Towa Ribbons Pvt. Ltd. vs Collector of Customs>1992(10)LCX0041

1992(10)LCX0041

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

S/Shri G.P. Agarwal, Member (J) and N.K. Bajpai, Member (T)

TOWA RIBBONS PVT. LTD.

Versus

COLLECTOR OF CUSTOMS

Order No. 317/92-C, dated 23-10-1992 passed in C/Appeal No. 2493/91-C

CASES CITED

Atul Glass Industries Ltd. v. Collector — 1986(07)LCX0018 Eq 1986 (025) ELT 0473 (S.C.) [Paras 9, 16]

Steel Authority of India Ltd. v. Collector — 1987(01)LCX0020 Eq 1987 (029) ELT 0136 (Tribunal) [Para 9]

Collector v. Modern Roofings Ltd. — 1989(08)LCX0014 Eq 1990 (045) ELT 0174 (Tribunal) [Paras 9, 16]

Collector v. K. Hargovindas & Co. — 1986(12)LCX0066 Eq 1987 (029) ELT 0975 (Tribunal) [Para 9]

L.M. Van Moppes Diamond Tools India Ltd. v. Collector — 1986(02)LCX0033 Eq 1986 (024) ELT 0623 (Tribunal). [Para 10]

Collector. v. V.K. Mohan & Co. Exports — 1989(09)LCX0088 Eq 1989 (043) ELT 0811 (S.C.) [Para 11]

Dunlop India Ltd. v. UOI — 1975(10)LCX0016 Eq 1983 (013) ELT 1566 (SC) [Paras 11, 16]

TELCO v. Collector — 1990(04)LCX0073 Eq 1990 (050) ELT 0571 (Tribunal) [Para 14]

Advocated By : Shri S.D. Nankani, Advocate, for the Appellants.

Shri L.N. Murthy, JDR, for the Respondents.

[Order per : N.K. Bajpai, Member (T)]. - This is an appeal against the orders of the Collector of Customs (Appeals), Bombay holding that goods described as “Correctable Film Ribbons Jumbo Rolls” imported by the appellants had correctly been classified by the Assistant Collector of Customs, Air Cargo Complex, Sahar, under Heading No. 3920 of the Customs Tariff Act, 1975. He has rejected the appeal for classification of the subject goods under Heading 96.12 as “Typewriter or similar ribbons”.

2. Briefly stated, the facts relevant for disposal of the appeal are that the appellants had imported a consignment of 5 Rolls of “Correctable Film Ribbons Jumbo Rolls 660 mm wide” from London in February 1990 and claimed their assessment under sub-heading 9612.10. On a test of the representative sample, the Chemical Examiner reported them to be “.......a film of polyethylene coated on one side with carbon.” After .issuing a show cause notice and considering their representation and hearing them, the Deputy Collector passed an order, the relevant portion of which is as under :-

“.......heading 96.12 covers typewriter or similar ribbons etc. and the subject goods cannot be treated as ribbons. The importers have contended that these films will be slit and subjected to further processing and then typewriter ribbons would be made. The classification of imported goods is to be decided depending on the form in which the goods are imported and not by their end use or final shape that may emerge after further processing and manufacturing activity. In the instant case the goods are only in sheet/film form and typewriter ribbons would have to be made after much manufacturing activity. Hence the goods are not classifiable under Heading 96.12. The goods are correctly classifiable under Heading 39.20.”

“I have also examined the sample of the subject goods and find that these may be called polyethylene films coated on one side with carbon. Hence as regards I.T.C. restrictions these fall within the ambit of entry 404 of Appendix 3, Part A, April-March 1988-91 (Import Policy). In view of this entry a specific licence is required which has not been produced by the importer and the goods cannot be allowed clearance under OGL Appendix 6. Therefore, the import is unauthorised under the provisions of Section 111 (d) of the Customs Act read with Section 3 of the Imports & Exports (Control) Act.”

3. In view of the above, the Deputy Collector ordered confiscation of the goods under Section 111(d) and gave an option to clear them on payment of a fine of Rs. 20,000 in lieu of confiscation. On appeal Collector (Appeals), while upholding the classification of the goods under Heading 39.20, remanded the matter to the Deputy Collector for fresh adjudication after giving adequate opportunity to the appellants to explain their case, because the Deputy Collector went beyond the scope of the show cause notice inasmuch as, while the allegation in the notice was that the goods were hit by entry 587A of Appendix 3A of the import policy for 1988-91, the Deputy Collector held that the goods fell within the ambit of Serial No. 404 of Appendix 3A of the policy.

4. The appeal before us has been made on both counts - the question of classification as well as licence. Although the Deputy Collector has issued a fresh show cause notice to the appellants for deciding the validity of the import under the OGL, the matter has not proceeded further before the Deputy Collector, in view of the present appeal to the Tribunal.

