1990(10)LCX0068

BEFORE THE CEGAT, SPECIAL BENCH ‘B2’, NEW DELHI

Shri Harish Chander, Member (J) and Smt. V. Rajamanickam, Member (T)

COLLECTOR OF CUSTOMS

Versus

KINJAL ELECTRICALS PVT. LTD.

Order No. C/487 to 493/90-B2 and Mis.c.. Order No. C/88 to 91/90 B2, dated 31-10-1990 in C/Appeal No. 812/84-B2 and C/A. Nos. 796 & 1292/85-B2 with Supply. A. Nos. C/2658, 2663 to 2665/90 B2 with C.O.D. Nos. 256 to 259/90-B2

Cases Quoted

SHAMA ENGINE VALVES LTD. v. COLLECTOR - 1984(04)LCX0046 Eq 1984 (018) ELT 0533 (TRIBUNAL) [PARAS 5,10]

COLLECTOR v. WARNER HINDUSTAN LTD. - 1986(06)LCX0020 Eq 1986 (026) ELT 0367 (TRIBUNAL)    [PARA 6]

CROMPTON GREAVES LTD. v. COLLECTOR - 1981(02)LCX0018 Eq 1989 (043) ELT 0788 (TRIBUNAL)     [PARA 9]

Advocated By : Shri M.K. Sohal, JDR, for the Appellant.

Shri N.C. Sogani, Consultant, for the Respondents.

[Order per : V. Rajamanickam, Member (T)]. — The following appeals have been filed against the order of the Collector of Customs (Appeals), Bombay by the Revenue:-

Along with the three main appeals, Supplementary Appeals No. C/A.No. 2658/90-B2, C/2663/90-B2, C/2664/90-B2, and C/2665/90-B2 along with COD Nos. 256 to 259/90-B2 have been filed. Since the main appeals have been filed within time, the appellants have requested for the condonation of delay in the late filing of the Supplementary Appeals.The delay in filing the Supplementary Appeals is, therefore, condoned. The issues being similar in all three appeals and the Respondents being common, the appeals are taken up for decision and a common order is passed.

2. The issue involved is the classification of “HSK-4 Electric Resistance Wire” whether under Heading 73.15 (1) or 73.15 (2), C.T.A.

3. The brief facts are M/s. Kinjal Electricals Pvt. Ltd. have imported consignments of “HSK-4 Electric Resistance Wire”, ferrous Base, Bright quality from Japan. As per the test certificate from the suppliers the following was the composition of the item :-

The goods were assessed as stainless steel wire under Heading No. 73.15 (2) read with Notification No. 259/82, the Respondents have claimed assessments under Heading 73.15 (1) read with Notification No. 112 dated-16-4-1982. The assessment claimed and consequential refund was rejected by the Assistant Collector which however was allowed on appeal before Collector (Appeals). The Revenue has contested the order of the Collector (Appeals), hence this appeal.

4. The Collector (Appeals) has gone by the fact that the aluminium content in the imported resistance wire is 3.43% and nickel content is 0.016%. As per the ISI 6525-1972, for stainless steel wire, the maximum permissible limit of aluminium content for the wire should be 0.03% with tolerance variation of + .05% and in these cases of import the aluminium content is much more than 0.3%, the wire does not conform to the ISI Specifications for the stainless steel wire and hence classifiable under Heading 73.15 (1) C.T.A. The department has pointed out that wire contained 20.03% Chromium and is covered by the definition of stainless steel in the ISI as well as Para 242 (2) (v) of the ITC policy book 1983-84. Further, they have indicated in their grounds of appeal that having 12 to 14% or more chromium and 3.5 to 4.5% of aluminium is often used as electrical resistance alloy and has been accepted by American Iron and Steel Institute as stainless steel and is given trade number 406. Thus addition of aluminium alone cannot be a criterion to decide whether it is stainless steel or not, when the universal definition does not exclude any alloying element and merely pres.c.ribes the minimum chromium content. They have further contended that the property of corrosion resistance characteristic of stainless steel depends on the presence of chromium and it is generally accepted that this property becomes pronounced when chromium content in the steel reaches 12% or above. By adding aluminium alloy in higher percentage, it does not reduce the corrosion character of stainless steel. They therefore plead that the original assessment of the Asst. Collector has to be restored.

