Customs, Calcutta Vs. G.C. Jain & Anr.
appeals are directed against the judgment and order dated 17.02.2002 passed by the
Customs, Excise and Gold (Control) Appellate Tribunal, Eastern Bench, Kolkata
in appeal Nos. CRV-75 and 74 of 1999, whereby the Tribunal had allowed the
appeal of the Respondents and set aside the order passed by the Commissioner of
Customs on the ground that the Butyl Acrylate Monomer i.e. the chemical
imported by the Respondents can safely be held to be an adhesive and was covered
by the advance licences produces by the Respondents.
per the facts on record the Respondents, M/s. Sanghvi Overseas imported 14 consignments
of Butyl Acrylate Monomer (hereinafter referred to as `BAM') between April and December,
1997 and cleared the same against advanced licenses by availing the benefit of customs
Notification Nos. 203/92 and 79/95, without payment of duty. Another consignment
of BAM was cleared by the Respondents under bill of entry dated 06.03.1998 and thereafter
one more consignment was imported. The last two consignments were warehoused
and not cleared by the authorities.
all these consignments of BAM, the Respondents declared the product as Butyl Acrylate
Monomer and claimed the classification under heading 2916.12. The assessments were
sought by the Respondents as adhesives under the DEEC license.
were initiated by the Revenue against the Respondents on the belief that the product
imported by the Respondents was defined organic chemical and was not an adhesive.
The Revenue/appellant took a stand that the advanced licences covering imports
of adhesives submitted by the Respondents for clearance of the consignments under
DEEC scheme, availing the benefit of customs notification were not applicable
in the matter of clearance of the goods in question inasmuch as the said licences
were for import of adhesives and the product imported was not adhesive. Accordingly,
searches were conducted in the offices of the Respondents and their statements were
recorded. The customs clearing agent was also interrogated and efforts were made
to find out as to whether the product in question was used as a bonding agent or
not. Shri R.K. Jain, in his statement, recorded during such investigations, deposed
that the product was used as a bonding agent and on polymerisation the same
become an adhesive.
Revenue also drew the samples and sent it for testing. The Revenue also sought
the opinion of the various experts as also the persons of the trade dealing in identical
items. On the basis of the material collected during the investigation the Revenue
formed an opinion that the BAM was not adhesive but was one of the raw
materials for adhesive formations. As such Revenue was of the opinion that the
exemption had been wrongly claimed by the Respondents. In addition, the Revenue
also disputed the value of the goods in question.
on the above basis the Respondents were served with a show cause notice
proposing confirmation of demand of duty, as also confiscation of the imported product
and imposition of personal penalties upon the various persons.
the adjudication proceedings the Respondents took a specific stand that the BAM
in question is a liquid which becomes adhesive on polymerisation upon coming
into contact with light and heat. It was argued on behalf of the Respondents
that to prevent spontaneous polymerisation BAM is normally stabilised by some inhibitor
and that since BAM polymerises readily without much requirement of processing and
as after polymerisation the same shows adhesive properties it should be treated
as adhesive only. They also placed reliance on the manufacturer's printed literature
and contended that it is clear that BAM is used as an adhesive. The Respondents
clarified that BAM does not possess any adhesive properties in the Monomer
form, but the same is an adhesive in the polymer form, which process is undertaken
naturally when the Monomer form comes in contact with heat and light. The
Respondents pleaded that it is not feasible and practicable to import the item in
polymer form as after polymerisation, the product immediately becomes an
adhesive which does not has much shelf-life. The Respondents also pleaded their
case on the point of time-bar by submitting that they had declared the goods in
the bill of entry correctly and the clearances were given by the customs authorities
after drawing samples and satisfying themselves that the product was an adhesive
and squarely covered by the advance licences. Their advance licences were accordingly
debited by the customs authorities. As such they submitted that the longer
period of limitation could not be invoked against them inasmuch as there was no
mis-declaration on the part of the Respondents.
said show cause notice culminated into the impugned order passed by the
Commissioner, whereby, it was held that BAM was not adhesive and the benefit of
the advance licences and the notification in question was not available to the importer.
