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TMI Blog1996 (8) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... fiscation under Section 111(m) of the Act, 1962 for misdeclaration of the description. However, he has not imposed any redemption fine but has imposed a penalty of Rs. 2,00,00,000/- (Rupees Two Crores only) under Section 112(a) of the Act and while imposing this penalty the learned Collector has taken into account the fact that the goods which are liable for confiscation are not physically available. He has imposed personal penalty under Section 112(a) of the Act on the following persons: Names Amount of Penalty (i) Shri J.S. Chowdhari (Import Executive) Rs. 5,00,000/- (Rupees Five Lakhs only) (ii) Shri S.M. Jayawant (Import Assistant) Rs. 4,00,000/- (Rupees Four Lakhs only) (iii) Shri P.S. Ramachandran (Manager R D) Rs. 2,00,000/- (Rupees Two Lakhs only) (iv) Dr. R.K. Sharma (Lab. Incharge) Rs. 1,00,000/- (Rupees One Lakh only) He has not imposed any penalty on the indentor M/s. Chemrub and S/Shri S.L. Tibrewala, D.R. Bansal, R.K. Mirani and S.K. Sureka. 3. (i) These orders have arisen out of adjudication of four show cause notices issued to the importe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tic Rubber as defined in the Customs Tariff, Chapter 40 and which was being regularly assessed to customs duty under CTH 39.01 at the rate of 100% Basic and 40% Additional Duty. On the basis of the information, the Customs authorities sent a representative sample of TS-430 material out of a consignment of the importer which was sought to be cleared by them under IGM/Item No. 812/31 (B/E Thoka No. 10151 dt. 26-4-1994). In the mean time, the importer through their Customs House Agents, submitted a single page copy of purported technical brochure that TS-430 grade was Polychlorobutadiene Rubber. To further substantiate their case the importer also submitted a test report prepared by their own Research Control Lab. at Satna claiming that TS-430 material satisfied the expression Synthetic Rubber as per Note 4 (a) of Chapter 40 and they reiterated that TS-430 material was unsaturated Synthetic Rubber. On the basis of such claims by the importers, 60% of the goods were released pending further enquiry and report of Dy. Chief Chemist on the sample forwarded to them. On being tested vide its order No. 216/2-7-1992, the Dy. Chief Chemist gave an opinion on the nature of TS-430 material as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CSP, having the same properties but were misdeclaring/suppressing the relevant documents in respect of TS-430 before the Customs authorities with a motive to evade the Customs duty over the last eight years inasmuch as Hypalon had been charged to an aggregate duty of 200% Adv. as against about 100% Adv. levied on TS-430. These inter alia included: (a) A common folio under the nomenclature CSP maintained in the raw material. (b) The trend of import of Hypalon showed decreasing quantities from 27 MTs in 1984-85 to nil in 1990-91 and 1991-92 whereas import of TS-430 showed a rising trend from one MT in 1984-85 to 65 MTs. in 1990-91. Again in 1992-93 (till November, 1992) Hypalon imported was 30 MTs. as against TS-430 nil quantity which was attributed in the Show Cause Notice to high profitability in TS-430 import owing to duty evasion. (v) The Department also relied on two reference books in Annexure H to the show cause notice to bring out the difference between Polychlorobutadiene and CSP and to prove that CSP was fully saturated polymer not covered under Chapter 40 of the Customs Tariff. 4. (i) The appellants have taken their stand against the Department s alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led the Bill of Lading, Bill of Entry dt. 23-11-1984 before the Customs department, Bombay. (ii) In the Bill of Entry dt. 23-11-1984, the Department had made the following endorsement on the Bill of Entry : TR No. 1655A Lab No. 10070 M/s. Sohwa Trading Co. Ltd., Japan Des. Synthetic Rubber TS 430 Sample is Synthetic Rubber (Polychlorobutadiene Type) In the form of coloured soft lumps. It is free from added ingredient. Although the importer had described the said goods as Synthetic Rubber TS 430 , the Department by way of the said endorsement in the said Bill of Entry described the said goods as Synthetic Rubber (Polychlorobutadiene Type) . The importer has taken a stand that they never described the said goods as Synthetic Rubber (Polychlorobutadiene Type) . The Department in all the imports made by the importer from time to time from 1984 classified the said goods as Synthetic Rubber (Polychlorobutadiene Type) under heading 40.02 of the Tariff. The appellant had taken the stand up to January, 1986, that they described the goods as Synthetic Rubber TS 430 only, imported by them in their Bill of Entries. On the other hand in all the said Bill of Entries, the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n their respective invoices, Test and Analytical Certificates and Bills of Lading. They also submitted that in view of the relevant rules and practices followed by the Customs Department, they had no choice in the matter but to adopt the description appearing in the relevant invoices, bills of lading and Test and Analytical Certificates. In the circumstances, they stated that in respect of all imports made from and after September, 1986 right up to 1991, the said goods were described as Synthetic Rubber Grade TS 430 (Polychlorobutadiene Type) in the bills of entry filed by them. They also submitted that the Bill of Entry filed by them on 1-12-1989 the Department made the following endorsement :- T.No. 1444 dated 8-1-1988 Synthetic Rubber Grade TS 430 As seen from the literature submitted by the party, this is claimed to be Synthetic Rubber of Polychlorobutadiene Type. This is confirmed by the Test obtained here. Party s claim may therefore be accepted. It is free from added ingredient. (iii) On the basis of the said endorsement, the said goods were classified by the Department under heading 40.02 of the Tariff and assessed on 5-12-1989 and the same were cleared by them u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anisation with sulphur into non-thermoplastic substance, which at a temperature between 18 C and 29 C will not break on being extended to three times their original length and will return, after being extended to twice their original length within a period of five minutes to a length not greater than one and half times their original length. In the premises, the said goods must be regarded as Unsaturated Synthetic Substance within the meaning of the said Note 4(a) of Chapter 40 . They also submitted the report dt. 23-4-1993 of the Indian Institute of Technology, Powai, Bombay; Report dt. 21-1-1992 of the University of Calcutta, and Test Report dt. 14-2-1992 of Professor Abhijit Banerjee of the Calcutta University, all of which stated that the goods are of unsaturated substance, and as such, clearly fall within the said Note 4(a) of Chapter 40. They also submitted the affidavit of several experts namely : (i) Dr. A.S. Bhattacharya (ii) Dr. Varinder Kumar Tikku (iii) Shri Damodar Hari Pal (iv) Shri P.K. Sen Gupta All the said affidavits of these experts have stated that the goods