1996 (8) TMI 360 - AT - Customs

Synthetic Rubber Grade TS 430 - Demand - Limitation - Strictures against Collector - Bias of adjudicating authority

Issues Involved:
1. Classification of imported goods under the Customs Tariff Act.
2. Alleged misdeclaration and suppression of facts.
3. Imposition of penalties on the appellants.
4. Invocation of the extended period for demand under Section 28(1) of the Customs Act.
5. Relevance of private test reports and expert opinions.
6. Applicability of the Calcutta High Court judgment in a similar case.

Detailed Analysis:

1. Classification of Imported Goods:
The primary issue was whether the imported goods, TOSO CSM 430, should be classified under Heading 39.01 as chemically modified Polyethylene or under Heading 40.02 as synthetic rubber. The Collector classified the goods under Heading 39.01, based on a test report that identified the product as Chlorosulphonated Polyethylene Polymer, a modified Polyethylene Polymer, and a saturated polymer, not synthetic rubber. The appellants argued that the product was synthetic rubber, supported by various test reports and expert opinions.

2. Alleged Misdeclaration and Suppression of Facts:
The Department alleged that the appellants misdeclared the goods as "Synthetic Rubber Grade TS-430" instead of Chlorosulphonated Polyethylene, which led to a lower duty rate. The Collector held that the appellants were aware of the correct nature of the goods but failed to disclose it, thus invoking the extended period for demand under Section 28(1) of the Customs Act.

3. Imposition of Penalties:
Penalties were imposed on the appellants under Section 112(a) of the Customs Act for misdeclaration and suppression of facts. The Collector imposed a penalty of Rs. 2,00,00,000/- on the company and additional penalties on individual employees.

4. Invocation of Extended Period:
The Collector justified the invocation of the extended period for demand, citing suppression of material facts by the appellants. The appellants contended that the classification was based on the Department's own test reports and that there was no suppression or misdeclaration on their part.

5. Relevance of Private Test Reports and Expert Opinions:
The appellants presented various test reports and expert opinions to support their claim that the goods were synthetic rubber. The Collector rejected these reports, stating that they were not conclusive and that the Department's test report was more reliable. The appellants argued that the Collector should have sought clarification from the experts or ordered a retest of the samples.

6. Applicability of Calcutta High Court Judgment:
The appellants relied on the Calcutta High Court judgment in the case of National Insulated Cables Co. Ltd., which held that Hypalon-40 (a similar product) was classifiable under Chapter 40 as synthetic rubber. The Collector distinguished this case, stating that the goods before him were different and involved misdeclaration and suppression of facts.

Majority Decision:
The majority decision, delivered by Member (J) and Member (T), held that the goods were classifiable under Heading 40.02 as synthetic rubber. They found that the Department's classification under Heading 39.01 was not justified, as the goods had all the functionalities and properties of synthetic rubber. They also held that there was no misdeclaration or suppression of facts by the appellants, and the extended period for demand was not invokable. Consequently, the penalties imposed on the appellants were set aside, and the appeals were allowed with consequential reliefs.

Conclusion:
The judgment concluded that the imported goods, TOSO CSM 430, should be classified under Heading 40.02 as synthetic rubber, and not under Heading 39.01 as chemically modified Polyethylene. The allegations of misdeclaration and suppression of facts were not substantiated, and the extended period for demand was not applicable. The penalties imposed on the appellants were set aside, and the appeals were allowed.

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