Accordingly, the demand of duty was confirmed by invoking the extended and longer
period of limitation in respect of 14 bills of entries on the ground that the Respondents
had mis-declared the product in question.
was also held by the Commissioner that the goods are liable to confiscation,
but inasmuch as the same were not available, no redemption fine had been imposed
by him. Penalty of equivalent amount was imposed upon M/s. Sanghvi Overseas. The
goods covered by the bills of entry dated 08.05.1997 and 19.03.1998 which were under
seizure by the Revenue were confiscated with an option to the Respondents to
redeem the same on payment of redemption fine of Rs. 6,00,000/- (Rupees six
lakhs). Further penalty of Rs. 3,00,000/- (Rupees three lakhs) was imposed upon
M/s. Sanghvi Overseas in relation to the importation of the goods under the above
two bills of entries. Penalty of Rs. 65,00,000/- (Rupees sixty-five lakhs) was imposed
on the second Respondent Shri R.K. Jain on the findings that he was the main person
behind the imports which led to evasion of huge amount of customs duty and was
an adviser to the importers. It was also observed that the evidence on record showed
his active and financial involvement in the matter.
by the abovementioned order, the Respondents filed an appeal before the Central
Excise Gold (Appellate) Tribunal, Kolkata submitting that the BAM in question
can be classified as an adhesive and the Respondents had rightly claimed clearance
of the goods on the basis of the advanced licences which allowed adhesive to be
cleared duty free. It was pointed out that the Revenue also drew samples before
clearance of the goods and it is only thereafter that the clearances were permitted
by them. The Tribunal by its order dated 17.02.2003 allowed the appeals of the Respondents
stating that BAM can be rightly classified as an adhesive and therefore, the Respondents
had rightfully claimed the clearance of goods on the basis of advanced licences.
Hence, the present Special Leave Petitions have been preferred by the Appellant.
learned counsel appearing for the Appellant submitted before us that the Tribunal
made a fundamental error in ignoring the fact that the BAM was required to undergo
a further industrial process to become an adhesive, and thus the imported item
under no circumstances could be classified as an adhesive. The contention is
that the imported chemical is a Monomer organic chemical, which is one of the raw
materials used in the manufacture of adhesives, the opinion which has been substantiated
by various experts from the field of Industry. The appellant has alleged that
the imported material i.e. BAM (inhibited), is a colourless liquid, lighter than
water, monomer organic chemical having wide use in paint, textile and leather
industry as raw material and can in no way be compared with other ployurathene
adhesives of well known brands. It was further contended that in the product literature
submitted before the Tribunal, the portion specifying that BAM was used as raw
material for Adhesive Industry was erased by the Respondent Importers. He also refuted
the Respondents' claim that BAM in the Monomer form on coming in mere contact with
heat and light undergoes self- polymerization and au contraire it was submitted
that it requires a specific industrial process.
next contention was that the Tribunal also failed to take into account that the
difference in value between acrylates and products obtained after polymerization
is one and a half times to three times which means polymerization involves complicated
technical and industrial processes. It has been contended that various experts in
the fields from industry as well as renowned institutions have categorically opined
that BAM is not an adhesive. It was also argued that taking into account the product
literature of M/s LG Chemicals Ltd, a manufacturer of the imported product,
which was part of the appeal petition, revealed that BAM was a raw material for
adhesive. It was claimed that BAM in inhibited state is quite different from
product obtained after emulsion polymerisation through industrial process. Thus
the form in which the goods were imported could not be termed as an adhesive.
