Thermax Ltd. vs Collector of Customs>1992(12)LCX0008

1992(12)LCX0008

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

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

THERMAX LTD.

Versus

COLLECTOR OF CUSTOMS

Order No. C/560 and 561/92-D, dated 23-12-1992 in C/Appeal Nos. 2127/89 and 1408/90-D

Cases Quoted

Geep Flashlight Industries Ltd. v. U.O.I. - 1984(08)LCX0021 Eq 1985 (022) ELT 0003 (SC) [Paras 4, 8, 11]

Sunrise Electric Corporation v. Collector -
1983(08)LCX0067 Eq 1983 (014) ELT 2465 (Tribunal) . [Para 5]

Premier Tyres Ltd. v. Collector - 1983(12)LCX0019 Eq 1984 (016) ELT 0419 (Tribunal) [Para 5]

Mahindra Engg. & Chemical Products Ltd. v. U.O.I. – 1992(01)LCX0028 Eq 1992 (058) ELT 0161 (S.C.) [Paras 8, 11]

Atul Glass Industries Ltd. v. Collector - 1986(07)LCX0018 Eq 1986 (025) ELT 0473 (SC) [Paras 8, 11]

Bradma India Ltd. v. Collector - 1990(07)LCX0054 Eq 1990 (050) ELT 0533 (Tribunal) . [Para 8]

Lantif Plastics v. Collector - 1992(01)LCX0038 Eq 1992 (060) ELT 0603 (Tribunal) [Para 8]

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

Shri J.N. Nair, D.R., for the Respondents.

[Judgment per : S.L. Peeran, Member (J)] - In both the appeals, common question of law and facts arises. Hence they are taken up together for disposal as per law.

2. E/Appeal No. 2127/89-D - In this appeal, the importer had filed three refund claims for refund of excess Customs duty paid on ‘Filter Bag spares’ and Filter Bags Woven Type Glass’ which had been assessed under Heading No. 7019.00 of Customs Tariff Act in the bill of entry. They had sought refund claiming benefit of Notification No. 69/87-Cus., dated 1-3-1987. The learned Assistant Collector in the order-in-original has held that the exemption under the said notification is not to importers as the notification is available to those parts covered under Heading 98.06 of the Schedule to Customs Tariff Act, while the importers had cleared the goods under Heading 7019.00. On appeal, the learned Collector held that the appellant had not raised the issue of classification before the lower authorities and hence new ground raised in the appeal stage is not entertainable.

3. C/Appeal No. 1408/90-D - In this appeal, the importer had imported Filter bags of Fibre glass and filed Bill of Entry. The same was assessed under Heading 9806.00 of the Schedule to Customs Tariff Act, 1975 by applying Note 1 of Chapter 98. The Assistant Collector held the item to be parts of machine covered under Heading 8421.29 of the said schedule. However, he has denied the benefit of the Notification No. 69/87-Cus., dated 1-3-1987 by virtue of exclusion provision (xiv) to this notification amended by Notification No. 52/88 dated 1-3-1988 which excludes articles made of glass. However, the benefit of Notification No. 69/87-Cus., dated 1-3-1987 as amended was extended to the importer. The learned Collector (Appeals) has also rejected their appeal. The learned Collector has held that while Filter bags which are used to prevent harmful materials i.e. tar, gases, dust etc. from escaping into air and are classified under Heading 8419, the Chapter Note 1(c) to Chapter 84 excludes articles of glass from being classified thereunder. The appellants have contended in Appeal No. 2127/89-D that they had originally claimed the benefit of Notification No. 69/87 and that they had claimed the imported item as parts falling under Heading 98.06 of the Customs Tariff Act.

4. In Appeal C/1408/90-D, it is contended that the learned Collector should have also taken into consideration Note 7(d) of Chapter 98 while referring to Note 1 to Chapter 98. Referring to these Chapter notes, they contend that while in terms of Chapter Note 1, all parts of machineries even though covered elsewhere in the Chapters are to be taken to have been classified under Chapter Heading 98, but Note 7 provides for certain exclusions. In other words, powers have been given to the Central Government to exclude certain categories of goods from the purview of Chapter Heading 98.06 and in exercise of the said power under Chapter Note 7(d), Notification No. 257/88 dated 21-9-1988 had been issued. It is stated by them that it is never the intention of the Government to cover the items covered in the proviso to Notification No. 69/87 under Heading 98.06. They submit that both the notifications are required to be read in conjunction and not in isolation. They further state that if certain items were excluded from Heading 98.06 by virtue of Notification No. 257/88 which cover the same goods which are covered under the proviso to Notification No. 69/87, then it would be incorrect to hold that earlier these goods were covered under Heading 98.06 and benefit of Notification 69/87 would not be available. They further state that the intention of the Government to charge 15% less on components of machineries has also to be looked into while interpreting the Notification 69/87. They submit that the article filter bag is obtained after several processes from Glass to Glass fibre, then to yarn, then to fabric, then specially treated fabric and from which the item filter bag is obtained and therefore filter bag cannot be considered as an article of glass. The item is known as filter bags and not as glass filter bags and in common parlance it is not known as articles of glass. They rely on the ruling of the Hon’ble Supreme Court as decided in Geep Flash Light Industries Ltd. v. U.O.I. as reported in 1985 (022) ELT 3.