are Synthetic Rubber and it was also known in the market. They also relied on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een obtained by the Department from 1984 onwards, in respect of consignment imported by the importer from time to time. The ld. Collector has held that the goods are classifiable only under Chapter 39 and not under Chapter 40, as the latest test results dt. 8-7-1991 obtained by the Department had indicated that the item is Chloro- sulphonated Polyethylene Polymer, a modified Polyethylene Polymer and that it is saturated polymer and not Synthetic Rubber. The ld. Collector has drawn his own conclusion and has challenged the experts evidence and test results of the appellants by reading page 484 of Encyclopaedia of Chemical Technology by Kark-Othmer, wherein it is stated that the Polyethylene is essentially Synthetic Polymer. He has come to the conclusion that the item is made from base material Polyethylene chemical synthetic Rubber and the product of this polymerisation reaction is chemically modified form of original Polyethylene. In this regard the ld. Collector has also noted the definition of Polyethylene from Hawley s Concise Chemical Dictionary and also noted some paragraphs from the book titled Fibres, Films, Plastics and Rubbers by W.J. Roff and R.J. Scott. Referring to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orities attempted to do so. He has held that the Scientific test and analysis is supposed to be carried out by taking appropriate precautions, ruling out confusing/ambiguous/false data/signals and applying appropriate controls to rule out false signals. He has held that the none of the learned professors chose to determine, spectroscopically or otherwise the chemical nature, its composition and purity before subjecting the same to spectroscopy or bromination test. He has held that the previous objective was always restricted to determine saturation/unsaturation, if any, in the sample and never to determine the actual chemical composition of the sample. He has held that the procedure applied and the inferences given therein, therefore, cast serious doubts about their acceptability as the last word in the present circumstances. He has also held that on comparison of the three reports, it can be seen that NMR report indicates two signals indicating a double bond, whereas FTIR report indicates 1 signal indicating a double bond terminal vinyl type and IR report indicates 4 signals indicating a double bond terminal. He has held that as three different contents/structures. He has in his o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative is to rely upon authentic literature of the manufacturer which leads to believe that TOSO-CSM is fully saturated Chlorosulphonated Polyethylene. He has rejected the various arguments raised by the importer with regard to two or more Chapters being applicable then most appropriate chapter is only Chapter 40. The ld. Collector has also rejected the appellant s plea that the case is fully covered by the Calcutta High Court s judgment in the case of National Insulated Cable Company as reported in 1987 (28) E.L.T. 248, which has considered the three previous judgments of the Tribunal and held that the product Hypalon-40 is classifiable under Chapter 40, on the ground that the goods before him for adjudication are TOSO-CSM TS-430 with an allegation of wilful mis-statement and suppression of facts. He has held that he can take a different view from the view expressed by the Calcutta High Court. He has also rejected the arguments that there are no mala fides and there was no mis-declaration. The ld. Collector has held that the importers had knowledge of the correct material and had not disclosed the details and had taken advantage of the wrong technical reports of the Department an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. On the basis of some investigations carried out and the test results obtained in the other imports of the other case, (namely, the importers of M/s. Universal Cable Ltd.), the department issued a show cause notice dt. 12-4-1993 to appellants. It is alleged in the show cause notice that none of the Bill of Entries filed by the department, they had declared the chemical composition of the Synthetic Rubber and they had described the goods as Synthetic Rubber TS-430 and TS-530 only. It is stated that such Bills of entries were apparently cleared/assessed by the customs Department on the basis of a Test Report pertaining to a certain previous consignments imported by a certain other party. These test reports appear to be erroneous in as much as these reports indicated that the TS-430 and TS-530 materials were Polychlorobutadiene Type Synthetic Rubber. It is alleged that the Assistant Collector of Customs vide a communication F.No. S/26-497/91 2B, sought an advice from the Dy. Chief Chemist of the New Customs House as to whether the sample of TS-430 was a Polychlorobutadiene Synthetic Rubber or Chlorosulphonated Polyethylene Elastomer. The Dy. Chief Chemist vide T.O. No. 216/2-7-19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial of M/s. Toyo Soda Manufacturing Co. Ltd., was Chlorosulphonated Polyethylene, product chemical name was Hypalon . (emphasis supplied). It is alleged that in spite of such complete knowledge about the chemical nature of TS-grade material, the said importer had deliberately suppressed by not declaring the actual chemical nomenclature of the TS-grade material and took undue benefit of the lower rate of Customs duty on the basis of an incorrect previous test reports, which the importer had reason to believe that the same was incorrect. 8. The appellant filed their reply denying all the allegations and reiterating that they were importing TS-430, TS-530 from 1988. They denied having been in possession of any literature and having suppressed any facts. They have stated that the products are synthetic rubber as has been found on test by the department and its classification has to be under Chapter 40, they have relied on test report dt. 17-5-1989 which states that the goods are synthetic rubber. They have also submitted that by technical No. 284 dt. 7-7-1989 the Dy. Chief Chemist had opined that the said goods are synthetic rubber and also had confirmed that the sample of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are treated and classified as Synthetic Rubber. They pointed out to the Notification No. 345/86-Cus., dt. 16-6-1986 where the goods including Chlorosulphonated Polyethylene (CSP) falling under Chapter 39 or 40 of CTA are eligible for benefit thereof. They submitted that the said notification issued under Section 25 of the said Act reflects Government s understanding. They submitted that even according to the Government, CSP can fall only as Synthetic Rubber and thus the goods are classifiable under Chapter 40. They have submitted that Hypalon has been held to be classifiable under Chapter 40. Therefore, the goods have to be classified under Chapter 40 only. They also submitted that the demands are all time-barred as they have not suppressed any fact. In all Bills of Entry they have only described the goods as Synthetic rubber TS 430 . Therefore, the Department having earlier obtained test results and confirmed