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TMI Blog1984 (12) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... short). The Appellate Collectors of Customs at Madras and Bombay held, by their impugned orders, that the former was the correct heading as claimed by the appellants whereas the show cause notices issued by the Central Government take the tentative view that the latter is the correct heading. 3. The facts relevant to the Premier Tyres cases are that Premier Tyres imported, prior to 1-9-1978, a number of consignments of PEG 300 (300 stands for the molecular weight of the product). They claimed that the goods were assessable to basic Customs duty under heading No. 38.01/19(1) of the CTA, 1975, with no additional (countervailing) duty of Customs. The Assistant Collector of Customs, however, did not accept this claim. He classified the goods under heading 39.01/06 of the CTA, 1975. In some of the cases, he charged additional duty under item No. 15-A of the First Schedule to the Central Excises Sa!t Act, 1944 (CET-for short). On appeal, the Appellate Collector, Madras, by his impugned order, set aside the Assistant Collector s order and held that the goods were classifiable under heading 38.01/19(1) of the CTA, 1975 and that no additional duty was leviable since the goods fell outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the CCCN (Customs Co-operation Council Nomenclature) Explanatory Notes and Encyclopaedia of Chemical Technology by Kirk-Othmer and took the tentative view that mixtures of lower polyethylene glycol, viz. di-, tri-, and tetra- (ethylene glycols) which are technologically and commercially known were covered as miscellaneous chemical products in Chapter 38, CTA, 1975; mixtures of higher polyethylene glycols, containing more than 4 monomeric units, which were graded according to their average molecular weights, were classified as polycondensation/polyaddition products under Chapter 39, CTA, 1975. These were similar to resols and liquid polyisobutylene and because of Note 2(c) to Chapter 39, were classifiable within Chapter 39 under heading 39.01/06. The Respondent submitted elaborate arguments by their letter dated 10-12-1981 denying all the allegations. 5. It is relevant to note that in both sets of appeals, the dispute is only regarding the classification under the CTA, 1975 for the levy of basic Customs duty. There is no dispute regarding levy of additional duty-in the Premier Tyre Company Group of cases, the Central Government s review notice specifically states that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nomenclature for heading 39.01/06 came into force) and the goods in the Dai-lchi-Karkaria cases were imported after 1-9-1978, Chapter Note 2(c) did not undergo any change and so, the arguments were the same in both sets of cases. The textual change in the nomenclature of the heading did not make any difference to the classification of the subject products. (iv) Referring to the CCCN Explanatory Notes under heading 39.01 (page 572), it was urged that the heading did not cover condensation products which did not have the character of artificial plastic materials. One of the examples given in the note is mixed polyethylene glycols of very low molecular weight which, according to the notes, fall under heading 38.19. This position was reiterated by the notes under heading 38.19 of the CCCN (page 559) which placed under the said heading mixed polyethylene glycols with very low molecular weight, e.g. mixture of di-, tri-, and tetraethylene glycols. The notes also showed that other polyethylene glycols were, however, excluded; they fell under heading 39.01 or, if having the character of artificial waxes, under item 34.04. The subject goods were similar to polyethers which, according to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s v. Collector of Customs, Madras - 1983 E.L.T. 174. In that case, the goods were ion exchange resins. Even so, they were held not to fall within Chapter 39, but within Chapter 38. In the present case, the goods were. admittedly, not even resins as seen from the Chemical Examiner s note of 28-8-1976. (iv) In the case reported in 1981 E.L.T. 824 there was no evidence regarding the low molecular weight of the goods unlike in the present case where the Chemical Examiner had clearly stated that the goods were of low molecular weight. The Government s decision had thus no application here. (v) The manufacturer s literature (extracts filed would show that PEG could, depending on its molecular weight, be a liquid, solid (wax) or vaseline. There was no reference to any resin application. The appellants used the goods as mould release agent in the tyre industry. (vi) PEG 300 was not similar to resols or liquid polyisobutylene. The latter two could be further polymerised into resins or used as plastics unlike PEG 300. The technical opinion furnished by the appellants General Technical Manager was relied upon. (vii) Alternatively, the product, being a lubricating preparation, cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal force. (v) PPGs were polypropylene oxide diols and not polyoxy propylenes. Similarly, PEGs were polyethylene oxide diols and not polyoxye-thylenes. For this reason, the CCCN Notes at page 574 under heading 39.01 were also not relevant. (vi) Commercial PPGs were only up to 6000 molecular weight. The threshold molecular weight for calling a polymer a high molecular-weight polymer was 6,000-12,000. The present products were not high polymers . 11. In his reply arguments, on behalf of the Department, Shri Raghavan Iyer made the following points :- (i) Note 2(c) to Chapter 39 did not concern itself with high polymers . Resols and polyisobutylene were polymerised up to a certain stage. The present goods were also polymerised up to a certain stage. This similarity would suffice for application of Note 2(c) and classifying the products under heading 39.01/06. There need not be any similarity in so far as end-use was concerned. It was also not necessary that PEGs and PPGs could be made into resins. (ii) Shri J.B. Koshy s alternative submission for classification under Chapter 34 was not tenable since PEG 300 was not waxy in character : only PEG 1000 and 1500 were waxes. