1992 (5) TMI 88 - AT - Customs

Summary

Issues Involved:
1. Classification of cellulose nitrate discs under Customs Tariff Act, 1975.
2. Applicability of exemption under Notification 226/76-Cus.
3. Legality of the Additional Collector's order.
4. Relevance of past clearance practices.
5. Interpretation of Chapter Note 10 of Chapter 39 CTA and HSN Explanatory Notes.
6. Applicability of Delhi High Court judgment in the case of Super Traders v. Union of India.

Issue-Wise Detailed Analysis:

1. Classification of Cellulose Nitrate Discs under Customs Tariff Act, 1975:
The primary issue is whether cellulose nitrate discs imported by the appellants fall under Heading 39.20 CTA, which covers "Other plates, sheets, film, foil and strip of plastics, non-cellular," or under Heading 39.26 CTA as articles of plastic. The Customs House classified the discs as articles of plastic under Heading 39.26, arguing that the discs, being in circular form, do not qualify as sheets under Heading 39.20 or 39.21 CTA. The Additional Collector upheld this classification, noting that Chapter Note 10 to Chapter 39 CTA specifies that sheets must be cut into rectangles or squares, which the discs are not.

2. Applicability of Exemption under Notification 226/76-Cus:
The appellants claimed exemption under Notification 226/76-Cus, which exempts cellulose nitrate sheets and films from duty in excess of 60%. The Customs House and the Additional Collector concluded that the exemption could not be extended to the discs, as they do not fall under the specified headings for sheets and films. The appellants argued that the discs should be considered sheets in a different form and thus eligible for the exemption.

3. Legality of the Additional Collector's Order:
The appellants challenged the legality of the Additional Collector's order, arguing that the goods had already been assessed with the exemption by the Assistant Collector and that the Additional Collector's re-adjudication was unlawful. The respondents countered that the order was valid as the Bill of Entry had not been released to the appellants and that the Additional Collector had provided ample opportunity for the appellants to present their case.

4. Relevance of Past Clearance Practices:
The appellants argued that similar goods had been allowed clearance under Notification 226/76 in the past, and the sudden change in practice was unlawful. The respondents maintained that past clearances did not prevent the authorities from correcting a mistake and that the current classification and exemption denial were correct.

5. Interpretation of Chapter Note 10 of Chapter 39 CTA and HSN Explanatory Notes:
Chapter Note 10 to Chapter 39 CTA specifies that sheets must be cut into rectangles or squares to qualify under Heading 39.20. The HSN Explanatory Notes, which have persuasive value, support this interpretation. The Additional Collector and the Tribunal majority found that the circular discs do not meet these criteria and thus fall outside the scope of Heading 39.20, aligning with HSN guidance that such items are classifiable under Heading 39.26.

6. Applicability of Delhi High Court Judgment in the Case of Super Traders v. Union of India:
The appellants relied on the Delhi High Court judgment in Super Traders, where stainless steel sheets in circular form were considered sheets. The Tribunal majority found this case inapplicable, as it dealt with a different tariff schedule and material (stainless steel) and was based on the erstwhile CCCN, not the current HSN-aligned CTA. Additionally, the specific wording of Chapter Note 10 to Chapter 39 CTA differs from the note interpreted in the Super Traders case.

Conclusion:
The Tribunal majority upheld the Additional Collector's order, classifying the cellulose nitrate discs under Heading 39.26 as articles of plastic and denying the exemption under Notification 226/76. The appeal was rejected, affirming that the goods do not qualify as sheets under Heading 39.20 due to their circular shape, which does not meet the criteria set by Chapter Note 10 to Chapter 39 CTA.