5. Shri M.K. Sohal the Ld. J.D.R. while reiterating the points raised in the appeal, stated that the order of the Collector (Appeals) has laid emphasis on the aluminium content in the alloy but the criterion to determine the alloy steel as stainless steel is the percentage of chromium content. He referred to the case law 1984(04)LCX0046 Eq 1984 (018) ELT 0533 (Tribunal) - Shama Engine Valves Ltd. v. Collector of Customs, Bombay :-

“Stainless Steels - Alloy steels containing over 12% chromium are stainless steels - IS: 1956: 1976. - It is quite clear that stainless steels are a class of alloy steels. It is also clear that according to the understanding in India as exemplified by ISI Specification. IS, 1956 : 1976, an alloy containing over 12% chromium is considered as stainless steel.”

He read out the definition of stainless steel from the Book “An Encyclopaedia of Metallurgy And Materials” by C.R.Tottle. The following is the definition :-

“Stainless Steel: A corrosion-resistant type of alloy steel which contains a minimum of 12% Cr. This latter is the element which confers upon the steel its property of resisting attack by the atmosphere or by a number of chemical reagents. The effect is attributed to the ability of chromium to form a thin, but very tenacious, film of oxide at the surface of the alloy which resists attack by most oxidising agents. The resistance to corrosive attack ”. enhanced if nickel be added, and is further improved by small additions of molybdenum and copper. There are three main classes of stainless steels."

and therefore stressed that alloy steel containing more than 12% chromium should come within the purview of stainless steel and the subject goods having chromium content of 20.03% should be of stainless steel falling under Heading 73.15 (2).

6. Shri N.C. Sogani, Ld. Consultant, refuted the assessment made under Heading 73.15 (2) and claimed that the Electric Resistance Wire imported was classifiable under 73.15 (1), as the aluminium content was 3.43% and as per the ISI 6526-1972 of ISI Specification for stainless steel wires, the maximum permissible limit of aluminium content in the stainless steel wire is 90.03% with tolerance variation of + 0.05% and the aluminium content in the imported wire being 3.43%, it does not conform to the specifications and hence it has to be brought under the residuary item 73.15 (1) C.T.A. Further it was his contention that the Encyclopaedia referred to has not taken into consideration the aluminium content and is not applicable. He referred to the case law in his favour in Collector of Customs, Bombay v. M/s. Wamer Hindustan Ltd., reported in 1986(06)LCX0020 Eq 1986 (026) ELT 0367 (Tribunal) wherein it has been held that “Incolony - 800" containing 21% chromium, 42.425% Iron, 32.5% Nickel and other elements in small quantity not ”stainless steel Alloy" but Nickel Alloy. He also referred to the Public Notice dated 06-01-1986 issued by the Bombay Customs notifying assessment of electrical resistance wire (ferrous based) under Heading 73.15(1) CTA.

7. The points put forth have been considered. The Respondents have imported “HSK-4 Electric Resistance Wire” and have been classified under Heading 73.15(2). There is no dispute in classification under the main Heading 73.15 which reads as follows :-

“Alloy steel and high carbon steel in the forms mentioned in Heading Nos. 73.06/07 to 73.14:

(1) Not elsewhere specified

(2) Coils for re-rolling, bars (including bright bars), rods, wire rods, wire, circles, angles, shapes and section strips, sheets and. plates, of slainles steel".

Alloy steel and high carbon steel have been defined in the Chapter notes to Chapter 73 - 1(d) as under :-

“alloy steel” (Heading No. 73.15):

Steel containing, by weight, one or more element in the following proportions :

more than 2 per cent of manganese and silicon, taken together, or -

2.00 per cent or more of manganese, or

2.00 per cent or more of silicon, or

0.50 per cent or more of nickel or

0.50 per cent or more of chromium, or

0.10 per cent or more of molybdenum, or

0.10 per cent or more of vanadium, or

0.30 per cent or more of tungsten, or

0.30 per cent or more of cobalt, or

0.30 per cent or more of aluminium, or

0.40 per cent or more of copper, or

0.10 per cent or more of lead, or

0.12 per cent or more of phosphorus, or

0.10 per cent or more of sulphur, or

0.20 per cent or more of phosphorus and sulphur, taken together or

0.10 per cent or more of other elements, taken separately."

