Full Judgment Text
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PETITIONER:
M/S. RELIANCE SILICON (I) PVT. LTD.
Vs.
RESPONDENT:
THE COLLECTOR, CENTRAL EXCISE, THANE
DATE OF JUDGMENT: 06/11/1996
BENCH:
S.P. BHARUCHA, S.B. MAJMUDAR
ACT:
HEADNOTE:
JUDGMENT:
W I T H
[Civil Appeal Nos.2162-70/88; 1942-53/88; 3657-72/90; 3284-
85/90; 1507/84; 3105/88; 5929/90; 6263/95; 1768/90]
J U D G M E N T
S.B Majmudar, J.
This group of appeals arising from diverse orders
passed by Customs, Excise & Gold (Control) Appellate
Tribunal (hereinafter referred to as ’CEGAT’) can be
conveniently classified into three categories of cases.
Category (1) consists of Civil Appeals Nos.3105 (NM) of
1988; 1768 (NM) of 1990; 3284-85 (NM) of 1990 5929 (NM) of
1990; and 6263 (NM) of 1995 filed on behalf of Revenue by
the Collectors of Central Excises concerned, wherein it is
contended that preparations from silicone as manufactured by
the respondent-manufacturers at the relevant time were
covered by Central Excise Tariff Item 15A(l) and not by
Tariff Item 15AA as contended by the respondent-
manufacturers and as upheld by the Tribunal. Category (2)
consists of Civil Appeals Nos.1942-53 of 1988; 2162-70 (NM)
of 1988; and 3657-72 (NM) of 1990 moved by M/s Hico Products
Ltd. being aggrieved by the diverse orders of the Tribunal
which has taken the view that silicone oil manufactured by
them and/or imported by them, as the case may be, was liable
to be brought to tax under Central Excise Tariff Item 15A as
applicable at the relevant time of manufacture or import, as
the case may be, and not under residuary Tariff Item 68 as
contended by them for the purpose of determining the
appropriate excise duty payable by them and/or
countervailing duty payable by them on these goods. Category
(3) consists of Civil Appeal No.453 of 1986 moved by M/s
Reliance Silicon (I) Pvt. Ltd. and Civil Appeal No.1507 of
of 1984 moved by M/s Hico Products Ltd. These two appellants
are manufacturers of preparations out of silicone The
grievance of the appellant in Civil Appeal No.453 of 1986 is
against the Tribunal’s order holding that silicone
preparations prepared by them are covered by Tariff Item
15A(1) and would not be covered by Tariff Item 68. The
grievance of the appellant in Civil Appeal No.1507 of 1984
is of a similar nature, namely, that silicone preparations
manufactured by the wrongly held exigible to Central Excise
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duty under Tariff Item 15A(1) by the to Tribunal. As common
questions arise for our consideration, these matters were
heard together and are being disposed of by this common
judgment.
Category (1)
For the sake of convenience we will first deal with the
grievance voiced on behalf of the Revenue by the Collectors
concerned in their appeals against the decisions of the
Tribunal. It must be noted at the outset that five Member
Bench of the Tribunal in its judgment in the case of
Collectors of Central Excise, Bombay III v. Auxichem
reported in 1988 (34) E.L.T. 637 has exhaustively gone into
the entire factual data dealing with this controversy and
has taken the view that silicone preparations are not
silicone but only preparations containing silicone for use
in textile processing and by their very nature these
preparations are akin to surface active preparations,
wetting agents, softeners and as such classifiable under
Item 15AA of the Central Excise Tariff. As the question for
consideration is of a highly technical nature depending for
its answer on the chemical characteristics of the products
on the anvil of scrutiny, the decisions rendered by the
Tribunal which is an expert body on the subject cannot be
lightly interfered with in appeals unless it is demonstrated
that the findings reached and the conclusions arrived at by
the Tribunal are such which no reasonable man well
acquainted with the subject could arrive at or are otherwise
erroneous in law or based on no evidence. Keeping in view
these contours of enquiry in these statutory appeals we may
now proceed to deal with the main contentions canvassed by
learned counsel for the Revenue in support of its appeals.
It was vehemently contended before us that the five member
Bench of the Tribunal had erred in taking the view that
silicone preparations were covered by Central Excise Tariff
Item 15AA and not Tariff Item 15A(1) which held the field at
the relevant time when the concerned goods were manufactured
and when their exigibility to duty was to be considered.
