2000(09)LCX0086

IN THE CEGAT, COURT NO. II, NEW DELHI

S/Shri Lajja Ram, Member (T) and P.S. Bajaj, Member (J)

COMMISSIONER OF C. EX., AURANGABAD

Versus

ISOVOLTA (I) PVT. LTD.

Final Order No. 1430/2000-B, dated 19-9-2000 in Appeal No. E/711/95-B

Cases Quoted

Bakelite Hylam Ltd. v. Collector — 1985(08)LCX0053 Eq 1985 (022) ELT 0879 (Tribunal) — Followed ...... [Paras 15, 16]

Chetna Polycoats Pvt. Ltd. v. Collector — 1988(07)LCX0042 Eq 1988 (037) ELT 0253 (Tribunal) — Followed ... [Para 15]

Collector v. Bakelite Hylam Ltd. — 1997(03)LCX0041 Eq 1997 (091) ELT 0013 (S.C.) — Followed ....................... [Para 14]

Collector v. Chetna Policoats Pvt. Ltd. — 1991(02)LCX0126 Eq 1991 (055) ELT A067 (S.C.) — Followed........... [Para 15]

Collector v. Metro Wood Engineering Works — 1989(02)LCX0063 Eq 1989 (043) ELT 0660 (Tribunal) — Followed [Paras 1, 16]

Geep Flashlight Industries Ltd. v. U.O.I. — 1984(08)LCX0021 Eq 1985 (022) ELT 0003 (S.C.) — Followed ............ [Para 11]

Kirloskar Electric Co. Ltd. v. Collector — 1994(04)LCX0091 Eq 1994 (071) ELT 1019 (Tribunal) — Followed [Paras 2, 16]

U.O.I. v. Kamalakshi Finance Corporation Ltd. — 1991(09)LCX0044 Eq 1991 (055) ELT 0433 (S.C.) — Relied on [Para 15]

Wood Polymers Ltd. v. Collector — 1990(03)LCX0091 Eq 1990 (047) ELT 0595 (Tribunal) — Followed ............. [Para 16]

Advocated By :   Smt. Rashida Hussain, SDR, for the Appellant.

Shri Pramod Saran, Sales Executive, for the Respondent.

[Order per : Lajja Ram, Member (T)]. - In this appeal filed by the Revenue, the respondents are M/s. Isovolta (India) Pvt. Ltd., and the matter relates to the classification of Nomex Mica Paper and Mica Paper based products. The assessee had sought their classification under sub-heading No. 6807.00 of the Central Excise Tariff (CET), and had claimed the benefit of exemption under Notification No. 59/90-C.E., dated 20-3-90. sub-heading No. 68.07 covered, among others, articles of Mica. Under Notification No. 59/90-C.E., dated 20-3-90 among others, articles of Mica failing under sub-heading No. 6807.00 enjoyed exemption from duty. It was proposed in the show cause notice dated 30-7-93 that the correct classification of the products in question was under sub-heading No. 8546.00, which covered electrical insulators of any material, and the applicable exemption Notification was Notification No. 77/89-C.E., dated 1-3-89. Under Notification No. 77/89-C.E., dated 1-3-89, concessional rate of duty was prescribed for electrical insulators of any material other than electrical insulators of paper and paper board, coated, impregnated or covered with plastics (excluding adhesives), and falling under Heading No. 85.46 of the Tariff. Relying upon the Tribunal’s decision in the case of Collector of Central Excise v. Metro Wood Engineering Works - 1989(02)LCX0063 Eq 1989 (043) ELT 0660 (Tribunal), the Asstt. Collector of Central Excise, Nasik, who adjudicated the matter, held the goods to be classifiable under sub-heading No. 8546.00 of the CET, read with Notification No. 77/89-C.E., dated 1-3-89. He confirmed the consequential demands since 1992. On appeal, the Collector of Central Excise (Appeals), Pune, observed that the goods in question could not be used directly as insulators as they had to be impregnated with resin, and that they were not an insulator but an insulating material. He set aside the order passed by the Asstt. Collector of Central Excise, Nasik, and allowed the appeal of the respondents before us.

In appeal, the Revenue had stated that the assessee was clearing the goods to the users of insulators, and not to the insulator manufacturers. No process such as impregnation by resin was carried out by the users of the goods in question. The goods as cleared in the finished form, were wound on electrical cables and acted as insulators. The process of manufacture made it clear that the goods were fully manufactured. The heat treatment to fix the insulator on the cables did not alter either the character or use of the goods. The Revenue had pleaded that the appellate authority has based his order on the fact that the goods were further impregnated with resins, which was not a fact.