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficial resin. The words such as following the terms artificial resins make it clear that condensation , etc., products are enumerated as illustrative examples of the types of goods sought to be covered within the heading. The essential criterion, however, is that the product must be an artificial resin. 16. The show cause notice in the Premier Tyres group of cases states in express words that PEG 300 may not answer to the description of artificial plastics or resins and, that being so, it would not appear to fall under item 15-A of the CET. This statement alone is sufficient to rule out classification of the product under heading 39.01/06. But, the notice invokes Chapter Note 2(c) in support of the proposed classification under heading 39.01/05, on the basis that PEG 300 is similar to resols and liquid polyisobutylene. The notice says that PEG 300 which has an average molecular weight of 285 to 315 is a mixture of polyethylene glycols with an average of 6-7 monomer units. PEGs are of very high molecular weight and resins can also be prepared from them just as resols, polyisobutylene which also form resins after further polymerisation. Beyond the above statements, no evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanatory Notes themselves. At page 568, the notes states that the Chapter (Chapter 39) also includes resols, liquid polyisobutylene and similar artificial products which have been less intensively transformed by polycon-densation or polymerisation than the corresponding artificial plastic materials. In other words, the clear implication is that resols and polyisobutylene could be transformed into resins or plastic materials by further polymerisation. According to the Condensed Chemical Dictionary 10th Edition (pages 891 and 93) revised by Gessner G. Hawley, resols are A-stage or one-step resins. It is an alkaline catalysed thermo-setting phenol-formaldehyde type resin consisting primarily of partially condensed phenol alcohols. At this stage the product is fully soluble in one or more solvents (alcohols, ketones) and is fusible at temperatures below 150oC. On further heating and without use of a catalyst or additive, the resin is eventually converted to the insoluble, infusible cross-linked form (C-stage). The A-stage resin is a constituent in most commercially dominating varnishes and is also used in special moulding powders. The C-stage resin (see page 289 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne are excluded from heading 39.01/06 and included in heading 38.19. Other polyethylene glycols are, however, classified under heading 39.01 (pages 559, 592 of the CCCN Notes). It appears to us that this is an erroneous way of reading the notes. Di-, tri- and tetraethylene glycols are cited only as examples. These ethylene glycols of very low molecular weight do not have the character of artificial plastic materials and hence, the notes indicate that they are excluced from heading 39.01 (and included in heading 38.19) in accordance with the general dictum that: It should be noted that with certain exceptions (see Chapter Note 2), the heading (39.01) does not cover condensation products which do not have the character of artificial plastic materials. The general rule is that the product should have plastic character. The exception is what is given in Chapter note 2, i.e. silicones and resols and liquid polyisobutylene and similar polycondensation or polymerisation products. It is not as though any polyethylene glycol above the tetra-stage glycol is automatically within heading 39.01. It must either have plastic character itself or be similar to resols or liquid polyisobutylene. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under item No. 68 CET. It was in this context, the Tribunal said that it was difficult to understand why, if the chemical was a pharmaceutical chemical for basic duty, it was not so for additional duty. Here, it is an admitted position that the goods are not resins or plastic materials. What, however, the Department contends is that for heading 39.01/06 it need not be a resin or plastic material. This aspect we have dealt with at length. 22. Shri Koshy relied upon the Tribunal s decision in 1983 E.L.T. 174. In that case, the goods were admittedly ion exchange resins. Because of their ion exchange property for which rather than their resinous or plastic property, they were known, the Tribunal said they were correctly classifiable as water treatment chemicals under heading 38.01/9(9). Here, the goods are not resins. The cited decision is of no direct relevance. 23. Having regard to the foregoing discussion, we hold that PEG 300 was not classifiable under heading 39.01/06 of the CTA 1975. It was appropriately classifiable under heading 38.01/19(1) as a miscellaneous chemical product not elsewhere specified. In this view, it is not necessary to consider the alternative claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(c) to Chapter 39 lies on the Department. The Department has heavily relied upon the Deputy Chief Chemist s technical opinion dated 3l-7-1981. We have perused the opinion. The effect of the relevant portion is that the purport of Note 2(c) is that low molecular weight polycondensation/polymerisatioa products which do not possess visually obvious resinous characteristics (e.g. resols, polyisobutylene) are covered by the said note. The two substances are mentioned only by way of illustration. In this respect, PEGs are similar to them. Hence Note 2(c) is attracted, we think this is to miss the real point of Note 2(c). We have already discussed at length this aspect and concluded that the similarity referred to in Note 2(c) implies that a polycondensation or polymerisation product to be covered by this note should be less intensively transformed than the corresponding plastic material (i.e. polymerised up to a stage, e.g. A stage resin : resols) or capable or being converted into resins by further polymerisation. And, on this aspect, we do not have any help from the Deputy Chief Chemist s note, 26. Shri Bagalkote has argued that PPG cannot be made into a resin by heat unlike resol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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