1992(10)LCX0039
BEFORE THE CEGAT, SPECIAL BENCH ‘B’, NEW DELHI
Shri P.C. Jain, Member (T) and Ms. S.V. Maruthi, Member (J)
JYOTI PLASTIC
Versus
COLLECTOR OF CUSTOMS
Order No. E/230/92-B1, dated 9-10-1992 in Excise Appeal No. E/387/92-B1
Cases Quoted
Dunlop India v. U.O.I. - 1983 (013) ELT 1.566 (SC) [Para 7]
Hindustan Petroleum Corpn. v. Collector - 1986 (024) ELT 637 [Para 7]
Kandelwal Metal & Engineering Works. v. U.O.I. - 1985(06)LCX0008 Eq 1985 (020) ELT 0222 (SC) [Para 9]
Saurashtra Chemicals v. Collector - 1985(08)LCX0017 Eq 1986 (023) ELT 0283 (Tribunal) [Para 9]
Katrala Products (P) Ltd. v. Collector - 1989(08)LCX0013 Eq 1989 (044) ELT 0160 (Tribunal) [Para 9]
Advocated By : Shri V. Lakshmikumaran, Advocate, for the Appellants.
Shri M.S. Arora, JDR, for the Respondents.
[Order per : S.V. Maruthi, Member (J)]. - The dispute relates to the classification of plastic pipes, tubes and fittings and bolts and nuts and gears for electroplating barrels.
2. The appellants are a small scale industry engaged in the manufacture of articles of plastics. Prior to 1st March, 1986 articles of plastics arc exempt from payment of duty. Therefore, with effect from 1st March, 1986, they started filing classification list classifying the plastic pipes, fittings, tubes, bolts and nuts under Tariff Heading 39.17 and 39.22.90 respectively and claimed exemption under Notification No. 132/86. With effect from 14-4-1986 classification list No. 193/86-87 was filed claiming under Heading 3917 and exemption under Notification No. 132/86 for pipes and fittings. Similar classification lists were filed upto 3-3-1988. All the classification lists filed by the appellants were approved by the Central Excise authorities. The appellants also filed RT 12 for the months of Feb., 1987, June, 1987, Nov., 1987 and Dec., 1988. Therein they have claimed the benefit of exemption. The appellants have adopted the invoice price for assessment. Therefore, they were enclosing invoices with RT returns for the purpose of assessment. In the year 1990-91, the classification list No. 15/90-91, dated 3-1-1991 was filed for gears for electroplating barrels. The Superintendent directed the appellants to furnish the information as to the use of gears. The appellants replied that these gears were used for electroplating barrels. Similarly, another query was raised asking the appellants to furnish the information relating to the use of tubes and fittings, bolts and nuts etc. The appellants furnished the necessary information on 21-3-1991. The appellants submitted that these pipes, fittings, bolts and nuts and gears were used in the chemical industry because of their non-corrosive characteristics.
3. A Show Cause Notice was issued proposing to re-classify the goods on the ground that since the pipes and fittings, gears, bolts and nuts are used in chemical industry because of their non-corrosive characteristic, they are liable to be classified under Chapter 84. It is also proposed in the Show Cause Notice to demand duty of Rs. 36,65,698.20 on the clearances made during the period 1st April, 1986 to 31st March, 1989. The allegations in the Show Cause Notice are that the appellants suppressed the fact (1) that the products were exclusively used in chemical, pharmaceutical and fertiliser projects; (2) that these products are non-corrosive characteristics; (3) they never declared or informed the end-use; and (4) they did not give full description.
4. On receipt of reply, the Collector held that the appellants wilfully suppressed and mis-declared the facts warranting invoking extended period of limitation and passed the impugned Order against which the present appeal is filed.
5. The Collector held relying on Rule 2(n) of the interpretative rules that these items namely plastic pipes and pipe fittings are exclusively used in chemical, pharmaceutical and fertilisers projects and, therefore, they are classifiable under Heading 8485.10 as machinery parts not specified elsewhere in Chapter 16. Similarly, he classified the nuts and bolts under 8485.90, gears for electroplating barrels were classified by the Collector under Tariff Heading 3925.90.
