1992(05)LCX0053

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

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

On Reference : Shri S.K. Bhatnagar, Vice President

RAWAL INDUSTRIES

Versus

COLLECTOR OF CUSTOMS

Misc. Order No. 107/91-C & Final Order No. 153/92-C, dated 4-5-1992 in Appeal No. C/1446/90-C

CASE CITED

SUPER TRADERS v. U.O.I. - 1982(09)LCX0008 Eq 1983 (012) ELT 0258 (DEL.) ................................. [PARAS 2, 3, 5, 7]

Advocated By : Shri M. Iqbal I. Khatri, Authorised Representative, for the Appellants.

Shri M. Jayaraman, S.D.R., for the Respondents.

[Order per : K.S. Venkataramani, Member (T)]. - The appellants herein imported in May, 1989 consignment of cellulose nitrate sheets and discs through Bombay Customs House and claimed exemption under Notification 226/76-Cus. for both these items. This notification exempts inter alia cellulose nitrate sheets, cellulose nitrate film falling under Chapter 39 Customs Tariff Act, 1975 (CTA) from so much of the duty as is in excess of 60%. On examination of the goods and inspection of the sample the Customs House took the view that C.N. discs are not covered by the exemption as aforesaid and after asking for the appellants explanation in the matter and hearing them personally, the Additional Collector, passed the impunged order dated 13-3-1989 holding that in the light of Chapter Note 10 of Chapter 39 CTA ‘75 and the corresponding Explanatory Note to HSN that the discs imported which are in circular form are more appropriately classifiable as articles of plastic under Heading 39.20 CTA and not as sheets under Heading 39.20 or 39.21 CTA and that the exemption under Notification 226/76 which is available to C.N. sheets cannot be extended to the discs imported. Hence the present appeal.

2. Shri Iqbal I. Khatri authorised representative appearing for the appellants submitted that C.N. Sheet in disc form is not an article ready for use as no consumer can use it directly as an article of plastic. He also relied upon the Delhi High Court decision in the case of Super Traders v. Union of India 1983 (012) ELT 258 wherein the Court held that stainless steel sheets in the form of circles are stainless steel sheets only. He further urged that similar goods were allowed clearance in the past under Notification 226/76 and that this general practice has been unlawfully changed without notice. The appellants also assailed the legality of the impunged order on the ground that the Addl. Collector had on 28-7-1989 already assessed the goods extending the exemption. The Asstt. Collector’s assessment order, argue the appellants, can only be reviewed as per law and there cannot be readjudication by the Addl. Collector. Shri Jayaraman the Ld. SDR contended that the invoice for the consignment shows that C.N. sheets and discs are separately described and invoiced and are priced differently, showing that the two goods are commercially distinct. The case law relating to stainless steel is also not relevant for determining classification under Chapter 39 CTA under the amended Tariff aligned to HSN. The Ld. SDR also pointed out that there was no infirmity in the Addl. Collector’s order of adjudiction as the B/E had not been released to the appellants at the Assistant Collector’s level and moreover the Addl. Collector had afforded ample opportunity to the appellants to put forth their case and has passed a speaking order which is correct in law according to the department.

3. The submissions made by both the sides have been carefully considered. The question is whether the cellulose nitrate discs imported are classifiable under Heading 39.20 CTA which covers

“Other plates, sheets, film, foil and strip of plastics, non-cellular, whether lacquered or metallised or laminated supported or similarly combined with other materials or not”

and whether the exemption under Notification 226/76 which covers C.N. sheets and films is applicable. The relevant Chapter Note 10 to Chapter 39 lays down the coverage of Heading 39.20 as follows :-

“In Heading Nos. 39.20 and 39.21 the expression ”plates, sheets, film, foil and strip" applies only to plates, sheets, films, foil and strip (other than those of Chapter 54) and to blocks of regular geometric shape, whether or not printed or otherwise surface worked, uncut or cut into rectangles (including squares) but not further worked (even if when so cut, they become articles ready for use)."