the goods as synthetic rubber cannot change its opinion by alleging that they had been suppressing facts and that the goods are plastics. In this regard, they relied on the rulings rendered by the Hon ble Supreme Court in the Cases : (i) Collector of Central Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were akin to Hypalon and as Hypalon had been classified under Chapter 39, the impugned goods also were required to be cleared as Plastics under chapter 39. He submitted that the controversy had been settled by the Division Bench ruling of the Calcutta High Court rendered in the case of Collector of Customs, Calcutta and Others v. National Insulated Cable Co. Ltd. and Another as reported in 1994 (46) ECC 101. The Hon ble Calcutta High Court had dealt at great length on the technical aspects of the matter and had accepted the test reports from the I.I.T. Kharagpur, which had confirmed Hypalon-40 as a synthetic rubber. He also submitted that merely because the chemical report stated that the goods to be saturated that by itself is not sufficient for classifying it under Chapter 40, as the Calcutta High Court had rejected this plea on the enormous evidence placed by the importer for classifying Hypalon under Chapter 39. He submitted that the department did not obtain clarification with regard to the requirement under Note 4(a) of Chapter 40 and there was dispute regarding it. He submitted that the item in all the text books, chemical dictionary and in all the test report which depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alon as synthetic rubber. He submitted that the department had proceeded on the basis that the goods were similar to Hypalon and as Hypalon is classifiable under Chapter 39, the imported goods were also required to be classifiable likewise. He submitted that the party had been importing the goods from 1984 and it is only the department after carrying out the test had confirmed the goods as synthetic rubber and it is the Department who had described the same as Polychlorobutadiene Type . He submitted that the appellant had accepted the test results of the Department time and again and that they had continued to describe the goods likewise. The manufacturer had also accepted the said description and had continued to describe the same in their documents. Therefore, when the ld. Collector found the earlier test report to be wrong, then it is the department, which is to be blamed. He submitted the main allegation of the department is that the goods were similar to Hypalon , however, the ld. Collector had departed from the said allegation and had come to a different conclusion on the basis of his own understanding of the product by rejecting the technical evidence and technical repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion Synthetic Rubber as defined under Note 4(a) of Chapter 40. He submitted that the basis for the Collector to proceed was also from the reading of the text books. The experts had not obtained their test results properly and not stated categorically as to whether the goods were unsaturated or saturated synthetic substance and, therefore, the experts evidence losses its evidential value. Even if the goods were marketed as synthetic rubber yet as they were saturated synthetic substance , their inclusion under Chapter 40 would not be in terms of chapter notes. He agreed that the synthetic rubber is made of polymer and composed of polyethylene as in the case of plastics. The ld. Collector s ground for excluding it from the Chapter 40 was on the basis of the admission that the goods were saturated synthetic rubber substance. He submitted that the collector did not have the benefit of the judgments of the Division Bench of Hon ble Calcutta High Court. He pointed out that the Calcutta High Court had held that even if it is saturated synthetic substance it would fall under Chapter 40 but he pointed out that in his humble opinion, the judgment would not be in the terms of Tariff Note, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28 of the Customs Act. 11. Countering the arguments of the ld. SDR, ld. advocates pointed out that the literature relied by the ld. Collector to hold that the goods had no double bond is on the basis of his reading of the literature on TS-530 and not on TS-430. Imports pertains to TS-430 only and hence the reliance on the said literature is totally misconceived. The ld. Advocate also submitted that there is no occasion to protest with regard to the test results obtained by the department, as the test results pertained to separate proceedings, and even in those proceedings protest has been lodged. In these circumstances, there was no test results to be relied and, therefore, the department had proceeded on a totally erroneous consideration. However, the importer had obtained all the expert s evidence to counter the departments claim and hence the ld. Collector s findings were totally illegal and not sustainable in law. They also pointed out that the subsequent report did not indicate as to whether it satisfied the Note 4(a) of Chapter 40. The importers had specifically alleged that the department did not have equipments to carry out such tests and, therefore, the ld. Collector ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t results during the 1984-89 certified the product to be synthetic rubber classifiable under Chapter 40 of the Customs Tariff Act. However, he has proceeded solely on the basis of subsequent report of Dy. Chief Chemist which has already been extracted above. Thus, the report dt. 2-7-1992 of Dy. Chief Chemist states that the goods were not Polychlorobutadiene Synthetic Rubber, but it was Chlorosulphonated Polyethylene Polymer, a modified Polyethylene Polymer. It also stated that it is a saturated polymer and not a synthetic rubber. The ld. Collector had also relied on one pamphlet of the supplier which had been seized from the premises of the partner of M/s. Skytone Electrical (India), which had stated that TOSO-CSP contains no double bond in the molecule . The literature had also described the two kinds of vulcanising agents for such compounds i.e. Metal Oxide based and peroxide/epoxy resin combination. Therefore, the ld. Collector had held that in the absence of reliability of the test report submitted by the importers, the only alternative is to rely upon authentic literature of the manufacturer which leads to believe that TOSO-CSM is fully saturated Chlorosulphonated Polyethy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... polyethylene without unsaturation, the importers have not submitted any published work to prove unsaturation in the Chlorosulphonated Polyethylene. With all due respect to ld. Collector we have to hold that this type of approach adopted by the ld. Collector, with utter disregard to the technical opinion of the expert/institutions is totally erroneous and unfortunately is without any sound basis. The ld. Collector ought to have to put his doubts to the technical experts to seek clarification from them or he could have sent the evidence produced by the importers to the departmental experts for clarification and opinion. Having failed to do so and also having failed to obtain further test results of the remnant samples, the