6. The appellants are not challenging the classification of the gear. However, they challenging the same on the ground of limitation which will be dealt with in the latter paragraphs.
7. The main contentions of Shri Lakshmikumaran are that the Show Cause Notice is barred by limitation; (2) Pipes, fittings and tubes are classifiable under Tariff Heading 3917. The Collector proceeded to classify the goods on the basis of enduse which is not a requirement provided under Tariff Heading 84. Tariff Heading 3917/3926 are specific headings, covering the impugned items namely pipes, fittings, tubes, nuts and bolts where the enduse if irrelevant. In support of the above, he relied upon the judgment of the Supreme Court in Dunlop India [1983 (013) ELT P. 1566]. He brought to our notice the interpretative Rule 3 according to which specific heading should be preferred to general heading. He next contended that the Note 1(g) of Sec. XVI excludes parts of general use as defined in Note 2 of Section XV. Plastic goods falling under Heading 39 therefore by virtue of this exclusion clause are excluded from Chapter 84. He also relied on the judgment reported in the case of Hindustan Petroleum Corpn. v. C.C, Madras, 1986 (024) ELT 637 wherein it was held that enduse is not relevant unless it is specifically mentioned in the Tariff Heading. Elaborating his argument, he submitted that the products are correctly classifiable under Chapter 39 and not under Chapter 84 and especially not under Heading 8485.90 for the following reasons:-
“In terms of Note (1)(g) of Section XVI parts of general use as defined in Note 2 to Section XV of base metal (Section XV) or similar goods of plastics (Chapter 39 ) are excluded from the purview of Section XVI under which Chapter 84 is covered;
If it is established that the items in question are covered under the terms “parts of general use” then they would straightway go out of the purview of Section XVI itself. [This would also prove the inapplicability of Chapter Note 2(n) of Chapter 39];
Parts of general use are defined under Section XV in Note 2. It refers to articles of Headings 7307, 7312, 7315, 7317 or 7318 among others.
Heading 7307 specifically covers tube or pipe fittings (for e.g. couplings, elbows, sleeves, etc.). Heading 7318 specifically covers bolts and nuts among other things.
Thus tube or pipe fittings and bolts and nuts are parts of general use and are therefore excluded from Section XVI even if they are made of plastics. On this ground itself these items are to be classified under Chapter 39 Heading 3917/3926.
Bolts and nuts are described as parts of general use and are excluded from the purview of Section XVI even if made of plastic. Therefore, they are classifiable under Heading 3922 (3926)."
8. He also referred to alphabetical index to Harmonised Commodity Description and Coding System and Explanatory Notes. He pointed out that HSN dealing with Heading 3917 and 3926 specifically says that tubes, pipes and fittings are classified under Heading 3917. The said heading does not exclude the articles with reference to enduse.
9. Shri Arora appearing for the Department submitted that Chapter Note 2(n) specifically excludes article of plastic falling under Chapter XVI. By virtue of Chapter Note 2(n), if they are parts of machinery then they have to be excluded from the purview of Heading 39, and unless the enduse is known the parts cannot be identified. He pointed out that these articles have a specific use. Rule 2(a) of the Interpretative Rules is relevant and the Collector is justified in relying on Rule 2(a) of the Interpretative Rules. He also submitted that enduse is absolutely essential as long as it is not indicated in the classification list there is a suppression of facts. He also referred to the judgment of the Supreme Court Khandelwal Metal Works [1985 (020) ELT P. 222] and Saurashtra Chemicals [1986 (023) ELT P. 283], Product Pvl. Ltd. v. Collector of Customs [1989 (044) ELT P. 160].
10. The question, therefore, is whether the goods are classifiable under Tariff Headings 3917, 3926 or 84 of the Customs Tariff. Heading of Chapter 39 reads as follows:-
“PLASTICS AND ARTICLES THEREOF”.
Heading 3917 reads as follows :-
“Tubes, pipes and hoses, and fittings therefor (for example, joints, elbows, flanges), of plastics.”