The alloy of steel contains one or more elements and there is no doubt that the wire is of alloy steel. It contains chromium and aluminium of the proportions specified. The dispute is only with regard to the wire, whether it is of stainless to fall under Heading 73.15(2). A reference to the CCCN Explanatory Notes Vol-3 page 1005, throws some light on the alloying materials which confer special properties. For purpose of resistance to corrosion, stainless chrome or nickel chrome steel are added. Therefore the presence of one or more of the alloying materials is to give the material the desired quality. So taking the product imported, the chromium content would be imparting the quality of resistance to corrosion. It is the claim of the Respondents that the aluminium content in the wire does not conform to the ISI specification for stainless steel wire which is less than 0.3%. The s.c.ope of the specification is that the standard covers the requirement or stainless steel wire for general corrosion resistance. It is the contention of the appellant in their grounds of appeal that alloy having 12 to 14% or more chromium and 3.5% to 4.5% aluminium is often used as electric resistance alloy and has been accepted by Aluminium Iron and Steel Institute as stainless steel and is given trade-mark 406. Therefore, now comes the question whether we are dealing with a plain wire of stainless steel or an electric resistance wire which is the product imported. The literature produced by the Respondent states that it is HSK Electric Resistance Wire, for which the metal which gives its essential character should be the main consideration. The appellant has also referred to the American Iron & Steel Institute’s specification with trade number 406 which has not been a subject dealt with by both the lower authorities. Being an electric resistance wire, it seems that the classification of the wire with aluminium content of 3.43% hasi not been properly analysed, instead the emphasis is on a wire containing more chromium for the purpose of concluding that it should be a stainless steel wire.

8. In helping to decide the classification, the interpretative rules set the guidelines. Rule 3(b) provides for classification on the criterion of that which gives the material its essential character. The following is the Rule 3(b) :-

“Mixtures and composite goods which consist of different materials or are made up of different components and which cannot be classified by reference to (a) shall be classified as if they consisted of the material or component which gives the goods their essential character, in so far as this criterion is applicable.”

The definition of a ‘Resistance Wire’ in the McGraw Hill Dictionary is given as “Wire made from a metal or alloy bearing high resistance per unit length, such as nichrome, used in wire wound resistors and heating elements”. Therefore, the deciding factor should be material which gives the resistance wire its essential character.

9. Since according to the IS 6526-1972 of the ISI specifications for stainless steel wire, the aluminium content is not to exceed 0.03% , the Collector (Appeals) has rightly held that the standard criterion in classification of resistance wire of steel is the aluminium content and nickel content and not the chromium content. Therefore, adopting the Rule 3(b) of the interpretative rules, the classification under Chapter heading 73.15(1) is more appropriate. In a similar situation this Tribunal has decided a case in respect of Polyester Film insulating material reported in 1981(02)LCX0018 Eq 1989 (043) ELT 0788 (Tribunal) - Crompton Greaves Ltd. v. Collector of Customs where it was held that :-

“Polyester Film insulating material - Plastic coating on paper possesses the essential quality of insulation although present in negligible amount - Classiflable under Heading 39.01/06 of Customs Tariff Act, 1975 - Rule 3(b) of Rules of Interpretation - The appellant had imported paper and it contains 10 mil of paper and 1 mil of plastic. Thus the contents of paper is much more and the contents of plastic is negligible. The composite article may be made up of two materials both of which have like function, but one of whch possesses essential quality, in a much higher degree than the other. Interpretative Rule 3(b) plainly means that in such a case it is the second material which gives to the composite article its essential character. In the instant case the plastic coating on paper possesses the essential quality of insulation in a much higher degree and as such it is classifiable under Heading 39.01/06 for the levy of basic customs duty. [1983(08)LCX0067 Eq 1983 (014) ELT 2465 (CEGAT) relied on] (paras 5 & 6).”

In that case though the plastic content was negligible, the plastic coating on paper possessed the essential quality in insulation and hence Heading 39.01/06 was preferred. Similarly in the present case, since the chromium content and 3.5% to 4.5% aluminium is used in electric resistance wire, the emphasis should be on the materials I hat gives the wire its essential character. The definitions quoted from the “Encyclopaedia of Metallurgy and Materials”, on stainless steel by the Ld. J.D.R. is in respect of the general meaning of what stainless steel is, but it does not dwell deeply on the aspect of classifying a composite material.

10. The case law cited by the Ld. J.D.R. Shri M.K. Sohal reported in 1984(04)LCX0046 Eq 1984 (018) ELT 0533 (Tribunal) is with respect to the ISI Specification for stainless steel, with alloy containing more than 12% which will not be applicable, as the deciding factor rests on the product, Electric Resistance Wire and not merely a stainless steel wire. Similarly, the case law referred to by Shri N.C. Sogani, the Ld. Consultant, is not applicable as the context in which the decision has been taken is not the same.

11. Therefore, in view of the above dis.c.ussion, the classification under Chapter Heading 73.15(1) is upheld and the appeals filed by the Revenue is dismissed. The appeals filed for condonation of delay are allowed.

Equivalent 1991 (051) ELT 0543 (Tribunal)