1990(06)LCX0062

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

S/Shri G. Sankaran, President, S.L. Peeran, Member (J) and G.A. Brahma Deva, Member (J)

HINDUSTAN GAS & INDUSTRIES LTD.

Versus

COLLECTOR OF CUSTOMS

Order No. 645/90-C, dated 22-6-1990 in Appeal No. C-3728/1988-C

Advocated By : Shri V. Lakshmi Kumaran, Advocate, for the Appellant.

Shri S. Chakraborty, JDR, for the Respondent.

[Order per : G. Sankaran, President]. - The issue for determination in the present appeal is the classification under the First Schedule (the “Schedule” for short) to the Customs Tariff Act, 1975, of a 100 cubic metre capacity Balloon gas holder imported by the appellants. The appellants claimed assessment under Heading No. 59.11 (Sub-heading 5911.90) of the Schedule. However, the lower authorities classified the goods under Heading 40.16 (Sub-heading No. 4016.99) of the Schedule. Hence, the present appeal.

2. We have heard Shri V. Lakshmi Kumaran, Advocate, for the appellants and Shri S. Chakraborty, JDR, for the respondent-Collector.

3. The balloon is made of polyamide (nylon) silk fabric coated on both sides with rubber. According to the statement of facts in the appeal memorandum, the appellants have an air separation plant which produces both liquid oxygen as well as low pressure gaseous oxygen. The liquid oxygen is either sold as liquid or as high pressure oxygen gas in cylinders after conversion into gas. The low pressure oxygen is collected in a gas holder - the subject balloon - to which a high pressure compressor is attached for sucking the gas from the gas holder and compressing it at high pressure into cylinders. It is stated that in addition to collection of low pressure oxygen gas from the air separation plant, the gas holder is also used for collection of low pressure vented oxygen.

4. It is the appellants’ submission that the gas holder is an integral part of the air separation plant without which manufacture of oxygen gas compressed at high pressure in cylinders cannot take place. The position is explained thus :-

“Low Pressure Gas obtained from the Plant cannot be compressed into the Cylinders at a high pressure without first being collected in a Gas Holder as the gas compressor cannot function effectively and properly without being attached to a Gas Holder. This is because the flow rate of the low pressure Oxygen Gas obtained from the Plant does not remain same at all times due to several factors such as the proportion in which various products viz. Liquid Oxygen, Low Pressure Gaseous Oxygen, Nitrogen and Argon are being drawn from the Air Separation Plant or the necessity of venting the Liquid Oxygen etc. whereas the capacity of the Compressor is fixed. A fall in the flow rate of input (Low Pressure Oxygen Gas) in the Compressor will create vacuum like conditions and will damage the entire plant. Therefore in order to provide steady flow of low pressure Oxygen Gas to the Compressor a Gas Holder has to be provided by the appellant”.

A schematic diagram of the plant showing the position of the gas holder has been submitted (page 1 of the appellants’ paper book). These prima facie do support the appellants’ contention that the balloon is an indispensable and integral part of their plant. The Revenue has not controverted the explanation of the balloon’s function as set out by the appellants. However, the lower authorities have held that the balloon cannot be treated as a textile article for technical purposes to qualify for sub-heading 5911.90. It is a stationary article tethered by ropes and not attached with a particular machinery. Its main function is storage of gas. Since the rubber content predominated, the appropriate classification, according to the Assistant Collector, is sub-heading 4016.99. The Collector (Appeals) has observed that the balloon is not involved in any manufacturing process or in any application in the operation or function of any machine as is done, for example, by a gasket in a machine or a straining cloth in an oil press or a textile fabric in a paper-making machine as illustrated in note 7 to Chapter 59 of the Schedule.

5. The competing headings read as follows :-

Chapter - 40

Rubber and articles thereof.

Chapter 59

Impregnated, coated, covered or laminated textile fabrics; textile articles of a kind suitable for industrial use.