5. We have heard Shri S.D. Nankani, the learned Counsel for the appellants and Shri L. Narasimha Murthy, the learned Departmental Representative.

6. On the question of import licence Shri Nankani merely stated that Collector (Appeals) as well as the Deputy Collector objected to the clearance of the goods under the OGL on the basis of their finding with regard to classification of the goods under the Customs Tariff Act. He submitted that the Tribunal should, therefore, go into that part of the order of Collector (Appeals) too and set it aside after accepting the appellants plea for classification of the goods under Heading 96.12 as typewriter ribbons.

7. Shri Nankani’s main argument on the question of classification of the goods is that because the plastic film has been coated with carbon, “it has been prepared for giving impression, whether or not in spools or catridges” and has acquired the special character of typewriter ribbons in view of the provisions of Rule 2 (a) of the General Rules for the Interpretation of the Customs Tariff. He tried to explain that once the polyester film is inked, it becomes unsuitable for any other use and the process of inking imparts to it its essential character of a typewriter ribbon. He submitted that the authorities have laid undue emphasis on the physical dimensions and have overlooked the essential character of the goods. He also submitted that the description of the goods in the invoice as “Correctable Film Ribbons”, though in the form of Jumbo Rolls 660 mm wide, indicate the true nature of the goods imported. He went on to say that since the goods have been described as ribbons, there is no reason why they should be considered to be different and classified as Polyester Film under Chapter 39. The moment a Polyester Film is inked it becomes a ribbon for the purpose of giving an impression which is the attribute given to it in sub-heading 96.12.

8. Elaborating on his submissions, Shri Nankani explained with reference to the Explanatory Notes of the HSN for sub-heading 96.12 and read out the following portion from there to emphasis his point :-

“These ribbons are usually of woven textiles, but sometimes they are made of plastics or paper. To fall in the heading, they must have been inked or otherwise prepared to give impressions (e.g., impregnation of textile ribbons, or coating of plastics strip or paper with colouring matter, ink, etc.)

The heading does not cover

(a) Rolls of carbon or other copying paper strip, not suitable for use as typewriter, etc., ribbons, but designed to produce duplicate copies in accounting machines, cash registers, etc. This strip, which is usually much wider than typewriter ribbons (generally more than 3 cm in width) falls in Chapter 48.

(b) Ribbons not prepared by inking, impregnation, coating, etc., to give an impression, these are classified in Chapter 39, Section XI, etc., according to the constituent material.

9. He submitted that it is significant that ribbons not prepared by inking, impregnation, coating etc., to give an impression are excluded from the purview of Heading 96.12. Laying emphasis on the primary function of an article for the purpose of determining its classification under the Tariff, Shri Nankani referred to the decision of the Supreme Court in the case of Atul Glass Industries Limited & Others v. Collector of Central Excise & Others, [1986(07)LCX0018 Eq 1986 (025) ELT 0473 (S.C.)], which relates to classification of mirror. The Supreme Court had held the mirror was not glass and its classification had to be determined with reference to the ‘reflective function’ that it performed. He also cited the decisions of the Tribunal in the case of Steel Authority of India Limited v. Collector of Customs, Madras, [1987 (029) ELT 136], and Collector of Central Excise v. Modern Roofings Limited, [1990 (045) ELT 174], in which it was held that the functional character of an article had to be taken into consideration for determining its classification in the absence of any definition in the statute. He also referred to the decision of the Tribunal in the case of Collector of Customs, Bombay v. M/s K. Hargovindas & Co. [1986(12)LCX0066 Eq 1987 (029) ELT 0975 (Tri.) = 1987 (013) ECR 717], which related to the question of classification of skimmed milk powder as milk.

10. Arguing for the Department, Shri L.N. Murthy, the learned JDR submitted that the question of applying Rules of Interpretation would arise only when classification cannot be determined according to the terms of the headings and any relative Section or Chapter Notes. He, therefore, submitted that the reference to Rule 2(a) of the Rules of Interpretation by the learned Counsel for determining the essential character of the article was mis-placed. He cited paragraph-16 of the decision of the Tribunal in the case of L.M. Van Moppes Diamond Tools India Limited, Madras v. Collector of Customs, Madras, [1986 (024) ELT 623], and submitted that we have to first see whether the goods as imported can be classified under Heading 96.12 as typewriter or similar ribbons and it is only when we fail to do so that the question of referring to the Rules of Interpretation would arise. He submitted that the form in which the goods had been imported clearly showed that they were not ribbons and placed reliance on Explanatory Notes of the H.S.N. relating to the items excluded from Heading 96.12 which was as under :-

“Rolls of carbon or other copying paper strip, not suitable for use as typewriter, etc., ribbons, but designed to produce duplicate copies in accounting machines, cash registers, etc. This strip, which is usually much wider than typewriter ribbons (Generally more than 3 cm in width), falls in Chapter 48.”