findings arrived at are, therefore, totally fallacious and unsustainable in law. It is well settled that the adjudicating authority cannot substitute the expert s opinion with their own opinion. It is also well settled that the technical expert s opinion is the last word in technical matters unless it is shown to the contrary with better evidence. The ld. Collector may be having a genuine doubt with regard to the literature seized from the importers. But this lite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor has not performed this function and has not assisted the Tribunal in this matter. (iii) The department s charges are that the material imported are akin to Hypalon and as Hypalon is classified under Chapter 39, the same is required to be classified under Chapter 39 and not under Chapter 40. The Department has also proceeded on the presumption that the goods are saturated synthetic substance and hence, they are eliminated from Chapter 40. This aspect of the matter has been concluded by the Hon ble Calcutta High Court in the case of National Insulated Cable Company [1994 (74) E.L.T. 568 (Cal.) = 1994 (46) ECC 101]. The Hon ble Calcutta High Court has held that even if the goods are saturated synthetic organic polymer they continue to fall under Chapter 40 and not under Chapter 39. The findings given by the Hon ble High Court in paragraphs 8 to 12 are reproduced herein below : 8. The appellants have challenged the said decision of the learned Trial Judge. We find that in Collector of Central Excise, Kanpur v. Krishna Carbon Paper Co. [1989 (19) ECC 32 (SC)], their Lordships of the Supreme Court held and observed that where no definition is provided in the statute itself for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demerits of the two reports, we find that the departmental testing was negatively and selectively oriented. The test was directed only for the ouster of Hypalon-40 from the classification of synthetic rubber. There is another loophole in the report. It made a leap for the conclusion that it was synthetic resin, though exclusion from synthetic rubber does not necessarily bring the item under synthetic resin. An item not being synthetic rubber has again to be proved by test whether it is synthetic resin. It is not in dispute that the Customs authorities conducted no test in that direction. To our mind, the report of the Indian Institute of Technology merits more attention and credibility. It conducted the test in a more comprehensive manner. It found Hypalon to be a polymer. It further found that the item possesses the essential properties of synthetic rubber, i.e., capability of vulcanization by system to transform Hypalon irreversibly into an elastic and non-thermoplastic substance and further its capacity of being extended to about four times of its original length and further its power to revert to its original length when extended to twice the original length if released after e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, the finding given in paras 24 to 26 of the single Judge also requires to be quoted in order to disposal the doubts raised by the ld. Collector on this point. The same is noted herein below : 24. On the state of records, the case of the customs authorities appears to be based mainly on the chemical report. This chemical report is not conclusive of the stand taken by the customs authorities. The test results do not indicate anything positive in support of the contention of the customs authorities. A note is attached to the test memo. This note is dated 23rd August, 1984 which invites attention to Customs T.O. No. 1 of 82-83 dated 2nd April, 1982 of the Deputy Collector of Customs as regards the assessment of Hypalon-40. According to the Deputy Collector Hypalon-40 is appropriately classifiable under Chapter 39. This T.O. on assessment by the Deputy Collector of Customs is a general instruction not based on any scientific data. It however mentions certain technical features. The conclusion reached by the Dy. Collector is that Hypalon is classifiable under Chapter 39 because Hypalon is fully saturated. It however goes on to say that Hypalon is as such saturated and that unsat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reports of the experts, more particularly those of I.I.T., Kharagpur. The Court had also applied the rule 4 of the Rules for the Interpretation. Therefore, the ld. Collector in the light of these findings of the Hon ble High Court, ought to have decided in favour of the appellants. Somehow he has emboldened himself, to differ from this judgment, which we do not find it to be in keeping with the judicial discipline. Although the ld. Collector has got liberty to distinguish the judgment but in a case like this, where the Department has proceeded on the basis that the item is equivalent to Hypalon, this judgment should have been applied as it had gone in very great detail on all technical aspects including Note 4(a) to Chapter 40 of the Tariff. In that event of the matter, it was not proper for the ld. Collector to have passed any comments on this judgment of Hon ble Calcutta High Court. There is no justification for the ld. Collector to have made such comments on the ld. Judgment of the Calcutta High Court. The ld. Collector was inclined to accept the single member judgment of the same High Court in the case of National Insulated Cable Co. Ltd., which was in favour of the deptt. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rubber under Open General Licence, Appendix 6, List 8, Part I Serial No. 537 of Import Policy 1990-93, as not permissible. The Tribunal had gone into great detail on this matter and after examining the issue had held that Hypalon-40 is a synthetic rubber. The Tribunal examined Appendix 3 Part A at Serial No. 482, which read as follows : 482. Synthetic rubber, the following :- (i) Styrene Butadiene Rubber (SBR); and 34-1193-00-3 (ii) Poly Butadiene Rubber (PBR)-34-1192-00-7 . The Serial No. 537, Appendix 6, List 8, Part I of the Import Policy for 1990-93 had covered Synthetic rubber other than those appearing in Appendix 3, Part A . Therefore, the Department had alleged that the Hypalon-40 did not fall under S.No. 537. The Tribunal had taken into consideration the interpretation given by the Chief Controller of Imports Exports, in the matter of interpretation of import Policy and Procedures as per para 28 of the Import Policy 1990-93, and held that such opinion will prevail over any clarification given by any other authority. The said authority had given an opinion that the product Hypalon-40 is a synthetic rubber. The Tribunal had upheld the clearance of the goods under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... classification are very different from those which decide classification for purposes of levy of Customs duty. We are, therefore, unable to accept this view of the learned Additional Collector. We would also like to mention that during the hearing the learned Departmental Representative had referred to the decision of the Tribunal in the case of National Insulated Cables Co. of India Ltd. v. Collector of Customs, Calcutta [1985 (21) E.L.T. 793] in which it was decided that Hypalon-40 40E were classifiable as Synthetic Resins under Heading No. 39.01/06 of the Customs Tariff and not as Synthetic Rubber under Heading 40.01/04 ibid. Since the question of classification of the goods for assessment of duty is not the subject matter of the appeal before us, it is not necessary for us to go into this question with reference to the decision cited before us. In fact, the following portion of paragraph 11 of the decision in that case is relevant and is quoted below :- The fact that the import control authorities recognise Hypalon as a Synthetic Rubber is not, in our view, decisive of the classification of the goods under the Customs Tariff Schedule since the objects of the two enactments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have submitted copies of their application as well as the clarification furnished. In view of this, we do not consider that there was any irregularity in the clarification furnished by the Joint Chief Controller of Import Exports, Bombay. In view of the above, the impugned order is set aside and the appeal is allowed with consequential relief to the appellants. 