Pearl Plastic Manufacturing Co. vs Union of India

Sujata Manohar, J.—This group of Writ Petitions is in respect of imposition of additional duty of Customs (countervailing duty) on acrylic sheet scrap imported by these petitioners. Imports in some of these petitions are prior to 1st March, 1982, while imports in most of these petitions are subsequent to 1st of March, 1982.

The date of 1st of March, 1982 is relevant because after 1st of March, 1982 Explanation III has been added to Central Excise Tariff Item 15A which is the relevant item for the purpose of imposition of countervailing duty on acrylic sheet scrap. The relevant Tariff Item 15A prior to 1st of March, 1982 was as follows :

15A. "ARTIFICIAL OR SYNTHETIC RESINS AND PLASTIC MATERIALS AND CELLULOSE ESTERS AND ETHERS, AND ARTICLES THEREOF -

(1) The following artificial or synthetic resins and plastic materials, and cellulose esters and ethers, in any form, whether solid, liquid or pasty, or as powder, granules or flakes, or in the form of moulding powders, namely :-

(i) Condensation, poly condensation and polyadditional products, whether or not modified or polymerised, and whether or not linear such as Phenoplasts, Aminoplasts, Alkyds, Polymides, Superpolyamides, Polyesters, polyalkyl esters, polycarbonates, Polyethers, Polyethylene amines, Polyurethanes, Epoxide resins and Silicones;

(ii) Polymerisation and co-polymerisation products such as Polyethylene Polytetrahaloethylenes, Polyisobutylene, Polyvinyl chloride, polyvinyl acetate, Polyvinyl chloroacetate and other polyvinyl derivatives, Polyacrylic and Polymethacrylic derivatives and coumarone indene Resins, and

(iii) Cellulose acetate (including Cellulose dictate or Cellulose triacetate), Cellulose acetate propionate, Ethylcellulose and Benzycellulose, whether plasticised or not and plasticised Cellulose nitrate.

(2) Articles made of plastics, all sorts, including tubes, rods, sheets, foils, sticks, other rectangular or profile shapes, whether laminated or not, and whether rigid or flexible, including lay flat tubings, and polyvinyl chloride sheets, not otherwise specified.

After 1st of March 1982 Item 15A was altered and Explanation III was added. The relevant part of the altered Item 15A is as follows :

"15A. Artificial or Synthetic resins and plastic materials; and other material and articles specified below -

(1) Condensation, poly condensation and poly-addition products, whether or not modified or polymerised, and whether or not linear (for example, pheno-plasts, aminoplasts, alkyds, polyalkyl esters and other unsaturated polyesters, silicones); polymerisation and co-polymerisation products (for example, polyethylene, polytetrahaloethylenes, polyisobutylene, polystyrene, polyvinyl chloride, polyvinyl acetate, polyvinyl chloroacetate and other polyvinyl derivatives, polyacrylic and polymethacrylic derivatives, coumarone indene resinics); regenerated cellulose; cellulose nitrate, cellulose acetate and other cellulose esters, cellulose ethers and other chemicals derivatives of cellulose, plasticised or not (for example, collodions, celluloid); vulcanised fibre; hardened proteins (for example, hardened casein and hardened gelatin); natural resinics modified by fusion (run gums); artificial resinics obtained by etherification of natural resinics or of resinic acids (ester gums); chemical derivatives of natural rubber (for example, chlorinated rubber, rubber hydrochloride, oxydised rubber, cyclical rubber); other high polymers, artificial resinics and artificial plastic materials, including alginic acid, its salts and esters; linoxyn.

(2) Articles of materials described in sub-item (1) the following namely :- Boards, sheeting, sheets and films, whether lacquered or metallised or laminated or not; lay flat tubings not containing any textile materials.

(3) Polyurethane foam.

(4) Articles made of polyurethane foam.

XX XX XX XX XX XX Explanation III. Sub-item (1) is to be taken to apply to materials in the following forms only :-

(a) liquid pasty (including emulsions, dispersions and solutions);

(b) blocks, lumps, powders (including moulding powders), granules, flakes and similar bulk forms;

(c) waste and scrap."

As a result of the amendment of the Tariff Item 15A, waste and scrap of materials falling under Tariff Item 15A(1) are also covered in Tariff Item 15A(1).

