Judgment
1. The captioned appeals involve the same issue and are, therefore, dealt with and disposed of by this common order.2. The issue involved is whether "Arbocel FDY 600 Cellulose Powder" imported by the appellants was liable to be charged to additional duty of customs at the rate of 40%+5% of 40% ad valorem under Item No. 15-A" of the Central Excise Tariff Schedule as assessed by the Customs Authorities or at 8% ad valorem under Item 68 of the said Schedule (hereafter referred to as C.E.T.), as contended by the appellants.
3. The customs authorities had assessed the goods to basic customs duty under heading No. 39.01/06 of the Imports Customs Tariff Schedule. The appellants' contention was that the correct heading was under Chapter 47 of the said Schedule. It, however, appears that no arguments were addressed before the lower authorities in respect of this plea. The Collector (Appeals) in his impugned orders has, therefore, stated that he did not wish to go into this aspect but at the same time observed that the classification under heading 39.01/06 was appropriate.
4. In so far as the levy of additional duty of customs was concerned, the Collector (Appeals) observed that re-generated cellulose was squarely covered by Item 15A(1), C.E.T. He did not. therefore, see any reason to interfere with the assessment and consequently rejected the appeals.
5. We have heard Shri N.C. Sogani, Consultant, for the appellants and Shri A.S. Sundar Rajan, Departmental Representative, for the respondent.
6. Shri Sogani submitted at the outset that the dispute before us was limited to the aspect of additional duty of customs in so far as appeals Nos. 2318/83, 1653/85 and 1654/85 were concerned. However, the classification of the goods under both the Customs Tariff Schedule as well as the Central Excise Tariff Schedule were in dispute in appeal No. 760/84-C. Shri Sogani stated that the imported goods were not synthetic wood pulp, though the department had chosen to call them regenerated cellulose. Referring to page 568(b) of the Explanatory Notes to the Customs Co-operation Council Nomenclature (CCCN), Shri Sogani submitted that, in accordance with the general note on the coverage of Chapter 39, (which corresponds to Hem 15-A of the C.E.T.), the materials covered within the Chapter were only those which were capable, or of having been capable at some stage, of being formed under external influence (usually heat and pressure, if necessary with a solvent or plasticisers) into shapes which are retained on the removal of the external influences. The imported cellulose powder was not capable of being "formed" unlike synthetic resins and artificial plastic materials. Cellulose powder was only a filler having multifarious applications as would be seen from page 569 of the C.C.C.N. explanatory notes. Shri Sogani then referred to the Glossary of Chemical Terms, (Hempel and Hawley) and stated that the term "regenerated cellulose" was meant to cover rayon and cellophane. The imported goods were neither of these. Shri Sogani then referred to page 663 of the Explanatory Notes under heading 47.01 and submitted that cellulose in powder form was pulp within the scope of the said heading.
He finally submitted that based on these considerations, the proper classification for levy of additional duty of customs would be Item No.68, C.E.T. It was under this item that excise duty was being levied on indigenous cellulose powder.
7. In reply, Shri A.S. Sundar Rajan, Departmental Representative submitted that cellulose was a high polymer as could be seen from pages 209 and 834 of "Condensed Chemical Dictionary" by Hawley. It was not correct to say that Chapter 39 of the Customs Tariff Schedule was restricted to plastics and resins. It covered other high polymers corresponding to heading No. 39.06 of the C.C.C.N. Page 57 of the Compendium of Classification Opinions published by the Customs Co-operation Council would show that cellulose powder was classifiable under heading No. 39.06 of the C.C.C.N. The levy of additional duty of customs with reference to Item No. 15-A(J) of the C.E.T. Schedule which corresponded to heading No. 39.01/06 of the Customs Tariff Schedule was, therefore, correct. To a query from the Bench, Shri Sundar Rajan stated that he was not relying on the concept of regenerated cellulose in support of his arguments.
8. In reply, Shri Sogani stated that the degree of polymerisation of the imported goods was of the order of 870. The goods would, therefore, not qualify to be termed "high polymer". Further, the use of the goods was different from the ones described in the C.C.C.N. Compendium of Opinions.
