Grasim Industries Ltd. vs Collector Of Customs, Bombay>1996(12)LCX0109

1996(12)LCX0109

IN THE CEGAT, COURT NO. II, NEW DELHI

Shri S.K. Bhatnagar, Vice President and Ms. Jyoti Balasundaram, Member (J)

GRASIM INDUSTRIES LIMITED

Verses

COLLECTOR OF CUSTOMS, BOMBAY

Final Order Nos. C/1666-70/96-B, dated 5-12-1996 in Appeal Nos. C/989 & 1080/93-B, C/24-26/94-B2

Cases Quoted

Garware Nylons Ltd. v. U.O.I. — 1980(04)LCX0012 Eq 1980 (006) ELT 0249 (Bom.) [Para 11]

J.K. Steel v. U.O.I. — 1978 (002) ELT 0351 (S.C.) [Para 11]

Dunlop India Ltd. v. U.O.I. — 1975(10)LCX0016 Eq 1983 (013) ELT 1566 (S.C.) [Para 11]

Collector v. Fuse Base Eltoto Ltd. — 1993(07)LCX0044 Eq 1993 (067) ELT 0030 (S.C.) [Para 11]

Electro Steel Castings Ltd. v. Collector — 1987(01)LCX0036 Eq 1989 (043) ELT 0305 (Tribunal) [Para 20]

Collector v. Delhi Cloth Mills — 1995(05)LCX0155 Eq 1995 (078) ELT 0685 (Tribunal) [Para 20]

Kerala State Electricity Board v. Collector — 1995(09)LCX0103 Eq 1995 (080) ELT 0346 (Tribunal) [Para 20]

Brakes India Ltd. v. Collector — 1987(08)LCX0099 Eq 1987 (031) ELT 1030 (Tribunal) [Para 20]

Ballarpur Industries Ltd. v. Collector — 1994(12)LCX0070 Eq 1995 (075) ELT 0006 (S.C.) [Para 20]

Collector v. Kirloskar Brothers Ltd. — 1994(12)LCX0061 Eq 1995 (076) ELT 0216 (Tribunal) [Para 20]

Titanium Equipments & Anode Mfg. Co. Ltd. — 1994(07)LCX0032 Eq 1995 (077) ELT 0909 (Collr. Appl.) [Para 20]

D.C.W. Ltd. — 1995(03)LCX0095 Eq 1995 (077) ELT 0326 (Collr. Appl.) [Para 20]

Collector v. Travancore Titanium Products — 1995(02)LCX0114 Eq 1995 (078) ELT 0211 (Tribunal) [Para 20]

Advocated By : S/Shri N.R. Khaitan and Rahul Ray, Advocates, for the Appellants.

Shri Mohammed Ali, JDR, for the Respondent.

[Order per : S.K. Bhatnagar, Vice President]. - These are five appeals against the orders of Collector of Customs (Appeals), Bombay, dated 21-7-1993 and 20-9-1993.

2. Learned Counsel stated that the appellants are engaged in the manufacture of `Viscose Staple Fibre’ at their factory. It is stated that in the manufacture of Viscose Staple Fibre, filtration of Viscose Solution is essential for removing impurities like gels, silica and undissolved cellulosic particles and for that purpose special pressure type continuous filtration machinery is employed. These machines use Sintered Filter Media as the medium of filtration. As with any sophisticated filtering machine, the filtering medium is the most vital part of the equipment. The appellants further state that the filtration plant performs the function of filtering and purifying viscose in liquid form for the manufacture of Viscose Staple Fibre. Copies of the drawings showing dimensions of sintered filter media and the viscose filtration machinery where the said goods are used as component part are marked (Annexure-B). These drawings cleraly show that sintered filter media is fitted as part into Viscose Filteration Machinery as it is, without undertaking or carrying out any further work on it. Without fitting of sintered filter media, viscose filtration machinery cannot function because of the fact that sintered filter media is a very vital component of viscose filtration machinery performing the function of filteration of viscose in liquid form removing the impurities present in the viscose solution.

