1992(07)LCX0042

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

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

KUTTY FLUSH DOORS AND FURNITURE CO. PVT. LTD.

Versus

COLLECTOR OF CUS.

Order Nos. C/329 & 330/92-D, dated 31-7-1992 in Appeal Nos. C/2660/90 & 2516/89-D

Cases Quoted

BHOR INDUSTRIES LTD. v. U.O.I. - 1980(10)LCX0019 Eq 1980 (006) ELT 0752 (GUJ.)   (PARAS 5, 13]

KHANDELWAL METAL AND ENGG. WORKS v. U.O.I.
 - 1985(06)LCX0008 Eq 1985 (020) ELT 0222 (S.C.)  [PARAS 5, 6, 14]

KUTTY FLUSH DOORS v. COLLECTOR - 1987(04)LCX0092 Eq 1989 (043) ELT 0736 (TRIBUNAL) [PARA 7]

VAN MOPPES DIAMOND TOOLS INDIA LTD. v. COLLECTOR
 - 1986(02)LCX0033 Eq 1986 (024) ELT 0623 (TRIBUNAL) [PARAS 8, 14]

KUTTY FLUSHDOORSv.COLLECTOR - ORDER N0. 268/87-C (TRIBUNAL) [PARAS 10, 11]

ATUL GLASS INDUSTRIES LTD. v. COLLECTOR - 1986(07)LCX0018 Eq 1986 (025) ELT 0473 (S.C.) [PARA 12]

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

Smt. J.M.S. Sundaram, SDR, for the Respondents.

[Order per : S.L. Peeran, Member (J)]. - As both the appeals raises a common question, they are taken up together for disposal as per law. The question that arises for consideration is the classification of imported item “Master Board”. In E/Appeal No. 2515/89-D, the Assistant Collector in the order-in-original has classified the item in question under [sub-] heading 6809.90 of CTA, 1985 as “articles of stone, plaster, cement, asbestos, mica or similar materials" and assessed to duty at 100% plus 40% and additional duty of 15% while the importer is claiming the classification under [sub-] heading 3823.90 of CTA, 1985 which covers “prepared binders and chemical products and preparations of chemical or allied industries and residual of the chemical or allied products. While the Collector (Appeals) in the impugned order has held the impugned product to be classifiable under Heading 68.08.

2. In Appeal No. E/2660/90-D, the Assistant Collector has classified the impugned product under Heading 68.08 CTA which has been upheld by the Collector (Appeals) holding that Rule 3(b) of General Rules of Interpretation of the Tariff Schedule is to be applied on the principal of essential character envisaged thereunder.

3. The appellants claim to be the manufacturers of wooden flush doors in which range there is a type called “Fire Door”. Its function is said to be to contain a fire in a building or portion of it for a specified rate of time. The imported item is said to be used in the fire door. The appellants rely on the manufacturer’s catalogue which states that the master board is made by a chemical called calcium silicate matrix reinforced with cellulose and it does not contain asbestos or any other inorganic, mineral or man-made fibre. The sample of the item was sent for chemical analysis and it revealed that calcium silicate is the major constituent and cellulose is 15.8%.

4. In Appeal C/2660/90-D, the test report revealed that it is made up of asbestos and a small amount of mica. On retest, it was reported to contain mica and cellulose fibre agglomerated with inorganic silicate in the falling percentage cellulose fibre 10%, mica 10-15%, calcium silicate 80%.

