1994(05)LCX0059
IN THE CEGAT, SPECIAL BENCH ‘C’, NEW DELHI
S/Shri G.P. Agarwal, Member (J) and P.K. Kapoor, Member (T)
RAJASTHAN PETRO SYNTHETICS LTD.
Versus
COLLECTOR OF CUSTOMS, BOMBAY
Order No. 157 & 158/94-C, dated 2-5-1994 in Appeal No. C/493/91-C and C/243/92-C
Cases Quoted
National Organic Chemical Inds. v. Collector —1987(03)LCX0027 Eq 1987 (030) ELT 0463 (Tribunal) [Paras 5,11]
Kirti Packaging Inds. Ltd. v. Collector—1988(02)LCX0045 Eq 1988 (035) ELT 0414 (Tribunal) [Paras 5,11]
Collector v. P.V.C. Wires & Cables—Order No. 460/87-C, dated 26-6-1987 [Paras 5, 11]
Collector v. Chemphar Drugs & Liniments—1989(040) ELT 0276 (SC) [Para 5]
Padmini Products v. Collector —1989(08)LCX0031 Eq 1989 (043) ELT 0195 (SC) [Para 5]
Nat Steel Equipment Pvt. Ltd. v. Collector —1988(01)LCX0006 Eq 1988 (034) ELT 0008 (SC) [Para 5]
Silver Chem Inds. v. Collector —1990(05)LCX0074 Eq 1990 (049) ELT 0634 (Tribunal) [Para 5]
Jaishri Engg. Co. (P) Ltd. v. Collector —1989(03)LCX0025 Eq 1989 (040) ELT 0214 (SC) [Para 5]
Globe Engg. Works v. Collector—1988 (038) ELT 471 [Para 5]
Micro Electronics v. Collector —1989(01)LCX0034 Eq 1989 (041) ELT 0464 (Tribunal) [Para 14]
Jain Shudh Vanaspati Ltd. v. U.O.I. —1980(08)LCX0003 Eq 1982 (010) ELT 0043 (Del.) [Para 14]
Advocated By : Shri K. Srinivasan, Consultant, for the Appellant.
Shri S. Kak, Jt. CDR, for the Respondents.
[Order per : G.P. Agarwal, Member (J)]. - These are two cross appeals, Appeal No. C/493/91-C filed by the Importer, M/s. Rajasthan Petro Synthetics Limited, and Appeal No. C/243/92-C filed by the Revenue, against the common impugned order-in-original passed by the Collector of Customs, Bombay.
FACTUAL BACKDROP:
2. It was the case of the Revenue that M/s. Rajasthan Petro Synthetics Limited (hereinafter referred to as the Importers) have been importing so called Polypropylene Dyed Chips & Sarma Polypropylene Chips as a raw material for the manufacture of polypropylene yarn and the clearances of these goods were allowed under Customs Tariff Heading 3902.10 with benefit of concessional rate of duty under Notification No. 227/76-Cus. on the basis of their declared description and test report since 1986. However, when the importers filed their Bill of Entry No. 7480 dated 24-10-1988 for clearance it was noticed after the careful scrutiny of the Invoice that the price of Polypropylene Dyed Chips is about three times of the normal price of polypropylene and it varies according to the colour, showing that the price is dependent on the colourant rather than the base material that is to say Polypropylene. Consequently, the importers were asked to submit the manufacture’s literature to verify whether it is colour master batch. But they did not produce the same. However, manufacture’s literature of M/s. Hoechst, Italy regarding the remafin range of products was obtained from the indentors M/s. Hoechst India Ltd. which described that Remafin AP products are pigment preparations of organic and inorganic pigments in a polypropylene carrier. The specifications indicate the content of colourant to vary from 30% + 70%. Since the importers had also imported similar goods from M/s. Sandoz, Switzerland the literature of the manufacturer M/s. Sandoz was also obtained. Since the earlier test reports with respect to the goods imported earlier were given in the absence of technical literature from the manufacturers and in the absence of testing facilities at the laboratory the manufacture’s literature was forwarded to the Deputy Chief Chemist who amended his earlier technical opinion and confirmed that the subject goods under reference could be considered to be coloured master batches. Premises of the importers in New Delhi were also searched and as a result thereof various incriminating documents were recovered and taken over. Statements of S/Shri Arun Kumar Mittal, General Manager and B.B. Verma, Manager (Imports) of the appellant company were also recorded. As a sequel thereof Show Cause Notice dated 20-10-1989 was issued to the importers proposing the classifications of the subject goods under Heading 3204.17 or 3206.49 and demanding duty as mentioned therein and also proposing confiscation of the subject goods and imposition of penalty. Besides, they were also asked to show cause as to why the provisional assessment of 16 Bill of Entries as shown in Annexure-II to Show Cause Notice be not finalised. Show Cause Notice was also issued to Shri B.B. Verma, Manager (Imports) of the appellants company proposing penalty. It was hotly contested by the importers and Shri B.B. Verma inter alia on the ground that