1995 (5) TMI 27 - SC - Customs

Whether Class E and other high temperature resisting material could be subjected to duty under Chapter 39 or Chapter 48 of the Schedule of Customs Act? Held that - In the material in dispute paper is impregnated with plastic to provide it rigidity and toughness. Since it is used in high-voltage electric motions it was electrical grade insulation. The exemption however is to such goods falling in Chapter 48 of the First Schedule. There is nothing either in the notes or in the heading of 39.01/06 to suggest that it applies to paper coated with plastic. In fact the word such as to amplify the words artificial resin in the heading has not been used before artificial plastic material. It has by implication now included in Chapter 48 paper with coating of plastic if the constitution of plastic was less than half the total thickness. The order of the Tribunal thus is upheld but for different reasons.In the appeal filed by Collector (Customs) the learned counsel failed to demonstrate that the order levying countervailing duty under Tariff Item 68 suffers from any error of law. Appeal dismissed.

Issues:
1. Classification of goods under Chapter 39 or Chapter 48 of the Schedule of Customs Act.
2. Interpretation of Notification No. 37 of 1-3-1978 regarding electrical grade insulation paper.
3. Application of internationally recognized rules of interpretation in the Schedule.
4. Exclusion of certain items from Chapter 48 and their classification under Chapter 39.
5. Levying of countervailing duty under Tariff Item 68.

Analysis:

Classification of Goods under Chapter 39 or Chapter 48:
The dispute revolves around whether Class E and other high temperature resisting materials should be subjected to duty under Chapter 39 or Chapter 48 of the Schedule of Customs Act. The Tribunal's decisions in previous cases highlighted the essential characteristics of the materials and the role of plastic components in providing insulation. The thickness and composition of the imported materials were crucial factors in determining the appropriate classification under the respective chapters.

Interpretation of Notification No. 37 of 1-3-1978:
The Notification exempted electrical grade insulation paper under Chapter 48, emphasizing the importance of understanding what constitutes electrical grade insulation paper. The Tribunal's analysis of the composition and insulation properties of the materials played a significant role in determining whether the exemption applied to the imported goods.

Application of Internationally Recognized Rules of Interpretation:
The judgment delves into the rules for interpreting the Schedule of Customs Act, emphasizing the importance of headings, notes, and sub-notes in determining the classification of goods. The application of Rule 1 of the Rules for interpretation underscores the necessity of considering specific terms in the headings and relevant notes for accurate classification.

Exclusion of Certain Items from Chapter 48 and Classification under Chapter 39:
The Tribunal's oversight of note (e) regarding the exclusion of certain papers coated with plastic from Chapter 48 led to a reevaluation of the classification under Chapter 39. The amendment to the Tariff Schedule further clarified the classification criteria for materials with plastic coatings, emphasizing the need to consider the constitution of plastic in determining the appropriate chapter for classification.

Levying of Countervailing Duty under Tariff Item 68:
The appeal filed by the Collector (Customs) questioned the levy of countervailing duty under Tariff Item 68. The judgment noted the failure to demonstrate any legal errors in the imposition of this duty, leading to the dismissal of the appeal.

In conclusion, the judgment upholds the classification of goods under Chapter 39, the interpretation of Notification No. 37, and the application of internationally recognized rules of interpretation. The exclusion of certain items from Chapter 48 and their classification under Chapter 39 was clarified, and the appeal regarding the levying of countervailing duty under Tariff Item 68 was dismissed.

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