Tariff Item 15A(1) as applicable at the relevant time read
as under:
"15A. Artificial or Synthetic
resins and plastic materials; and
other materials and articles
specified below :
(1) Condensation polycondensation
and Fifty poly-addition products,
whether or percent not modified or
Polymerised, and ad whether or not
linear (for example, valorem
pheno-plasts, amino plasts, alkyds,
polyallyl esters and other
unsaturated polyesters, silicones);
polyethylene and co Polymerisation
products (for example;
polyethylene,
polytetrahaloethylenes,
polyethylene, polystyrene,
polyvinyl chloride, polyvinyl
acetate, polyvinyl chloroacetate
and other polyvinyl derivatives,
polyacrylic and polymethacrylic
derivatives, coumaroneindene
resins); regenerated cellulose;
cellulose nitrate, cellulose
acetate and other cellulose esters,
cellulose ethers and other chemical
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derivatives of cellulose,
plasticised or not (for example,
collodions, celluloid); vulcanised
fibre; hardened proteins (for
example, hardened casein and
hardened gelatin); natural resins
modified by fusion (run gums);
artificial resins obtained by
esterification of natural resins or
of resinic acids (ester gums);
chemical derivatives of natural
rubber (for example, chlorinated
rubber, rubber hydrochloride,
oxidised rubber, cyclised rubber);
other high polymers, artificial
resins and artificial plastic
materials, including alginic acid,
its salts and esters; linoxyn."
Relevant Explanations to this Tariff Item read as under:
"Explanation II; In sub-item (1),
"Condensation, polycondensation,
polyeddition, polymerisation and
co- polymerisation products" are to
be taken to apply only to goods of
a kind produced by chemical
synthesis answering to one of the
following descriptions :-
(a) artificial plastics, including
artificial resins;
(b) silicones;
(c) resols liquid polyisobutylene,
and similar artificial
polycondensation or polymerisation
products.
Explanation III: Sub-item (1) is to
be taken to apply to materials in
the following forms only:-
(a) liquid or pasty (including
emulsions, dispersions and and
solutions);
(b) block, lumps, powders
(including moulding powders),
granules, flankes and similar bulk
forms;
(c) waste and scrap "
Tariff Item 15AA on the other hand reads as under :
"15AA. Organic surface-active
agents Twenty (other than soap);
surface-active percent preparations
and washing preparation, ad whether
or not containing soap. valorem
A mere look at the Tariff Item 15A shows that if the
commodity manufactured is artificial or synthetic resin or
any plasitc material it would be covered by the sweep of
this Item. But the Item goes further and refers to other
materials and articles specified therein. It is of course,
true that Item 15A(l) refers to condensation,
polycondensation and poly-addition products whether or not
modified or polymerised and also refers to esters and other
unsaturated polyesters, silicones. The products prepared out
of silicones by mixing them with other diluting agents like
water etc. are not within the sweep of the said Item. On the
other hand if such imported silicone oil is diluted and
mixed with water so that the mixture can be utilised as
organic surface agent or as surface-active preparations and
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washing preparations it would be Tariff Item 15AA which
would squarely get attracted It hes, been held by the
Tribunal in the judgment under appeal that silicone oil
which was imported by the manufacturers was mixed with water
and other diluting agents and such silicone preparations
prepared by utilising imported silicone oil on which
admittedly countervailing duty was paid under Tariff Item
15A(1) itself could not be considered to have remained
silicone itself but would be treated to be products almost
akin to surface-active preparations, wetting agents,
softeners and, therefore liable to be classified under Item
15AA. It has to be kept in view that the silicone oil which
was imported by the concerned manufacturers was subsequently
diluted and mixed and used in The manufacture of Their
products, namely silicone softeners 662 and silicone AU 331
etc. They manufactured no goods by the process, condensation
and polycondensation etc Such silicone preparations out of
imported silicone oil which underwent process of dilution
could not be treated to have remained silicone itself so as
to attract Tariff Item 15A(l). The Tribunal was, therefore,
justified in placing the diluted silicone oil and other
preparations from silicone as classifiable under Tariff Item
15AA. The amendment brought about in 1982 by amending Tariff
Item 15A(1), in our view. would not make any difference in
favour of the Revenue for the simple reason that before the
amended Item 15A(1) as reproduced hereinabove would apply it
should be shown that by the process of manufacture
undertaken by the concerned respondent-assessees any process
of condensation. polycondensation and poly-addition was
resorted to qua the concerned silicones. The Tribunal has
noted as a matter of fact that the imported silicone oil
which had borne the countervailing duty under Tariff Item
15A(1) had not undergone such process of condensation,
polycondensation and poly-addition but had only got diluted
by addition of water and other dilutants so as to make it a
surface active agent. Therefore such a diluted product as
manufactured by the concerned respondents cannot be brought
to tax under Tariff Item 15A(1) but would if at all be
assessed to excise duty only under Tariff Item 15AA as
rightly held by the Tribunal. We have carefully gone through
the judgment of the five Member Bench of the Tribunal
impugned in these appeals by the Revenue. In para (g) of the
judgment under appeal the Tribunal has observed at under :
"9. The only silicones that are
assessable under Item 15A are the
synthetic polymers, the first stage
when the silicone product, or if I
may call it the undiluted, unmixed
silicone polymer is produced by
synthesis. Generally speaking the
states in which silicone appears
are fluids, resins and elastomers.