5. The learned Assistant Collector, while rejecting the importers request for reassessment, has held that the item is more appropriately classifiable under Item 68.09 and not under Chapter 38 as the item is not chemical product and not sold as such. On appeal, the learned Collector has also upheld this finding. He has held that the item consists of cellulose and calcium silicate and obviously material covered by Heading 68.08. Though the original assessment is under Heading 68.09, the rate of duty remains the same and the goods basically remains classifiable under Chapter 68. He has also held that the issue of “predominance by weight” is applicable only to alloys falling under Chapters 73 and 74 in terms of Section Note 3(a) to Section XV and not Heading 68.08. The Importer had relied on a ruling of the Gujarat High Court in the case of Bhor Industries Ltd. v. Union of India [1980 (006) ELT 752]. The learned Collector held that the issue in that case was whether marble asbestos vinyl floor tiles can be considered as plastics in view of the fact that plastics constitute only 10 to 15%. As the plastic was not a predominant material, the Court held that item could not be treated as article of plastics. Therefore, the learned Collector held that the said ruling is not applicable to the facts of the present case. Likewise, the ruling of the Hon’ble Supreme Court in the case of Khandelwal Metal & Engg. Works v. Union of India [1985 (020) ELT 222] was also held to be not applicable to the facts of the case, as the judgment was probably based on Section Notes 3(a) to Section XV relating to alloys falling under Chapters 73 and 74.

6. The appellants are aggrieved with the findings of the lower authorities. They contend that the item is neither an article of plaster nor made of composition based on plaster. The classification has to be based on the ingredient chemical which provides the essential character and hence falls under Chapter 38. They contend that their item called ‘interdents’ made of aluminium phosphate polyhydroxy compounds etc., imported by them and used in ‘fire doors’ in edges of doors was held to fall under Chapter 38 by the Appellate Collector of Customs, Madras in his order No. C-3/2654/1979 dated 24-6-1980. The articles of Heading 68.09 will not withstand temperature like 900⁰C and above, while the imported item Master Board would withstand. The residuary Item 68.15 is not applicable as the item is not made of stone or other material substance. The Supreme Court ruling in the case of M/s. Khandelwal Metal & Engg. Works (supra) would apply to the facts of the present case. It is further pointed out by the appellants that the item in question consists of calcium silicate, which is the principal ingredient and givng the essential character of the product falling under Heading 38.23 and not under Heading 68.08 which can be attracted only in the case of the product having been made of “vegetable material”. In the item, the cellulose in fibre form was used only as a stiffener and in no way it gives the essential character of the product and hence the item does not deserve to be classified under Heading 68.08 of CTA.

7. We have heard Shri V. Lakshmi Kumaran, learned advocate for the appellants and Smt. Sundaram, learned DR for the Revenue. Shri Lakshmi Kumaran, reiterating the grounds of appeal, contended that the item is more appropriately classifiable under Chapter 38 as an article of chemical product and not as a ‘board’ under the Heading 68.08. He contended that mere mention of ‘Board’ under Heading 68.08 cannot be determinative factor for classifying a product under the said heading. The classification under Heading 68.08 can be only if there is a predominance of vegetable fibre, which is not so in the present case. The cellulose fibre of 10% is being used only as a stiffener and it cannot be considered as a main ingredient. He submitted that interpretative Rule 3(a) is to be applied in the present case and the item being a basic material for fire resistant products and not a consumer product or finished goods, it does not fall under Heading 68.08 but being made up predominantly of chemical product. Thus it requires to be classified under Heading 38.23. He further contended that even the lower authorities classifying the product under Heading 68.08 does not appear to be correct and the appropriate item, even as per the lower authorities reasoning should have been under Heading 68.15 of the CTA. He also relied on the technical literature annexed with Appeal Memo. He also relied heavily on the ruling rendered in the appellants own case in Order No. 264/87-D dated 6-4-1987.

8. Smt. Sundaram countering the arguments of the learned advocate, submitted that Chapter 68 comes under Section XIII. The reading of Section XIII would disclose that the question of predominance of vegetable fibre cannot be gone into for the purpose of classification. The vegetable fibre if reinforced or agglomerated with chemical binder then the item would be classifiable only under [heading 68][2]. Calcium silicate being a mineral, has been used to reinforce the cellulose and it has acted as a binder. The binder has performed a major function. The item is in the form of a board and hence the question of application of Interpretative Rules does not arise. She further contended that Interpretative rules need not be resorted to if the classification can be done on the basis of the section and Chapter notes. In this context, she relied on the ruling rendered in the case of Van Moppes Diamond Tools India Ltd., Madras v. Collector of Customs, Madras [1986 (024) ELT 623].

