Collector of Central Excise, Hyderabad Vs.
M/S. Bakelite Hylam Ltd.  INSC 258 (10 March 1997)
AHMADI, SUJATA V. MANOHAR
10TH DAY OF MARCH, 1997 Present:
the Chief Justice Hon'ble Mrs. Justice Sujata V. Manohar M.S.Usgaonkar,
Additional Solicitor General, D.A. Dave, Harish N. Salve, Sr.Advs. Dhruv Mehta,
Dalip Tandon, V.K.Verma, A.Subba Rao, P. Parmeswaran, Ms. Janki Ramachandran,
Ms. Meenakshi Arora, (Devan Parikh, Ms. Ruby Ahuja,) Advs. for Ms. M. Karajawala,
V. Lakshmi Kumaran, V. Sridharan, V. Balachandra, Ravinder Narain, Ms. Amrita Mitra,
M.L. Lahoty, Amit Bansal, Pawan Sharma, Himanshu Shekhar, Rajiv Tyagi, U.A. Rana,
S. Tripathi, C.N. Sree Kumar, Ms. Indu Malhotra, V.L. Francis, and P.I. Jose,
Advs. with hem for the appearing parties.
following Judgment of the Court was delivered:
1228/91, 1229/91, 7086/95, 6593-6594/94, 4702/90, 2554-55/89, 3182-3202/90,
4886/90, 2898/91, 3050/32, 3251/95, 438/91, 2491/92 and 9001/96)
V. Manohar, J.
appeals, which are at the instance of the Collector of Central Excise, raise
common questions regarding the classification of laminated sheets. There
varieties of laminated sheets are involved in these appeals:
Decorative laminated sheets;
Industrial laminated sheets which are paper based and;
Glass Epoxy laminated sheets.
manufacturing process of decorative laminated sheets has been described by the
manufacturers. Paper is passed through or immersed in a resin bath (phenol formaldehyde
resin) so that the paper is impregnated with resin. This paper is then dried.
At this stage the paper which is impregnated with resin is known as 'Prepreg -
P' ('P' stands for paper). Layers of Prepreg paper are then stacked. The top
layer consists of paper which has a decorative design on it an which is
impregnated with resin.
sheets of papers so stacked are then pressed together in a hydraulic press
applying pressure and heat to make a laminated sheet. In the process, the resin
passes through the pores of paper and acts as a binder. The end product is a
hard rigid sheet which is impact resistent and is unaffected by hear or
moisture. These decorative laminated sheets are sold in the market and they are
commonly used for surfacing of furniture.
case of industrial laminates which are paper based, the process of manufacture
is similar except that the paper which is used is electrical grade kraft paper.
These industrial laminates are used as electrical insulators.
case of glass epoxy laminates instead of paper, glass fabric is impregnated
with resin and dried (Prepeg-G).
layers of resin impregnated glass fabric-Pepeg-G are pressed together in a
hydraulic press applying heat and pressure in order to produce glass epoxy
are also used as electrical epoxy laminated sheets.
are also used as electrical insulators.
dispute in these appeals relates to the correct classification of these
products under the Central Excise Tariff as applicable at the material time.
The classification lists which are the subject matter of these appeals relate
to the period 1983 to 1989 (approx).
classification lists prior to 28.2.1986 are governed by the First Schedule to
the Central Excises and Salt Act, 1944 (hereinafter referred to as the 'Old
effect from 28.2.1986 the Central Excise Tariff Act, 1985 came into force.
Hence the classification lists after 28.2.1986 are governed by the Central
Excise Tariff Act, 1985 (hereinafter referred to as the 'New Tariff').
have been some changes in the relevant Tariff Entries under the Central Excise
Tariff Act of 1985 from 1.3.1988.
description of the material tariff entires for our purposes, however, has not
been affected by the changes made in the Central Excise Tariff Act of 1985 with
effect from 1.3.1988, except for a change in the number of the entry.
the Old Tariff, the two competing entries in the First Schedule are Entry 15A(2)
and Entry 68. Entry 15A(2) at the material time was as follows :
Artificial or Synthetic resins and plastic materials, and other materials and
articles specified below:
Condensation, Polycondensation and polydaddition products....