the subject goods were rightly cleared under Heading 3902. It further appeared that on receipt of the reply and the submissions made by the appellants a corrigendum to the said Show Cause Notice was issued on 2-7-1990 proposing that subject goods, namely, Sarma Polypropylene Chips are classifiable under Tariff Heading 3812.30. After usual adjudication proceedings the Collector of Customs held that the correct classification of the subject goods, namely, Polypropylene Dyed Chips would be under Chapter 32 and their sub-classification would be based on whether the pigments are organic or inorganic. On the same analogy he also held that the correct classification of Sarma Chips would be under Heading 38 of Customs Tariff and not under Heading 39 as claimed by the importers. On these findings he ordered that all the provisional assessment be finalised classifying the polypropylene dyed chips under the appropriate sub-heading of Chapter 32 and the Sarma Chips under appropriate sub-heading of Chapter 38 of the Customs Tariff and after finalising so the differential duty should be recovered in terms of the P.D. Bonds and by enforcing the Bank Guarantee given by the importers and if the entire differential duty has not been secured by Bank Guarantees, the importers should be asked to deposit the balance differential duty forthwith. In the operative portion Collector has also ordered that the duty short levied as indicated in Annexure-I and which comes to Rs. 38,45,396/- be paid by the importers. Hence the present Appeal No. C/493/91-C by the importer.
3. Since the Collector of Customs vide his impugned order has not imposed any penalty under Section 112 of the Customs Act on the importer and their employees, the Revenue has filed the captioned Appeal No. C/243/92-C. It is worthwhile to mention that though in the prayer the Revenue has requested for the imposition of suitable penalty on the importers and their employees yet they have not made the employees of the importers as respondents in the present appeal. In other words, the appeal has been filed against the importers M/s. Rajasthan Petro Synthetics Limited only.
4. At the outset it may be stated that the Ld. Consultant Shri K. Srinivasan appeared on behalf of the importers M/s. Rajasthan Petro Synthetics Limited submitted that the appellants are not challenging the classification of imported goods, namely, Sarma Polypropylene Chips.
5. As regards the classification of the Polypropylene Dyed Chips it was contended by the learned consultant that these are to be classified under Customs Tariff Heading 3902.10 and not under Customs Tariff Heading 32 as held by the Collector. Elaborating, he submitted that the appellants’ importer are the manufacturers of Polypropylene Yarn and hold the Industrial Licence. Synthetic Yarn, such as, Polypropylene could be manufactured either by a continuous process starting from the basic raw materials or from the polymer chips. The facility available in the plant of the appellants at Udaipur is for manufacture of Polypropylene Yarn from Polymer Chips by the batch process. At the relevant time these were permissible for import under the OGL in terms of Sr. No. 464, List 8 Part II of Appendix 6 of 1989-91 Import Policy Book. In the 1985-88 Policy Book, it was included at Serial No. 67, List 8 Part II. The entry in both the policies was “Polypropylene”. He also drew our attention to Chapter 39 of the First Schedule to the Customs Tariff Act, 1975 to show that it includes “Plastics and Articles Thereof”. Chapter Note 1 under Chapter 39 defines the expression “Plastics” and expressly excludes textiles and textile articles of Section XI. Chapter Note 2 contains a list of exclusions from the scope of Chapter 39. It was stressed that Heading 39.02 is “Polymers of Propylene or of other Olefins in primary forms” and sub-heading 3902.10 is “Polypropylene”. All forms of polymers of Polypropylene are included in sub-heading 3902.10. Polypropylene chips which is a polymer of Polypropylene in the form of chips is therefore classifiable under sub-heading 3902.10. However, Polypropylene filament yarn produced out of these chips is classifiable under Section XI of the First Schedule, under Chapter 54, Heading 54.01 or 54.02. This, according to him, was on account of the exclusion clause (e) of Chapter Note 2. He also referred to the explanatory Notes appearing at page 552 of the Harmonised System Nomenclature under Chapter 39 and Heading ‘Plastics’ to show that wherever the expression ‘Plastics’ is used, it would exclude synthetic yarn or other synthetic textile article.