Tariff Heading 39.26 reads as follows:-
“Other articles of plastics and articles of other materials of Heading Nos. 39.01 to 39.14.”
“This heading covers articles, not elsewhere specified or included, of plastics (as defined in Note 1 to the Chapter) or other materials of Heading 39.01 to 39.14. They include -
(1)...........:......to
(5)........
(6) Screws, bolts, washers and similar fittings of general use."
Section XVI reads as follows :-
Machinery and Mechanical Appliances :-
Electrical equipment parts thereof etc.
Note (1)(g) of Section XVI reads as follows:-
“Parts of General use as defined in Note (2) to Section XV, of base metal, of Section XV or similar goods of plastics (Chapter 39)”.
Relevant heading under which Collector classified the goods i.e. 84.85 reads as follows:-
“Machinery parts not containing electrical conductors, insulators, coils, contacts or other electrical not specified or included elsewhere in this Chapter. 8485.90 .... others.
10. The Collector while classifying the fittings, tubes and pipes relied on interpretative Rule 2(a) as pointed out earlier Interpretative Rule Note 2(a) reads as follows:-
“2(a) in reference in a heading to article shall be taken to include reference to that article in complete or unfinished provided that as present, the incomplete or unfinished has the essential character of the complete or finished article.”
11. It is not clear how Rule 2(a) of the Interpretative Rule is relevant in this case. The said Rule speaks of classification of unfinished or incomplete article as a complete article or finished article provided it satisfies the essential character of complete or finished article. The Collector has not given any reasons how the said Rule is relevant. The goods in the instant case are plastic pipes, fittings and tubes and Chapter 39 deals with plastic and articles thereof and it is a specific heading. Heading 39.17 specifically deals with tubes, pipes and fittings. It is now well established that where there is a specific heading covering articles, the items should be classified under the said heading. In our view the revised version of the Collector under Interpretative Rule is irrelevant and misplaced. We may also point out in Rule 3(a) of the Interpretative Rules, the heading which provides the most specific description shall be preferred to headings providing a more general description. Therefore, the impugned articles classifiable under 39.17 of the Tariff heading. The above reasoning applies to nuts and bolts also. We also accept the argument of Shri Lakshmikumaran that under Note 1(g) of Section XVI parts of general use are excluded from Chapter 84. Parts of general use are defined under Note 2 to Section XV in the following manner:-
“Throughout this Schedule the expression ”parts of general use" means :
(a) Articles of Heading No. 73.07, 73.12, 73.15, 73.17 or 73.18 and similar articles of other base mental;"
Relevant Heading 73.07 reads as follow:-
“73.07 Tube or pipe fittings (for example, couplings elbows, sleeves), of iron or steel.”
In other words, tubes and pipes fittings of iron and steel are dealt with under Chapter 73. These are parts of general use. Similarly, tubes or pipe fittings of plastic which are of general use are covered by Heading 39 of the Tariff. As pointed out earlier Note 1(g) of Section XVI excludes from Chapter 84 articles of general use. Therefore, tubes, pipes and pipe fittings being articles of general use of plastic are classifiable under Heading 39.17. The above reasoning applies to Nuts and Bolts also. Accordingly, we classify them under Heading 39.26.
12. Since we hold that the goods are classifiable under 39.17 and 39.26 the question of suppression of facts does not arise and we accordingly, set aside the demand.
13. As regards the demand for gears the main contention of Shri Lakshmikumaran is that it is barred by limitation. From the facts narrated in the above paragraphs, the Department called for information as to the end use of gears and the appellants supplied the information by their letter dated 26-3-1991 and 21-3-1991. The Show Cause Notice was issued on 1-4-1991. In other words, immediately after clarifying that the gears were used for electroplating barrels. Show Cause Notice was issued. Since the appellants are not disputing the classification of gears and since Show Cause Notice was issued immediately after the appellants clarifying that the said goods are used in electroplating barrels, the appellants failed to disclose the enduse of the product. We, therefore, uphold the demand as far as the gears are concerned. The appeal is thus, partly allowed.
Equivalent 1993 (64) ELT 291 (Tribunal)