9. We have carefully considered the submissions made by both the sides and have also perused the citations as well as Tariff entries referred to before us. The item is ‘Master Board’. The product literature describes the impugned product ‘Master Board’ as “a tough, flexible, dimensionally stable, Class O Multipurpose building board. It is simple and safe to work, easy to decorate and it will not rot or decay." The literature further states about the product as follows :-

“Master board, the product – Master board has a laminar structure and consists of a calcium silicate matrix reinforced with cellulose. It does not contain asbestos or any other inorganic mineral or man-made fibre. The board is cured in a high pressure steam autoclave which causes an irreversible chemical change, thus providing high dimensional and chemical stability accompanied by low alkalinity.

Master board properties - Master board is unaffected by moisture; it will not swell, shrink or warp; it can withstand high temperatures; it is inert yet flexible and can be safely and easily handled, worked and decorated.

Master board appearance – Master board is off-white in colour and is supplied in rectangular boards with square-cut edges. It is smooth sanded on one face and lightly textured on the other.

Master board performance – Master board is Class O to the building regulations.Class 1 surface spread of flame and in the event of fire, it will not give off toxic smoke or gases. Master board can be used to provide fire protection using the specifications shown on pages 2, 5 and 8. Master board has low alkalinity and resists attack by most chemical fumes, it is unaffected by brine, chlorine solutions and urine. However, it is an absorbent board and should be protected where concentrations are likely to occur. Master board resists attack by insects, termites and vermin. It will not nourish mould growth but can absorb matter that will. Master board can be steam-cleaned if required. Master board will not swell or sarp and the effects of free water will not cause deterioration of most decorated surfaces. It can be used in external locations sheltered from direct rainfall or as a weathering membrane provided an impermeable coating is applied to prevent the ingress of water. Master board provides a degree of thermal insulation and is an ideal support for thermal insulation materials in the lining of industrial and agricultural buildings. Master board is compatible with all common building materials, but will absorb the oils used in mastic compounds unless suitably protected. Master board is light and easy to handle, it is easy to cut with normal woodworking tools and can be nailed without predrilling or screwed into position. It is a durable material and will not break easily or shatter if struck whilst nailing."

10. Among the various uses shown in the product literature are that it could be used as a ceiling linings, partitions, fire doors, masonary and stud wall linings, external sofit linings, ducks and dye coverings, shop fittings, display and stand fitting, industrial and agricultural linings. From the reading of the entire product literature, it is very clear that the Master board has multipurpose uses and is not exclusively used for fire protection doors. The appellants contend that the predominant content is calcium silicate and therefore, the item has to be classified under [sub-] heading 3823.90 of CTA. This plea of the appellants has been negated by the Collector (Appeals) in both the cases and has held that the item is rightly classifiable under Heading 68.08 and that they have also applied Rule 3(b) of General Rules of Interpretation of Tariff Schedule. Shri Lakshmi Kumaran has argued that Heading 68.08 can be applied only if there is predominance of vegetable fibre which is not so in the impugned product. On the other hand, the learned DR has submitted that Chapter 38 comes under Section XIII which covers articles of glass, plates, cement, asbesto, mica or other similar matters; Ceramic Product, Glass and glassware and therefore, the description being very specific, the classification under [Heading 68][3] is appropriate and correct. In order to consider the claim of the parties, it is necessary to go through the rival entries mentioned below -

“Chapter 38 - This Chapter does not cover

(a) Separate chemically defined elements or compounds with exception of the following -

(1) Artificial graphite (Heading No. 38.01)

(2) Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plantgrowth regulators, disinfectants and similar products, put up as described in Heading No. 38.08;

(3) Products put up as charges for fire-extinguishers or put up in fire-extinguishing grenades (Heading No. 38.13)

(4) Products specified in Note 2(a) or 2(c) below.