2. The matter was fixed for hearing on 22-8-2000 when Smt. Rashida Hussain, SDR submitted that the goods as cleared from the factory of the respondents were fully finished insulators and the post-removal treatment after the goods in question were wound on the cables was for better adherence of the goods on the cables. She submitted that the matter was covered by the Tribunal’s decision in the case of M/s. Kirlosker Electric Co. Ltd. v. Collector of Customs, Madras - 1994(04)LCX0091 Eq 1994 (071) ELT 1019 (Tribunal). She referred to the grounds of appeal and pleaded for setting aside the impugned order-in-appeal, and for restoring the order-in-original passed by the Asstt. Collector of Central Excise, Nasik.

Shri Pramod Saran, Sales Executive wanted decision on the basis of the written submissions filed by the respondents.

3. We have carefully considered the matter. The issue for our consideration is the classification of the products, which the respondents have described as Nomex Mica Products - Nomex Mica paper and Mica Paper based products. Both the products were used for insulation purposes. Mica paper based products were directly used for insulation whereas Nomex Mica Paper was used for insulation purposes after cutting into desired shapes.

4. For the manufacture of Nomex Mica products, the Mica Paper and insulating paper (with trade name ‘Nomex Aramid’), were cut to size, adhesives were applied thereto. The resultant products were kept aside for natural drying and the evaporation of the thinner; thereafter Mica paper was bonded with the Nomex insulating paper and kept under pressure for making a composite product. The finished composite product was then cut to desired sizes.

5. Nomex Mica products were used by the buyers for insulating the electrical cables. The electrical cables with Nomex Mica products wound thereon was as a whole subjected to the processes of heating, pressing and curing for better adhesion of the products in question to the electric cables. As a result of all these processes, the resin already contained in the composite product got melted and the homogeneous insulation was provided to the electrical cables. This post curing process was for attaining the required electrical properties.

6. In their written submissions, the respondents have submitted that one of the goods manufactured by them and supplied to M/s. BHEL was resin rich, epoxy novolak bonded glass backed mica paper tape. It was provided in the corporate purchasing specification of BHEL as under :-

“The material shall be made from Mica paper with a woven glass fabric backing adherent to one side and evenly impregnated with a B stage epoxy novolak resin. The homogeneous insulation produced after pressing and curing shall have temperature index of at least 155.”

The resin used for bonding was to be catalysed epoxide novolak, and more specifically a poly glycidye ether of phenol formaldehyde Novolak of epoxide equivalent value approximately 180.

The Epoxide Novolak was to be catalysed with suitable hardener to comply with the given curing schedule. The glass fabric backing was to be of 0.04 - 0.05 mm. thick with a suitable finish compatible with the resin system used.

The goods in question were to be used as main slot insulation of stator and other parts of electrical machines.

7. It is, thus seen that the product as obtained finally was not just an article of Mica. Other products had also the similar characteristics and use. They were composite products in which Mica Paper was one of the many ingredients. The goods were designed for use as insulation material.

8. Such composite products could not be classified under Heading No. 68.07 of the CET as an article of Mica. Heading No. 68.07 covered the following:-

“All other articles of stone, plaster, cement, asbestos mica or of similar materials, not elsewhere specified or included.”

This entry does not refer to any composite material or composite article which consists not merely of stone, plaster, cement, asbestos, Mica, or similar materials, but also such materials in combination with other materials such as paper, adhesives, etc.

9. The assessee had declared their products as Nomex Mica Paper products and Nomex Mica paper based products. Nomex (introduced in 1960 by Du Pont), is the trade mark for a heat resistant aromatic polyamide fibre. It retains useful properties after long term exposure to temperature up to 220°C. It does not support combustion. It is used in electrical insulation (refer page 621 of the Condensed Chemical Dictionary 9th Ed. revised by Gessner G. Hawley).

Mica Paper is technically re-constituted Mica manufactured from Mica scrap which is cleaned and calcined, and then quenched in an alkaline medium when it becomes soft and fluffy. It is then neutralised, washed and mechanically disintegrated into fine flakes, which are mixed with water to obtain a slurry that is fed into paper mill where this “pulp” gets converted into 100% mica sheet, called mica paper.