3. It is stated that the filtering or purifying machinery and apparatus for liquids is classified under Heading 8421.29 and accordingly, viscose filteration machinery is covered under Heading 8421.29. The appellants further state that for use in the viscose filtration machinery, they imported the goods of the description `Sintered Filter Media’ (hereinafter referred to as the said goods) per various consignments between April, 1992 to February, 1993 as specifically described in the respective bills of entry bearing Nos. 00527, dated 2-2-1993, 000528, dated 2-2-1993, 0001010, dated 3-11-1992 and 0003310, dated 9-11-1992 which were filed with the customs authorities alongwith the other import documents which were duly noted in the Import Department. In the said bills of entry, they correctly described the goods as Sintered Filter Media for viscose filtration mature. Annexure C collectively are the copies of such bills of entry, order placed on foreign supplier dated 10-10-1992 and 26-3-1992 and other import documents. The sintered filter media is manufactured by fusing metallic powder by a special process called sintering, which leaves pores of micron size in the finished product. By itself, the sintered filter media cannot withstand the high pressure of filtration and can get damaged. It is, therefore, assembled in required shape by supporting it on a wire cloth.

4. It is stated and submitted that one of the units of the appellant, namely, Engineering and Development Division, situated at Birlagram, Nagda-456331 (MP) is manufacturing viscose staple fibre plant as also viscose filtration machinery. Sintered filter media is the only component of viscose filtration machinery which is not manufactured by the Engineering and Development Division of the appellant since the manufacturing process technology and technical knowhow for manufacturing sintered filter media is available with only two suppliers in the world and therefore, the said goods are necessarily to be imported. In view of these facts, there is no question for any part number for the said goods to be specified while placing the order on foreign supplier for manufacture and supplying the said goods.

5. The said goods are manufactured as per the precise dimensions and other specifications ordered by the appellant as it is a component part of viscose filtration machinery. As stated hereinabove, wire cloth made of stainless steel only serves the purpose of supporting base and therefore, the said sintered filter media is not merely a wire cloth but it contains assembly with metal powder particles by a sintering process and certain given specified size and position, as per the order placed by the appellants on foreign supplier of such goods. These facts are substantiated and supported from the manufacturing process of sintered filter media as given in the catalogue of the supplier. The main characteristics of sintered filter media with regard to its construction of material, manufacturing process and its use/utility in filteration of viscose solution are as follows : -

(i) Metal powders with a range of particle size from 0.5 to 1000 microns and fibres with various diameters are the basic materials for manufacturing sintered components. In comparison with wrought materials, porosity is a characteristic parameter in Powder metallurgy. Structural P/M parts have from 0.1 to 90% porosity. The lower the porosity the higher the mechanical properties.

(ii) Powders can be produced almost from all metals. Shape, size and distribution of the powder particles are important parameters which effect the properties of a high porosity sintered material. By varying the parameters of the powder producing process, it is possible to produce spherical or irregular shaped powder particles in a wide range of particle size. Besides permeability, filter grade and mechanical strength; the corrosion resistance is often of prime importance. SIKA filters are manufactured in a wide variety of materials like Titanium, Aluminium and Superalloys as Hastelloy, Inconel, Monel, Incology and others. Stainless steel, bronze and nickel are the most commonly used materials for producing SIKA filters.

(iii) SIKA-FIL is produced in flexible sheets of 0.6-12mm thickness with a wire mesh backing sintered together pleated or flat sheets, will be processed to tubes, cartridges and plates.

(iv) Sintering the fundamental processing step for all P/M products means bonding of powder particles through diffusion at temperatures well below the melting point. The structure after sintering shows that the grain boundaries run over the original particle boundaries. Sintering gives the high porosity materials its shape, stability and properties of a metallic strong component. SIKA materials are used as self supporting constructional elements. The pores after the sintering process are mechanically fixed in respect of size and position. In the case of the fibre material SIKA-FIL, the sintering process bonds the fibres with each other to provide a flexible but definitely fixed structure containing the individual pores.

(v) Separation, filtration-processes are well known and are continuously gaining importance. High porosity sintered metals offer the best solution of problems where special requirements are expected from filters such as filtration at high temperatures and temperature changes (upto 600 degree centigrade) high differential pressure, fluctuating pressure (dynamic load) corrosion retentivity of dirt and cleanability by backflushing.