learned counsel for the Respondents refuted all the contentions raised by the
Appellant and submitted that `BAM' is used as adhesive in leather industry and that
during transportation and storage it is kept in a manner which would restrict
it from self polymerisation. It was thus submitted that when the chemical BAM is
packed, an inhibitor is used to keep the goods in storage condition and that as
and when the container is opened and the chemical comes into contact with air, light
and heat at room temperature, the BAM starts self polymerization by itself and suo
moto and gets the properties of adhesive. He also pointed out the fact that there
is no dispute with regard to the fact that the BAM when polymerised becomes
in short is whether BAM can be said to be an adhesive for the purpose of allowing
the duty free clearances against advance license issued under the DEEC scheme. Goods
in packed condition are of no use. It can only be used when it is opened and put
to use. We are, therefore, to consider as to whether for all practical purposes
BAM is an adhesive. It is admitted in the Show Cause that end-use of BAM is
adhesive in leather industry. However, a distinction is sought to be made in the
present case that until monomer becomes polymer, it is not adhesive. It is alleged
that in Monomer form, BAM is not adhesive. By putting such an interpretation,
an attempt has been made by the appellant to divest BAM from the coverage of adhesive.
The issue is whether the requirement of opening the container, allowing BAM to contact
with air, light and heat and even putting a catalyst could detract from its
being an adhesive.
the expression "adhesive" is not defined in the Act. It is now well settled
that the words and expressions, unless defined in the statute have to be construed
in the sense in which persons dealing with them understand i.e. as per trade
and understanding and usage.
word "adhesive" was mentioned in the ex-Bond B/E inasmuch as the appellant
sought release of goods under advance licences allowing adhesive as duty free
import. In any event goods were chemically tested in the Customs House and goods
were cleared after satisfaction of the proper officer that BAM is an adhesive. The
department was very much conscious that goods were claimed as an adhesive and they
were so satisfied after examination of the goods and deliberation made in this regard.
Therefore, the 14 consignments referred to in para 4 of the Show Cause Notice were
cleared on the basis of advance licence under Customs Notification No. 203/92-Cus.
or 79/95-Cus. Customs authorities cleared the goods with consciousness and
knowing fully well that BAM is an adhesive. There is no question of suppression
of any fact before customs authorities because no fact was concealed. Each of
the consignments were tested and chemically examined.
the counsel appearing for the Respondents submitted before us that the
allegation made by the customs authorities in the Show Cause Notice cannot be allowed
to stand on two counts. Firstly, the goods imported were very much covered by
the licence and secondly, assuming, though denying that the goods were not covered
under the licence even then customs authorities cannot change their stand inasmuch
as after debiting of the licence, the position becomes irreversible. Licence
cannot be restored to its original position. The valid order of clearances made
under Section 47 of the Customs Act cannot be disturbed because of the irreversible
situation. Acceptance of advance licences for clearance of BAM as adhesive stands
absolute and it cannot be repudiated as licences have been debited by customs authorities.
Assessment orders already made cannot be disturbed in the facts and circumstances
of the case. These are important factors and areas which are required to be
kept in mind while deciding the issue falling for our consideration.
the undisputed picture which emerges is that the imported chemical is in its
Monomer form and becomes an adhesive on self-polymerisation. The Respondents' case
is that the self-polymerisation, which is nothing but increase in molecular weight
takes place on the chemical coming out of the container. The question is that whether
the solution in its Monomer form can be considered as an adhesive or not. According
to the Respondents it is not practical and feasible to import the product in its
polymerised form and the same is always stored in its Monomer form. In fact inhibitors
are added to avoid self-polymerisation of the product during storage. It is the
case of both the sides that the Monomer form becomes polymer form of the chemical
suited to be used as adhesives, when it comes in contact with nature. It is only
that in some cases where bulk polymerisation is required, extra heat i.e. more than
the heat provided by the nature is required to increase the process of polymerisation,
as has been opined in the opinions of experts brought on record by the Revenue.