5. We have heard Shri V. Lakshmi Kumaran, learned advocate for the appellant and Shri J.N. Nair, learned JDR for the revenue. Shri V. Lakshmi Kumaran, learned advocate submitted that in C. 2127/89-D, although the original assessment was in Chapter 70 and the importer in the refund claim had claimed the benefit of Notification No. 69/87, it meant that they had also asked for reclassification under sub-heading 9806, as the Notification 69/87 dealt with this heading only. Therefore, the non-mentioning of reclassification in refund claim is not fatal. He submitted that the item being a part of a machinery, it falls under sub-heading 8421.39, and hence the item is required to be classified under sub-heading 9806 by virtue of note of the said heading. He relied on the ruling of Sunrise Electric Corporation Bombay v. CC Bombay as reported in 1983(08)LCX0067 Eq 1983 (014) ELT 2465 and in the case of Premier Tyres Ltd. Kala Massey v. CC Madras as reported in 1984 (016) ELT 419 to buttress his arguments that appellants are not barred to raise the question of correct classification and it could not be raised even at appellant stage.

6. Shri J.N. Nair, learned JDR replying to the arguments of Shri V. Lakshmi Kumaran submitted that in C. 2127/89-D, the party had sought clarification under Chapter 70. The invoice also does not show the item as part of machine but it refers as spare and therefore the classification under Chapter 70 has to be upheld. Even in refund claim, they had not claimed the item as part of a machine and no reclassification was also sought in the refund claim. Thus non-pleading of facts pertaining to the item being parts of machinery is fatal to the case. Therefore, the classification made under Heading 7019.90 of the schedule of Customs Tariff Act as articles made of fibre glass, is a correct one and the claim requires to be rejected as also because in refund claim, reclassification under Heading 9806 of Customs Tariff Act was also asked by the importer.

7. Shri V. Lakshmi Kumaran arguing for appeal C. 1408/90-D contended that the item in this appeal also requires to be classified under 8421.39 of Customs Tariff Act and in view of Note 1 of Chapter 98, the item requires to be classified thereunder. The machinery in which this part is used is classifiable under Chapter 84 and as such the part would also fall in this heading. The finished goods and its parts would fall under 8421.39. There is no dispute in this appeal regarding the item being used as a part of finished machines.

8. The Collector (Appeals) rejected their case on the ground that item being an article of glass and the benefit of Notification No. 69/87 is not available in view of proviso XIV. He contended that the item is not an article of glass but composite article. In this context he relied on the ruling of Geep Flash Industries rendered by Hon’ble Supreme Court (supra), Mahindra Engineering and Chemical Products Ltd. v. U.O.I, and Others as reported in 1992 (058) ELT 161, Atul Glass Industries Ltd. v. CCC and Others as reported in 1986 (025) ELT 473. Shri J.N. Nair replying to the arguments of Shri V. Lakshmi Kumaran submitted that the Section XIV of the tariff excludes articles of glass from the Chapter 84. The article is made from fibre glass and fibre glass is a glass and hence the classification under Chapter 70 is proper. He relied on the ruling rendered in the case of Bradma India Ltd. v. CCE as reported in 1990 (50) E.L T. 533 and that of Lantif Plastics v. CCE as reported in 1992 (060) ELT 603.

9. We have carefully considered the submissions of both the sides and perused the record. The correct classification of the product in question, namely, “Filter bag spares and Filter bags woven type glass” will determine the eligibility of the notifications in question. The lower authorities have classified the product under sub-heading 7019.90 as ‘other’, sub-heading 7019 has the description ‘Glass fabrics (including glass wool) and articles thereof (for example, yam, woven fabrics). We have to see as to whether the products fits into this description. If not can the rival claim of party for classification under sub-heading 8421.39 of the CTA and in view of Note 1 of Chapter 98, does the product require to be placed under sub-heading 9806 of the CTA can be considered.

10. The finding given by the learned Collector (Appeals) in 1408/90-D is reproduced below :-

“I have gone through the written and oral submissions made by the appellant and find that while Filter Bags which are used to prevent harmful materials i.e. tar, gases, dust etc. from escaping into air and are classified under 8419, the Chapter Note 1(c) to Chapter 84 excludes articles of glass from Note 1C to Chapter 87.

“Laboratory glassware (Heading No. 70.17); machinery, appliances or other articles for technical uses or parts thereof, of glass (Heading No. 70.19 or 70.20)”.