Articles of materials described in sub-item (1), the following namely :-
Boards, sheeting, sheets and films, whether lacquered metallised or laminated
or not; lay flat tubings not containing any textile materials." Entry 68
which is a residuary entry, is as follows:
No. Description of goods Rate of Duty
other goods, not elsewhere specified, Twelve per but excluding- cent ad valorem
(a) Alcohol, all sorts, including alcoholic liquors for human consumption;
Opium, Indian hemp and other narcotic drugs and narcotics; and (c) dutiable
goods as defined in section 2(c) of the Medical and Toilet Preparations (Excise
Duties) Act, 1955 (16 of 1955).
For the purpose of this item, goods which are referred to in any preceding item
in this Schedule for the purpose of excluding such goods from the description
of goods in that item (whether such exclusion is by means of an Explanation to
such item or by words of exclusion in the description itself or in any other
manner) shall be deemed to be goods not specified in that item." According
to the Excise Authorities, all these laminated sheets which are manufactured by
the respondents are sheets of plastic material falling under Tariff Entry
15A(2) of the Old Tariff. The manufacturers, on the other hand, contend that
the laminated sheets cannot be considered as sheets of plastic material. The
sheets are made up of composite material consisting of either paper or glass
fabric as also resins. Hence these sheets are not covered by Entry 15A(2). They
would fall under the residuary Entry
The claim of the manufacturers has been upheld by CEGAT. Hence these appeals
have come before us.
deals the articles of materials which are described in sub-item(1). The
material which is described in sub-item(1) falls under the category of
artificial or synthetic resins and plastic materials. The different products
and processes by which they are derived are described in sub-entry (1).
Sub-entry (2) describes Articles of this material in different forms such as
boards, sheeting, sheets, films, whether lacquered or metallised or laminated
or not and lay flat tubings. This entry does not refer to any composite
material or composite article which consists not merely of artificial or
synthetic resins and plastic materials but also such material in combination
with other materials such as paper or glass fabric in the present case.
case of Geep Flashlight Industries Ltd. V. Union of India (1985  ELT 3 SC), this Court
considered Tariff Entry 15A(2) as it stood at the relevant time. The entry as
made of plastics, all sorts, including tubes, rods, sheets, foils, sticks,
other rectangular or profile shape whether laminated or not and whether rigid
or flexible including lay flat tubings and polyvinyl cholride sheets....
Court said that a mere reference to Tariff Item No. 15A(2) would show that
articles described there are plastic material in different shapes and forms and
not articles made from such plastic material. There is a noticeable difference
between plastic material in different shapes and form such as tubes, rods,
sheets etc. and articles made from such plastic materials such as a plastic
torch. This Court further held that articles made of plastic "refer to
articles made wholly of commodity commercially knows as plastics and not articles
made from plastics along with other material. The interpretation, which this
Court put on Entry 15A(2) in the above case will apply equally to Entry 15A(2)
set out earlier which was thus modified subsequently and with which we are
concerned. The basic wording of Entry 15A(2), namely, "articles of
material described in sub-item(1), the following" is similar to the
original wording "Articles made of plastic all sorts". The
description which follows: boards, sheeting, sheets, films etc. in Entry 15A(2)
as applicable here, also refers to plastic material in different shapes and
forms. This entry does not deal with a composite commodity which may consist of
plastics or materials described in sub-item (1) of Entry 15A, combined with
other material. Therefore, the ratio of this Court's decision in the case of Geep
Flashlight Industries Ltd. (supra) applies directly to Entry 15A(2) as
applicable here. A composite material such as we have to consider, will not be
covered by Entry 15A(2).
case of Wiltech India Ltd. v. C.C.E. (1996  ELT p.5 SC), this Court held
that a razor made of plastic with an iron rod would fall under Tariff Item 68.
Razors which are not wholly made of plastic would not qualify for exemption
under Notification No. 182/82-CE.
laminated sheets are not made wholly of material described in Entry 15A(1), the
CEGAT has rightly held that under the Old Tariff, laminated sheets in question
cannot be classified under Tariff Entry 15A(2). They are to be classified under
the residuary Entry 68.
the coming into force of the Central Excise TARIFF Act of 1985, however, the
tariff entries have undergone substantial change.