(b) Mixtures of chemicals with foodstuffs or other substances with nutritive value, of a kind used in the preparation of human foodstuffs (generally Heading No. 21.06)

(c) Medicaments (Heading No. 30,00)

As can be seen from the rival entries, Chapter 38 refers to Miscellaneous Chemical Products. A reading of sub-heading 38.23 clearly indicates that it refers to prepared binders, foundry moulds or coarse; and chemical products and preparations of chemical and allied industries. The product in question is neither a binder nor a foundry mould nor it is chemical product and traded as such. It is also not commercially known as a chemical product. As can be seen from the product literature, the supplier has been trading as a board and therefore, the product not having been traded as chemical product and identified as such, cannot be brought under this sub-heading . Therefore, the reasoning given by the lower authorities for excluding Chapter 38 is correct and it is not at all appropriate to the impugned goods. Further, it has to be observed that Shri Lakshmi Kumaran did not seriously press for this heading and ultimately contended that the appropriate heading would be 2815 . The learned advocate cited the order passed by this Bench in their own case in order No. 268/87-C dated 6-4-1987. This pertains to erstwhile tariff and even as can be seen in this order, the appellants’ claim for classification under Chapter 38 has been negatived on the ground that [sub-] heading 3801.90 is a residuary heading and Heading 68.01/16 (1) of the Customs Tariff Schedule which reads “articles of other mineral substances not elsewhere specified” was held to be more appropriate. It has to be noted that there is a vast change in the present tariff and therefore, it will not be correct to hold that the order No. 268/87-C rendered under old tariff applies to this case. As has been noted, Chapter 68 deals with articles of glass, plastic, cement, asbestos, mica and other similar products. The product in question is cellulose, mica, Chapter Heading 68.08 has the specific entries as “Panels, boards, tiles, blocks and similar articles of vegetable fibre, of straw or of shavings, chips, particles sawdust or other waste of wood, agglomerated with cement, plaster or other mineral binders". The importer has said that the product is not essentially made out of chemical fibre but of chemicals.

11. On the other hand, the Revenue has contended that calcium silicate is a binder and the essential characteristics to the product has been given by the foundry fibre. The Revenue has taken resort to Rule 3(b) of the Interpretation Rules of the Tariff. The Interpretation Rules 1 to 3 are given below -

“Classification of the goods in this Schedule shall be governed by the following principles.

1. The titles of Sections, Chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions -

2. (a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished articles has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), presented unassembled or disassembled.

(b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of
Rule 3.

3. When by application of Rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows -

(a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a[4]

(b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a) shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable.

(c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration".

Rule 3(b) has to be resorted to only when classification cannot be done by virtue of Rule 3(a). As we have stated that Chapter 38 is not at all appropriate and that the Tribunal has also expressed its view on the erstwhile Tariff, in the above referred order No. 268/87-C, therefore, the question of resorting to Rule 3(b) does not arise in this case in the first instance. As can be seen from Rule 1 read with Rule 3(a), the classification has to be determined according to the terms of the heading and in related Chapter or Section and placed in the most specific description than a general heading. The impugned product has come out in the form of a Board and it is completely identifiable as such. Therefore, the question of its classification as a mixture of two or more products does not arise. In the circumstances, the description of the product as Board, which has been made from the cellulosic fabric agglomerated with mica and calcium silicate, is more specific than to consider it as a mixture of different materials or as a chemical product. The Heading 68.15 which refers to articles of stone of other mineral substances (including articles of peat) not elsewhere specified or included, is not a specific description of the impugned product and therefore, does not fit in.

12. The description of the product, as has been noted from the product literature, as well as the manner in which the product has been traded and commercially known, is ‘Master Board’. The Board is clearly mentioned under Heading 68.08 and therefore, we have to uphold the reasoning given by the learned Collector (Appeals). The observations made in para 8 of the ruling rendered by Hon’ble Supreme Court in the case of Atul Glass Industries Ltd. & Others v. C.C.E. [1986 (025) ELT 473] is more appropriate to the facts of the present case and the same is relied by us. The para 8 is reproduced below -

