Collector
of Central Excise Vs. M/S. Wood Polymers Ltd. [1997] INSC 944 (17 December
1997)
S.C.
AGRAWAL, D.P. WADHWA
ACT:
HEADNOTE:
THE
17TH DAY OF DECEMBER,1997 Present:
Hon'ble
Mr.Justice S.C.Agrawal Hon'ble Mr.Justice D.P.Wadhwa Joseph Vellapally, F.S.Nariman,
Sr. Advs., Y.P.Mahajan, K.C.Kaushik, S.Dwivedi, V.K.Verma, Mrs.Rekha Pandey, Ms.Meenakshi
Arora, (Mrs.Alka Agarwal, V.K.Bhatt, Mrs.V.D.Khanna,) Advs. for M/S.I.M.Navavati,
Associates, Mrs. Janaki Ramachandran, K.K.Anand, Rajesh Kumar, M.L.Lahoty, Paban
Kr.Sharma, Himanshu Shekhar, R.N.
Karanjawala,
Mrs.Nandini Gore, Arvind Kumar, Mrs.M.K.Karanjawala, Advs. with them for the
appearing parties.
The
following Judgement of the Court was delivered:
S.C.AGRAWAL,J.
CIVIL
APPEALS NOS. 1852-53/1991.2516-21/1991 AND 11899/1996 These appeals by the
Revenue raise a common question, namely, whether paper based laminated
Sheets/Boards are classifiable for the purpose of excise duty under Heading
3920.21 of the Schedule to the Central Excise Tariff Act, 1985 [hereinafter
referred to as `the Act'] as claimed by the Revenue or under Heading 4818.90 of
the said Schedule till February 28,1988 and under Heading 4823.90 of the said
Schedule on and after March 1,1988 as found by the Customs Excise & Gold
[Control] Appellate Tribunal [hereinafter referred to as `the Tribunal'].
M/s
Wood Polymers Ltd., the respondent in Civil Appeals Nos.1852-53 of 1991,
manufactures (i) paper based decorative laminated sheets, (ii) cotton fabric
based laminates and (iii) paper based insulators electrical grade. The said
products were classified by the Assistant Collector of Central Excise under
Chapter 39 sub-Heading 3920.21. The said classification was approved in appeal
by the Collector of Central Excise (Appeals). On further appeal by the assessee,
the Tribunal, by its judgment dated March 6,1990, held that paper based
decorative laminated sheets/boards are classifiable under sub-heading 4818.90
till February 28, 1988 and under Heading 4823.90 on and after March 1,1988, and
that cotton fabric based laminates are classifiable under Heading 3922.90 till
February 28.1988 and under Heading 3926.90 on and after March 1,1988. As
regards paper based insulators it was held that same are classifiable under
Heading 8546.00. In taking the said view the Tribunal has followed its earlier
judgments in Amit Polymers & Composited Ltd., Hyderabad v. CCE
Hyderabad,1989 (20) ECR 454, and M/s Meghdoot Laminate Pvt. Ltd. v. CCE Ahmedabad,
Order Nos, 553 to 572/89 dated September 29, 1989. As regards paper based
insulators the Tribunal has placed reliance on its decision in CCE Ahmedabad v.
Metro Wood Engineering Works, 1989 (22) ECR 369. Civil Appeals Nos.1852-53 of
1991 have been filed by the Revenue against the said judgment of the Tribunal.
The
same view was taken by the Tribunal in judgment dated August 17,1991 in the
case of M/s Meghdoot Laminate Pvt. Ltd and in the judgment dated November
3,1995 in the case of M/s Moti Polymers in respect of paper based decorative
laminated sheets which were held to be classifiable under Heading 4818.90 and
not under Heading 3920.21 as claimed by the Revenue. Civil Appeals Nos. 2516-
21 of 1991 and Civil Appeal No. 11899 of 1995 have been filled against the said
judgment of the Tribunal.