From these three so-called primary
silicones a number of derived
products like sealants, ring
washers, adhesives, surface active
preparation, encapsulation cement
etc. are obtained. Many of these
preparations are in emulsions. All
these preparations have other
materials, additives, emulsifiers
etc. added to aid and help in the
use of the preparations in the
desired industry application."
We do not find any error of law or any perversity in
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the reasoning adopted by the Tribunal on the facts of these
cases. On the contrary in our view the decision of the
Tribunal is well sustained on the evidence on record and
calls for no interference in these appeals moved by the
Revenue.
Category (2)
That takes us to the consideration of appeals by the
assessees comprised in Category (2). So far as these appeals
are concerned the main grievance was voiced by learned
counsel for the appellant in Civil Appeal Nos.1942-53 of
1988. The learned counsel submitted that silicone oil
imported by the appellant at the relevant time was governed
for the purpose of customs duty and countervailing duty not
by Tariff Item 15A(1) but by the residuary Item 68 and
accordingly it would be covered by Chapter 38 of the Customs
Tariff of India 1985-86 which held the field at the relevant
time and would be out of Chapter 39 thereof. So far as this
contention is concerned a close look at Tariff Item 15A(1)
of the Central Excise Tariff which would be relevant for
deciding the countervailing duty liability of the appellant-
importer would be apposite. It is true as contended by
learned counsel for the appellants that the Head Note of
Tariff Item 15A talks of artificial or synthetic resins and
plastic materials. However it also does talk of other
materials and articles specified in the said Item.
Therefore, it is not possible to agree with the contention
of learned counsel for the appellant-importer that other
articles and materials must necessarily partake the
character of artificial or synthetic resins or must be
resins of any other type, as that contention would make the
wide phraseology employed in the very same Item in its
second part concerning other materials and articles
specified in the said Item otios and would denude these
words of their real meaning and content. Tariff Item 15A(1)
as noted earlier covers condensation, polycondensation and
poly-addition products whether or not modified or
polymerised and also covers esters and other unsaturated
polyesters silicones. A bare reading of the aforesaid
wordings in Item 15A(1) of the Central Excise Tariff may
prima facie suggest that only silicone items not in fluid
state may get covered by the sweep of the said Item.
However, no doubt in connection with the sweep of the said
Item remains once we turn to Explanations II end III as
engrafted in the very same Tariff Item 15A(1). To
recapitulate Explanation II reads that in sub-item (1)
condensation, polycondensation or poly-addition,
polymerisation and co-polymerisation products are to be
taken to apply only to goods of a kind produced by chemical
synthesis answering to one of the descriptions enumerated
therein which include silicones. Therefore, any condensation
and polycondensation or poly-addition in connection with the
silicones would bring the article within the sweep of Tariff
Item 15A(1). If any doubt remains in connection with the
physical appearance of such products containing silicone it
is set at rest by Explanation III which lays down that sub-
item (1) of Item 15A is to apply to materials even in the
liquid or pasty forms. Consequently silicone liquid also
would be covered by Tariff Item 15(1) once it has undergone
condensation, polycondensation or poly-addition. Learned
counsel for the appellant fairly stated that it is not his
case that silicone liquid which the appellant had imported
had not undergone a process of chemical synthesis by way of
condensation, polycondensation, poly-addition etc. but his
submission is that in the historical background of amended
Item 15A(1) it should be held that the said Item along with
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its Explanations only covered those types of silicone
products which resemble resins. In order to support this
contention he invited our attention to Chapter 39 of Customs
Teriff of India 1985-86 and submitted that Heading 39.01/06
covered only resins and not liquids like silicone oil
imported by the appellant. The said Heading reads as under :
Heading Sub-heading No. and Standard Central
No. description of article Rate of Excise
duty Tariff
Item
............................................................
