2014 (2) TMI 780 - AT - Customs

Exemption from customs duty vide Notification No.17/01-Cus (Sl.No.133) and under notification 21/2002 (Sl.No.145 & 146) - Import of Ultramid B 35F Nylon 6 Resin - Revenue contends that notification is applicable only to nylon chips falling under Chapter Heading 39.08 and not to Nylon 6 Resin which was the declaration as per the Bill of Entry - Held that - goods were in granule form and the accompanying documents described it as Nylon Resin and goods were declared in the Bills of Entry to be resin and the declarations were accepted. So Revenue has accepted the position that Resin can be in solid form. Even otherwise these days a simple search on the internet with the expression Plastic Resin will show suppliers and their products along with images of the physical form which are mostly in different solid forms. No geometric shape is assigned to the goods covered by the description chips . Even going by the Concise Oxford dictionary the meaning given for chip is a small thin piece removed in the course of chopping, cutting or breaking a hard material . The meaning given in the same dictionary for granule is a small compact particle . The difference in meanings is very thin and vague. So the basis of strict interpretation of notification canvassed by Revenue is based on such vague difference. The opinion of Professor of High Polymer Engineering Laboratory, Chemical Engineering Department, IIT Madras states that these words are used interchangeably - No authoritative text showing any difference between Nylon Chips and Nylon Granules has been produced. A search on internet shows similar physical forms for goods marketed as Nylon Chips and as Nylon Granules - Decided in favour of assessee.

Summary

Issues Involved:
1. Eligibility for customs duty exemption under Notification No. 17/01-Cus and 21/2002 for imported Nylon 6 Resin.
2. Classification of imported goods as "Nylon Chips" or "Nylon Resin" in granule form.
3. Interpretation of terms "chips" and "granules" in the context of customs notifications and industry standards.

Issue-wise Detailed Analysis:

1. Eligibility for Customs Duty Exemption:
The appellant, a manufacturer of nylon filament yarn, imported Nylon 6 Resin and claimed customs duty exemption under Notification No. 17/01-Cus and 21/2002, which were applicable to "Nylon chips for manufacture of nylon filament yarn" under Heading 39.08. The Revenue objected, asserting that the exemption was only for "nylon chips" and not "Nylon 6 Resin" as declared in the Bill of Entry. The adjudicating authority upheld this view, leading to a demand for duty. The Commissioner (Appeals) also rejected the appellant's claim, emphasizing that the notification strictly covered "nylon chips" and not other forms such as granules.

2. Classification of Imported Goods:
The appellant argued that terms like "resin," "chips," and "granules" are used interchangeably in the industry. They provided evidence, including a certificate from a Professor of High Polymer Engineering and a supplier's certificate, to support that Nylon 6 Resin in granule form is essentially the same as nylon chips. The Commissioner (Appeals) disagreed, stating that nylon chips and granules are distinct and that the notification only covered chips. The Revenue maintained that granules could not be considered chips, citing HSN notes and arguing that the physical form of the imported goods did not match the exemption criteria.

3. Interpretation of Terms "Chips" and "Granules":
The Tribunal considered the definitions and industry usage of the terms. It noted that the Customs Tariff and the exemption notification did not define "chips." The Tribunal found that the term "chips" in the Directory of Fibre and Textile Technology referred to polymer feedstock used in fiber production without specifying a geometric shape. The Tribunal also considered dictionary definitions, finding the difference between "chips" and "granules" to be vague. The opinion from the IIT Professor and market reports supported the interchangeable use of these terms in different regions. The Tribunal concluded that the Revenue's strict interpretation based on vague distinctions was not justified.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal. It held that the imported Nylon 6 Resin in granule form qualified for the customs duty exemption under the relevant notifications, as the terms "chips" and "granules" were used interchangeably in the industry, and no authoritative evidence was provided to distinguish them definitively.

Order Pronouncement:
The submissions were recorded on 04-12-13, and the order was pronounced on 11-02-2014.