Urethane India Ltd. vs Collector Of Customs>1991(05)LCX0054

1991(05)LCX0054

BEFORE THE CEGAT, SPECIAL BENCH C, NEW DELHI

Shri K.S. Venkataramani, Member (T) and Shri S.L. Peeran, Member (J)

URETHANE INDIA LTD.

Versus

COLLECTOR OF CUSTOMS

Order No. 455/91-C, dated 21-5-1991 in C/Appeal No. 2033/90-C

CASE CITED

COLLECTOR v. PREMIER TYRES LTD. - 1984(12)LCX0015 Eq 1985 (020) ELT 0124 (TRIBUNAL) [PARA 2]

Advocated By : Shri R. Sashidharan, Advocate, for the Appellants.

Shri M. Jayaraman, SDR, for the Respondent.

[Order per: K.S. Venkataramani, Member (T)]. - This appeal is directed against the order of the Collector of Customs (Appeals), Madras dated 31-1-1990 by which he had confirmed the order of the Assistant Collector of Customs, (Group-1 & 2), Madras Customs House dated 26-12-1989 confirming the classification of Polyurethane Resin Polytetramethlene Adipate Glycol (PTMAG) imported by the appellants as other polyesters under Heading 3907.99 and not under 2905 as other Diols. The appellants imported a consignment of PTMAG and filed into Ex-bond Bill of Entry dated 15-11-1989 and sought clearance of a quantity of 3057 Kg. of a material by filing an Ex-bond Bill of Entry dated 11-12-1989 claiming assessment of the goods under sub-heading 2905.39 which covers other Diols. The Assistant Collector of Customs passed an order holding that the goods imported by the appellants are classifiable under Heading 3907.20 as other Polyethers on the basis of report given by the Chief Chemist, Central Revenue Control Laboratory (CRCL). The Assistant Collector, in his order, observed that, according to the Customs House Lab. Test Report, the product imported is an organic polymer (Polyol) and it is other than Glycol ethers. On a reference made to the Chief Chemist, at the instance of the importers, it was confirmed by that authority that the goods is a synthetic polymer with more than five monomer units. The Chief Chemist opined that the product is polymer, number of monomer units being much more than five as seen from the molecular weight. Such polymers are classifiable under Heading 39 ICT by virtue of the number of monomer units and not by the mere fact that molecular weight is low or high. The Assistant Collector observed that the claim for classification of the PTMAG under sub-heading 2905.39 as other Diols is not supported by the Chief Chemists Report and turned down their claim. The Assistant Collectors order was upheld by the Collector (Appeals) in a detailed order in which that authority referred to several textual authorities as well as HSN Notes for coming to the conclusion that PTMAG imported cannot be considered as Diols under Chapter 29 but would more appropriately be classified as a Polyester or Polyol under Chapter 39 under Heading 3907.99. It may be noted that the Department, in coming to this conclusion, was relying upon the fact that the goods contained more than five monomer units. This is a condition for classification contained in Chapter Note 3(c) of Chapter 39 which says that Headings 39.01 to 39.11 apply only to goods of a kind produced by chemical synthesis, falling in the following categories :

2. Sh. Sashidharan, Ld. Counsel appearing for the appellants, contended that the product under reference, is a separate chemically defined organic compound specifically covered by the description Diol also called Glycol. He referred to the Condensed Chemical Dictionary by G.G. Hawley which has defined Diol as a Synonym for glycol or dihydric alcohol. Further the Customs House Laboratory, according to the appellants, did not appear to have examined whether the product falls within the definition of a Diol or Glycol. According to the Ld. Counsel, PTMAG, throughout the world, is more specifically called Diol or glycol rather than just a polyether or a polymer. Diols being covered under heading 2905.39 CTA, PTMAG should be classified under this heading rather than under Chapter 39. The Ld. Counsel referred to the suppliers literature PTMG in the record to show that it is a Diol. It was also contended that the goods PTMAG cannot fall under Chapter 39 at all, according to the appellants, because of the Chapter Note 1 to Chapter 39 because the expression Plastic under the Tariff, according to the Chapter Note 1 means only those materials of-heading 3901 to 3914 which are or have been capable, either at the moment of polymerisation or at some subsequent stage of being formed under external influence by moulding, casting, rolling or other process into shapes which are retained on the removal of the external influence. Such is not the case with reference to the imported goods which are not in the nature of resin but are chemicals not capable of being moulded or extruded. Further Chapter Note 6 to Chapter 39 has laid down that Heading 3901 to 3914 - the expression primary forms applies only to the following forms :

Liquids and pastes, blocks or irregular shape, lumps and powders, granules, lakes and similar forms.