In respect of Acrylic sheet scrap which has been imported prior to 1st of March 1982, there is no dispute that acrylic sheet scrap, for the purpose of imposition of countervailing duty, would fall under the residuary Central Excise Tariff Item No. 68 and not under Item 15A. In the case of Indo Plast and another Vs. Union of India and others, a Division Bench of this Court considered a case where acrylic plastic scrap was imported prior to 1st of March 1982. The Division Bench held that ''Acrylic plastic scrap'' would fall under Central Excise Tariff Item 68 and not under Central Excise Tariff Item 15A, as Item 15A does not cover scrap. In view of this decision, in respect of ''Acrylic sheet scrap'' which has been imported prior to 1st of March 1982, the scrap is classifiable for the purpose of countervailing duty under Central Excise Tariff Item 68.

In the case of Acrylic sheet scrap which is imported after 1st of March 1982 the position is no different. The goods imported by the petitioners are scrap from acrylic sheets. Acrylic sheets fall under Central Excise Tariff Item 15A(2). The petitioners submit that scrap arising from articles falling under Item 15A(2) are not covered by explanation III(c). The petitioners have relied upon two decisions of the Customs, Excise and Gold Control Appellate Tribunal (CEGAT) which have been upheld by the Supreme Court, as the Supreme Court has summarily dismissed Special Leave Petitions filed by the Collector of Customs from these decisions.

In the case of Prakash Products v. Collector of Customs, Bombay, reported in 1984 (16) ELT 438 (Tri), a Special Bench of the CEGAT considered a case where acrylic crushed sheet scrap was imported. The Tribunal considered explanation III to Item 15A in this connection. It held that the Item 15A(1) of the Central Excise Tariff after 1st of March 1982 covers prime material as set out in that item. Item 15A(2) deals with articles made from materials described in sub-item (1). These articles include boards, sheeting, sheets and films, whether lacquered or metallised or laminated or not. The Tribunal held that since the scrap which was imported in that case was scrap arising from sheets falling under Item 15A(2), sub-item (c) of Explanation III did not cover such scrap. Explanation III makes it clear that it is to sub-item (1) that waste and scrap are added. These cover waste and scrap of materials falling in sub-item (1). Since Explanation III does not apply to Item 15A(2), waste and scrap which arise from articles mentioned in Item 15A(2) are not covered by Explanation III(c). Hence once again such scrap would have to be classified under residuary Tariff Item 68 of the Central Excise Tariff for the purposes of countervailing duty.

There are observations to a similar effect made by the Tribunal in another case of Paresh Products v. Collector of Customs, Bombay reported in 1987 (31) ELT 308 (Tri.). Our attention is also drawn to Civil Appeal Nos. 2718-25/1985 along with Civil Appeal Nos. 1854-57/91, 2181-82/86 and 1439/88 before the Supreme Court. These included an appeal from the decision of M/s. Paresh Products. These appeals from the decision of the Tribunal on the same point were summarily dismissed by the Supreme Court.

Mr. Rege who appears for the respondents in these matters before us, also agrees that appeals and/or Special Leave Petitions from the judgments of the Tribunal in similar matters have been rejected summarily by the Supreme Court.

The question whether any excise duty is leviable on scrap or not, which was another question raised in all these petitions, now no longer survives in view of the decision of the Supreme Court in the case of Khandelwal Metal and Engineering Works and Another Vs. Union of India (UOI) and Others, , where the Supreme Court held that scrap is also an excisable commodity.

In the premises the petitioners are liable to pay countervailing duty on acrylic sheet scrap imported by then on the footing that the goods so imported fall under Central Excise Tariff Item 68.

Mr. Rege applies for liberty to encash the Bank guarantees furnished by the petitioners.

The respondents to ascertain the quantum of countervailing duty payable in each of the petitions in view of our above decision and intimate the same to the petitioners concerned. The petitioners to pay the countervailing duty so ascertained within 6 weeks of the receipt of the intimation, failing which liberty to the respondents to encash the Bank guarantee furnished to them by the concerned petitioners to the extent of the countervailing duty so ascertained.

The petitioners to keep the bank guarantee alive for the aforesaid purpose for a period of four months from today.

Liberty to apply.

In the event of the petitioners paying the amount of countervailing duty as ascertained the bank guarantee and/or undertaking given by them to stand discharged.

In the case of those petitioners who have already paid the countervailing duty on the basis that Tariff Item 15A is applicable, and who have asked refund of the countervailing duty so paid in excess, liberty to the petitioners concerned to make a separate application for refund.

In the circumstances there will be no order as to costs.