Continuing further, he also submitted that Chapter Note 6 defines ‘Primary Forms’ as applied to Headings 39.01 to 39.14. It includes blocks of irregular shape, lumps, powders (including molten powders), granules, flakes and similar bulk forms. Polypropylene chips are bulk forms of Polymer and hence classifiable under Heading 39.02. Polypropylene Yarn, according to him, could not be dyed at the yarn stage. In this respect, it is different from either Synthetic Yarn like Polyester Yarn which can be either dope dyed or dyed at the yarn or fabric stage. PP Yarn has to be dyed at the Polymer stage before the spinning of the yarn. The PP Chips in white or non-dyed yarn are imported as PP grey chips. Where it is required to obtain coloured yarn, PP Chips are made with the colourant or the pigment dispersed in the PP Polymer. To spin the yarn, the chips are fed into the hoppers, melted to obtain polymer melt and extruded through spinerettes. Where coloured yarn is required, the grey melt from one hopper and the coloured melt from another are mixed in the right proportion and extruded in the spinerettes to obtain coloured or dyed yarn. It was emphasised that earlier the subject goods were assessed under Heading 39.02 and at no time the Customs Authorities raised any objection that the goods were ‘Master Batches’ and it is only in October, 1988 that the Delhi Customs House commenced the enquiries against the appellants and pursuant to the same informed the Bombay Customs House that the goods were ‘Master Batches’ assessable under Heading 32.06 or 32.04 depending upon the nature of the pigment content of PP. Attacking the test reports, he submitted that most of the reports are stereotyped stating that the sample was PP Synthetic Resin in the form of a particular coloured granule/pellets. In some cases, it was merely reported to be “Pigmented PP Chips”. In the test report No. 4930 II B dated 2-12-1988 it was categorically stated “They are not coloured master batches. However, its actual use may be ascertained”. In the test report No. 3774, Group II B dated 29-10-1987, the sentence “It has characteristics of master batch” has been scored out and initialled. He also referred to the other test report to emphasise that even the Customs House Laboratory was itself confused apparently since there was no definition of a master batch. He also referred to a clarification said to have been issued by the Central Board of Excise & Customs in their letter No. 93/122/86/CX-3 dated 17-12-1986 in a matter raised by the All India Federation of Plastic Industries, Delhi, regarding assessment of PVC Colour Master Batch and drew our attention to its enclosures including the opinion of the Chief Chemist wherein the Chief Chemist referred to the Colour Master Batches or Colour Concentrates as those added to promote through incorporation of the colourant throughout the plastic end product. On the basis of this opinion, it was argued that the PP Yarn was not a plastic end product and the Chief Chemist had given the opinion only with reference to the plastic colourants as Master Batches used only for colouring plastics, rubber etc. in the mass and this had no relevance for the classification of Polypropylene dyed chips.