(1) (2) (3) (4)
............................................................
39.01/06 Condensation, polycondensa- 200% 15A.
tion and polyaddition 15B,
products, whether or not 16B.
modified or polymerised,
and whether or not linear
(for example, phenoplasts,
aminoplasts, alkyds, polyallyl
esters and other unsaturated
polyesters, silicones);
polymerisation and co-polyme
risstion products (for example,
polyethylenes,
polytetrahaloethylenes,
polyisobutylene, polystyrenes
polyvinyl chloride, polyvinyl
acetate, polyvinyl chloroacetate
and other polyvinyl derivatives,
polyacrylic and polymethacrylic
derivatives, coumaroneindene
resins); regenerated cellulose;
cellulose nitrate cellulose
acetate and other cellulose
esters, cellulose ethers and
other chemical derivatives of
cellulose, plasticised or not
(for example, collodions;
celluloid); vulcanised fibre,
hardened proteins for example,
hardened casein and hardened
gelatin); natural resins
modified by fusion (run gums)
artificial resins obtained by
esterification of natural
resins or of resinic acids
(ester gums); chemical
derivatives of natural rubber
(for example, chlorinated
rubber, rubber hydrochloride,
oxidised rubber, cyclised
rubber); other high polymers
artificial resins and
artificial plastic materials,
including alginic acid, its
salts and esters; linoxyn.
We cannot appreciate how the said Heading would not
cover silicone oil . Silicone which has undergone process of
condensation, polycondensation and poly-addition is
expressly covered by the said Heading. It cannot, therefore,
be said that the residuary Heading found in Chapter 38 of
the said Customs Tariff which deals with miscellaneous
chemical products not elsewhere specified as indicated in
Heading No 38 01/19 could be effectively pressed in service
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by the appellant. So far as the claim of exigibility to
countervailing duty is concerned, as we have shown earlier
Central Excise Tariff Item 15A(1) read with Explanations II
and III clearly shows that silicone oil imported by the
appellant which has undergone the process of condensation,
polycondensation and poly-addition would squarely get
covered by the sweep of the said Tariff Item 15A(1). The
view taken by the Tribunal in this connection cannot be
found fault with Learned counsel for the appellant strongly
relied upon a decision of the Tribunal in the case of Tamil
Nadu Electricity Board, Madras v. Collector of Customs,
Madras 1983 (12) E.L.T. 174. The said decision was rendered
in connection with resins classified under Chapter 39 of the
Customs Tariff. It was held that if the copolymer resin had
a special ability to cause exchange of ions, it could not be
regarded as merely artificial resin but as a class of
products which had been given characteristics that made
their use appropriate only in a particular respect and for a
particular purpose, namely ion exchange, rather than as a
general purpose resin. On the peculiar facts of the case
before the Tribunal it Was held that the products concerned
could be treated as water treatment chemicals and not as
artificial resins so as to attract Chapter 39 of the Customs
Tariff, We fail to appreciate how the said decision can be
of any avail to the appellant on the facts of the present
case. Learned counsel for the appellant next contended that
the earlier Tariff Item 15A of the Central Excise Tariff
which was earlier pressed in service by the appellants and
which contention was accepted by the Revenue was almost
identical with the amended Item 15A(1) save and except
addition of some further items but for applicability of item
15A(1) it had to be shown that the concerned produce was
artificial or synthetic resin or an article made up
therefrom. It is not possible to agree. The whole Tariff
Item 15A(1) underwent a sea change when it was amended in
1992 and came on the Statute Book. The Explanations II and
III to this amended Item were not existing on the Statute
Book when earlier Tariff Item 15A(1) held the field.