It is clear that sheet as per this chapter note is to be taken to apply only to sheets which have been cut into rectangles (including squares). The goods imported however, are neither in the shape of rectangles nor in shape of squares but are discs in circular shape. Therefore by virtue of Chapter Note 10 such-goods fall outside the scope of Heading 39.20 CTA. The Notification 226/76 also specifically covers C.N. sheets and films falling under Chapter 39 and as such C.N. sheets imported which do not fall under 39.20 CTA cannot be held to be eligible for the exemption. The Customs Tariff Act since 1985 has been aligned to the Harmonised System of Nomenclature (HSN) and as such it is now well settled that the Explanatory Notes to HSN do have a persuasive value though not statutory force. It is seen that the Additional Collector has considered HSN Explanatory Notes which indicate that sheets cut into shape other than rectangular are inter alia classifiable under Heading 39.26 which would appear to be well founded when it is seen that Heading 39.26 covers inter alia articles made of Cellulose nitrate falling under Heading 39.12. It is also observed that reliance on the Delhi High Court judgment in the case of Super Traders may not advance the appellants’ case because firstly the Court in that case was interpreting the erstwhile Tariff Schedule based on Customs Co-operative Council Nomenclature (CCCN) which has since been replaced by the Harmonised System of Nomenclature, secondly it was with reference to a different chapter relating to stainless steel and not plastics with which we are concerned in the present case, and thirdly the Court was interpreting Chapter Note 1(n) of Chapter 73 according to which the term sheets in that chapter is to be taken to apply to sheets which have been cut to non-rectangular shape and the Court held that stainless steel sheet circle imported in that case should mean sheet cut to non-rectangular shape. As it has been seen the chapter Note 10 to Chapter 39 with which we are concerned is differently worded. It is also significant that the supplier has invoiced and priced the C.N. discs differently from C.N. sheets which indicates commercial distinction as between the two products even as per supplier’s invoice. It is, further observed that duty has been paid on the consignment and the goods cleared only subsequently to the adjudication of the case by the Additional Collector in which the appellants had been heard, made further submissions after hearing, and a detailed speaking order had been passed. It has also not been shown that an order for clearance of the goods under Section 47 of Customs Act had been passed by the proper officer following any earlier assessment of the goods. Hence the appellants’ arguments regarding the legality of the Addl. Collector’s order do not have much force. The fact that there had been clearances in the past of the goods with exemption under Notification 226/76 will not be a bar to the revenue authorities correcting a mistake. In the circumstances the Additional Collector’s order is well-founded and is upheld. The appeal is rejected.

4. [Order per : S.L. Peeran, Member (J)]. - The appellants are actual user having small scale unit for manufacturing Table Tennis ball of ‘Milano’ brand. They have imported Cellulose Nitrate in flat form of thickness 0.45 mm for manufacturing table tennis ball as a raw material. They have contended that International standard size of Table Tennis ball being manufactured from International standard size of C.N. Sheet Discs differs from C.N. Sheet of cut length in square form by being in circle form only. They were importing C.N. Sheet regularly in both the forms for several years and it was assessed for duty @ 60% plus 45% under Chapter 39.20 and concession granted under Notification No. 227/76-Cus. accepting both i.e. circle as well as square shapes under the form of ‘sheet’. The consignment in question was initially cleared by grant of exemption but however, an audit objection was raised and as a conseqence, the authorities initiated the proceedings and resulting in passing of the impugned order denying the exemption to the imported Cellulose nitrate sheet in discs shapes but granting it only to C.N. Sheet in circle shape.

5. The question that arises for consideration is as to whether C.N. sheet in disc shape and in circular form is an article of plastic falling under heading 3926.90 of Customs Tariff Act, 1975 or they are sheets falling under Heading 39.20 or 39.21 Customs Tariff Act and entitling for exemption under Notification No. 226/76-Cus., dated 2-8-1976? The Tariff Heading 39.20 of Customs Tariff Act and Note 10 to Chapter 39 have already been extracted in the main order. The learned Additional Collector in the impugned order has concluded after noting Chapter Note 10 of Chapter 39 of the Customs Tariff and HSN Note at page 554, 572 and 573 that the discs which are in circular form are more appropriately classifiable as article of plastic under heading 39.26 and benefit of exemption under Notification No. 227/76-Cus. available to C.N. sheets cannot be extended to C.N. Discs. He has also not accepted the Chief Controller of Imports & Exports, New Delhi’s classification dated 10-8-1989 cited by the importer. He has also rejected the ruling of Delhi High Court in Super Traders’ case reported in [1983 (012) ELT 258].

6. This finding of the learned Additional Collector is erroneous. The impugned goods cannot be treated as articles of plastics. An ‘Article’ is in a complete form capable of being put to immediate use and the customer identifies the article on the basis of its use like plastic bucket, tumbler etc. While the C.N. sheets in disc form cannot by any stretch of imagination be understood as an article of a plastic. As it is still in sheet form and it is a raw material for manufacturing Table Tennis balls. The Chapter Note 10 of Chapter 39 of Customs Tariff defines the expression as “Plastic film, foil and strip applies to plates, sheets, film, foil and strip (other than those of Chapter 54) and to blocks of regular geometric shape, whether or not, printed or otherwise surface worked, uncut or cut into rectangles (including squares) but not further worked (even if when so cut), they become articles ready for use”. The definition of plate given above applies to blocks of regular geometric shape. The C.N. sheet in disc form is in circular shape which is a regular geometric shape. In the definition there is a comma after the word ‘Geometric shape’. The explanation to plate ends there. The further words “whether or not printed is illustrative of the ‘geometric shape’. Circular shape in disc form is a regular geometric shape and the impugned goods not being an article of plastic for immediate use but are raw material waiting to undergo processes to become an article in the form of a Table Tennis ball will definitely be a sheet falling under Item 39.20 and entitling for exemption under Notification No. 226/76, dated 2-8-1976.