The imported goods do not conform to such forms. Referring to the HSN Notes, the Ld. Counsel submitted that the goods are having low molecular weight and therefore, will not be classifiable under Chapter 39. An alternate claim for classification of the goods was also made under Heading 38.23 as miscellaneous chemical products and reliance was placed in the case of Collector of Customs, Cochin v. Premier Tyres Ltd. -1984(12)LCX0015 Eq 1985 (020) ELT 0124 (Tribunal).

3. Sh. Jayaraman, the Ld. S.D.R. appearing for the Department contended that Chapter 29, as laid down by the Chapter Note 1(a), applies only to a separate chemically defined organic compounds for the goods imported. There is no standard formula in chemical dictionary and the suppliers literature produced, indicates that it is a polymerised product. Therefore, it falls outside Chapter 29. As regards classification thereunder, the Chief Chemists opinion is very clear that the product is one containing more than five monomer units is covered by Chapter Note 3(c) to Chapter 39. As regards the claim that the goods are classifiable as other Diol, the Ld. S.D.R. pointed out that the basis of the Assistant Collectors order was the report of the Chief Chemist which has not been questioned by the appellants, and detailed confirmation of this conclusion of the Assistant Collector by the Collector (Appeals) in his elaborate order, which has brought out the facts that the goods is a polymerised product and not a Diol. According to the Rule 3(c) of the Rules for Interpretation of the Tariff when two headings apply equally, one occurring later has to be preferred. The ratio of the case law cited, is not applicable as it is with reference to a resol product.

4. The submissions made by both the parties have been carefully considered. The main contention of the appellants is that PTMAG is a Diol and as such is specifically covered by Heading 2905.39 as other Diols. Heading 29.05 covers Acyclic alcohols and their halogenated sulphonated nitrated or nitrosated derivatives. Therefore, there is a lot of force in the reasoning of Collector (Appeals) that to merit classification under Heading 29.05, an item should basically be an alcohol. PTMAG imported is admittedly not an acyclic alcohol and their halogenated sulphonated, nitrated or nitrosated derivatives. It is more than a Diol and in particular it contains an ester chain provided by the adipic acid. The appellants, however, in the appeal, have submitted that the products under Heading 29.05 and listed thereunder are not necessarily derived from alcohol. They have contended that even if PTMAG contains an ester chain provided by the adipic acid, it does not cease to be a diol or glycol. However, as against this we have to go by the General Explanatory Note to the Tariff-Note No. 1 is to the effect that where in Col. 3 of the Schedule the description of an article or a group of articles under a heading is preceded by" - (dash) the said article or group of articles shall be taken to be sub-classification of the article or group of articles covered by the said heading. Under Heading 29.05 under the Heading Acyclic alcohols and their halogenated, sulphonated, nitrated or nitrosated derivatives, the description Diols is preceded by single - . This shows that Diols, as mentioned in the Tariff Heading 29.05, should be an article covered by the description in the said heading. Therefore, if it is not possible to say that the description of Heading 29.05 will not include polymerised derivatives of alcohol, then such products cannot be brought under that heading. The classification of the PTMAG under Heading 3907.99 is supported by the Chief Chemists report which has not been challenged by the appellants herein. In that Report, the Chief Chemist has clearly opined that the goods imported are squarely a polymer with the number of monomer units being much more than five as seen from the molecular weight and that the product is only Polyol and not a reaction product of polyol with isocyanate. The classification on the basis of the units of monomer being more than 5 under Chapter 39 is also supported by Chapter Note 3(c) to Chapter 39 and it is well-settled that the Section Notes have a vital significance in the classification of the products under Tariff Schedule because these have the effect of either expanding or restricting the scope of the tariff heading itself. Even according to the Textual authorities, in Kirk Othmer dealing with Urethane polymers, it is stated at page 585 that polyester polyols most frequently used in the production of speciality polyurethane flexible foam and thermoplastic polyurethane elastomers and fibres are based on adipic acid. The appellants, admittedly, have imported PTMAG with adipic acid and are to use it as a raw-material, for the manufacture of thermo-plastic polyurethane. Therefore, the Collector (Appeals) conclusion on a detailed consideration of textual authorities and HSN Notes that PTMAG is correctly classifiable as other polyesters meriting classification under Heading 3907.99 and not under Heading 29.05 as other Diols is well founded and is upheld. The alternate claim made is for classification under Heading 38.23 covering residual products of chemical or allied industries not elsewhere specified. This claim is also not acceptable because the product as has been pointed out by the Collector (Appeals), is not a mixture of glycols. In the circumstances, there is no reason to interfere with the order passed by the Collector (Appeals). The appeal is rejected.

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Equivalent 1991 (56) ELT 886 (Tribunal)