“The test commonly applied to such cases is : How is the product identified by the class of section of people dealing with or using the product? That is a test which is attracted whenever the statute does not contain any definition. Porritts and Spencer (Asia) Ltd. v. State of Haryana [1978 (42) STC 433 = 1978(09)LCX0018 Eq 1983 (013) ELT 1607 (S.C.) ]. It is generally by its functional character that a product is so identified. In Commissioner of Sales-tax UP v. Macneill & Barry Ltd., Kanpur [1985 (2) Scale 1093 = 1985(11)LCX0020 Eq 1986 (023) ELT 0005 (S.C.) ], this Court expressed the view that ammonia paper and ferro paper, used for obtaining prints and sketches of site plans could not be described as paper as that word was used in common parlance. On the same basis the Orissa High Court held in State of Orissa v. Gestetner Duplicators (P) Ltd. [1974 (33) STC 333] that stencil paper could not be classified as paper for the purposes of the Orissa Sales Tax Act. It is a matter of common experience that the identity of an article is associated with its primary function. It is only logical that is should be so. When a consumer buys an article he buys it because it performs a specific function for him. There is a mental association in the mind of the consumer between the article and the need it supplies in his life. It is the functional character of the article which identifies it in his mind. In the case of a glass mirror, the consumer recalls primarily the reflective function of the article more than anything else. It is a mirror, an article which reflects images. It is referred to as a glass mirror only because the word glass is descriptive of the mirror in that glass has been used as a medium for manufacturing the mirror. The basic or fundamental character of the article lies in its being a mirror. It was observed by this Court in Delhi Cloth and General Mills Co. Ltd. v. State of Rajasthan & Ors [1980 (3) SCR 1109 = 1980(05)LCX0004 Eq 1980 (006) ELT 0383 (S.C.) ] which was a case under the Sales-tax law -

“

In determining the meaning or connotation of words and expression describing an article or commodity the turnover of which is taxed in a sales tax enactment, if there is one principle fairly well settled it is that the words or expressions must be construed in the sense in which they are understood in the trade by the dealer and the consumer. It is they who are concerned with it and it is the sense in which they understand it that constitutes the definitive index of the legislative intention when the statute was enacted."

That was also the view expressed in Geep Flashlight Industries Ltd. v. Union of India and Others [1985 (022) ELT 3]. Where the goods are not marketable that principle of construction is not attracted. Indian Aluminium Cables Ltd. v. Union of India and Others [1985 (3) SCC 284 = 1985(05)LCX0012 Eq 1985 (021) ELT 0003 (S.C.) ]. The question whether thermometers, lactometers, syringes, eye-wash glasses and measuring glasses could be described as ‘glassware’ for the purpose of the Orissa Sales Tax Act, 1947 was answered by the Orissa High Court in the State of Orissa v. Janta Medical Stores (1976 37 STC 33) in the negative. To the same effect is the decision of this Court in Indo International Industries v. Commissioner of Sales-tax, Uttar Pradesh [1981 3 SCR 294 = 1981(03)LCX0011 Eq 1981 (008) ELT 0325 (S.C.) ] where hypodermic clinical syringes were regarded as falling more accurately under the entry relating to ‘hospital equipment and apparatus’ rather than under the entry which related to ‘glasswares’ in UP Sales Tax Act."

13. The appellants have cited the ruling of Bhor Industries Ltd. case (supra). In this case, the Court has held that Marblex tiles, articles made of plastic material constituted only 10% - 15% of the product and it did not constitute the particular ingredient of tiles and acted only as a binding agent. Hence, it was held as not classifiable under Item 15A(2) of the erstwhile Tariff. As we have observed, this ruling is under the old tariff which is not appropriate and specific to the product in question under new tariff.

14. In the case of Khandelwal Metals case (supra), the matter pertained to imposition of additional customs duty in accordance with Section 3(1) of the Customs Tariff Act. This ruling is not pari materia with the present case. The learned DR referred to L.M. Van Diamond Tools India Ltd. case (supra). In this case, the Bench has held ‘since we have found that the goods could be classified with the aid of headings, sub-headings, section notes and chapter notes, there is no necessity to turn to the rules of interpretation of the Tariff Schedule. This ruling is more appropriate to the reasoning adopted by us. There is no merit in these appeals and the appellants contentions have to be rejected by upholding the reasoning given by the Collector (Appeals) in the impugned orders. Appeals dismissed.

Equivalent 1992 (62) ELT 642 (Tribunal)