7. The analogy given by the Hon’ble Delhi High Court in the case of Super Traders and Another v. Union of India & Others reported in 1983 (012) ELT 258 at para 4, 5, 6 and 7 which are noted below, is applicable to the facts of this case.

“Iron and steel articles are covered under Chapter 73 of First Schedule to 1975 Act. Heading No. 73.15 relates to Alloy steel. Stainless steel being alloy steel falls under this heading. This much is common case.”

5. The plea of the petitioners is that as there is no mention of stainless steel in the form of circles to be found in Heading 73.15(2) (prior to the Amendment Act) the only sub-heading under which the petitioner’s imports could be covered would be the residuary one i.e. 73.15(1) i.e. not elsewhere specified. The respondent’s plea however, is that circle is nothing else but ‘sheet’ which is specifically mentioned in 73.15(2) and, therefore, it would be covered by sub-heading (2). We agree with the interpretation given by the respondents. Reference in this connection be made to clause (n) of Chapter 73 of the Schedule to the 1975 Act, which defines sheets, plates in heading inter alia to sheets or plates which have been cut to non-rectangular shape perforated...(emphasis supplied). Now Heading 73.15 requires two things, namely (a) that goods must be of alloy steel, stainless; (b) they must be in the form mentioned in Headings 73.06/7 to 73.14. Admittedly the goods of the petitioner are of stainless steel. 73.13 deals with sheets and plates of iron and steel. But sheets in terms of clause (n) of Note-1 of Chapter 73 is to be taken to apply to sheets which have been cut to non-rectangular shape. The petitioner is importing stainless steel circle which really means sheet cut to non-rectangular shape. So there does not seem to be any justification to say as to why stainless steel circles would not be included in 73.15(2) read with 73.13, Clause (n) of Note 1 of Chapter 73. Mr. Sen the learned counsel for the petitioner sought to urge that non-rectangular does not mean circle because there is no angle in the circles. According to the counsel non-rectangular only means that the form is not rectangular does not mean circle because there is no angle in the circles. According to the counsel non-rectangular only means that the form is not rectangular but that the form necessarily must have some angle, otherwise clause (n) of Note 1 is inapplicable. We cannot agree. Now when clause (n) says that sheets or plates are to be taken to apply to sheets which have been cut to non-rectangular shape we must give it the obvious meaning i.e. the shape which is not rectangular. The additional requirement urged by Mr. Sen that the shape must be in a form which must necessarily have an angle reads something extra not found in the definition. A non-rectangular shape may be in the form of circle, may be of a shape having different angles like being quadrangular or Hexagon. But on no reasonable interpretation of this definition while if exclude sheets cut in the form of circles. In this connection we may note that M.L. Jain J. in C.M. 2737/1982 in CW 1812/1982, decided on 26-8-1982 also took the view that non-rectangular shapes will include circular and sugar shapes. This view has our respectful concurrence. This view of ours finds powerful support from the manner in which international custom people and trading circles understand the meaning of this heading. In this regard reference may be made to the Compendium of Classification Opinions. The Compendium gives a Numerical list set out in the order of the headings of the Customs Cooperative Council on the advice of the Nomenclature Committee. Thus under the Heading 73.13 or 73.15 (as the case may be) sheets or plates of iron or steel for boiler or tank bottoms, or ends include sheets or plates of iron or steel cut to circular shape but not further worked. This will show that in the international trade sheets or plates of iron or steel cut to circular shape will be included under Heading 73.13 or 73.15. There is no reason why for our Indian Customs Sheets should not include sheets or plates cut to circular shape also. It is significant to note that the First Schedule to 1975 Act is broadly based on the Brussels Tariff Nomenclature, though some of the individual headings have been merged or sub-divided to accord with the pattern of Indian import trade. The entries in the Schedule are common because without it international trade would suffer serious problems in being able to tax and identify various articles. As a matter of fact many a article bear lower rates of duty by virtue of General Agreement on Tariff and Trade (GATT). In that context the fact that international customs opinion describe sheets and plates under 73.15 to include sheets cut to circular shape would be a very strong reason not to interfere with the findings of the authorities under the Customs Act which have taken the view that stainless sheets would include stainless steel circles also.