to the Central Excise Authorities, decorative laminates fall under tariff entry
3920.31/3920.37 of the New Tariff. (N.B. the second number is the new number of
the relevant tariff entry by reason of the amendments made in the New Tariff
with effect from 1.3.1988). The manufacturers/respondents claim that decorative
laminates are classifiable under tariff entry 4818.90/4823.90 (the latter being
the new number of the tariff entry with effect from 1.3.1988). The claim of the
manufacturers has been upheld by CEGAT. This is challenged before us by the
the correct interpretation of the New Tariff some relevant factors have to
borne in mind. The Statement of object and Reasons accompanying the Central
Excise Tariff Bill, 1985 which later became the Central Excise Tariff Act, 1985
which later became the Central Excise Tariff Act, 1985, inter alia, states:
"The Technical Study Group on Central Excise Tariff which was set up in
1984 to conduct a comprehensive inquiry into the structure of the Central
excise tariff has suggested the adoption of a detailed Central excise tariff
based broadly on the system of classification derived from the International
Convention on the Harmonised Commodity Description and Coding System (Harmonised
System) with such contractions or modifications thereto as are necessary to
fall within the scope of the levy of Central excise duty. The group has also
suggested that the New Tariff should be provided for by a separate Act to be
called the Central Excise Tariff Act.' Hence for the interpretation of the New
Tariff harmonised system of nomenclature and its explanatory notes are
relevant. In the case of Collector of Central Excise, Shillong v. Wood Crafts
Products Ltd. 91995  SCC 452), this Court, while considering the Central
Excise Tariff Act of 1985, has held that looking to the Statement of Objects
and Reasons the Central Excise Tariff under the 1985 Act is based on the Harmonised
System of Nomenclature (HSN) and the internationally accepted nomenclature has
been adopted to reduce disputes on account of tariff classification.
for resolving any dispute relating to tariff classification, the
internationally accepted nomenclature emerging from the HSN is a safe guide,
this being the expressly acknowledged basis of the structure of the Central
Excise Tariff in the 1985 Act and the tariff classification made therein. In
case of any doubt, the HSN is a safe guide for ascertaining the true meaning of
any expression used in the Act.
addition the New Tariff Act has specifically laid down Rules of Interpretation
which govern the interpretation of various entries in it. Each chapter in the
New Tariff Act further contains its own Notes which are relevant for the
interpretation of entries forming part of that chapter.
Entry 3920.31 is in Chapter 39. Chapter 39 deals with "Plastics and
Articles thereof". Note 1 to Chapter 39 is as follows:- "Note 1:
Throughout his Schedule, the expression plastics means those materials of
heading Nos. 39.01 to 39.14 which are or have been capable, either at the
moment of polymerisation or at some subsequent stage, of being formed under
external influence (usually heat and pressure, if necessary with a solvent or plasticiser)
by moulding, casting, extruding, rolling or other process into shapes which are
retained on the removal of the external influence.
this Schedule, any reference to 'plastic' also includes vulcanised fibre. The
expression, however, does not apply to materials regarded as textile materials
of Sec. XI." Note 2(n) is as follows:- "Note 2: This chapter does not
Articles of Sec.XVI (Machines and mechnical or electrical appliances)
Therefore, articles falling under Section XVI (chapters 84 and 85) will not
fall under chapter 39.
39.20 is as follows;- Heading No. Sub-heading No. Description of Rate of duty
39.20 OTHER PLATES, SHEETS, FILM, FOIL AND STRIP OF PLASTICS, NON-CELLULAR,
WHETHER LACQUERED OR METALLISED OR LAMINATED, SUPPORTED OR SIMILARLY COMBINED
WITH OTHER MATERIALS OR NOT
- of polymers of vinyl chloride:
Rigid plates, sheets, (60%) film, foil and strip 3920.12 Flexible plates, (60%)
sheets, film, foil and strip ..... - ......
regenerated Cellulose 3920.21 Film, if thickness (60%) not exceeding 0.25 millimetre
3920.22 Sheet (60%) ..... - ......
Rigid plates, sheets, (60%) film, foil and strip 3920.32 Flexible plates,
sheets (60%) film, foil and strip ..... - .....
heading of entry 39.20 which govern all entries forming part of 39.20 covers,
inter alia, sheets of plastics, whether laminated and whether supported or
similarly combined with other materials or not. Therefore, unlike Old Tariff
Entry 15A(2) even sheets of plastics combined with other material can be
classified under entry 39.20. Polymers of vinyl chloride are classified under entry
3920.11 to 3920.19. Regenerated Cellulose falls under entry 3920.31 to 3920.39.