Mica Paper was one of the other materials that was used in the process of manufacture of the products in question. The finished products could not be taken as just articles of Mica.

10. Along with the supplementary classification list, effective from 11-1-88, the assessee had declared their process of manufacture as under :-

(a)     Mica Paper and Insulating Paper were cut to size.

(b)     Adhesive was applied to Mica Paper/insulating paper.

(c)      The paper was kept aside for natural drying and the evaporation of the thinner.

(d)     Mica paper was placed over the nomex paper and kept under pressure for good adhesion.

(e)     The composite product was then cut to desired size.

11. Such a composite product could not be considered as an article of Mica and could not be classified under Heading No. 68.07 of the CET.

Under the Explanatory Notes to the Harmonised Commodity Description and Coding System (HSN), worked Mica and articles of Mica including agglomerated or re-constituted Mica, whether or not on a support of paper, paper board or other materials, were classifiable under Heading No. 68.14. It is made clear in the HSN Explanatory Notes that Mica insulators and other Mica insulating parts of electrical apparatus, even unmounted were not classified in Heading No. 68.14 but fell in Heading Nos. 85.46 to 85.48.

It is also pertinent to refer to the Supreme Court’s decision in the case of Geep Flashlight Industries Ltd. v. Union of India - 1984(08)LCX0021 Eq 1985 (022) ELT 0003 (S.C.), wherein it had been held that the articles of plastics does not mean articles made from plastics along with the other materials. Para 3 from that judgment of the Apex Court is extracted below:-

“3. Petitioner is admittedly manufacturing plastic torches. It is contended on his behalf that for the purpose of levy of excise duty plastic torch manufactured by the petitioner is governed by Tariff Item No. 15A(2) which reads as under :

“Articles made of plastics, all sorts, including tubes, rods, sheets, foils, sticks, other rectangular or profile shape whether laminated on not, and whether rigid or flexible including lay flat tubings and polyvinyl chlorides sheets...”

The learned Counsel contended that the plastic torch manufactured by the petitioner is nothing else but plastic tube made of plastic in which certain other devices are inserted so as to make it a torch but it none-the-less retains the character of a plastic tube. A mere reference to Tariff Item No. 15A(2) would show that the articles therein described are plastic material in different shape and form and not articles made from such plastic material. There is a noticeable difference between plastic material in different shape and form such as tubes, rods, sheets, etc., and articles made from such plastic material such as plastic torch. It would be doing violence to language if one were to include plastic torch in articles under Tariff Item No. 15A(2) on the ground that a plastic tube is used for manufacturing plastic torch. Articles such as tubes, rods, sheets, foils, sticks, etc., of plastic material merely describe plastic material in different shape and form and each word used therein takes its colour from the word just preceding and just succeeding and the adjectival clause ‘articles made of plastics’. Articles made of plastic meaning article made wholly of, commodity commercially known as plastics, and not articles made from plastics along with other materials. By no canon of construction, a plastic torch can be read in conjunction with plastic tubes, rods, sheets, foils, etc., made of plastics. Plastic torch is a distinct and different commodity commonly known in the market as torch. Ordinarily, torch is not described by the name of the material used in the tube in which the device of torch is housed. The commodity known advertised, sold and offered in the market is torch. Prefix plastic merely describes the quality of torch as distinguished from other type of torches. It is not sold primarily as plastic tube.”

12. In their reply dated 30-8-93 to the show cause notice dated 30-7-93, the assessee had stated that their products were insulating materials. In their written submissions it has been explained that the goods in question were wound on the electrical cables and after the process of heating, pressing and curing, homogeneous insulation was provided to the electrical cable. In the Corporate Purchasing Specification by BHEL, for resin rich epoxy novolak, bonded glass, backed mica paper tape, it was stated that the goods were used as main slot insulator of stator and other parts of electrical machines. From the technical information placed on record, it is obvious that the goods in question were for wire insulation.

13. From the above description, it is seen that the correct classification of the products was under Heading No. 85.46 of the CET, which covered electrical insulators of any material.

According to the HSN Explanatory Notes, insulators of Heading No. 85.46 were used for the fixing, supporting or guiding of electric current conductors while at the same time insulating them electrically from each other, from earth etc.