18. Therefore, it is very clear that the importing authorities has also considered Hypalon-40 as synthetic rubber and that the Tribunal/High Court has accepted both for licensing purpose and for the classification purpose, the goods to be synthetic rubber. The Department had proceeded on the basis that the item is akin to Hypalon, as both the items contains Chlorosulphonated Polyethylene and, therefore, the classification under Chapter 40 cannot be ruled out; as the Govt. of India s understanding both for the purpose of interpretation and for the licensing purpose is that Hypalon-40 is a synthetic rubber. The Hon ble Supreme Court of India in the case of Collector of Central Excise v. Parle Exports Ltd., as reported in 1988 (38) E.L.T. 741 has held :- It is a settled principle of interpretation that Courts in const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clearly ruled out. We have also to observe that the Department had not proved that importers have misdeclared or suppressed the correct description of the goods for the reason that the Department itself by their own test report had accepted the goods as synthetic rubber from 1984 onwards. In the case of M/s. Skytone Electrical (India), the appellants were describing the goods as synthetic rubber TS 430. They were not declaring it as synthetic rubber (Polychlorobutadiene Type). Therefore, the allegations made against them that they knew contents and yet they had misdeclared the correct contents is also not sustainable. Earlier test reports of the importers also indicated that the goods are synthetic rubber and the Department had accepted the same. Therefore, in this case the charges of suppression or misdeclaration to invoke larger period is not sustainable. In view of our findings, the impugned orders are set aside and the appeals are allowed, with consequential reliefs, if any. Sd/- (S.L. Peeran) Member (J) Dated : 29-11-1994 20. [Contra per : S.K. Bhatnagar, Vice President]. - With due respects to Hon ble Member (J) my views and orders in the matter are as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mediate between Plastomers and Duromers (Hofmann P/4). 27. This is evident from what follows :- In his RUBBER TECHNOLOGY HANDBOOK Dr. Werner Hofmann classifies CSM under synthetic rubbers and indicates it as commercially important. At page 106 (3.3.11) he indicates the structural formula of CSM as follows : -CH2-CH-CH2-CH2-CH-CH2- | | Cl SO2Cl Chloro- Ethylene Chlorosulfonyl Units ethylene ethylene At 3.3.11.3 HOFMANN mentions about structure of commercially available CSM grades and states inter alia that :- Due to its fully saturated polymer backbone, CSM is, like CM, very resistant to weathering, aging, ozone and chemical degradation. HOFMANN while indicating compounding of CSM mentions various vulcanising chemicals including polyvalent metal oxides, polyfunctional alcohols like penta erythritol, peroxides and di amines etc. It also mentions vulcanising accelerators (including sulfur/sulfur donors like TMTD, DPTT and MBTT), fillers, plasticizers sand indicates that antioxidants are generally not needed. 28. The ENCYCLOPEDIA OF POLYMER SCIENCE AND ENGINEERING (Vol. 6-Page 513-21) mentions as follows :- Chlorosulfonated polyethy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose type and notes that Hypalon-45 and 48 are more thermoplastic than Hypalon-40. Significantly, it mentions, inter alia, that antioxidants are not required as a compounding ingredient for Hypalon since the polymer is chemically saturated and contains no double bonds. While mentioning various curing systems and techniques, it also mentions about an accelerator system composed of various chemicals; And it is noteworthy that sulfur donors/sulphur as such find mention only as a component of acceleration system which are used in combination with the main vulcanising agent and other chemicals used as plasticisers etc. 31. Thus, it is observed that some varieties of CSM do not require vulcanisation (as for e.g. TS 320) and those which do require curing are normally vulcanised with chemicals other than sulfur (although, as already noticed, sulfur donors/sulfur may be used in certain cases as components of accelerator system used during vulcanisation in combination with other chemicals and plasticizers, fillers etc. Moreover, the manufacturers bulletins describes the products as elastomers and we have already noted that thermoplastic elastomers have properties in between plastics ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing products whether or not vulcanised or hard natural rubber, balata, guttapercha, guayule, chicle and similar natural gums, synthetic rubber, factice derived from oils, and such substances reclaimed. 4. In Note 1 above and in heading 40.02, the expression synthetic rubber applies to : (a) Unsaturated synthetic substances which can be irreversibly transformed by vulcanisation with sulfur into non-thermoplastic substances which, at a temperature between 18oC and 29oC, will not break on being extended to three times their original length and will return, after being extended to twice their original length, within a period of five minutes, to a length not greater than one and a half times their original length. For the purposes of this test, substances necessary for the cross-linking, such as vulcanising activators or accelerators, may be added; the presence of substances as provided for by Note 5(b)(ii) and (iii) is also permitted. However, the presence of any substances not necessary for the cross-linking, such as extenders, plasticizers and fillers, is not permitted. 35. Therefore, to be considered as synthetic rubber for the purposes of this chapter, the product mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat is those in which only appendages to the main polymer chain have been changed by chemical reaction, are to be classified in the heading appropriate to the unmodified polymer. This provision does not apply to graft copolymers. 