He further submitted that in the trade, the subject goods are described as ‘Polypropylene Dyed Chips’ and internationally it is traded as Polypropylene Dyed Chips only as could be seen from the Certificates of Origin issued by the Italian Chamber of Commerce, French Chamber of Commerce and Swiss Chamber of Commerce. Attacking the findings that the subject goods are ‘Master Batches’ he submitted that the expression ‘Master Batch’ had not been defined anywhere. It is not defined in the Customs Tariff Act or in the Imports and Exports (Control) Act or in the Imports (Control) Order, 1955 or in the Import Policy. Even the HSN did not refer to any goods or description or expression as ‘Master Batch’. However, the appellants had used this expression ‘Master Batch’ in some of the documents in a generic sense of representing basic colours. It was from a basic colour that a shade of the yarn or fabric is derived. To conclude, he submitted that this expression did not determine the classification as Chapter 32 does not bring any such Master Batch within its mischief. To support his contention, he cited the case of National Organic Chemical Industries v. Collector of Central Excise, Bombay, 1987(03)LCX0027 Eq 1987 (030) ELT 0463 (Tri.) = 1987 (012) ECC T-76, which was followed in Kirti Packaging Industries Ltd. v. Collector of Central Excise, Baroda, 1988(02)LCX0045 Eq 1988 (035) ELT 0414 (Tri.) = 1988 (017) ECC T-50 and also the Final Order No. 460/87-C dated 26-6-1987 passed by this Tribunal in the case of Collector of Central Excise, Calcutta v. M/s. P.V.C. Wires & Cables, wherein the case was remanded for de novo decision in the light of the ratio of the said cases. Apparently, the said Final Order dated 26-6-1987 was cited to show that all the aforesaid contentions which were advanced before the Collector were not considered by him. He also submitted that the appellants submitted the opinion of Sri Ram Institute of Industrial Research wherein while giving its use, it was opined that the subject goods, namely, PP Dyed Chips are classifiable under Heading 39.02 but this report was not at all considered by the Adjudicating Authority while recording the findings, though referred to in paragraph 13 of his impugned Order. Besides, he also submitted that the demand was time-barred as longer period of five years under Section 28(1) of the Customs Act was not available to the Department. To substantiate his submission, he drew our attention to paragraph 43 of the impugned Order wherein the Collector has recorded a positive finding in favour of the appellants that in this case there is no allegation of collusion and there is also no misstatement by the importers regarding the description of the goods. Consequently, the question of wilful misstatement will not arise. He emphasised that after holding so, the Collector of Customs went tangent in holding that there was suppression of facts by the appellants which has resulted in the short levy. He submitted that earlier the similar goods were assessed under Heading 39 on the basis of the description given by the appellants and the same description was given while filing the Bill of Entry No. 7480 dated 24-10-1988 and once it was held by the Collector that there was no mis-statement regarding the description of the subject goods, the question of suppression of facts does not arise. To substantiate his point, he cited the case of Collector of Central Excise v. Chemphar Drugs & Liniments, 1989 (040) ELT 276 SC; Padmini Products v. Collector of Central Excise, 1989(08)LCX0031 Eq 1989 (043) ELT 0195 (SC); Nat Steel Equipment Pvt. Ltd. v. Collector of Central Excise, 1988(01)LCX0006 Eq 1988 (034) ELT 0008 (SC); and Silver Chem Industries v. Collector of Central Excise, Bombay-III, 1990(05)LCX0074 Eq 1990 (049) ELT 0634 (Tri.) = 1991 (032) ECR 210. It was emphasised that by the impugned Order, the Collector has not confiscated the goods nor imposed any personal penalty which by itself proves that there was no suppression of facts on the part of the appellants.
6. To top his arguments, he also contended that a preliminary objection was raised by the appellants before the Collector of Customs in written reply to the Show Cause Notice as well as at the time of personal hearing that the Collector of Customs has no jurisdiction to set aside the Order under Section 47 of the Customs Act in his original jurisdiction by issuing a notice under Section 124 of the Customs Act, since he has no jurisdiction to reopen he passed assessment already finalised. In other words, his submission was that the assessment which had been finalised in the past could only be reviewed under Section 129D(2) of the Customs Act, 1962 and not by way of fresh adjudication proceedings, but curiously enough the Collector has not dealt with this preliminary objection though he has stated this contention of the appellants in paragraph 11 of his Order. In reply, Shri Sidharth Kak, learned JCDR, took us through the impugned Order and submitted that for the reasons recorded by the Collector of Customs, the subject goods were rightly classified under Heading 32. As regards the plea of the appellants that the demand was time-barred, he cited the case of Jaishri Engineering Co. (P) Ltd. v. Collector of Central Excise, 1989(03)LCX0025 Eq 1989 (040) ELT 0214 (SC), wherein in paragraph 10 it was held that from the conduct of the assessee therein, suppression is established. In other words, his submission was that from the conduct of the appellants in the present case, as detailed out in paragraph 45 onwards of the impugned Order, the suppression of facts stands fully established. As regards the contention of the learned consultant that the assessments which have been finalised could only be reviewed under Section 129D(2) of the Customs Act, it was contended by Shri Kak that in case of fraud or miss-statement by the importer Section 47 is no bar and cited the case of Globe Engineering Works v. Collector of Customs, 1988 (038) ELT 471.