Consequently it cannot he said that the amended Item 15A was
almost pari materia with the earlier Item 15A as contended
by learned counsel for the appellant. It has to be kept in
view that for deciding the liability to tax the clear
wordings of the Item have to be considered and given effect
to when on the express words of the Item the concerned
products get squarely covered by the same reference to the
past history of the said Item as might have existed in a
different form prior to its amendment would lose all its
significance and would remain a past event only and cannot
be validly pressed in service for deciding the taxability of
the product which is covered by the sweep of the amended
Item. Learned counsel for the appellant then submitted that
artificial resins and plastic materials are the only items
which are in the sweep of amended Item 15A(1). We have
already shown that the sweep of the Item is more
comprehensive and covers materials other than artificial
resins and plastic materials. It was lastly contended that a
Tariff Advice was issued in 1984 by the Additional Collector
of Central Excise, Thane which showed that even after
amendment of Tariff Item 15A of the Central Excise Tariff
Polyethylene Glycol continued to be classifiable under Item
No.68 and not under Item 15A(1). The said Tariff Advice is
at page 118 of the Paper Book in Civil Appeal Nos.1942-53 of
1988. We fail to appreciate how this Tariff Advice can
advance the case of the appellant any further. Polyethylene
Glycol might have been treated to have continued to be
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classified under Tariff Item 68 despite amendment of Tariff
Item 15A. We are not concerned with such a product. The
short question with which we are concerned is whether
silicone oil imported by the appellant is covered for the
purpose of deciding the countervailing duty payable thereon
by Central Excise Tariff Item 15A(1) or not. So far as that
question is concerned as the product was imported after the
amendment of Tariff Item 15A it is the amended Item which
will govern the same. As we have discussed earlier the wide
sweep of the said Item especially in the light of the two
Explanations engrafted therein, would clearly cover the
article in question. Consequently, no fault could be found
with the view of the Tribunal that the fluid silicone oil
imported by the appellant was a silicone polymer and,
therefore, liable to be covered for the purpose of customs
duty under Customs Tariff Chapter 39 and also assessable to
countervailing duty as per Central Excise Tariff Item
15A(1).
Category (3)
That takes us to the consideration of two appeals
comprised in Category (3). So far as the Civil Appeal No.453
of 1986 moved by M/s Reliance Silicon (I) Pvt. Ltd. is
concerned, the commodities manufactured by them which are in
dispute before us are silicone oil and also other silicone
preparations like emulsions. In view of our discussion while
disposing of Civil Appeals comprised in Categories (1) and
(2) it must be held that silicone oil manufactured by them
would squarely be covered by Tariff Item 15A(1) while so far
as silicone emulsion and other silicone preparations are
concerned as they are made by using silicone oil or other
components of silicone they would not be covered by Tariff
Item 15A(1) but would be covered by Tariff Item 15AA. But in
no case they would be covered by Tariff Item 68 which is a
residuary Item. The judgment and order of the Tribunal as
challenged by the said appellants will stand modified
accordingly by holding that silicone oil simpliciter
manufactured by the appellants would be liable to be taxed
under Tariff Item 15A(1) while silicone oil emulsions and
other preparations containing silicone manufactured by the
appellant will be covered by Tariff Item 15AA and in either
case residuary Tariff Item 68 would not apply. The
respondent authorities are directed to reframe relevant
assessments accordingly and recompute the excise payable by
the appellant for the relevant period. So far as Civil
Appeal No.1507 of 1984 is concerned the disputed item
manufactured by the appellant consists of silicone emulsion
manufactured from silicone oil. In view of our discussion in
connection with cases falling in Categories (1) and (2) and
also in the light of our aforesaid findings in appeal of M/s
Reliance Silicon (I) Pvt, Ltd. it must be held that the
product of silicone emulsion manufactured by the appellant
is liable to be taxed under Tariff Item 15AA and not under
Tariff Item 15A(1). The judgment and order rendered by the
CEGAT dated 2nd December 1983 confirming the order of the
Collector of Central Excise (Appeals) dated 11th March 1983
and the order of the Assistant Collector of Central Excise
dated 13th July 1982 will be liable to be set aside. The
respondent authorities are directed to re-assess the duty
liability of the appellant under Tariff Item 15AA for the
relevant period.
In the result all the appeals comprised in Categories
in Categories (1) and (2) are liable to fail and are
dismissed while Civil Appeal No.453 of 1986 comprised in
Category (3) is partly allowed as aforesaid. In this case as
detention order dated 31st January 1986 was based on the
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order of the Tribunal which is partly set aside by us the
respondent is directed to re-issue appropriate detention
order, it found necessary, in the light of recomputation of
excise duty liability during the relevant period as held
hereinabove by us. So far as Civil Appeal No.1507 of 1984 is
concerned the same is allowed as aforesaid. There will be no
order as to costs in all these appeals.