11. Shri Murthy submitted that the above exclusion clause itself gives a clue that a typewriter ribbon would not be generally wider than 3 cm. Since the goods imported by the appellants are 660 mm in width, they clearly fall outside the purview of ribbons. He assailed Shri Nankani’s contention that undue emphasis has been laid on the physical dimensions of the goods and stated that in order to be known as ribbons, the film had necessarily to be narrow and of small width. One could probably take 3 cm width as a guideline on the basis of the Explanatory Notes quoted above. Moreover, Note 2(v) to Chapter 39 specifically excludes articles of Chapter 96 and what has been imported by the appellants not being a manufactured article gets excluded from the scope of Chapter 39. Referring to the scope of the expression plates, sheets, film etc. in Heading No. 39.20, Shri Murthy read out from Note 10 of the Chapter and submitted that even coated plastic film would be covered by Heading 39.20 under which the goods had been held to be classifiable by the lower authorities. He submitted that by virtue of this Note, plastic film whether or not printed or otherwise surface worked would be covered by Heading 39.20. He submitted that this would cover coated plastic films too. He also cited the decision of the Supreme Court in the case of Collector of Customs v. K. Mohan & Co. Exports, [1989 (043) ELT 811], in which the Court had held that plastic films had a clear commercial identity as films, and they could not, therefore, be brought within the wide and vague expression “other rectangular or profile shapes”. In the present case what had been imported was not typewriter ribbons which have a distinct identity but as coated plastic film and these were appropriately classified under Heading 39.20. He also submitted that an article at the time of import had to be taken into account for the purpose of determining its classification under the Customs Tariff and apart from relying on this decision (K. Mohan & Company Exports), he also cited the decision of the Supreme Court in the case of Dunlop India Limited of Madras Rubber Factory Limited v. Union of India & Others [1975(10)LCX0016 Eq 1983 (013) ELT 1566], paragraph-30 of which being relevant is reproduced below :-

“30. The relevant taxing event is the importing into or exporting from India. Condition of the article at the time of importing is a material factor for the purpose of classification as to under what head, duty will be leviable. The reason given by the authority that V.P. Latex when coagulated as solid rubber cannot be commercially used as an economic proposition, as even admitted by the appellants, is an extraneous consideration in dealing with the matter. We are, therefore, not required to consider the history and chemistry of synthetic rubber and V.P. Latex as a component of S.B.R. with regard to which extensive arguments were addressed by both sides by quoting from different texts and authorities.”

12. Shri Murthy’s submission was that the goods as imported are not known as typewriter ribbons. It is only after slitting them and subjecting them to further processes as detailed in the Manual submitted by the appellants that they would become typewriter ribbons. He, therefore, submitted that the goods were not classifiable under Heading 96.12 but under Heading 39.20 as decided by the lower authorities.

13. As regards the appeal against the order about import licence, Shri Murthy submitted that Collector (Appeals) had remanded the matter to the Deputy Collector for fresh adjudication and, in the absence of any order on this aspect, the question of the Tribunal hearing an appeal would not arise. In this view of the matter, he submitted that the appeal was liable to rejection on both counts.

14. Replying, Shri Nankani particularly mentioned that the appellants had specifically prayed before Collector (Appeals) not to remand the matter to the Deputy Collector and this fact finds mention in Ground No. (vii) on page 16 of their Memorandum of Appeal. He also referred to the decision of the Tribunal in the case of TELCO v. Collector of Customs, [1990 (050) ELT 571], which had been specifically mentioned by Collector (Appeals) in paragraph-9 of his order.

15. We have carefully considered the appeal and the submissions made at the hearing. So far as the question of permitting clearance of the goods under the Open General Licence is concerned, Collector (Appeals) has set aside the order of confiscation and remanded the matter to the Deputy Collector for fresh adjudication after complying with the principles of natural justice. He has recorded a finding that the Deputy Collector had travelled beyond the terms of the show cause notice in deciding that the goods fell within the ambit of Serial No. 404 of Appendix 3A of the Import Policy whereas the allegation in the show cause notice was that the goods were hit by Entry 587A of Appendix 3A. Since the order of confiscation has been set aside and the matter is to be decided afresh by the Deputy Collector, we do not consider that it is for us to decide the question of permissibility of import under the OGL. We, therefore, consider that the appellants must first subject themselves to the process of adjudication on this question before we can go into the matter. We, therefore, reject the submissions made on this point.