7. Arguing on behalf of the Revenue in Appeal No. C/243/92-C filed by the Revenue, he submitted that the Collector of Customs erred in not imposing any penalty on the importers in view of his findings that there was suppression of facts by the appellants. In reply, it was contended by the learned consultant for the importer that since the findings of the Collector of Customs that the importers were guilty of suppression of facts cannot be sustained in the facts and circumstances of the case, the question of imposing any personal penalty does not arise. That apart, when the Collector of Customs has not imposed any penalty, his discretion should not be interfered with.
8. We have perused the records of the case and considered the submissions on behalf of both sides. As regards the classification of the disputed Polypropylene Dyed Chips it has been contended on behalf of the appellants that they were correctly classifiable under Heading 3902.10 and not under Heading 32 of the Customs Tariff as held by the Collector. In this regard reliance has been placed on Chapter Note 1 under Chapter 39 which defines the expression “Plastics” and expressly excludes textiles and textile articles of Section XI. The appellants have also drawn attention to Chapter Note 2 which contains a list of exclusions from the scope of Chapter 39 and they have stressed that Heading 39.02 covers “Polymers of Propylene or of other Olefins in primary forms” and sub-heading 3902.10 covers “Polypropylene”. It has been contended that “Polypropylene Chips” being a polymer of polypropylene in the form of chips was classifiable under sub-heading 3902.10 since all forms of polymers of polypropylene are included in sub-heading 3902.10. It has also been argued that polypropylene filament yarn produced out of the disputed polypropylene chips being classifiable under Chapter 54 was excluded from the expression ‘Plastics’ wherever used in Chapter 39 by virtue of exclusion clause (e) of Chapter Note 2 and Explanatory Notes appearing at page 552 of the Harmonized System Nomenclature under Chapter 39. In this regard it has been submitted “Polypropylene Chips” being bulk form of polymer are classifiable under Heading 39.02 since in terms of Chapter Note 6 ‘Primary Forms’ as applied to Headings 39.01 to 39.14 include blocks of irregular shape, lumps, powders (including molten powders) granules, flakes and similar bulk forms. According to the appellants coloured polypropylene yarn which unlike other synthetic yarns cannot be obtained at yarn or fabric stage by the process of dyeing, is produced by mixing polypropylene chip having dispersed colour or pigment with grey non-coloured chips and the melted mixture is extruded through spinnerettes. It has been claimed that earlier the goods were assessed under Heading 39.02 and it was only in October, 1988 that Delhi Customs House commenced certain enquiries on the suspicion that the goods were ‘Master Batches’ assessable under Heading 32.04 or 32.06 and also informed the Bombay Customs. The appellants have also contended that even the Customs House Laboratory was confused in the absence of any definition of Master Batches since the test reports given by the Customs House Laboratory were not consistent as in one of these the finding was that the goods were “pigmented P.P. chips”, whereas in another reports the finding that “It has characteristics of Master Batch” has been scored out. The appellants have referred to the clarification issued by the Central Board of Excise and Customs in their letter No. 93/112/86/CX. 3, dated 17-12-1986 on the question of classification of P.V.C. Colour Master Batch on the basis of the opinion of the Chief Chemist that the subject goods being internationally traded as ‘Polypropylene Dyed Chips’ could not be deemed as ‘Master Batch’ which are used for colouring plastics, rubbers etc. whereas polypropylene yarn is not a plastic product.