38. (i) So far as Note 1 is concerned, as already seen, the products are thermoplastic polymerisation products capable of acquiring by moulding and casting etc. various shapes which are retained as evident from the main applications indicated in the Technical Bulletin of TOYO SODA and annexed with this order. Therefore, the criteria laid down in this chapter note are satisfied. (ii) In so far as Chapter Note 2 (g) is concerned as the products do not satisfy the definition given in Chapter 40 they are not hit by this note. (iii) As regards Chapter note 3 - It is obviously satisfied as undisputably it is a synthetic polymer with more than 5 monomer units. (iv) Chapter note 5 covers chemically modified polymers of the type described therein. The very fact that the products are admittedly made of chlorosulfonated polyethylene shows that they are chemically modified polymers. The reaction by which chlorosulfonated polyethylene is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial of the type imported by the appellants and now in question because they do not disclose the same characteristics as indicated by the standard technical literature and the technical specifications indicated by the manufacturer himself and therefore, they are irrelevant and inadmissible ex-facio OR (ii) If the samples sent to the ld. Experts were really of the material of the type imported and in question then obviously they do not disclose the whole truth. They are therefore, unacceptable. (iii) The dates of these reports show that they have been procured after the investigations had begun; Therefore, coupled with the above facts they have apparently been so obtained with an eye on the case. All this goes to show that the Collector was right in discarding them (and we will discuss the implications of such reports a little later as we proceed with the matter). 43. In so far as the judgment of Hon. Calcutta High Court in the case of National Insulated Cable Co. [1994 (74) E.L.T. 568 (Cal.) = 1994 (46) ECC 101] is concerned, we would like to mention that we respectfully agree in its entirety that Hypalon-40 was certainly known in the commercial world as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have since come to light and we have both standard technical literature and manufacturers own bulletins to overcome the handicaps which their Lordships faced; and we could arrive at a complete picture and definite conclusions both technically and legally. 49. (i) The present case(s) is even otherwise distinguishable as first and foremost the chlorosulfonated polyethylene substances are of various varieties and grades which differ in the details of chemical composition, characteristic properties and main applications. (ii) Secondly given details of commercial synthetic elastomers significantly take note of, inter alia, commercial CSM Polymers introduced by Toyo Soda Manufacturing Co. Ltd., Japan the manufacturers of the products in question; And as many as 7 T.S. grades of CSM showing different composition and characteristic properties have been tabulated in the technical literature. Therefore, the Test Report of one cannot be relied upon for another and the generalisations are best avoided. (iii) Further, the comparison of the technical parameters indicative of description and characteristics of Hypalon as given in Morton s Book of Rubber Technology and those indicated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t synthetic rubbers but a type of modified polymers of ethylene. This distinction is important from the legal point of view as both HSN and customs tariff exclude them from Chapter 40 and include them in Chapter 39 by virtue of chapter notes of Chapter 40 read with those of Chapter 39; And HSN specifically mentions modified polymers of polyethylene and cites the example of chlorosulfonated polyethylene in its heading note under 39.01. (iii) Ours is a customs case; HSN is an internationally accepted classification for customs purposes and one on which our own tariff is based and the former s persuasive value has been long recognised by Tribunals and Courts. The Customs tariff entries and chapter notes of course have a legal binding force. In case of international trade the cargo is required to pass through the customs and the traders (including foreign suppliers and Indian importers) have to know and keep in view the International Customs practices; and the importers are in any case bound by the customs tariff particularly. We on our part have to take into account every word of the chapter note and cannot leave out the important fact that these were saturated synthetic substance ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... happen in a future case and could not have proceeded on that assumption; And if anything, they could only go by and were indeed expected to go by the existing customs and trade practice and to declare their product accordingly. But they chose not to do so. 57. Since the appellants M/s. Universal Cables have themselves admitted that they were given to understand that the Japanese product (TS 430) was equivalent to Hypalon and Hypalon was a chlorosulfonated polyethylene and the manufacturer/supplier s technical bulletin also described it as chlorosulfonated polyethylene then it was their duty to describe it correctly as chlorosulfonated polyethylene and not to make an attempt to mislead by first withholding the fact and later describing the product wrongly as polychloro butadiene. It is important to note that Polychloro-butadiene is the description of an entirely different type of synthetic rubber which is polymer of chloroprene (or 2 chloro butadiene) and goes by the generic name of Neoprene). Neoprene is an unsaturated synthetic rubber and therefore obviously the attempt was to bring it within the framework of chapter note 4(a) which allows unsaturated rubbers to be included in C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s by itself not sufficient and it is the product which was required to be described fully. This was all the more important where such a description would make all the difference in terms of either import/export or customs requirements. Here apparently the full, correct and complete description was intentionally withhold. 61. The argument that subsequently even the manufacturers/ suppliers also commenced describing the goods as synthetic rubber grade TS 430 polychloro butadiene type also does not help the appellants. If anything it shows, the collusion between the manufacturer/supplier and the appellant and deliberately mis-declaring and misleading the Department with a view to get it wrongly classified and hoodwink the customs. This is apparent from the fact that the technical bulletins of the manufacturer TOYO SODA Manufacturing Co. themselves described the product as chlorosulfonated polyethylene elastomer and clearly indicated in the introduction itself that these were without double bonds (i.e. saturated compounds) and different from other general synthetic rubbers and were vulcanised by metal oxides etc. already noted above. This important and material information was eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with other chemicals mentioned by them in their bulletin and consider it their distinguishing feature. (iv) In so far as the report of Professor M.V. Pandya of I.I.T. Bombay is concerned, first and foremost it is a report procured subsequent to the issue of the show cause notice