Tariff Heading 8421 covers centrifuges, filter or purifying material and apparatus for liquids and gasses. The Explanatory Notes has enumerated the various types of gas filters and purifiers. Their main object is to separate solid or liquid particles from gasses and either to recover products of value (i.e. coal dust, metallic particles etc.) or to eliminate harmful materials from gasses or smoke fumes. The filters and purifiers are known by the principle adopted. One such principle is the removal or separation by physical or mechanical means. Again in this category there are two types. In the first type as in liquid filters, the separating element consists of a porus surface or mass (felt, cloth, metallic spunge, glass wool, etc.). In the second type, the separation is achieved by suddenly reducing the speed of the particles drawn along with the gas and they are then collected by gravity. The filters imported are known as Bag Filters and these have been described on page 1183 of the Explanatory Notes as under :-

‘Bag filters. These consist of a series of bag shapes cloth filtering elements, and often incorporate a shakar mechanism to cause the trapped particles to fall through the bottom of the bags.’

In view of the Chapter Note it appears that while Bag Filters made of polyster etc. will be classified under 8421, the Bag Filters which are made of glass fibre etc. will be covered by Chapter 70.

This is also otherwise mentioned in the Chapter Note of Chapter 84. In the Compendium of Classification opinions brought out by Customs Co-operation Council it has been mentioned that Air Purifying Filters ready for use will merit classification under 7019.90. However, while including Chapter 98 in the Customs Tariff with effect from 1-3-1987, the Government had clarified that the intention is to subject the parts of various machines falling under Chapters 84,85,86 etc. to uniform rate of duty. Therefore, even if a particular part merits classification under a specified heading in the Customs Tariff, that part will be classified under Heading 9806 and not under the specific entry.

Being an article of glass the benefit of Notification No. 69/87 is not available. Notification No. 69/87 confers exemption on goods classified under 9806 excepting article made of glass. The item under consideration is basically made from glass, and therefore qualifies for being described as an article of glass. In view of proviso (xiv) to the notification the filter bags will not be entitled to the benefit of the aforesaid notification. The appeal is therefore rejected."

11. The learned Collector has given reasons for excluding the item under Chapter 84 and it is by virtue of Chapter Note 1(c). The learned advocate has argued that the item cannot be considered as an article of glass as the product has emerged from fibre glass and in the commercial parlance it is not known as an article of glass but it is known as a part of machinery falling under Chapter 84. We do not agree with this submission. The item will fall out of Chapter 84 by virtue of its Chapter Note 1(c). The reasons given by the learned Collector are quite reasonable and we adopt the same. The reason for including the product under sub-heading 70.19 is strengthened more by reading the explanatory notes under “Harmonised Commodity Description and Coding System” Vol. 3 of Chapter 70.19. At page 984, under 70.19, it states that

“This Chapter includes glass fibre themselves and glass fibre (including glass wool as defined in Note 4 to this chapter) made up in various forms including those glass fibre articles excluded from other headings by their nature. Glass fibres have the following properties; they are flexible or animale textile fibre (glass yarn cannot be knotted easily); they do not stretch; they are strong (stronger than any of the textile fibres of Section XI); they do not burn; they do not rot and are resistant to water and most acids; they are a poor conductor of electricity and in some cases, of heat or sound, they are non-hygroscopic...”

“Glass fibres and articles of glass fibres of this heading may be, in particular, in following forms :-

(A) Glass wool in bulk;

(B) Slivers, rovings, yarn and chopped strands;

(D) This sheets (voiles) webs, mats, mattresses, boards and similar non-woven products.

This heading also covers curtains, draperies and other articles of woven glass fabrics." (underlines by us)

At page 944, the uses of glass fibres are given serial No. (6) states

“for the manufacture of miscellaneous other products such as : Filteraion products for air-conditioning or for the chemical industry brushes, wicks for lamps and lighters, cinema screens.”

The HCCN is having persuasive value. The description under sub-heading 70.19 clearly suggests that the products are appropriately classifiable under sub-heading 7019.90 and hence the classification adopted by the lower authorities is proper.

As we have upheld the order on merits, the other questions raising the additional grounds at appellate stage does not survive for consideration. The learned Counsel has relied on the rulings of the Supreme Court as in the case of Atul Glass Industries and Other; Mahindra Engineering & Chemical Products Ltd. and Geep Flashlight Industries Ltd. These decisions have been rendered under erstwhile Central Excise Tariff pertaining to Glass mirror. Arc Chamber and the entry ‘articles of plastic’. As the present case is under new Tariff, it is based on section note and Chapter notes. The products are specifically excluded by Note 1(c) of Chapter 84 and the entry 7019.90 is more specific and hence the classification made thereunder, is to be upheld.

In the result, we do not find any merits in these appeals and the same are dismissed.

Equivalent 1993 (66) ELT 255 (Tribunal)