9. It is seen that the Department had been allowing the clearance of goods declared as ‘Polypropylene Dyed Chips’ imported by the appellants under Heading 3902.10. However, it was noticed that the price of polypropylene dyed chips was about 3 times the price polypropylene and depending upon the colour of the dyed chips, the price could be even higher. The Department therefore suspected that the importers were actually importing coloured Master Batch misdeclared as Polypropylene Dyed Chips. The importers who were asked to produce manufacturers literature for verification of the correct nature of the goods did not do so. The Department therefore obtained the literature of M/s. Hoechst, Italy and M/s. Sandoz, Switzerland, the two internationally known suppliers of the goods in question, from their indenting agent in India. The Remafin range of products which were being imported by the appellants from M/s. Hoechst India Ltd. were described by the manufacturers as “Pigment preparations of organic and inorganic pigments in its polypropylene carrier”. According to the manufacturers the content of colourant in the product varies from 30% to 70%. Similarly the literature in respect of the products supplied by M/s. Sandoz, Switzerland described the product as ‘Inorganic & Organic speciality pigments for the mass colouration of polypropylene filaments and staple fibres. According to the manufacturer the percentage of colour/pigment in their product varies from 25% to 50%. The relevant literature from the two suppliers also showed colour Index No. in order to facilitate verification whether a particular product was organic or inorganic pigment. In the absence of proper facilities for carrying out tests of complex materials, in certain test reports given by the Deputy Chief Chemist, Customs House Laboratory, prior to the availability of the manufacturers literature, the goods were described as “pigmented polypropylene in cylindrical cuttings” and in some cases it was also mentioned that “it is not a master batch”. However, in cases where tests were carried out after the manufacturers literature was available, on account of the details regarding composition of the product given by the manufacturers, the Customs House Laboratory was able to verify the contents of samples drawn from the imported goods and the Deputy Chief Chemist confirmed that the goods declared by the importer as polypropylene dyed chips were actually pigmented preparation/master batches which merited classification under Heading 3204.17 in the case of organic pigment preparation and under Heading 3206.49 in the case of inorganic pigment preparation and not under Heading 3902.10 as claimed by the importer. The importers premises was also searched and as a result of the search a number of incriminating documents were recovered. Statements of Shri Arun Kumar Mital, General Manager (Technical) and Shri B.B. Verma, Manager (Imports) in the appellant firm were also recorded.
As observed by the Collector in Para 4 of the impugned order, a data sheet regarding “Estimates of Cost of Production” was recovered during the search which showed that in the manufacture of dyed polypropylene yarn the appellants were also using master batch along with polypropylene chips and other material. As pointed out by the Collector in para 5 of the impugned order the seized correspondence showed that in respect of goods described by the appellants in the import document as “Polypropylene Dyed Chips” in their inter-office correspondence the appellants used the word “Master Batches” and they had even advised certain foreign suppliers not to describe the goods as ‘Master Batch’ and Optical Brightener Chips respectively or to mention the Tariff Heading 32.07/90 and 32.04/17 as per practice in respect of proforma invoice. The appellants contention that the disputed goods being polypropylene chips were covered by 3902.10 has no force at all since as observed by the Collector the goods being essentially concentrated dispersion of colouring matter in plastic they would be excluded from the purview of Chapter 39 in view of the following, exclusion clause under General Notes to Chapter 39 of the HSN which is accepted as having a persuasive value in classification of goods under the Customs Tariff.
“In addition to the exclusions mentioned in Note 2, the Chapter excludes
(a) Concentrated dispersions of colouring matter in plastics having the character of products of Chapter 32; see, for example, the Explanatory Notes to Heading 32.04 [paragraph (1)(C) regarding concentrated dispersions of colouring matter in plastics, and paragraph (II)(2) concerning organic luminophores, e.g. rhodamine B in plastics]. Heading 32.05 (seventh paragraph concerning concentrated dispersions of colour lakes in plastics) and Heading 32.06 (Part A), sixth paragraph, sub-paragraph (I) concerning concentrated dispersions of other colouring matter in plastics.
(b) Preparations of polymers of Heading 39.01 to 39.13 specially formulated for use as glues or adhesives, not exceeding a net weight of 1 kg. (Heading 35.06).
(c) Plastics and articles thereof (other than the goods of Heading 39.18 or 39.19), printed with motifs, characters or pictorial representations, which are not merely incidental to the primary use of the goods (Chapter 49)."
10. In our view the findings of the Collector that disputed goods being pigment preparations of organic and inorganic pigments in polypropylene carrier were correctly classifiable under Chapter 32 and their sub-classification was determinable on whether the pigments were organic or inorganic are sustainable in view of the following extracts from the General Notes of sub-Heading 32.04 and 32.06 of the HSN.
