1997 (3) TMI 598 - SC - Central Excise

Whether industrial laminates and glass epoxy laminates cannot be considered as electrical insulators ? Held that - 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 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.

Summary

Issues Involved:
1. Classification of Decorative Laminated Sheets under Old and New Tariff.
2. Classification of Industrial Laminated Sheets under Old and New Tariff.
3. Classification of Glass Epoxy Laminated Sheets under Old and New Tariff.

Detailed Analysis:

1. Classification of Decorative Laminated Sheets under Old and New Tariff:
The appeals concern the classification of laminated sheets, specifically decorative laminated sheets, under the Central Excise Tariff. The manufacturing process involves impregnating paper with resin, drying it to create 'Prepreg - P', and pressing layers of this paper under heat and pressure to form a hard, rigid sheet. Under the Old Tariff, the two competing entries are Entry 15A(2) and Entry 68. Entry 15A(2) pertains to "Artificial or Synthetic resins and plastic materials" and includes "Boards, sheeting, sheets, and films, whether lacquered metallised or laminated or not". The manufacturers argue that laminated sheets, being composite materials of paper and resin, do not fall under Entry 15A(2) but under the residuary Entry 68. This claim was upheld by CEGAT, and the Supreme Court agreed, citing the case of Geep Flashlight Industries Ltd. v. Union of India, which clarified that Entry 15A(2) applies to articles made wholly of plastic materials, not composites. Thus, decorative laminated sheets under the Old Tariff are classified under Entry 68.

Under the New Tariff, the Central Excise Authorities argue that decorative laminates fall under Entry 3920.31/3920.37, which covers "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". The manufacturers claim these should be classified under Entry 4818.90/4823.90, which pertains to "Other articles of paper pulp, paper, paperboard, cellulose wadding or webs of cellulose fibres". The Supreme Court referred to the Rules of Interpretation under the New Tariff Act, specifically Rule 3(b), which states that composite goods should be classified according to the material that gives them their essential character. Since the rigidity and resistance to heat and moisture of decorative laminated sheets are imparted by resins, they are appropriately classified under Chapter 39, Entry 3920.31/3920.37, not under Chapter 48. Therefore, the Supreme Court overturned CEGAT's decision and classified decorative laminated sheets under Entry 3920.31/3920.37 of the New Tariff.

2. Classification of Industrial Laminated Sheets under Old and New Tariff:
Industrial laminated sheets, which are paper-based and used as electrical insulators, have a similar manufacturing process to decorative laminates but use electrical grade kraft paper. Under the Old Tariff, these sheets do not fall under Entry 15A(2) for the same reasons as decorative laminates and are classified under the residuary Entry 68.

Under the New Tariff, industrial laminates fall under Chapter 85, Entry 8546, which deals with "Electrical insulators of any material". Note 2(n) of Chapter 39 excludes articles of Section XVI, which includes electrical equipment and parts thereof. Despite the Central Excise Department's contention that these sheets are not electrical insulators until cut and punched, the Supreme Court held that mere cutting or punching holes does not constitute manufacture. These sheets retain their insulating properties and are used as electrical insulators. Therefore, they are classified under Entry 8546.00 of the New Tariff (Entry 7014 before 1.3.1988).

3. Classification of Glass Epoxy Laminated Sheets under Old and New Tariff:
Glass epoxy laminated sheets, made by impregnating glass fabric with resin and used as electrical insulators, follow a similar classification path. Under the Old Tariff, they do not fall under Entry 15A(2) and are classified under the residuary Entry 68.

Under the New Tariff, these sheets also fall under Chapter 85, Entry 8546, due to their use as electrical insulators. Note 2(n) of Chapter 39 excludes them from Chapter 39, directing their classification under Entry 8546.00 of the New Tariff (Entry 7014 before 1.3.1988).

Conclusion:
The Tribunal's classification of decorative laminates under the Old Tariff Entry 68 is upheld. However, the classification under the New Tariff is revised to Entry 3920.31/3920.37. For industrial laminates and glass epoxy laminates, the Tribunal's classification under the Old Tariff Entry 68 and New Tariff Entry 7014/8546 is upheld. Appeals are partly allowed, and any entitlement to refund will be processed per the decision in Mafatlal Industries Ltd. v. Union of India. No order as to costs.