(vi) The purification of oil and its fuel products is a wide field for the application of sintered metal filters. Bronze filters have a wide use for heating and hydraulic oil filtration and various other applications. For microfiltrations with filter grades, 25 mm of fuel and hydraulic oils, the sinter metal fibre material SIKA-FIL offers especially favourable properties. Owing to the extremely high porosity compared with wire mesh the sintered metal filters have gained great importance in the entire chemical industry.

6. It is, therefore, evident that in sintered filtered media; wire cloth is only a supporting base and actual filtering medium is the deposit of powder particles which undergo sintering process to give the desired characteristics. The pores after the sintering process are mechanically fixed in respect of size and position by assembly with the wire cloth by using it as a supporting base.

7. It is further stated that sintered filter media is used as component part of viscose filtration machinery and it is fixed in the viscose filtration machinery in exactly the same shape and form in which it is imported without carrying out any further work on it. No modification or alteration is required to be undertaken on the said goods as these are ready for fitment as it is in the viscose filtration machinery.

8. The appellants state that since viscose filtration machinery for which the imported goods sintered filter media, serve as essential components for doing the filtration of viscose in liquid form and since the viscose filtration machinery being a filtering machinery falling under Heading 8421.29, the appellant took up the matter with the A.C. of Group IV and requested him to examine the issues and direct reassessment of the said goods under Heading 8421.99 vide letters dated 6-2-1993 and 3-12-1992 respectively. However, since the Assistant Collector was not inclined to accept their contentions, the appellant requested for an order in assessment.

9. The A.C. thereafter passed the orders dated 23-1-1993, 23-2-1993 and 23-12-1992 wherein he has erroneously upheld the classification of the goods in question as made on the respecting bills of entry, under 7314.11. The appellants further state that they challenged the said orders in assessment by filing 4 different appeals with the Collector of Customs (Appeals), Bombay.

10. The Collector has failed to appreciate the true and proper meaning of the Headings 8421.29 and 8421.99 whereunder filtering or purifying machinery used for viscose filtration and the parts thereof are covered respectively. Attention was drawn to the Heading under 7314.11 together with the relevant portiion of the Explanatory Notes to the harmonised commodity description and coding system appearing on pages 1025, 1180 and 1181. The explanatory note on Page 1025 under Paragraph (c) relating to exclusions, it has been categorically provided as under : -

Apart from articles made up of wire netting which are excluded generally from this heading, the following fall in other chapters viz.

Thus, from the above, it is evident that wire cloth when made into the form of machinery part by assembly with other materials like the one in the instant case, are expressly excluded from the purview of the chapter Heading No. 7314.11. The Collector (Appeals) has chosen to draw erroneous support from the Explanatory Notes to Harmonised Commodity Description appearing on Page 1184 wherein it is mentioned that filtering elements are classified according to the constituent material and ingnoring the fundamental point that in the case of the appellant this is irrelevant. Time and again, the hon’ble Supreme Court, various High Courts and Appellate Tribunal (CEGAT) have held in a number of cases that in the matter of classification, CCCN Explanatory Notes are to have only persuasive value and these do not have any binding value in the matter of interpretation of entries in the Indian Customs Tariff Schedule.

11. Further, the benefit of ambiguity or doubt of the taxing provisions always goes to the assessee. The Hon’ble Bombay High Court in the case of Garware Nylons Ltd. - 1980 ELT 249 following the decision of the Hon’ble Supreme Court, particularly in J.K. Steel v. Union of India - 1978 (002) ELT 351, gave the aforesaid ruling which relates with the matter of classification. The appellants also relied on the decision of the Dunlop India Ltd. - 1975(10)LCX0016 Eq 1983 (013) ELT 1566 (S.C.) in support of their contention that there is no estoppel in tax laws and the importer is well within his rights to claim the appropriate classification even at the appellate stage. For that in the matter of interpretation of tax laws, it is a well-settled legal position that in the event two views on classification are possible, the view that benefits the assessee has to be adopted. However, in the instant case, there is no such possibility of two views existing, as the position is clear that the said goods are classifiable under Heading 8421.99 and nowhere else. For that in the matter of classification, the onus is always on the Department to establish that the classification made by them for charging duty is correct in law and in the instant case while giving the said decision the Department has totally failed to discharge the said onus. The Hon’ble Supreme Court in a judgment delivered in a similar classification matter, held that the Tribunal was wrong as it did not touch upon the question as to how the product, known as the broadcase receiver set, was identified by the people dealing with or using the product as understood in common parlance. Further, the names of certain products have functional association in the mind of the consumers. There is a mental association in the mind of the consumer in respect of certain products keeping in view the utility of the product and also the reputation the name of the product has acquired in the market and among the consumers [1993(07)LCX0044 Eq 1993 (067) ELT 0030 (S.C.)].