In the form, the goods were cleared, they were finished products. The goods were supplied to the users - one such important users were BHEL. The goods as cleared were wound on electrical cables and acted as insulators. After being wound on electrical cables, any process on such wounded cables will not change the character of insulators so wounded. The insulators could be in different forms depending upon the requirements.

14. In the case of Collector of Central Excise, Hyderabad v. Bakelite Hylam Ltd., Hyderabad - 1997(03)LCX0041 Eq 1997 (091) ELT 0013 (S.C.), the products before the Apex Court were the industrial laminated sheets and glass epoxy laminated sheets being used for electrical insulation. The Hon’ble Supreme Court observed that their being a specific entry for electrical insulators of any material under sub-heading No. 8546.00 of the CET, the same were classifiable under the said specific sub-heading. It was observed by the Apex Court that these sheets having insulation properties could not be taken out of the category of electrical insulators just because they were required to be cut to the requisite shape, and holes may have to be punched in them before they could be fitted as insulators. The Supreme Court held that as the goods in question had insulating properties and were used as electrical insulators, they were classifiable as electrical insulators.

We consider that this decision is applicable to the facts in the appeal before us.

15. We may also refer to the Tribunal’s decision in the case of Chetna Poly Coats Pvt. Ltd. v. Collector of Central Excise - 1988(07)LCX0042 Eq 1988 (037) ELT 0253 (Tribunal). The issue arising for determination in this case was whether the electrical insulation tapes manufactured by the appellants were classifiable under sub-heading No. 8546.00 CET as claimed by the appellants, or sub-heading No. 3919.00 CET as held by the lower authorities. The Tribunal after making a reference to their earlier decision in the case of Bakelite Hylam Ltd., Hyderabad v. Collector of Central Excise, Hyderabad - 1985(08)LCX0053 Eq 1985 (022) ELT 0879 (Tribunal) had held that the electrical insulation tapes were classifiable under Heading No. 85.46 CET as electrical insulators. In para 11 of their order, the Tribunal considered the scope of Heading No. 85.46 and held as under :-

“11. We may now consider Heading 85.46, sub-heading 8546.00, which covers electrical insulators of any material. The lower authorities have relied on the explanation notes to the Harmonised System in ruling out classification of electrical insulating tapes under this heading. The expression “electrical insulators” occurring in explanation II to item 15A of the previous Tariff Schedule came up for consideration before this Tribunal Bakelite Hylam Ltd., Hyderabad v. Collector of Central Excise, Hyderabad 1985 (022) ELT 879. The Tribunal went at length into the question and, after considering technical authorities as also Board’s understanding as reflected in its tariff advice No. 123/81, dated 23-11-1981, came to the conclusion that articles made from materials which have electrically insulating properties (examples - mineral fibre, cellulose, glass fibre, certain plastic glass, porcelain etc.) can be appropriately described as insulators. The goods in that case were rigid plastic laminated sheets and boards having electrical insulating properties The goods in the present case are electric insulating tapes having adhesive properties. Following the reasoning of this Tribunal in the Bakelite Hylam case, we see no reason why the present goods cannot be described as electrical insulators.”

In Bakelite Hylam Ltd., Hyderabad v. Collector of Central Excise, Hyderabad - 1985 (022) ELT 879, the matter related to the classification of rigid plastic laminated sheets and boards under the erstwhile Central Excise Tariff. The goods in question were composite goods and comprised of plastic material and other materials such as glass, paper, etc. The Tribunal went at length into the question as what was meant by the expression “electric insulators”, and after considering the technical authorities as also Board’s understanding as reflected in their Tariff Advice No. 123/81, dated 23-11-81, came to the conclusion that the articles made from materials which had electrically insulating properties could be appropriately described as insulators.

The decision of the Tribunal in the case of M/s. Chetna Polycoats Pvt. Ltd. was the subject matter of Civil Appeal No. 2321 of 1989 preferred by the Department which was dismissed at the stage of admission by the Supreme Court on 13-2-91 [1991(02)LCX0126 Eq 1991 (055) ELT A067 (S.C.)] (refer para 4 of Union of India v. Kamalakshi Finance Corporation Ltd. - 1991(09)LCX0044 Eq 1991 (055) ELT 0433 (S.C.), and “Tits Bits” at page A28 of 1991 (53) ELT

16. The adjudicating authority had placed reliance on the Tribunal’s decision in the case of Collector of Central Excise v. Metro Wood Engg. Works - 1989(02)LCX0063 Eq 1989 (043) ELT 0660 (Tribunal). The issue for consideration in that case was whether the industrial laminates were classifiable as articles of plastics under sub-heading No. 3920.31, or under sub-heading No. 8546.00 as electrical insulators. The departmental representative had pleaded that the industrial laminates were not insulators but raw materials for insulators (para 4).