Now, according to note 2(a) to Chapter 40, textiles and textile articles falling in Section XI are not covered by Chapter 40. Note 7 to Chapter 59 reads as follows :-

“7. Heading No. 59.11 applies to the following goods, which do not fall in any other heading of Section XI:

(a) Textile products in the piece, cut to length or simply cut to rectangular (including square) shape (other than those having the character of the products of Heading Nos. 59.08 to 59.10), the following only:

(i) Textile fabrics, felt and felt-lined woven fabrics, coated, covered or laminated with rubber, leather or other material, of a kind used for card clothing, and similar fabrics of a kind used for other technical purposes;

(0ii) Bolting cloth;

(iii) Straining cloth of a kind used in oil presses or the like, of textile material or of human hair;

(iv) Flat woven textile fabric with multiple warp or weft, whether or not felted, impregnated or coated, of a kind used in machinery or for other technical purposes;

(v) Textile fabrics reinforced with metal, of a kind used for technical purposes;

(vi) Cords, braids and the like, whether or not coated, impregnated or reinforced with metal, of a kind used in industry as packing or lubricating materials;

(b) Textile articles (other than those of Heading Nos. 59.08 to 59.10) of a kind used for technical purposes [for example, textile fabrics and felts, endless or fitted with linking devices, of a kind used in paper-making or similar machines (for example, for pulp or asbestos-cement), gaskets, washers, polishing discs and other machinery parts]."

According to note 4(a) to Chapter 59, textile fabrics impregnated, coated, covered or laminated with rubber and weighing not more than 1500 gms per square metre are classifiable as rubberised textile fabrics under Chapter 59 (Heading 59.06) and not Chapter 40. In the present instance, the weight of the fabric is, according to the supplier’s telex, 950 ± 60 gms per square metre. The rubber content is approximately 70%. The predominance of rubber in the fabric of the balloon does not, in our view, detract from the position that it is a textile fabric coated on both sides with rubber.

6. The learned DR, contends that since the balloon is a composite article, and its essential character (elasticity) is due to rubber, it falls under Chapter 40, by application of Rule of Interpretation 3(b). Further, the balloon, being in the nature of a gas holder, cannot be considered as a part of a machine. It is separate from the machinery and not attached to it. Therefore, it does not qualify for classification under Chapter 59.

7. To the above, the learned counsel’s reply is that the balloon is not an unnecessary appendage. It has a role to perform in the air separation plant and without it, the plant cannot function. Since the goods are classifiable with reference to the competing headings and relative chapter notes, there is no need to resort to the Rules for Interpretation of the Schedule.

8. We have considered these submissions. From the Rules for Interpretation of the Schedule, it is evident that the Rules are to be invoked only if goods cannot be classified under the Schedule by reference to the headings, sub-headings and relative Chapter and section notes. In the present instance, as already discussed, we are satisfied that the subject goods can be classified without the aid of the Rule of Interpretation. The question of invoking Rule 3(b) does not, therefore, arise. The appellants’ submissions on the function of the balloon in the air separation plant, as a necessary part thereof, have not been effectively rebutted by the Revenue. The only argument is that the balloon is a gas holder (which it is) separate from the machinery and not attached to it. It is not correct to say that the balloon is not attached to the machinery. From the schematic diagram, it is seen that it has an inlet and an outlet. The inlet receives low pressure oxygen gas from the oxygen plant and oxygen vented from the liquid oxygen storage tank and from transport tankers. The outlet is connected to the oxygen compressor. The appellants’ contention that the balloon is not a mere storage tank but that it has a definite role to play in the plant - preventing the development of vacuum conditions in the plant with likely damage to it if the compressor were to be directly attached to the oxygen plant - remains unrebutted.

9. In the light of the foregoing discussion, we are of the view that the subject balloon falls for classification under Heading 59.11 (Sub-heading 5911.90) and not under Heading 40.16 (Sub-heading 4016.99).

10. In the above view, it is not necessary for us to consider the counsel’s alternative claim for classification of the goods in Chapter 84.

11. We set aside the impugned order and allow the appeal with consequential relief to the appellants.

Equivalent 1990 (49) ELT 548 (Tribunal)