12. The appellant is entitled to the refund of the duty as recovered erroneously and contrary to the statutory provisions of law in collection of taxes contrary to law and, therefore, the same is in violation of the provisions of Article 265 of the Constitution of India.

13. For that in Note 2 to Section XV, the expression `parts of general use’ is defined to include certain specified goods only without mentioning any goods covered under 7314 and, therefore, there is no legal justification to treat the said goods as `parts of general use’ and thereafter classify under Chapter Heading 7314.11. The appellant, further submits that even in terms of Note 1(g) of Section XVI, only `parts of general use’ are excluded, but however, the goods which are shown as parts and classified under Chapter 84 are not excluded from Chpater 84 and therefore, the said goods are classifiable under Heading 8421.99 since sintered filter media is a part of filtration machinery. In support of this contention the appellant craves leave to refer to the Expalnatory Notes under Chapter Heading No. 8421.29. The relevant portion from page 1180 is extracted as below : -

The Heading covers :

(1) __________

(2) Filtering or purifying machinery and apparatus for liquids or gases other than e.g. filter funnels, milk strainers for filtering paints (generally Chapter 73). The above explanation clarifies beyond any doubt that sintered filter media is covered under Heading No. 8421.99 as it is a component part of Viscose Filtration Machinery.

14. For that even in terms of Explanatory Note 2 under Chapter Heading 73.14 of Brussel’s Trade Nomenclature at Page 1025 the said goods are excluded from the Heading under 73.14 which reads as under :

“apart from articles made up of iron melting which are excluded generally from the heading the following fall in other Chapters, namely,

(a) Woven fabric of metal thread, of a kind used in articles of apparel, as furnishing fabric or the like (Heading 58.09).

(b) _________

That what is classifiable under Heading 7314.11 is only a woven wire cloth made of stainless steel and since the said goods are manufactured in the form of machinery part by assembly of metallic powder by a special process called “Sintering” with having the wire cloth as supporting base, the classification of the said goods under 7314.11 is totally ruled out. It has got no use anywhere in any industry except to the extent of fitting the same as it is into Viscose Filtration Machinery. Chapter Note 1(g) of Section XVI provides for the exclusion of goods of general use for classification under Customs Tariff Chapter 84, whereas in the instant case, Chapter Note 1(g) of Section XVI is not applicable since Sintered Filter Media is not goods of general use and therefore, only the provisions as contained in Note 2(a) of Section XVI are applicable.

15. Learned DR drew attention to the order-in-original and order-in- appeal and emphasised that the bill of entry and invoice description itself shows that the item is admittedly a wire cloth and has not attained the final character of a machinery part.

16. This wire cloth cannot be considered as a part of a machinery or machine or something solely or principally designed for a particular kind of machine. He would, in this connection, draw attention to Section Notes 1 & 2 of Section XVI of the Customs Tariff. As per Section Note 1(g) of Section XVI, such wire cloth can only be considered as a part of general use which has to be classified under Heading 7314.11 as rightly observed by the learned Assistant Collector and therefore, learned Collector was justified in confirming his order.

17. Learned DR stated that the case laws cited are not directly related to the present case. As per explanatory notes to harmonised commodity description and coding system, (P.1184), filtering elements are classified according to their constituent material. The subject goods are wire mesh made of stainless steel and sintered with steel metal into the form of porous material over stainless steel. As such, it is not assemble with other materials. Sintering and assembling are two different processes. Hence, goods do not merit to be classifiable under 8421.99. For classification under 8421.99, it has to be in the form of final character of machinery parts, which is not so in this case. It is not solely or principally designed for a particular kind of machine as mentioned in Section Note 2 to Section XVI of the 1st Schedule CTA 75. It is also not shaped for a particular machinery, since there is no particular part No. of the machinery.