On
behalf of the Revenue it has been submitted that the matter now stand covered
by the recent judgment of this Court in CCE Hyderabad v. Bakelite Hylam Ltd.,
(1997) 91 ELT 13(SC). In that case the Court has considered the questions
regarding the classification for the purpose of excise duty of the following
items: (i) Decorative laminated sheets;
(ii)
Industrial laminated sheets which are paper based, and (iii) Glass Epoxy
laminated sheets. In the judgment under appeal in that case the Tribunal had
held that all these varieties of laminated sheets were not covered by Entry 15-
A(2) and were classifiable under residuary Item 48 of the Old Tariff which was
in operation prior to coming into force of the Act and that the said products
were classifiable under Heading 4818.90 till February 28, 1988 and under
Heading 4823.90 on or after March 1,1988 and that they did not fall under
Heading 3920.21 till February 28,1988 and under Heading 3920.37 on or after
March 1,1988 of the New Tariff in the Schedule to the Act. Reversing the said
view of the Tribunal, this Court has held that the Tribunal had rightly
classified decorative laminates under residuary Item 68 of the Old Tariff. But
as regards classification under the New Tariff, this Court set aside the
decision of the Tribunal in so far as it classified decorative laminated sheets
under Heading 4818.90/4823.90 of the New Tariff and held that decorative
laminated sheets were classifiable under Heading 3920.31/3920.37 of the New
Tariff. In respect of industrial laminated sheets and glass epoxy laminated sheets
it was held that they had been correctly classified by the Tribunal under
Heading 7014/8546 of the New Tariff.
In
view of the judgment of this Court in Bakelite Hylam Ltd., (supra) the decision
of the Tribunal holding that paper based insulators manufactured by M/s Wood
polymer Ltd.,[respondents in Civil Appeals Nos. 1852-53 of 1991] are
classifiable under Heading 8546 of the New Tariff must be upheld since it is in
consonance with the decision of this Court in Bakelite Hylam Ltd., (supra). The
only question that remains is with regard to classification of paper based
decorative laminated sheets/boards and cotton fabric based laminated sheets.
Shri F.S.Nariman,
the learned senior counsel appearing for the respondents in Civil Appeals Nos.
1852-53 of 1991, has, however, urged that the decision of this Court Bakelite Hylam
Ltd., (supra) does not lay down the correct law and it needs reconsideration in
so far as it related to classification of paper based decorative laminated
sheets.
In
order to deal with the said submission of Shri Nariman we would set out the
relevant entries in the New Tariff which were in these terms :
------------------------------------------------------------
Heading No. Sub-heading No. Description of ------------------------------------------------------------
3920 Other Plates, Sheers, Film, foil and strip, of plastics, non-cellul- ar,
whether lacquered or metallised or laminated, supported or similarly combined
with other materials or not. Of regenerated Cellulose :
3920.21
Film of thickness not exceeding 0.25 millimeters.
Of
Other Plastics :
3920.31
Rigid plates, sheets film foil and strip.
4818
Other Articles of Paper pulp, paper, paper- Board, Cellulose Wadding or Wabs of
Cellulose Fibres 4818.90 other.
------------------------------------------------------------
Some changes were made in the tariff entries in the Schedule to the Act effect
from March 1,1988 and Heading No. 3820.31 was re-numbered and as a result
plates, etc. of other plastics that were `Rigid laminated' were placed in
Heading 3920.37. Similarly, Heading 48.18 was re-numbered as 48.23 and
sub-heading 4818.90 was numbered as 4823.90 with effect from March 1,1988.
The
New Tariff introduced by the Act prescribes the Rules of Interpretation of the
entries and in respect of goods which are prima facie classifiable under two or
more headings the following provision in contained in Rule 3:
"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:
(a)
The heading which provides the most specific description shall be preferred to
headings providing a more general description......
(b)
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 which gives them their essential character, insofar as this criterion
is applicable.
(c)
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." Shri Nariman has urged that test
to be applied for classification for the purpose of excise duty is the `common
parlance test', i.e., the sense in which the product is understood in the trade
parlance or commercial usage and understanding. The learned counsel has
submitted that paper based decorative laminates are manufactured by passing
several sheets of duty paid kraft paper through resin bath and are impregnated
with a chemical solution classified a resin solution (phenol formaldehyde
solution). It is submitted that the paper based decorative laminates are, therefore,
primarily paper falling in Chapter 48 dealing with paper and paper board,
articles of paper pulp and does not fall in Chapter 39 which deals with plastic
and articles thereto. It is submitted that this Court Bakelite Hylam Ltd.,
(supra) has considered the question in the light of Rule 3 of the Rules of
Interpretation and had not examined the trade parlance and commercial of
traders, dealers and users, expert opinions, trade literature and marketing
material were produced before the authorities to show that the decorative
laminates are in commercial parlance are not known as plastic and are not sold,
marketed and used as article of plastic.