As such the Tribunal was of the view that the Butyl Acrylate Monomer, which
undergoes self-polymerisation on coming in contact with the atmosphere, can be
safely held to be an adhesive and covered by the various advance licences in
is also noted that in the technical literature given by the manufacturer, use of
the product has been shown as adhesives. Even though the Revenue has disputed that
the said literature produced by the Respondents is not correct and is manipulated
inasmuch as the same is different than the manufacturer of identical product in
India, however, no concrete evidence to that effect has been led by the
Revenue. The Tribunal has given a finding that the literature produced by the Respondents
is of the Korean manufacturer and is given in English language as well as Korean
language and there is no reason to doubt the veracity of the said literature. Inasmuch,
as the manufacturers themselves have shown the use of Butyl Acrylate as
adhesive as well as textile binders, we see no reasons to take a different
the DEEC scheme, the word `adhesives' has not been defined. Under exemption notification,
the word `materials' has been defined as under: -
"(a) raw materials,
components, intermediates, consumables, computer software and parts required for
manufacture of export products" Therefore 'materials' permissible, are not
only raw materials but are also intermediates for such raw materials, which are
required for manufacture of export products specified in the licences, which in
this cases are 'Leather Industry' products. The term used as 'material' required
for manufacture of export products would encompass such entities also which are
not only directly used or usable as such in the manufacturing processes but
also which could be used with same processing.
the Encyclopaedia of Chemical Technology 4th Edition published by John Wiley and
Sons, it is found for Acrylate Esters as in the present case it prescribes :-
Emulsion polymerization is the most important industrial method for the preparation
of acrylic polymers. The principal markets for aqueous dispersion polymers made
by emulsion polymerization of acrylic esters are the print, paper, adhesives, textile,
floor polish, and leather industries, where they are used principally as coatings
or binders. Copolymers of either ethyl acrylate or butyl acrylate with methyl methacrylate
are most common. (Vol. 1, page 328)"From this authoritative Book, it is apparent
and can be concluded, that BAM, which is an Acrylate Ester, can be polymerised by
using water to prepare the 'aqueous emulsion dispersion' which is used in the
'Leather Industry' as a 'Coating or Binder' to be an Adhesive. The aqueous preparation
of this emulsion would not require any elaborate use of technology. There is no
reason why BAM which on aqueous dispersion, even if classified under 2916.12,
can be used as a binder in 'Leather Industry' as per this authoritative Encyclopedia
on Technology, should be denied the benefit of considering the same as adhesives.
appellant has placed reliance on the judgment passed by the CEGAT, Mumbai in the
matter of Pioneer Embroideries Ltd v. commissioner of Customs, Mumbai 2004
(178) E.L.T 933 (tri.). We have gone through the said judgment however the same
is not applicable to the present case both on facts and law.
it is found that the licences produced entitle the Respondent to clear the
ex-bond goods free of duty, there are no reasons for them to have mis-declared
the values since the goods are duty free. There appears no incentive to do so.
There is no allegation that the licences produced will not cover the quantity
of values, even after the alleged loading of values as declared. Therefore, this
court upholds the decision of the Tribunal.
is also observed that the demand is hit by the bar of limitation inasmuch as
the appellant had cleared the goods in question after declaring the same in the
bills of entries and giving correct classification of the same. Availing of
benefit of a notification, which the Revenue subsequently formed an opinion was
not available, cannot lead to the charge of mis-declaration or mis-statement,
etc. and even if an importer has wrongly claimed his benefit of the exemption, it
is for the department to find out the correct legal position and to allow or disallow
the same. In the instant case the appellant had declared the goods as Butyl Acrylate
Monomer with correct classification of the same and the word 'adhesive' was added
in the ex-bond bill as per the appellant's understanding that BAM is an adhesive.
In these circumstances it was for the Revenue to check whether BAM was covered
by the expression adhesive or not and if even after drawing of samples they
have allowed the clearances to be effective as an adhesives appellant cannot be
held responsible for the same and subsequently, if the Revenue has changed their
opinion as regards the adhesive character of BAM, extended period cannot be invoked
against them. As such we are of the view that the demand of duty in respect of
14 consignments is also barred by limitation.
the present appeals are dismissed but without any orders as to costs.
[Dr. Mukundakam Sharma ]
[ Anil R. Dave ]