18. Learned DR further stated that in support of above observations and findings of the Departmental authorities, he would also like to draw attention to the HSN. It would be seen from Heading 73.14 of HSN, this Heading of HSN covers “Cloth (including endless bands), grill, netting and fencing, of iron or steel wire; Expanded metal of iron or steel” and admittedly, the product has a steel mesh or wire net. The explanatory note thereunder also shows that “the material of the Heading may be used for many purposes e.g., for the washing, drying or filtering of many materials etc. and this material may be in rolls, in endless bands (e.g., for belting) or in sheets, whether or not cut to shape.

19. Learned Counsel has drawn attention to the Exclusion Clause but only those articles made of wire netting are excluded which are of a type mentioned therein and under sub-clause (c) wire cloth etc. made into the form of machinery parts only are excluded and the example given shows that if they are so formed by assembly with other materials, then only they fall under Chapter 84 or 85 otherwise not. Again, Heading 84.21 covers only filtering or purifying machinery and apparatus for liquids or gases and parts thereof. Since the item in question has not assumed the form of part of such a machinery, this heading cannot be invoked. It was his contention that once this is the position, it is immaterial whether the item was made by sintering process or otherwise and the definition of `sintering’ indicated by the learned Counsel and mentioned in their own catalogue shows that it does not amount to assembly. In fact, the Heading 84.21 also indicates that many filtering elements are classified according to their constituent material. In this case, the constituent material is iron or steel and therefore, it has been rightly classified under Chapter 73 and because it is in the form of a wire net, therefore, it is described as a wire cloth.

20. Learned Counsel reiterated his submissions and further cited the following case law in support of his contention : -

(i) 1989 (043) ELT 305.

(ii) 1995 (078) ELT 685.

(iii) 1995 (080) ELT 346.

(iv) 1987(08)LCX0099 Eq 1987 (031) ELT 1030.

(v) 1995 (075) ELT 6.

(vi) 1995 (076) ELT 216.

(vii) 1995 (077) ELT 909.

(viii) 1995 (077) ELT 326.

(ix) 1995 (78) E.L.T 211.

21. We have considered the above submissions. We observe that there is a lot of force in the learned counsel’s submissions.

22. It is true that the bills of entry and the invoice describe the goods as Wire Cloth made into the form of machinery parts by assembly with other material (sintered filter media for viscose filtration machiner).

23. Apparently, the description has been adopted to take care of the requirements of HSN and the Customs Tariff for classification purposes as well and therefore, it remains our job to see whether this represents the correct factual position and would result in the classification of the product under Heading 8421.99 as claimed by the appellants or the material would be required to be classified under Heading 7314.11 as woven product of stainless steel as claimed by the Department.

24. In this respect, in view of the technical material incorporated in the catalogue of the suppliers, the main question which faces us is whether sintering process which has been employed in the manufacture of the article makes any difference;

25. And, in my opinion, it does. The article ceases to be a plain wire cloth simplicitor once it is subjected to a sintering process which results in emergence of a new article by joining of metallic particles whether in the form of powder or fibres as sintering is a solid state reaction joining metallic or ceramic particles to each other. At temperatures well below the melting point, bridges are formed between the particles by diffusion. A green compact from powder has the shape of a finished part without changing its configuration. Metal powders with a range of particle size from 0.5 to 1000 microns and fibres with various diameters are the basic materials for manufacturing sintered components. Some of the most important applications for high porosity sintered metals are filtration, flow control of liquids and gases, fluidization of powders, silencers and flame resistors. Many other applications lead this product into numerous branches of industry. The employment of this sintered metal filter is based on the characteristic properties of a depth type filter.

26. The articles made of this material are used for separation, filtration processes for (i) filtration of liquids, (ii) filtration of plastics, (iii) filtration of gases and (iv) fluidizing/sparging and also act as flame resistors as mentioned in the catalogue. In fact, not only filters but many other type of products like bearings and structural parts can be made by this process and the catalogue itself shows photographs of sintered bearings and other parts. In other words, the sintered article is a highly sophisticated article as compared to an ordinary wire cloth.