We are
unable to accept the said contention of the learned counsel. In view of the
rules regarding Interpretation which are contained in the New Tariff the matter
of classification has to be considered in the light of the said rules. As
indicated earlier, Rule 3 of the said rules contains the principles to be
applied for classification of goods which are prima facie classifiable under
two or more headings. Since decorative laminates are composite goods made from
different components, namely, paper and chemical solutions with which it is
impregnated, the classification of decorative laminates has to be determined in
the light of Rule 3(b). According to the said rule, composite goods consisting
of different materials or made up of different components which cannot be
classified by reference to sub-rule (a) shall be classified as if they
consisted of the material or components which gives them their essential
character insofar as this criterion is applicable. As a result of impregnation
with the chemical solutions the character of paper is changed into decorative
laminates and it is the chemical solutions which give them their essential
character. In this regard, this Court in Bakelite Hylam Ltd., (supra) has said
:
"In
the present case, the essential character of a decorative laminated sheet is
its rigidity or strength and its resistence to heat and moisture. This 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 characteristics of such laminated sheets, these goods are more
appropriately classifiable under Chapter 39." Reliance had been placed by
the Court on the following Explanatory Note to Chapter 39 in the Harmonised
System of Nomenclature :
"Combinations
of plastics and materials other than textiles :
This
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 :
(c)
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.
(d)
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 to 70, as the case may be.)" In has been pointed out that
Explanatory Note clearly provides that sheets of paper impregnated with
plastics and compressed together, as in the present case, provided they have a
hard, rigid character would fall under Chapter 39 and if having more the
character of paper or of articles of glass fibres they are classified in
Chapters 48. Since the decorative laminated sheets are hard and rigid in
character, they are classifiable under Chapter 39 and not under Chapter 48.
Shri Nariman
has placed reliance on the decision of this Court in Moti Laminates Private
Ltd. v. Collector, 1995 (76) ELT 241 (SC), wherein it has been held that Phenol
Formaldehyde (Resol) is not "goods" capable of being bought and sold.
Shri Nariman has also submitted that classification of decorative laminated
sheets can be determined under Rule 1 of the rules of interpretation which
reads as under :
"1.
The titles of Sections and Chapters are provided for ease of reference only;
for legal purposes, classification shall be determined according to the terms
of the headings and any relative Section or Chapter Notes and, provided such
headings or Notes do not otherwise require, according to the provisions
hereinafter contained." In Bakelite Hylam Ltd., (supra) this Court has
taken note of Rule 1. It has been pointed out that Rule 1 does not help to
classify the goods in question because in view of Note 1(f). Chapter 48 is not
applicable to these goods.
Under
Note 1(f) to Chapter 48 paper reinforced stratified plastic sheeting or one
layer of paper board coated or covered with a layer of plastics the latter
constituting more than half the total thickness or articles of such materials,
other than wall coverings of heading No. 48.14 do not fall that Chapter but
fall in Chapter 39. In view of the said provision in Chapter 48 it has been
held that Rule 1 cannot be invoked and the matter of classification has to be
determined in accordance with Rule 3(b) of the Rules of Interpretation.
In Moti
Laminates Private Ltd. (supra) this Court was considering the question whether
resin or resol which are produced in the process of manufacturing laminated
sheets are liable to payment of excise duty for the reason that artificial or
synthetic resins and plastic materials are leviable goods under Item 15A of the
old tariff. It was held that resol or resin is not marketable or capable or
being marketed and, therefore the same was not subject to duty.
The
said decision in Moti Laminates Private Ltd. (supra) does not have any bearing
on the question of classification of paper based decorative laminated sheets
produced by the respondents.
It has
been pointed out that by Finance Act, 1997 the Central Excise Tariff Act, 1985
has been amended and the following new the sub-Heading 4823.40 has been Inserted
:
"4823.40.