In those cases, the assessee had pleaded that the industrial laminates were used as electrical insulators and as such, they will be classifiable under sub-heading No. 8456.00 as electrical insulators. The Tribunal referred to their earlier decision in the case of M/s. Bakelite Hylam Ltd., Hyderabad v. CCE, Hyderabad - 1985(08)LCX0053 Eq 1985 (022) ELT 0879 (Tribunal) and agreed that an article made from materials which have electrically insulating properties could be appropriately described as an insulator. It was observed that once the goods in question had attained the essential character of insulators mere cutting and making holes will not make those goods different from insulators. It was held that the industrial laminates in question were electrical insulators and were classifiable under sub-heading No. 8546.00 of the CET.

The appellate authority had distinguisned this Triounal’s decision on the following grounds :-

“However, in the present case as mentioned by the appellants, their product cannot be used directly as insulators as they have to be impregnated with resin.”

The process of manufacture of the goods in question had been described above. It is clear that the adhesive was applied to Mica Paper/insulating paper, and during post-curing, it was just this resin in the composite product that adhered to the electrical cables.

We, therefore, consider that the above observations of the ld. Collector of Central Excise (Appeals) were not factually correct.

16. We may also refer to the Tribunal’s decisions in the case of (1) Wood Polymers Ltd. v. Collector of Central Excise - 1990(03)LCX0091 Eq 1990 (047) ELT 0595 (Tribunal) and (2) Kirloskar Electric Co. Ltd. v. Collector of Customs, Madras - 1994(04)LCX0091 Eq 1994 (071) ELT 1019 (Tribunal).

In the case of Wood Polymers Ltd., the industrial laminates were found to be electrical insulators having insulating properties, and the same were held to be classifiable under sub-heading No. 8546.00 CET.

In the case of Kirloskar Electric Company Ltd., v. Collector of Customs, Madras, the insulating material Trivaltherm - N - O’ was described as an electrical insulating material in the catalogue. They were found to be a composite article made-up of polyester film glued on either side with Nomex paper and used as a slot liner, coil separator, phase separator, etc., in Class F rotating machine where machine’s insulation system was rated for 155°C. They were held to be classifiable under Heading No. 85.46 of the Customs Tariff.

17. In the written submissions, the respondents have referred to the earlier order-in-appeal dated 29-1-1993 passed by the Collector of Central Excise (Appeals), Pune in their own case. In that case, it was proposed in the show cause notice that the goods were classifiable under sub-heading No. 8544.00. The manufacturer had sought classification under sub-heading No. 6807.00. In the review, the classification under sub-heading No. 8546.00 was proposed. The Collector of Central Excise (Appeals) observed that the appeal filed by the Department went beyond the show cause notice. The matter was not decided on merits and on this limited ground, that the Collector’s review order proposing classification under sub-heading No. 8546.00 went beyond the show cause notice, the appeal filed by the Department was rejected.

We find that even in this case the assessee had admitted that their product had got insulating properties, but had contended that by themselves, this could not be called insulators, as insulators had to be made out of them. The Collector of Central Excise (Appeals) held as under :-

“Therefore, without coming into the merits, I reject the appeal on the basic ground that it goes beyond the terms of the show cause notice and is therefore not maintainable.”

Such an order could not be a ground for convassing that the correct classification could not be decided by the Department in subsequent proceedings. In the present case, proper show cause notices had been issued and the matter had been decided after observing the principles of natural justice. We do not find force in the arguments of the respondents in this regard.

18. After giving our careful thought and consideration to the matter, we do not agree with the view taken by the ld. Collector of Central Excise (Appeals). We set aside the impugned order-in-appeal and restore the order-in-original No. 58/94, dated 17-3-94 passed by the Asstt. Collector of Central Excise, Division-II, Nasik.

However, in the facts and circumstances of the case, the demands will be restricted to the normal period of limitation.

With these observations, the appeal filed by the Revenue is allowed. Ordered accordingly.

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Equivalent 2001 (135) ELT 462 (Tri. - Del.)