tariff under the Central Excise Tariff Act, 1985, specified articles of plastics combined with other materials are classifiable under Heading 39.20. This argument should fail in view of the Chapter Note 1(f) of Chapter 48 of the new Tariff. According to this Chapter Note, paper reinforced stratified plastic sheeting, or one layer of paper or paperboard coated or covered with a layer of plastics is excluded from Chapter 48 if plastics constitute more than half the total thickness. In the case before us, plastics constitute 30 to 40% only, i.e., less than half of the finished product by thickness (as well as by weight). Classification of the product under Chapter 39 is thus ruled out.

10. As Chapter 39 is thus excluded, the product being composed of two materials, viz., paper and resin, the correct classification should be under Chapter 48 which covers paper, paperboard and articles thereof, etc. Collector (Appeals) has classified the goods under Heading 4-11-39 as laminated paper, whereas the assessee has claimed classification under Heading 4818.90 as other articles of paper. The question to be considered now is which of these two Headings is more appropriate for classification of the product in dispute before us. The product as described by the Collector (Appeals) in the process of manufacture, which has been quoted in paragraph 3 of this order, is laminated sheets made of impregnated paper. These laminated sheets are made of two sheets of impregnated paper. One of them is the core paper and the other, which is top paper, is the design paper. These two sheets of impregnated paper are laminated in hydraulic process applying pressure and heat. The intermediate product in the manufacture of the final product is the “impregnated paper” falling under Heading 48.11 and not the final product. Final product, which is in dispute before us, is the combination of two sheets of impregnated paper by hydraulic pressure and heat. The end product is used for decorative purposes. The impugned order, vide extract quoted in paragraph 3 above, shows that the end-product is sold for the purpose of surfacing of furniture etc. The learned S.D.R. has argued that it is not used as paper. In the case of State of U.P. v. Kores India Ltd., reported in 1977 (1) S.C.R. Page 837 (S.C.), Supreme Court has defined “paper” in the following terms, viz., “The word ‘paper’ is understood as meaning a substance which is used for bearing, writing or printing, or for packing, or for drawing on, or for decorating, or covering the wall.” The top impregnated paper performs the decorating function in the final product. The final product is an article made of two sheets of impregnated paper. It is thus an article of paper falling under Tariff Heading “4818.90 - Other.” Collector (Appeals) has ordered classification under Heading 4811.39. In our view, this is not appropriate. The intermediate product, which is impregnated paper, could be classified under Heading 4811.39, but not the final product.

11. Shri Doiphode has argued that the essential characteristic of the product is resin and hence, according to the Interpretative Rule 3(b) it should be classified under Chapter 39. We have not been able to persuade ourselves to accept this argument as the Interpretative Rule 3(b) cannot be used where the goods can be classified in terms of Rule 1 ibid. In this case, we have observed that the product is article of paper and hence clearly covered by Heading “4818.90 - Other.” According to Interpretative Rule 1 the product should be classified under this Heading. There is, therefore, no scope for invoking Interpretative Rule 3(b). The learned S.D.R. has referred to Page 597 of the “Materials Hand Book” by George S. Brady and Henry R. Clauser, Eleventh Edition, relevant extract from which has been reproduced in paragraph 6 of this order. It has been stated therein that the properties of the laminate are related directly to the properties of the paper from which the laminate is made. This also negatives the point made by the learned S.D.R.

12. In view of the foregoing discussions, we hold that the product in dispute in this case is correctly classifiable under Heading 4818.90. We, therefore, set aside the impugned order and allow appeal No. E/54/88-C filed by the assessee. The appeal filed by Revenue is dismissed. The cross-objection filed by M/s. Amit Polymers & Composites Ltd. is disposed of in the light of the foregoing findings.

Equivalent 1989 (39) ELT 674 (Tribunal)