dated 30th November, 1992. This is apparent from the fact that this report is dated April 23, 1993 and has been given with reference to the TS-430 sample submitted by the appellants and with reference to their letter dated January 27, 1993. The ld. Professor finds on analysis of the sample that it has terminal carbon-carbon double bond (unsaturation) and confirms the presence of vinyl type terminal unsaturation in the polymer. These observations are significant in as much as they show that the so called sample of TS 430 was not a sample of the goods imported or even that of the type of the goods imported as the characteristics reported are not those of TS 430 manufactured and exported by the Japanese firm M/s. TOYO SODA MANUFACTURING CO. LTD. and indicated in their technical bulletins. If, however, the sample was of the type of goods imported the situation would become even more intriguing in as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, the personal type of remarks against him made at page 40 were not called for and I disassociate with them. I consider that the learned Collector has proceeded objectively and fairly and has come to the correct conclusion. 65. Before proceeding further in the matter, I may mention that it is interesting to note that in the proceedings before the collector, it was stated by the learned counsel (Sh. Nankani) for M/s. Skytone that they were adopting the arguments advanced by the learned counsel Sh. Hidayatullah for M/s. Universal Cables; Whereas in the proceedings before the Tribunal the learned counsel Sh. Khaitan appearing for M/s. Universal Cables had stated that they were adopting the arguments advanced by learned counsel Sh. Laxmikumaran for M/s. Skytone Electricals. 66. Shri Laxmi Kumaran in turn also referred to the test reports filed by M/s. Universal Cables and relied upon them and also drew attention to the Calcutta High Court judgment in the Hypalon-40 case. On the technical side, he had initially argued about the unsaturated character as originally claimed by the appellants but subsequently was good enough to admit that the products were polychlorosulfonate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the demands were time barred and they were not liable to penalty. However, a perusal of the records tells a different story. 70. First and foremost like Universal Cables, they have also not filed a complete declaration that is to say a declaration which would be sufficient for determining the correct classification. The fact that they had deliberately withheld the information relevant for the purpose of determining the correct classification is evident from the statement of Sh. H.S. Sethi, partner of M/s. Skytone Electricals who has admitted inter alia, that even the very first order was placed on the basis of advice of an employee who was an ex-employee of M/s. Universal Cables and on being informed by Sh. Jhunjhunwala that TS grade material was equivalent to Hypalon and that they had themselves imported Hypalon which was classified by the Customs under 39.01. He has also clearly admitted that his employee who had advised them to import TS material had also informed that it was CSP i.e. chlorosulfonated polyethylene. Furthermore, recovery of catalogues or bulletins pertaining to TS 430 and 530 indicating the chemical description chlorosulfonated polyethylene show that they we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were unsaturated. 74. It only confirms us in our belief that the appellants have not only tried to bluff the customs through and through, all through but they have not even stopped at that and tried to pull the wool so to say on the Tribunal s eyes. 75. In view of the above discussion, the order of the Collector, in so far as the importing firms are concerned, is quite justified. They are liable to pay the duty demanded and suffer the penalty imposed. The order of the Collector is, therefore, confirmed (except for a minor modification regarding sub classification). 76. In so far as Executives of M/s. Skytone Electricals are concerned the liability towards penalty is clearly established beyond doubt; Since Mr. Sethi is a partner with whose knowledge all these acts of omission and commission were done, he was rightly liable to penalty; And the Collector was correct in imposing the penalty deserved by the appellants in the circumstances. 77. In so far as the Staff and Executives of M/s. Universal Cables are concerned, the Collector has penalised Shri J.S. Choudhary, Manager (R D), Shri P.S. Ramachandran, Lab Incharge, Dr. R.K. Sharma and Import Assistant Shri S.M. Jaywant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, rejected. Sd/- (S.K. Bhatnagar) Vice President Dated : 18-5-1995 POINTS OF DIFFERENCES 80. In view of the difference of opinion between Hon ble Member Judicial and the Vice-President, the matter is submitted to the President for reference to a third Member on the following points :- 1. Whether the products were classifiable under Heading 39.01 as chemically modified Polyethylene or as a Synthetic rubber of a type classifiable under Heading 40.02? 2. Whether in view of the private test reports and the Calcutta High Court judgment in the case of Hypalon-40, the appeals were required to be accepted on merits or were required to be rejected, as the above do not advance their cause in the light of the observations and the findings of the Vice-President? 3. Whether any misdeclaration and suppression of facts was involved? 4. Whether the appellants were liable to the penalty imposed? 5. Whether the demands were time barred? 6. Consequently, whether the appeals were required to be accepted or rejected on the grounds of either merits or time bar or both? Sd/- (S.L. Peeran) Member (J) Dated : 26- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M.V. Pandey - Page 238 and Prof. Sengupta - Page 240 and Prof. Abhijeet Banerjee - P 245. He also referred to certain affidavits to the effect that the product is known in the market as synthetic rubber. These reports and affidavits have either not been considered or have been brushed aside on the grounds which are not tenable and without cross-examining any of the persons who made these reports and affidavits. In fact, doubts raised by the Collector in regard to these reports were never put to the appellants and no opportunity was given to them to deal with the same. Appellant has through out maintained that product TS-430 is unsaturated substance. The Deptt. has jumped to the conclusion that product is classifiable under Customs Tariff Chapter 39 as plastics without subjecting the product to the Test for determination whether it is plastics. Collector has referred to the failure to conduct Tests for Plastics as forgiveable mistake. This is not a forgiveable mistake but a fatal mistake which goes to the very root of the matter. Goods cannot be classified under Chapter 39 unless these are specifically tested to establish that they respond to the requirements of Chapter 39. No such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Bill of Entry. The Deptt. also examined the literature and came to the conclusion that it was chloro butadine. They have nothing to do with this. What they declared in the Bill of Entry was synthetic rubber TS-430 and this is how the product was known in the market. This cannot be called a wrong description. In any case, nothing was suppressed when the sample itself was offered for test and in fact, was tested. 