27. In view of this position, although a woven material of stainless steel described as `wire cloth’ acts as a backing material and forms the very base on which powder particles or fibres are joined by sintering, we have to look upon the material as a whole.

28. That the article is used for filtering machinery is not in dispute. That it can be used both for filtering of liquids and gases as evident from the catalogue (and not disputed) therefore, they are akin to the parts of the filtering machinery and hence, the Entry 8421.99 would be appropriate from a technical point of view.

29. Coming to the legal side also, Heading 73.14 covering cloth and netting etc. of iron and steel and woven products of stainless steel is apparently not applicable to such sophisticated products which have acquired a different character and use by way of application of sintering process. The bonding involved in sintering process and takes the material even beyond the stage of assembly. Heading 84.21 in HSN covers filtering or purifying machinery and apparatus for liquids and gases other than those of the specified types such as milk strainers etc. and it is important that sintered products have not been included. On the other hand, the explanatory Note (II) under this heading while referring to filtering and purifying machinery etc. for liquids under sub-clause (a) refers to sintered metallic powders and clause (b) refers to filtering or filtering machinery for gases and further it covers parts of such machinery also. In our case, the same material can be used both for sintering liquids as well as gases and is used as a part of filtering machinery. Learned DR has drawn attention to the fact that one of the Notes also mentions that “it should be noted, however, that filter blocks of paper pulp fall in Heading 48.12 and that many other filtering elements (ceramies, textiles, felts, etc.) are classified according to their constituent material.” This, by itself, is not sufficient to exclude sintered filter media which are a class by themselves and the fact that some filtering elements are classified according to their constituent material does not mean that sintered media also should be classified only according to the constituent material.

30. It has been pointed out that under Heading 73.14 which covers iron and steel cloth netting etc., it is mentioned in Explanatory Note (A) that “the material of the heading may be used for many purposes e.g., for the washing, drying or filtering of many materials: to make fencing, food protecting covers and insect screening, safety guards for machinery, conveyor belting, shelving, mattresses, upholstery, sieves and riddles, etc.: and for reinforcing concrete, etc. The material may be in rolls, in endless bands (e.g. for belting) or in sheets, whether or not cut to shape : it may be of two or more ply” and only wire cloth made into the form of machinery parts e.g. by assembly with other materials has been excluded.

31. It is obvious that wire cloth or netting etc. can be and are used for filtering of many materials and they may be in rolls or cut to shape and size because such materials can act as a sieve whereas from the catalogue, it is apparent that deep filters of sintered material are known not merely for their sieve effect but also for impact effect and adsorption as evident from the following words : -

“During the purification of a liquid or a gas, the following three mechanisms are of partucular importance for the efficient working of a depth type filter : -

1. sieve effect 2. impact effect 3. adsorption".

This is, therefore, an important distinctive feature. Moreover, the Exclusion Clause indicates `assembly with other materials’ only as an example. Hence, bonding or joining by sintering with other materials would also get coverd. In view of this position, the item gets excluded from Heading 73.14 and would fall under Chpater 84. The only thing is that this Chapter prescribes different sub-headings for machinery for filtering and purifying the liquids and those for purifying and filtering of gases.

32. But, that does not make much of a difference in view of the fact that in the present case, we are concerned with parts of filtering and purifying machinery and apparatus and such parts are covered by Heading 8421.99 and were by virtue of this classification entitled to the benefit of Notification No. 172/89-Cus. (as amended) since Entry 18 of the said notification covers goods falling under sub-heading 8421.91 or 8421.99, excluding parts of goods falling under sub-heading 8421.23 or 8421.31 whereas the filtering or purifying machinery for liquids (other than the specified ones) is covered under 8421.29 and the appellants have stated (and the Department has not disputed) that the machinery in which these parts are intended to be used is meant for filtration of viscose solution.

33. In view of the above position, the impugned orders are set aside and the appeals are accepted.

_______

Equivalent 1997 (92) ELT 607 (Tribunal)