Sheets of other Central Excise Authorities, decorative laminated sheets which
consist of a combination of paper and synthetic resins should be classified
under entry 3920.31 since the final product which is in the form of laminated
sheets, has all the essential characteristics of a plastic rather than of
manufacturers, however, contend that paper which is a component of a decorative
laminated sheet constitutes 60% to 70% of the product while resins constitute
only 30% to 40% of the product. Hence looking to the predominance of paper as
also the decorative quantity given by it to the sheets, decorative laminated
sheets should be classified under Chapter 48 of the New Tariff which deal with
"Paper and Paperboard, Articles of Paper Pulp, of Paper or of
Paperboard". The relevant entries, according to the manufacturers, are
4818.90/4823.90. Note 1(f) to Chapter 48 is as follows:
(1): This chapter does not cover:
Paper reinforced stratified plastic sheeting, or one layer of paper or
paperboard coated or covered with a layer of plastics, the latter constituting
more than held the total thickness, or articles of such materials, other than
wall coverings of heading No. 48 14(Chapter 39)." The manufacturers have
placed emphasis on this note.
note, however, will not have any application in the present case. In the first
place the note refers to paper- reinforced stratified plastic sheeting or one
layer of paper coated or covered with a layer of plastics. the process of
manufacture of laminated sheets which is described earlier is totally
different. It requires impregnation of paper with resins, drying it to produce prepeg
and then pressing layers of prepeg under a hydraulic press, Therefore, simply
because paper content is higher than resin content, note 1(f) does not become
4818 is as follows;
No. Sub-heading No Description of goods Rate of duty 4818 OTHER ARTICLES OF PAPER
PULP, PAPER, PAPER- BOARD, CELLULOSE WADDING OR WEBS OF CELLULOSE FIBRES.
boxes containers and cases -- - (including flattened or folded boxes) and
flattened or folded cartons), whether in assembled or unassembled condition:
Intended for packing of match sticks Nil 4818.12 Printed cartons, boxes,
containers and cases, made wholly out of paper or paper-board of heading No. or
sub-heading No. 48.04, 4805.11, 4805.19, 4807.91, 4807.19 or 4818.13 Other
printed cartons, boxes and cases 35% 4818.19 Other Nil 4818.20 Toilet tissues,
handkerchiefs and 12% cleansing tissues of paper 4818.90 Other 12% [Underlining
ours] The manufacturers contend that decorative laminates should be classified
as other articles of paper under entry 4818.90 looking to the predominance of
paper in the contents of decorative laminated sheets.
since decorative laminates are composed of paper as well as resins, it is
possible that they can be classified either under Chapter 39 which deals with
plastics or under Chapter 48 which deals with paper. In order to decide which is
the more appropriate classification it is also necessary to refer to the Rules
of Interpretation prescribed under the New Tariff Act. Rules 1, 2(b) and 3 as
The titles of Section and Chapters are provided for ease of reference only; for
legal purposes, classification shall be determined according to the term so of
the headings and any relative Section or Chapter Notes and, provided such
headings or Notes do not otherwise require, according to the provisions
(b) Any reference in a heading to a material or substance shall be taken to
include a reference to mixtures or combinations of that material or substance
with other materials or substances. Any reference to goods of a given material
or substance shall be taken to include a reference to goods consisting wholly
or partly of such material or substance. The classification of goods consisting
of more than one material or substance shall be according to the principles
contained in rule 3.
When by application of sub- rule(b) of rule 2 or for any other reason, goods
are, prima facie, classifiable under two or more headings, classification shall
be effected as follows;
The heading which provides the most specific description shall be preferred to
headings providing a more general description...
Mixtures, composite goods consisting of different materials or made up of
different components, and goods put up in sets, which cannot be classified by
reference to (a), shall be classified as if they consisted of the material or
component of the material or component which gives them their essential
character, insofar as this criterion is applicable.
When goods cannot be classified by reference to (a) or (b), they shall be
classified under the heading which occurs last in the numerical order among
those which equally merit consideration." [underlining ours] Rule 1 does
not help to classify the goods in the present case because Note 1(f) in Chapter
48 is not applicable to these goods. The other relevant rule of interpretation
is Rule 3(b) which provides that mixtures or composite goods consisting of
different materials which cannot be classified with reference to Rule 3(a) as n
the present case, are to be classified as if they consisted of the material or
component which gives them their essential character. in the present case, the
essential character of a decorative laminated sheet is its rigidity or strength
and its resistance to heat and moisture. These are essentially characteristics
which are imparted by resins. Paper does not possess any of these
characteristics. Therefore, applying Rule 3(b) and going by the essential
characteristic of such laminated sheets, these goods are more appropriately
classifiable under Chapter 39.