86. Ld. Advocates, Sh. Lakshmikumaran and Sh. Shridharan appearing for the appellants 5 and 6, adopted the arguments of ld. Sr. Advocate, Sh. Sorabjee, adding that :- 86.1 Chapter Note 4(a) mainly states that the expression synthetic rubber applies to and does not say applies only to . In other Chapters such as Chapter 29 and 39, the Notes specifically mention applies only to . 86.2 In their case consignments were imported in April, 1988 to April, 1991 and Show Cause Notice was issued only in April, 1993. The first consignment imported was assessed by the Customs House on the basis of the Test Report of the Customs House Laboratory in relation to imports by some other party. No details were called from them. They have declared goods correctly as per invoice an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lants is made out is correct. He, however, admitted that he is not in a position to say how wrong Test Reports happened to have been given in the past. The appellants knew that the product was Chloro Sulphonated Polyethylene and this product is classifiable as plastics under Chapter 39. Referring to plea of time bar, he said that the appellants only gave commercial description of the goods and did not give technical details and composition of goods. In absence of technical details and composition the goods could not be properly classified. It was their duty to have placed all the facts before the Department and, having failed to do so, they cannot say the facts were in possession of both sides. Hon ble Apex Court judgment in case of M/s. Pushpam Pharmaceuticals, therefore, can t help their case. They knew that the products were identical to Hypanol-40 which they were previously importing and which were being assessed under Tariff Item 39 at higher rate of duty. To this extent, therefore, there was suppression. 88. In the rejoinder, the ld. Sr. Advocate submitted that Department can t have it both ways. If the impugned goods TS-430 are the same as Hypanol and if the Deptt. knew th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from this very premise. 90.2 In view of this, classification of the impugned product, Hypanol, itself is of basic relevance. 91. The Condensed Chemical Dictionary revised by Gessnerg Hawley describes Hypanol as a trade mark for Chloro Sulphonated Polyethylene, a synthetic rubber. 91.1 Gardner s Chemical Synonyms and Trade Names describes Hypanol as a proprietary trade name for synthetic rubber [Chloro Sulphonate Polyethylene] . 91.2 Encyclopedia of Polymer Science and Engineering Vol. - VI refers to Chloro Sulphonated Polyethylene in these words : Chloro Sulphonated Polyethylene [CSM] is the basis of a family of synthetic elastomers prepared by simultaneous chlorination and sulphonation of Polyethylene........... . Commercially Sulphonated Polyethylene (Hypanol) offers the advantages of superior resistence to oil, ozone and heat compared with standard synthetic rubber............. . 91.3 This encyclopedia at Page 516 of Vol. - VI while showing commercially Chloro Sulphonated Polyethylenes in Table 1 states that commercially CSM Polymers have been recently introduced by Denki and Toyo Soda Manufacturing Ltd. in Japan. 91.4 The Technical Bulletin of Toyo Soda Manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apter Note 4 of Chapter 40 of the Customs Tariff Act, 1975. The Court observed that Hypanol was not specifically tested to find out whether it responded to the composition of synthetic resin as specified in the Chapter 39 of the Customs Tariff Act. The Court concluded that though Hypanol 40 does not correspond to the definition of rubber as given in Note 4 to the Chapter 40 to the extent that it is not an unsaturated substance, it materially and substantially corresponds with other qualities as specified in Note 4. Division Bench upheld this judgment, in case of Collector of Customs, Calcutta v. National Insulated Cables Co. - 1994 (74) E.L.T. 568 (Cal.) = 1994 ECC 101 (Cal.) observing that even the fact of being saturated substance would not preclude it from being synthetic rubber when it has all the functionalities and properties of synthetic rubber. 93. Admittedly Hypanol-40 is Chloro Sulphonated Polyethylene. TS-430 also admittedly, as held by the Customs Authorities, and also revealed by Customs House Test Report, is Chloro Sulphonated Polyethylene. Hypanol is a trade mark of DUPONT while TS-430 and TS-530 are trade marks of Chloro Sulphonated Polyethylene manufactured by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eally fatal. 96. Rosato s Plastics Encyclopedia and Dictionary indicates two categories of Chloro Sulphonated Polyethylene. (i) Chloro Sulphonated Polyethylene elastomer and (ii) Chloro Sulphonated Polyethylene plastic. This also indicates that term rubber and elastomer are used interchangeably. This encyclopedia indicates, with reference to elastomers, that standard ASTM-1566 defines an elastomer as a macro molecular material that is capable, at room temperature, of recovering substantially its shape and size after the removal of a deforming load. Basically, an elastomer must be capable of retracting within 1 minute to less than 1.5 times its original length after being stretched at room temperature to twice that length and being held for one minute prior to release. Chloro Sulphonated Polyethylene elastomer is indicated among others, specifically under the heading elastomer. The encyclopedia indicates that Chloro Sulphonated Polyethylene elastomer is used among others in wires and cables covers whereas Chloro Sulphonated Polyethylene plastic is totally resistant to ozone. 97. Citing from Encyclopedia of Science and Engineering Vol. -VI Ld. V.P. indicated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to HSN Notes, even while they have no binding force [See Frozen Foods Pvt. Ltd. v. C.C.E. - 1992 (59) E.L.T. 279] they do have persuasive value, a great persuasive value, indeed. But the question is : how do we persuade ourselves in the face of Hon ble Calcutta High Court judgment to the contrary. The Test Reports were considered in detail by the Hon ble Court and the matter examined specifically with reference to Chapter Note 4(a) of Chapter 40 and the Court held that Hypanol-40 was classifiable under Chapter 40 of Customs Tariff. It was contended before me that this judgment has become final and the Deptt. has not even filed an appeal to the Supreme Court nor was there any contrary judgment of any other High Court. 99.2 As was contended during hearing by ld. Sr. Advocate, Sh. Sorabjee, no matter what all the literature all over the world may say about the impugned product, the product is what the Courts in India say it to be. 99.3 There is in my opinion nothing to proceed from the premise that full facts had not been brought to light . I agree when ld. Member (J) in Para-15 has recorded that the judgment should have been applied as it had gone in very great details o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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