16. On the question of classification it appears to us that the matter is quite simple; even though the goods have been described in the invoice as correctable film ribbons jumbo rolls, the fact that they are 660 mm wide itself shows that they are not ribbons. In fact this point is recorded in the order of Collector (Appeals), where the appellants’ Counsel had admitted that the goods are raw materials for manufacture of catridge ribbons for electronic typewriters. Further, the Supreme Court’s decision in the case of Dunlop India cited supra by the learned SDR holds that the condition of the article at the time of importation is a material factor for the purpose of determining its classification for levy of duty. This being so, we do not consider that the case law cited by the learned Counsel about the primary function and functional character of an article in the case of Atul Glass Industries cited supra and Modem Roofings Limited cited supra has any application to the facts of the present case. During the hearing, the learned Counsel also had submitted that if the appellants had imported the goods of a width suitable for typewriter ribbon, the authorities could not have allowed their imports by treating them as consumer goods. This is a clear admission of the fact that the goods as imported are not typewriter ribbons even though they may perform the function of giving impression because of a carbon coating on one side. It further appears from page 107 of the Manual (A Guide to Printing Systems and Supplies) that manufacture of film ribbon catridges involves seven steps and, so far as the subject goods are concerned, the process would start from step No. 4 which is indicated below :-

“4. Slitting Jumbo roll

Slitting of jumbo film roll on slitting machine and winding of film ribbon directly onto the respective cores as well as the integration of start and end leaders and cut out foil. Result: Pancakes.

“5. Finishing

Manufacture of standardised catridges on assembly tables, semi-automatic devices or manufacturing robots.

Flow process: Insertion of individual parts such as springs, brakes, idlers, take-up spools, drive wheel etc. in cartridge. Insertion of pancake, threading of film ribbon and fixing onto take-up spool. Closing cartridge.

6. Final inspection

Final inspection of the functional characteristics on respective testing machines. Samples are also taken between the individual manufacturing stages and tested according to specific test standards.

7. Packaging

Machine packaging in cardboard folding boxes."

17. The 3 headings of Chapter 39 which have to be considered for purposes of determining the classification of the subject goods are 39.19,39.20 and 39.21. These are as under :-

“39.19 Self-adhesive plates, sheets, film, foil, tape, strip and other flat shapes of plastics, whether or not in rolls”.

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

“39.21 Other plates, sheets, film foil and strip of plastics”.

18. It will appear on a careful reading of these three headings that the subject goods would fall under Heading 39.20.

19. Note 10 to Chapter 39 which is as under defines the scope of Headings 39.20 and 39.21 :-

“10. In Heading Nos. 39.20 and 39.21, the expression ”plates, sheets, film, foil and strip" applies only 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)." (Emphasis added)

20. The position becomes clear from the Explanatory Notes of the HSN to Heading 39.20 which runs thus : (p. 572)

“This Heading covers plates, sheets, film, foil and strip of plastics, other than those of heading .39.18 or 39.19. It does not cover cellulor products or those which have been reinforced, laminated, supported or similarly combined with other materials (Heading 39.21). The heading also excludes strip or an apparent width of an apparent width not exceeding 5 mm (Chapter 54).

According to Note 10 to this Chapter, the expression “plates, sheets, film, foil and strip” applies only to plates, sheets, film, foil and strip and to blocks of regular geometric shape, whether or not printed or otherwise surface-worked (for example, polished, embossed coloured, merely curved or corrugated), uncut or cut into rectangles (including squares) but not further worked (even if when cut, they become articles ready for use, for example tablecloths). Plates, sheets, etc., whether or not surface-worked (including squares and other rectangles cut therefrom), with ground edges, drilled, milled, hemmed, twisted, framed or otherwise worked or cut into shapes other than rectangular (including square) are generally classified as articles of Headings 39.18, 39.19 or 39.22 to 39.26.

(Emphasis represents words typed in bold print in the original)

21. From the above it is clear that the plastic film which is surface-worked is included under Heading 39.20 and the examples of what is surface-worked given in the Explanatory Notes covers not only operations like polishing and colouring but even embossing and corrugating. Such being the scope of surface work, there can be no doubt that “coating” would also be covered in its purview. The learned Departmental Representative too had taken this stand during the hearing and we notice that the examples given in the Explanatory Notes support such a view. Thus coated plastic film fall under Heading 39.20 and the appellants’ claim for classification 96.12 as typewriter or similar ribbons is not borne out by a detailed study of the competing headings. The appeal, therefore, fails and is rejected.

22. While replying, Shri Nankani had also referred to Note 2 (d) to Chapter 39 relating to exclusion of stamping foils of Heading 32.12 and taken the argument that since stamping foils and typewriter ribbons were performing similar functions the subject goods would be excluded from the purview of Chapter 39. This argument is fallacious because what is being classified under Chapter 39 is not typewriter ribbons.

Equivalent 1993 (66) ELT 320 (Tribunal)