Products consisting of sheets of paper or paper board, impregnated, coated or
covered with plastics (including thermostat resins or mixtures thereof or
chemical formulations containing melamine, phenol or urea formaldehyde with or
without curing agents or catalysts), compressed together in one or more
operation; products known commercially as decorative laminates".
The
submission is that the insertion of the said new entry in Chapter 48 has to be
regarded as legislative recognition of the commercial understanding that
decorative laminates is an article of paper because products known commercially
as decorative laminates have been included in the said entry falling in Chapter
48 which relates to paper and paper boards. We are unable to accept this
contention.
Decorative
laminates have been mentioned in the entry falling in sub-Heading 4823.40 which
has been inserted in Chapter 48 presumably in view of the decisions of the
Tribunal holding that paper based decorative laminated sheets fall under
Chapter 48. The insertion of the said entry in Chapter 48 does not, in out
opinion, mean that the interpretation placed by this Court in Bakelite Hylam
Ltd.
(SUPRA)
on the entries, as they stood prior to insertion of the entry falling in
sub-heading 4823.40, is not correct and it needs reconsideration. We are,
therefore, unable to accept the contentions urged on behalf of the respondents
seeking reconsideration of the decision of this Court in Bakelite Hylam Ltd.
(supra).
In
accordance with the law laid down in Bakelite Hylam Ltd. (supra) it must be
held that paper based decorative laminated sheets and cotton fabric based
laminates are classifiable under Heading 3920.21/3920.37 of the New Tariff and
the decision of the Tribunal holding that the same are classifiable under
tariff entries 4818.90/4823.90 and 3922.90/3926.90 cannot be upheld and has to
be set aside.
In the
result, Civil Appeals Nos. 1852-53 of 1991 are partly allowed and, while
maintaining the decision of the Tribunal that the paper based insulators are
classifiable under Heading 8546.00, the decision of the Tribunal holding that
paper based decorative laminated sheets are classifiable under sub-heading
4818.90 till February 28,1988 and under sub-heading 4823.90 on and after March
1, 1988 and cotton fabric based laminated decorative boards are classifiable
under sub-heading 3922.90 till February 28,1988 and under sub-heading 3926.90
on and after March 1,1988 is set aside and it is directed that the paper based
decorative laminated sheets and cotton fabric based laminated decorative boards
are classifiable under sub-heading 3920.21 till February 28, 1988 and under
sub-heading 3920.37 on and after March 1,1988.
Civil
Appeals Nos. 2516-21 of 1992 and 11899 of 1996 are also allowed and the
judgment of the Tribunal holding that paper based decorative laminated sheet
are classifiable under sub-heading 4818.90 is set aside and it is held that the
said product is classifiable under sub-heading 3920.31 till February 28,1988
and under sub-heading 3920.37 on and after March 1,1988. No order as to costs.
CIVIL
APPEALS NOS. 7027/1995, 7029/1995, 9483/1996, 221/1997, 10466/1995, 10489/1995
These appeals are filed against the judgment of the Tribunal dated July 18,1995
whereby the claim of the appellants for payment of excise duty at the concessional
rate on the notification No. 135/89-CE dated May 12, 1989 has been negatived.
The
appellants manufacture paper based decorative laminated sheets. The said
products are made by coating and impregnating paper in chemical solution,
namely, Phenol Formaldehyde Solution and Melamine Formaldehyde solution.
Notification
No. 135/89 dated May 12, 1989 provided as follows :
"Notification
No. 135/89-C.E.dated 12.5.1989 In exercise of the powers conferred by
sub-section (1) of Section 5A of the Central Excises and Salt Act, 1944 (1 of
1944, the Central Government, Being satisfied that it is necessary in the
public interest so to do, hereby exempts goods falling under sub- heading No.
4823.90 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986),
other than products consisting of sheets of paper or paper board impregnated,
coated or covered with plastics, compressed together in one or more operation,
from so much of the duty of excise leviable thereon which is specified in the
said schedule as is in excess of the amount calculated at the rate of 12% ad valorem."
