2001(03)LCX0140

IN THE CEGAT, WEST ZONAL BENCH, MUMBAI

S/Shri Gowri Shankar, Member (T) and S.S. Kang, Member (J)

IDEAL SHEET METAL STAMPINGS & PRESSING PVT. LTD.

Versus

C.C., MUMBAI

Order No. 658/2001-WZB/C-I, dated 1-3-2001 in Appeal No. C/1023/2000-Mum.

Commissioner v. Bhartiya Plastic Udyog — 1998(08)LCX0195 Eq 1999 (107) ELT 0161 (Tribunal) — Relied on [Para 6]

Advocated By :   S/Shri J.C. Patel and Sujay Kantawala, Advocates, for the Appellant.

Shri Arun Chopra, JDR, for the Respondent.

[Order per : Gowri Shankar, Member (T)]. - The appellant imported a consignment of goods declared to be “regrind polycarbonate”. The classification was claimed of the goods under Heading 3907.40 of the Customs Tariff and Heading 39074000 of the ITC Policy for the purposes of importation. Examination of the goods by the department and the Indian Institute of Technology, Powai, showed the goods to be “Transparent Grinded Sheet Piece in Aglo form of size 4-10 MM.” From this, the department concluded that the goods is nothing other than the scrap of plastic classifiable under Heading 39.15 of the tariff and the corresponding entry No 3915.9015 in the Import Policy. The policy required a licence for the goods falling under this heading and in the absence of this licence; notice was issued proposing confiscation of the goods under clause (d) of Section 111 of the Act and penalty on the importer under Section 112 of the Act. In the order impugned in this appeal, the Commissioner has held that the goods are nothing other than plastic scrap classifiable under Heading 3915, ordered their confiscation with an option to redeem them on payment of fine, and imposed a penalty under Section 112 of the Act on the importer. Hence this appeal.

2. It is the contention of the counsel for the appellant that “regrind plastic” is a form of recycled plastic obtained by successively reducing the size of the finished plastic product such as sheets, until they are in a form such as granules in which they can be used for injection moulding. The appellant uses them in its factory for production for textile bobbins by injection moulding. He cites technical literature in support of this view and also an affidavit of the manufacturer of the material in the U.S.A. He also relies upon the provisions of Note 7 to Chapter 39.

3. Note 7 to Chapter 39 provides that Heading 3915 (which is for waste, parings and scraps) of articles of plastic, does not apply to waste, parings and scrap of a single thermoplastic material, transformed into primary forms (Heading Nos. 39.01 to 39.14).” The same view is expressed more clearly in the Explanatory Notes to the Harmonised Commodity Description System of the World Customs Organisation. The Customs tariff and heading in Chapter 39 are based upon this Nomenclature. In the 1996 edition of the Notes, (at page 597) “primary forms” is defined, which covers waste, powder, granules, flakes and blocks of irregular shapes, lumps and similar bulk form. The notes go on to say that “waste, parings and scrap of a single thermoplastic material transformed into primary forms are classifiable under Heading 39.01 to 39.14 according to the material and not under chapter Heading 39.15.” Note 7 of this chapter is identical in wording to Note 7 of Chapter 39 to our Customs Tariff.

4. The test report indicates that the material imported is composed of polycarbonate, which is a thermoplastic material. The goods are in the form of flakes, which is one of the primary forms mentioned in the note. The imported goods therefore conform to the requirement of the tariff and therefore cannot be classifiable under Heading 3915 of the Customs tariff and under Heading 39159019 of the Schedule to the Import Policy. They would be classifiable under Heading 3907.4000 of the Policy, import of goods falling under which heading is freely importable without a licence.

5. From the technical literature produced by the counsel for the appellant, it would appear that the reason why Heading 39.15 does not apply to waste, parings and scrap of a single thermoplastic material, transformed into primary form is that such material can be, and is often used as effectively as such material in virgin form. The book “Recycling and Recovery of Plastics” published by Hanser Publishers, Munich, Vienna and New York, edited by Brandrup, Bittner, Menges, contains a monograph entitled ‘Problems Specific to the Injection Moulding of Recyclates by Erwin Burkle and Peter Karlinger. That monograph says in part :

“4.6.1 Introduction and State of the Art of Processing Recyclate by Injection Moulding.

In Injection moulding, it has long been state of the art to feed regrind from sprues, startup waste and production waste directly back to the production machine. This method is also known as “in-house recycling”. These recycling and reclamation processes are predominantly automatic and are carried out directly at the machine.

Greater effort is necessary, however, for reclaiming used material or recyclate. The amount of treatment in this case depends on the situation in question. Two treatment stages should be distinguished :

1.          Size reduction - separation - washing and drying - and

2.          Compounding and/or regranulation.

If the two treatment stages are combined, the resulting material (repelletized or reclaim) is equivalent to virgin material.”

6. If the recycled material is chemically and physically equivalent to the virgin material, it is only appropriate that it is treated as such for the purposes of classification. The view that we have taken with regard to the applicability of Note 7 to Chapter 39 has in fact been expressed earlier by a single member of the Tribunal in C.C.E., New Delhi v. Bhartiya Plastic Udyog - 1999 (107) ELT 161.

7. The departmental representative’s objection is that the expression “primary forms” referred to in the tariff and the Explanatory Notes refers not only to the physical form but also to the quality of the material. Such primary form, he says, can only exist with regard to virgin material. Doubtless, the Explanatory Notes to the Harmonised System, while dealing with “primary form” indicates these forms to be the formation of virgin material. However, the same notes, as we have mentioned above, specifically include any such primary form of waste, parings and scrap of a single thermoplastic material. We have already attempted a reason for this.

8. The appeal is accordingly allowed and the order confiscating goods, and imposing a penalty on the appellant is set aside. Consequential relief.

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