6. Mr. Sen urged that whenever the legislature wanted to include circles under any heading it say so specifically and refers us to Items 27 and 26A of the First Schedule of the Central Excises and Salt Act, 1944. Item No. 27 of Aluminium under clause (b) contains the description of manufacture of plates, sheets, circles mentioned separately. Similarly, Item No. 26A dealing with copper and copper alloys contains the description of the plates, sheets and circles separately. The suggestion is that as sheets, circles are separately mentioned, sheets cannot include circles. We are unable to agree.

7. It is no doubt true that in these two articles of the Excise Act, both sheets and circles are described separately, but then the description of an article under the Excise Act cannot be taken as converging and determining the meaning of the said item under the Customs Act. Mere fact that sheets and circles have been defined separately does not necessarily mean that sheets under the Customs Act cannot be said to include circles. In this connection, one cannot ignore that under Chapter 73 Note 1(n) specifically has said that sheets are to be applied to sheets cut to non-rectangular shape making it clear that the legislature meant to include circles under the heading of 73.15 (2). It is also of interest to note that both under Items 26A and 27 of the First Schedule of Excise Act the rate of duty is the same for the sheets and circles being Rs. 2000 per MT and Rs. 1450/- per MT respectively. We are mentioning this to show that even though sheets and circles have been defined separately, nevertheless the rate of duty on both forms i.e. sheets and circles is identically the same. If any inference is suggested to be drawn from the fact that sheets and circles are separate items because they are mentioned separately in the Excise Act as was suggested by the counsel for the petitioners and equally plausible inference can be drawn as suggested by counsel for the respondents by urging that as both sheets and circles are subject to the same rate of duty under the Excise Act, it should stand to reason that on same analogy the same rate of duty would be applicable to the sheets and circles under the Customs Act also. We need not however, pursue this line under the Excise Act as we are quite satisfied as discussed above, that stainless steel circles are included in Heading 73.15(2) of First Schedule to Import Tariff. Of course, after the amendment 15 of 1982 has come into force not even this argument is available because circles are now specifically mentioned in Heading 73.15(2)."

8. In view of my reasoning, I am inclined to allow the appeal with consequential relief if any. Ordered accordingly.

In view of the separate orders recorded by the two Members, the following point of difference has arisen :

“Whether cellulose nitrate discs imported in this case are classifiable under Heading 39.20 CTA, 1975 as sheets and whether the exemption under Notification 226/76 will be applicable thereto, or whether the goods are classifiable under Heading 39.26 as articles of plastics and as such ineligible for exemption.”

The point of difference is referred to the President in terms of Section 129C(5) of Customs Act, 1962.

9. [Order per : S.K. Bhatnagar, Vice President]. - This matter has been referred to me by the Hon’ble President in view of the difference of opinion between Hon’ble Member (Technical) and Hon’ble Member (Judicial) on the following point,

“Whether cellulose nitrate discs imported in this case are classifiable under Heading 39.20 CTA, 1975 as sheets and whether the exemption under Notification 226/76 will be applicable thereto, or whether the goods are classifiable under Heading 39.26 as articles of plastics and as such ineligible for exemption.”

10. I have thereupon heard the appellant and the respondent and also gone through the orders passed by my two learned colleagues.

11. During the course of hearing both the appellants and respondents have reiterated their respective points of view as urged by them before the Regular Bench of the above two Members.

12. I observe that finally a question has arisen whether the cellulose nitrate were eligible for the benefit of Notification 227/76-Cus. The Notification No. 227/76-Cus. covers cellulose nitrate sheets and cellulose nitrate films and therefore the point to be considered is whether the item which is undisputably consists of Cellulose and discs are covered by this exemption.

13. In this connection both the sides have referred to Chapter 39 CTA’ 75 the Chapter Note 10 and Heading 39.20 CTA.

14. I observe that Chapter Note 10 to Chapter 39 lays down the coverage of Heading 39.20 and covers only those plates, sheets, films, foils and strip (other than those of Chapter 54 and to the blocks of regular geometric shape, whether or not printed or otherwise, uncut or cut into rectangles and not further worked.

15. It is therefore apparent that the term ‘sheet’ as per this Chapter Note applies only to those which have been cut into rectangles (including squares). The goods imported are circular industrial discs; they are neither rectangles nor squares. Therefore by virtue of Chapter note these goods apparently fall outside the scope of Heading 35.20 CTA. The Notification 226/76 specifically covers sheets and films falling under Chapter 39 and as such imported discs are not eligible for the benefit of this notification. I am therefore in agreement with the views expressed by Hon’ble Member (Technical) for the reasons mentioned in detail in his order with which I entirely agree. The reference is answered accordingly. The file may now be sent to the Regular Bench for communicating the order of the Tribunal as per majority opinion.

16. The impugned order of the Additional Collector is upheld and the appeal is rejected as per the majority view above.

Equivalent 1992 (62) ELT 727 (Tribunal)