The said notification was subsequently replaced by Notification No. 20/94-C.E.
dated March 1, 1994 which was in the following terms :
"Notification
No. 20/94-C.E.dated 1.3.1994 In exercise of the powers conferred by sub-section
(1) of Section 5A of the Central Excises and Salt Act, 1944 (1 of 1944), the
Central Government, being satisfied that it is necessary in the public interest
so to do, hereby exempts goods of the description, specified in column (3) of
the Table hereto annexed and falling within the Chapter or sub-heading Nos. of
the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), as are
specified in column (2) of the said Table, from so much of the duty of excise leviable
thereon which is specified in the said Schedule, as is in excess of the amount
calculated at the rate specified in the corresponding entry in column (4) of
the said Table.
------------------------------------------------------------
S.No. Chapter/sub Description of goods Rate head No.
------------------------------------------------------------
1. 48 Maplitho
paper and kraft Nil paper supplied to a braille press against an indent placed
by the National Insti- tute for Visually Handicapped Dehradun
2. 48
Paper splints for matches, Nil whether or not waxed.
3. 48 Asphaltic
roofing sheets Nil
4. 48
Paper pulp moulded trays Nil
5. 48
Cellulose insole board of 100% sheets ad Valorem
6.
4811.30 All goods, other than products and consisting of sheets of paper 20%
4823.90 or paper board imprognated, ad coated or covered with Valorem plastics,
compressed to- gether in on or more operations.
------------------------------------------------------------
By Notification No. 144/94-C.E. dated December 22, 1994 Notification No. 20/94
dated March 1, 1944 was amended and entry at serial No . 6 in the table annexed
with the said notification was substituted by the following entry :
"All
goods, other than the following, namely ;- (a) Products consisting of sheets or
paper or paper board impregnated, coated or covered with plastics (including thermoset
resins or mixtures thereof or chemical formulations containing melamine,
phenol, urea or formaldehyde with or without curing agents or catalysts),
compressed together in or more operations, or] (b) Products known commercially
as "decorative laminates." The case of the appellants is that till
the issuance of Notification No. 144/94 dated December 22, 1994 they were
liable to pay concessional rate of excise duty on the basis of Notification No.
20/94 dated March 1, 1994 and only as a result of the amendment made in the
said notification by Notification No. 144/94 dared December 22, 1994 paper or
paper board impregnated, coated or covered with plastics known as
"decorative laminates" have been exclude from the benefit of such concessional
rate of excise duty. The submission of the appellants is that the products
manufactured by them fall under sub-heading 4823.90 and do not fall under the
exception since they are not laminated sheets or paper impregnated, coated or
covered by plastics but are made by coating and impregnated with chemical known
as Phenol Formaldehyde Solution Melamine Formaldeyhdre solution which is
unstable and unmarketable and which is not resin and that it cannot be said
that the paper is coated or covered with resins. In support of the aforesaid
submission reliance is placed on the decision of this Court Moti Laminates
Private Ltd. [supra] was rendered in the context of marketability and it was
not relevant to determine whether the final product of the appellants is
eligible to claim the benefit of concessional rate of duty in terms of
Notification No. 135/89.
In
Bakelite Hylam Ltd. (supra) this Court has held that paper based decorative
laminated sheets or boards do not fall in Chapter 48 but fall in Chapter 39 of
the New Tariff introduced by the Central Excise Tariff Act, 1985 and it cannot
be classified under sub-heading 4818.90 till February 28, 1988 and under
sub-heading 4923.90 on or after March 1, 1988. In view of the said decision the
products manufactured by the appellants, namely, paper based decorative
laminated sheets do not fall under sub-heading 4923.90. The appellants are,
therefore, not entitled to claim the benefit of concessional rate of duty on
the basis of Notification No. 135/89 dated May 12, 1989 and the Notification
No. 20/94 dated March 1,1994. The fact that products known commercially as
decorative laminates have been expressly mentioned in entry at serial No. 6, as
substituted on the basis of Notification No. 144/94 dated December 22, 1994, does
not mean that prior to the issuance of the Notification No. 144/94 dated
December 22, 1994 products known commercially as decorative laminates fell
within the ambit of the Notification No. 135/89 dated May, 12 1989 and No.
20/94
dated March 1, 1994 for the purpose of concessional rate of duty. The insertion
of products known commercially as decorative laminates by Notification No.
144/94 dated December
22,1994 only means
that these products have been expressly excluded for the purpose of
applicability of the concessional rate of duty.
There
is, therefore, no merit in these appeals and the same are accordingly
dismissed. But in the circumstances there is no order as to costs.
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