CHAPTER 32
Chapter Note 3.
“Heading Nos. 32.03, 32.04, 32.05 and 32.06 apply also to preparations based on colouring matters (including, in the case of Heading No. 32.06, colouring pigments of Heading No. 25.30 or Chapter 28, metal flakes and metal powders), of a kind used for colouring any material or used as ingredients in the manufacture of colouring preparations. The headings do not apply, however, to pigments dispersed in non-aqueous media, in liquid or paste form of a kind used in the manufacture of paints, including enamels (Heading No. 32.12), or to other preparations of Heading Nos. 32.07, 32.09, 32.10, 32.12, 32.13 or 32.15.”
| 32.04 | - | SYNTHETIC ORGANIC COLOURING MATTER WHETHER OR NOT CHEMICALLY DEFINED; PREPARATIONS BASED ON SYNTHETIC ORGANIC COLOURING MATTER AS SPECIFIED IN NOTE 3 TO THIS CHAPTER; SYNTHETIC ORGANIC PRODUCTS OF A KIND USED AS FLUORESCENT BRIGHTENING AGENTS OR AS LUMINOPHORES, WHETHER OR NOT CHEMICALLY DEFINED | | |||||
| | | ......... | | |||||
| | | ......... | | |||||
| | | (C) Concentrated dispersions of synthetic organic colouring matter in plastics, natural rubber, synthetic rubbers, plasticisers or other media. These dispersions are usually in the form of small plates or lumps and are used as raw materials for colouring rubber, plastics, etc., in the mass. | | |||||
| 32.06 | - | OTHER COLOURING MATTER; PREPARATION AS SPECIFIED IN NOTE 3 TO THIS CHAPTER; OTHER THAN THOSE OF HEADING NOS. 32.03, 32.04 OR 32.05; INORGANIC PRODUCTS OF A KIND USED AS LUMINOPHORES, WHETHER OR NOT CHEMICALLY DEFINED. | | |||||
* | * | * | * | * |
| ||||
This heading further includes preparations based on the colouring matters referred to above, and also the colouring pigments of heading 25.30 or of Chapter 28 and metallic flakes and powders, of a kind used for colouring any material or used as ingredient in the manufacture of colouring preparations in the form of:
(I) Concentrated dispersions in plastics, natural rubber, synthetic rubbers, plasticisers or other media. These dispersions are used as raw materials for colouring plastics, rubber, etc. in the mass.
or (II) Mixtures with relatively large quantities of surface active products or with organic binders. These are used for colouring in the mass plastics, etc. or as ingredients in preparations for printing textiles. They are normally in the form of pastes."
11. In the case of National Organic Chemical Industries v. Collector of Central Excise, Bombay, Kirti Packaging Industries Ltd. v. Collector of Central Excise, Baroda and Collector of Central Excise, Calcutta v. M/s. P.V.C. Wires & Cables, cited by the ld. Consultant on behalf of the appellants, it was held that Master Batch is a specialized product used in P.V.C. industry and it is intended for proper dispersal of colour in P.V.C. compound. It was, therefore, held that master batches were not classifiable under Item 15A(1)(ii) of the First Schedule to the Central Excises and Salt Act, 1944. These decisions are not relevant since they relate to the classification of goods under the erstwhile Central Excise Tariff and also for the reason that it was held that Master Batch is a specialized product used in the P.V.C. Industry for proper dispersal of colour in P.V.C. compound and was not classifiable under 15A(1)(ii) which corresponds to certain products falling under Chapter 39 of the Central Excise Tariff.
12. Ld. Consultant on behalf of the appellants has contended that the disputed goods cannot be deemed as Master Batch or colour concentrate. In this regard he has referred to the Explanatory Notes appearing at page 552 of the HSN under Chapter 39 and the Heading Plastic and also to letter No. 93/122/86/CX-3 dated 17-12-1986 of Central Board of Excise & Customs issued on the basis of the advice of the Chief Chemist wherein it was clarified that colour master batches are used only for colouring plastic, rubber, etc., whereas the disputed polypropylene dyed chips were meant for manufacturing coloured polypropylene yarn which is a textile material. There is evidently no force in the appellants contention since admittedly the disputed pigmented preparations or polypropylene Dyed Chips are melted with grey polypropylene chips to produce colour melt for the purpose of extrusion of coloured polypropylene yarn through spinerettes. The disputed goods, namely, pigmented polypropylene chips are used essentially for imparting colour to the polymer melt obtained by melting grey polypropylene chips before extrusion for production of yarn and thus their use is only for imparting colour to the melted polypropylene or plastic material before it is converted into textile material, namely, yarn. In view of the above discussions, we confirm the Collector’s finding that the disputed dyed polypropylene chips which are described by the manufacturers as pigment preparation carrier were correctly classifiable under Chapter 32 of the Customs Tariff and their sub-classification was to be based on whether pigment content therein were organic or inorganic.
