2013(04)LCX0278

IN THE CESTAT, WEST ZONAL BENCH, MUMBAI [COURT NO.I]

S/Shri P.R. Chandrasekharan, Member (T) and Anil Choudhary, Member (J)

AJAY INDUSTRIAL CORPORATION LTD.

Versus

COMMR. OF CUS. (IMPORTS), MUMBAI

Final Order No. A/1031/2013-WZB/C-KCSTB), dated 5-4-2013 in Appeal No. C/211/2012

Cases Quoted -

Commissioner of Sales Tax v. Agarwal & Co. - 1982(11)LCX0004 Eq 1983 (012) ELT 0116 (Bom.) - Relied on... [Paras 3,5.2]
Commissioner v. Henkel Terosonn India Ltd. - 2011(04)LCX0299 Eq 2012 (278) ELT 0499 (Tribunal)
- Relied on [Paras 3,5.2]
H.C.L. Ltd. v. Collector - 2001(03)LCX0075 Eq 2001 (130) ELT 0405 (S.C.) - Relied on [Paras 3,5.2]
Mangalam Alloys Ltd. v. Commissioner - 2010(04)LCX0068 Eq 2010 (255) ELT 0124 (Tribunal) - Referred [Para 3]

Advocated By -

Shri T. Vishwanathan, Advocate, for the Appellant.
Shri Amand Shah, Addl. Commissioner (AR),for the Respondent

[Order per : P.R. Chandrasekharan, Member (T)]. -

The appeal arises from Order-in-Appeal No. 18(Gr. II C85D)/2012 (JNCH)/IMP-14, dated 24-1-2012 passed by the Commissioner of Customs (Appeals), Mumbai-II, JNCH, Nhava Sheva.


2. The appellant, M/s Ajay International Corporation Ltd., Khandala, Maharashtra filed 11 Bills of Entry during 28-9-2010 to 10-12-2010 for the import of Chlorinated Poly Vinyl Chloride and claimed benefit of Notification No. 21/2002-Cus., dated 1-3-2002. The Bills of Entry were assessed and goods were classified under CTH 3904 22 90. However, the appellant was denied the benefit under Sr. No. 480 of the said notification and was directed to pay duty under Sr. No. 559, which provided for a higher rate of duty. The appellant paid duty under protest and filed an appeal before the lower appellate authority. The lower appellate authority held that the product Chlorinated Poly Vinyl Chloride is not a polymer and the same product is not classifiable under Heading No. 3904. However, he allowed the benefit of concessional duty under Sr. No. 559, which is applicable to goods falling under CTH 3901 to 3915. Hence, the appellant is before us.

3. The learned Counsel for the appellant submits that Chlorinated Poly Vinyl Chloride falls under Heading 3904, which covers polymers of vinyl chloride or of other halogenated olefins, in primary forms. As per Chapter Note 5 of Chapter 39, Chemically modified polymers, that is those in which only appendages to the main polymer chain have been changed by chemical reaction, are to be classified in the heading appropriate to the unmodified polymer. This provision does not apply to graft copolymers. He further submits that as per HSN Ex-planation Note, 'primary forms' is defined under Note 6 and as per the said note 6, if applies to liquids and pastes, including dispersions (emulsions and suspensions) and solutions, and blocks of irregular shape, lumps, powders (including moulding powders), granules, flakes and similar bulk forms. As per the HSN Explanatory Note, the polymers may contain other material such as plasticizers, stabilizers, fillers and colouring matter, chiefly intended to give the finished products special physical properties or other desirable characteristics. In the case of the appellant, the chlorination of PVC has been done, so that it can be used for making of pipes for handling hot-water by adding chlorine and creeping process of the product as improved, so that the product can be used in high temperature applications such as hot-water piping. This contention is based on the information given in Encyclopedia of Chemical Technology, Fourth Edition, Volume -24, page 1039. Notification No. 21/2002-Cus. vide Sr. No. 480 provides a concessional rate of duty of 5% of BCD on polymers of vinyl chloride falling under Heading No. 3904. Entry No. 559 provides the concessional duty of 7.5% on all goods falling under Heading No. 3901 to 3915 except 3908. Thus, two rates of duty have been prescribed and the appellant has chosen entry No. 480, which is more beneficial to him. Since the impugned goods have been classified under 3904 22 90, the benefit of Sr. No. 480 is available and cannot be denied on the ground that it applies only to PVC and not to compounds of PVC. He also relies on the decision of the Tribunal in the case of Henkel Terosonn India Ltd. - 2011(04)LCX0299 Eq 2012 (278) ELT 0499 (T), HCL Ltd. v. Commissioner of Customs - 2001(03)LCX0075 Eq 2001 (130) ELT 0405 (S.C.), Mangalam Alloys Ltd. v. Commissioner of Customs - 2010(04)LCX0068 Eq 2010 (255) ELT 0124 (T), Commissioner of Sales Tax v. Aganual & Co. -1982(11)LCX0004 Eq 1983 (012) ELT 0116 (Bom.) in support of the above contentions.

