2001 (11) TMI 530 - AT - Customs

Summary

Issues Involved:
1. Classification of "Plastic Laminated Films"
2. Alleged suppression of facts by the assessee
3. Essential characteristics of the product
4. Applicability of Interpretative Rules for classification
5. Limitation for demand of differential duty

Issue-wise Detailed Analysis:

1. Classification of "Plastic Laminated Films":
The primary issue revolves around the classification of "Plastic Laminated Films." The Commissioner of Customs & Central Excise classified the films under Heading 3920 of both the Customs Tariff Act, 1975, and the Central Excise Tariff Act, confirming differential duty of Rs. 1,86,73,889/-. The appellants argued that the films should be classified under Chapter sub-heading 7607.19 of the Customs Tariff Act, as the product consists of a core of aluminum foil covered on both sides with plastic films. The department contended that the predominant material in the films is plastic, based on the structure and CBEC Circulars.

2. Alleged Suppression of Facts by the Assessee:
The department claimed that the assessee suppressed facts by not declaring that identical Plastic Laminated Films procured indigenously were classified under Chapter 39.20 of the CETA. A show cause notice was issued invoking the extended period of limitation, demanding differential duty. The assessee countered that the classification was done based on departmental instructions and there was no suppression.

3. Essential Characteristics of the Product:
The debate centered on whether the essential characteristics of the product were derived from the aluminum foil or the plastic layers. The assessee argued that the aluminum foil provides essential barrier properties, while the plastic layers offer sealability. The department, however, emphasized that the plastic layers also have barrier properties and contribute significantly to the product's characteristics. Technical literature and previous tribunal decisions were cited by both parties to support their arguments.

4. Applicability of Interpretative Rules for Classification:
Given the difficulty in determining which material provides the essential character to the product, the tribunal applied Rule 3(c) of the Interpretative Rules. This rule states that when goods cannot be classified by reference to Rule 3(a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. Consequently, the tribunal concluded that the product should be classified under Heading 76.07, as it occurs last in numerical order compared to Heading 39.20.

5. Limitation for Demand of Differential Duty:
Since the tribunal decided the classification issue by applying Rule 3(c) and concluded that the product should be classified under Heading 76.07, there was no necessity to separately address the limitation aspect of the matter regarding the demand for differential duty.

Conclusion:
The appeal was allowed, and the impugned order was set aside. The tribunal determined that the product should be classified under Heading 76.07 by applying Rule 3(c) of the Interpretative Rules, given the technical evidence and the difficulty in ascertaining which material provided the essential character to the product.