13. Ld. Consultant on behalf of the appellants had contended that the Collector had failed to take note of the fact that Sriram Institute of Industrial Research has opined that polypropylene dyed chips were classifiable under Heading 39.02. It is evident that the Collector did not agree with the views expressed by Sriram Institute of Industrial Research regarding classification of the goods since he had held that the goods in question were correctly classifiable under Chapter 32 of the Customs Tariff. Since we have held the Collector’s finding in regard to the classification of the goods as sustainable, the opinion given by Sriram Institute of Industrial Research cannot be of any assistance to the appellants.
14. The appellants have also contended that the proper officer having made an order in regard to some of the consignments under Section 47 of the Customs Act, no fresh proceedings by way of issuing show cause notice could be initiated inasmuch as the order passed under Section 47 could not be set aside by any officer except by the Collector by following the procedure laid down in Section 129D(002) of the Customs Act. In support of his submissions he has cited various judgments of the High Court and this Tribunal. In this regard it is seen that in the case of Micro Electronics v. Collector of Customs reported in 1989 (041) ELT 464, the Tribunal relying upon the judgment of the Delhi High Court in the case of Jain Shudh Vanaspati Ltd. v. Union of India reported in 1982 (010) ELT 43 have held that the order passed under Section 47 attains finality and once the goods are cleared by Customs Authorities under Section 47 issuing of show cause notice for confiscation or imposing the penalty amounts to reviewing the order under Section 47 but there is an exception to the said proposition that such finality can be disturbed where the Department can successfully show that there was a fraud or deliberate suppression. In the appellants case, as observed by the Collector in the impugned order, as a result of the search of the appellants premises several incriminating documents were recovered which established that the appellants were aware that the disputed goods were not internationally traded as polypropylene chips covered by Chapter 39 of the Customs Tariff but were being described by manufacturers of international repute as preparation of organic and inorganic pigment in polypropylene carrier or inorganic or organic speciality pigment, and the appellants in their inter-office correspondence were describing the goods as ‘Master Batch’. These correspondence also showed that the appellants had also instructed their foreign suppliers not to give the correct description of the goods or their classification under Chapter 32 of the Customs Tariff in the relevant proforma invoices. For these reasons, on the ratio of the judgment relied upon by the Tribunal in the case of Micro Electronics v. Collector of Customs, supra, we hold that the issue of show cause notice even in cases where the goods had been cleared under Section 47 for reviewing the order of clearances passed by the concerned officer was not illegal. In view of the above discussion, we are inclined to agree with the Collector’s finding in paras 45-47 of the impugned order that the appellants had deliberately suppressed the manufacturer’s literature and other relevant information regarding the nature and composition of the disputed product. Further as observed by us earlier, the appellants with the intention of misdeclaring the nature of the goods in the relevant Bills of Entry, had instructed the suppliers that they should not indicate in the relevant proforma invoices the correct description and classification of the goods. For these reasons, the demand made by invoking the extended period by the Collector is sustainable.
15. For the reasons outlined above, we are also inclined to agree with the learned JCDR on behalf of the Department that the appellants were liable for penalty under Section 112(a) of the Customs Act, 1962. In view of the foregoing, the appeal filed by the appellants is dismissed. We also allow the appeal filed by the Revenue and impose a penalty of Rs. 5 lakhs (Rupees Five Lakhs only) on M/s. Rajasthan Petro Synthetics Ltd. under Section 112(a) of the Customs Act, 1962.
16. Both the appeals stand disposed of accordingly.
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Equivalent 1994 (72) ELT 603 (Tribunal)