4. The Addl. Commissioner (AR) appearing for the Revenue reiterates the findings of the lower appellate authority and submits that since the product under importation is a compound of PVC with chlorine, it cannot be classified as a polymer. Accordingly, he prays for upholding the impugned order.

5. We have carefully considered the submissions made by both the sides.


5.1 Heading 3904 read as follows :-


3904 POLYMERS OF VINYL CHLORIDE OR OF OTHER HALOGENATED OLEFINS, IN PRIMARY FORMS
3904 00 - Poly (vinyl chloride), not mixed with any other substances:
3904 10 10 - Binders for pigments
3904 10 90 - Other
- Other poly (vinyl chloride)
3904 21 - Non-plasticised
3904 21 10 - Poly (vinyl chloride) resins
3904 21 90 -- Other
3904 22 - Plasticised
3904 22 10 - Poly (vinyl chloride)(PVC) Resins (emulsion grade)
3904 22 90 - Other
3904 30 - Vinyl chloride-vinyl acetate copolymers
3904 30 10 - Poly (vinyl derivatives)
3904 30 90 - Other
3904 40 00 - Other Vinyl chloride copolymers
- Vinylidene chloride polymers
3904 50 10 - Copolymer of vinylidene chloride with acrylonitrite, in the form of expansible beads of a diameter of 4 micrometers or more but not more than 20 micrometers
3904 50 90 - Other
- Fluro-polymers
3904 61 00 - Polytetrafluroethylene
- Other
3904 69 10 - Poly (vinyl fluoride), in one of the forms mentioned in Note 6(b) to this Chapter
3904 69 90 - Other
3904 90 00 - Other


From the above tariff description, it can be seen that the said Heading 3904 covers, not only PVC not mixed with any other substance but also PVC mixed with other substances. It also contains compounds of PVC and copolymers of PVC such as, vinyl chloride-vinyl acetate copolymers, vinylidene chloride polymers, fluro polymers. Thus, all forms of PVC merit classification under Heading 3904. It is also provided in sub-heading note 1(b) that chemically modified polymers should be classified under sub-heading appropriate to the unmodified polymers. As per Note 6, primary forms has been defined to include liquids and pastes, including dispersions and solutions and blocks of irregular shape, lumps, powders (including moulding powders), granules, flakes and similar bulk forms. As per HSN Explanatory note, primary forms may contain other materials such as plasticizers, stabilizers, fillers and colouring matter, chiefly intended to give the finished products special physical properties or other desirable characteristics. From the Encyclopedia of Chemical Technology, copy of which has been submitted by the appellant, it is seen that PVC is chlorinated so that it can be used in high temperature applications such as hot-water piping. Therefore, chlorinated PVC remains under Heading 3904 as primary forms of PVC. Even if it is assumed that by chlorination, PVC has been chemically modified, as per subheading Note lb(2), they remain classified under the same heading as appropriate to the unmodified polymers.


5.2 In view of the above, we do not find any reason to classify the products chlorinated PVC in any other heading other than heading 3904. Vide Notification No. 21/2002 in Sr. No. 480, the concessional rate of duty of 5% has been prescribed for PVC falling under Heading 3904. The said entry covers all forms of PVC. Sr. No. 559 provides the concessional rate of duty of 7.5% on all goods falling under 3901 to 3915 except 3908. When two rates are specified in a notification for a product, the assessee is entitled to the benefit of that exemption, which gives him greater relief regardless to the fact that the notification as general in terms or other notification is more specific to the goods as held by the Hon'ble Apex Court in the case of HCL Ltd. (supra). Similarly, in the case of Commissioner of Sales Tax, the Hon'ble Bombay High Court held that the term 'milk' would ordinarily include 'milk in all its forms' including evaporated or dehydrated milk or milk powder. Even though the said decision pertains to Bombay Sales Tax Act, the ratio of the decision would apply to the facts of the present case. Accordingly, it is held that the expression 'polymers for vinyl chloride' used in the notification would cover all forms/types of PVC. The decision of the Tribunal in the case of Henkel Teroson India Ltd. (supra) also supports the above view. The question, which arose for consideration in that case, was whether co-polymers of vinyl chloride/vinyl acetate would fall under the broad category of polymers of vinyl chloride under Heading 3904 and eligible for benefit of Notification No. 21/2002 in Sr. No. 480 and this Tribunal held that the said entry would cover all forms of poly vinyl chloride and accordingly, the benefit would be available.


6. In the light of the foregoing discussions, we are of the considered view that the chlorinated PVC merits classification under CTH 3904 and is eligible for the concessional rate of duty of 5% BCD in Sr. No. 480 of Notification No. 21/2002. Thus, the appeal is allowed with consequential relief, if any. (Operative part of order pronounced in Court)

Equivalent 2015 (323) ELT 0385 (Tri. - Mumbai)