Explanatory Note to Chapter 39 in the harmonised System of Nomenclature also,
it is provided as follows:
of plastics and materials other than textiles:
Chapter also covers the following products, whether they have been obtained by
a single operation or by a number of successive operations provided that they
retain the essential character of articles of plastics:
Paper-reinforced stratified plastic sheeting, and products consisting of one
layer of paper or paperboard coated or covered with a layer of plastics, the
latter constituting more than half the total thickness, other than wall
coverings of heading 48.14.
Products consisting of glass fibres or sheets of paper, impregnated with
plastics and compressed together, provided they have a hard, rigid character.
(If having more the character of paper or of articles of glass fibres they are
classified in Chapter 48 or 70, as the case may be)." Note (d) clearly
provides that products consisting of glass fibres or sheets of paper
impregnated with plastics and compressed together as in the present case, if
they have a hard and rigid character, would fall under Chapter 39. If they have
more the character of paper or of articles of glass fibres, they would be
classified under Chapter 48 or Chapter 70, as the case may be. The decorative
laminated sheets which have a hard and rigid character are, therefore,
classifiable under Chapter 39 and not under Chapter 48. The appropriate entry
is 3920.31/3920.37 which deals, inter alia, with sheets of other plastics,
laminated sheets, therefore, cannot be classified under Tariff Entry
4818.90/4823.90. CEGAT is not right in classifying these under Entry
4818.90/4823.90 Industrial laminated sheets which are paper-based are used for
electrical insulation. Glass epoxy laminates are also used as electrical
insulators. The New Tariff Act contains a separate Section XVI which deals,
inter alia, with electrical equipment and parts thereof. Chapter 85 which forms
part of Section XVI deals with electrical machinery and equipment and parts
thereof. Entry 8546 deals with "electrical insulators of any
material". There is, therefore, a specific entry in the New Tariff Act
dealing with electrical insulator of any material. Under chapter 39 which deals
with plastics and articles thereof, chapter Note 2 (n) which is set out
earlier, provides that this chapter does not cover articles of Section XVI.
Therefore, industrial laminates and glass epoxy laminates which are used for electrical
insulation will not fall under Chapter 39 but will fall under Chapter 85 under
Entry 8546.00 (Entry 7014 under the New Tariff Act prior to 1.3.1988).
the contention of the Central Excise Department that industrial laminates and
glass epoxy laminates cannot be considered as electrical insulators because
these sheets are required to be cut in the requisite shape and holes may have
to be punched in them before they could be fitted as insulators. However, mere
cutting or punching holes does not amount to manufacture. These sheets have
insulating properties and are used as electrical insulators. They cannot be
taken out of the category of electrical insulators only because they have to be
cut to the requisite shape or a few holes may be required to be required to be
punched in them in order that they may fit into the electrical
instrument/appliance in question. The Tribunal, therefore, has correctly
classified there industrial laminates and glass epoxy laminates under Tariff
Item 8546 of the New Customs Tariff (after 1.3.88) and under Tariff Entry 7014
under the New Customs Tariff upto 28-2-1988. Under the Old Customs Tariff,
however, there is no express entry dealing with electrical insulators
equivalent to Entry 8546.00 of the New Customs Tariff. Entry 15A(2) of the Old
Tariff will not cover these laminated sheets also for the same reason as in the
case of decorative laminated sheets. These sheets, therefore, have been rightly
classified under the residuary Tariff Entry 68 of the Old Customs Tariff.
up, the Tribunal has rightly classified decorative laminates under the Old
Tariff Entry 68. The decision of the Tribunal, however, in so far as it
classifies decorative laminated sheets are classified under Tariff Entry
3920.31/3920.37 of the New Tariff. In respect of Industrial laminates
(paper-based) and glass epoxy laminates, the Tribunal has correctly classified
these laminates under Tariff Item 68 of the Old Tariff and under Tariff Entry
7014/8546 of the New Tariff.
these appeals are partly allowed. Any entitlement to refund will be processed
in accordance with the decision of this Court in Mafatlal Industries Ltd. etc.
v. Union of India etc. etc. (1996  SCALE
457). There will be no order as to costs in the circumstances of the case.