9. We have carefully considered the submissions of both sides. The goods are described in the bill of entry for home consumption as "ARBOCEL FDY 600" cellulose powder. In the statement of facts accompanying the appeal, it is stated that the cellulose powder imported by the appellants is for use in the manufacture of welding electrodes which they are licensed to manufacture. It appears that the goods were imported in the month of January 1982 and warehoused. The goods were cleared for home consumption from the warehouse in Septembsr, 1982. On 1-3-82, Item No. 15-A of the Central Excise Tariff Schedule had undergone a change by virtue of the provisions of the Finance Bill of 1982. For the purpose of the present dispute, therefore, we have to consider the Customs Tariff Schedule and the Central Excise Tariff Schedule as they stood with the enactment of the Finance Bill 1982.
10. A reading of heading No. 39.01/06 of the Customs Tariff Schedule shows that the heading covers, apart from polycondensation, polyaddition, polymerisation and co-polymerisation products etc., inter alia "other high polymers". Chapter Note 2 which is of a statutory nature, defines "condensation, polycondensation, polyaddition, polymerisation, and co-polymerisation products" as applying only to goods of a kind produced by chemical synthesis and answering to one of the three specified descriptions, one among them being artificial plastics including artificial resins. This Chapter Note is not intended to, and would not apply to, the term "other high polymers". Therefore, we have to ascertain its meaning with reference to literature on the subject. If cellulose powder is a high polymer it would be covered by the heading.
11. Now looking at the Central Excise Tariff Schedule, Item No. 15A(1), the heading of the item reads thus :- "Artificial or synthetic resins and plastic materials, and other materials and articles specified below...".
The text of the item is the same as that of heading No. 39.01/06 of the Customs Tariff Schedule and the term "other high polymers" figures in the subject item too. It is clear that the Central Excise item also covers, apart from artificial or synthetic resins and plastic materials, "other high polymers". If cellulose powder is a high polymer, it would fall for classification under the said item.
12. The question, therefore, is whether cellulose powder is a high polymer. The "Condensed Chemical Dictionary", 10th Edition, revised by Gessner G. Hawley, describes cellulose as a natural carbohydrate high polymer (poly saccharide) consisting of anhydro glucose units joined by an oxygen linkage to form long molecular chains that are essentially linear, it goes on to say that the degree of polymerisation ranges from 1,000 for wood pulp to 3,000 for cotton fibre giving a molecular weight from 1,60,000 to 5,60,000 (page 209 of the dictionary). "The Glossary of Chemical Terms" by Hampel and Hawley at page 54 says that the molecular weight of cellulose ranges from 1,50,000 to cover 5,00,000.
13. On the term "high polymer", the Condensed Chemical Dictionary by Hawley says at page 834 that it refers to an organic macro molecular composed of a large number of monomers. The molecular weight may range about 5,000 into millions (for some polypeptides). It goes on to say that natural high polymers are exemplified by cellulose and rubber.
14. From above discussion it is clear that cellulose is a high polymer.
It is described in literature as a high polymer. Shri Sogani has stated that the degree of polymerisation of the imported goods was of the order of 870 and, therefore, it would not qualify to be termed a high polymer. What, however, seems to be relevant is not the degree of polymerisation but the molecular weight. It is also to be noted that there is no evidence on record on the actual degree of polymerisation.
15. Shri Sogani had, during the hearing, relied on the classification of indigenously manufactured cellulose powder under Item 68, C.E.T.Evidence for this is a letter dated 28-5-82 from the Superintendent of Central Excise, Ahmedabad to the Cellulose Products of India. The product is described as Cellulose Powder (C.P. 100) and, on test, was found to be bleached wood pulp in the form of fine powder. Apart from this letter (it is not an order of adjudication), no material has been placed before us to ascertain whether the subject imported product was similar to the indigenous product and whether, apart from the chemical test, all relevant circumstances were gone into before classifying the indigenous product. We are thus not able to attach much value to the Superintendent's letter placed before us.
16. From the leaflet on ARBOCEL, it is seen that it is a highly purified cellulose free of lignin, resins and undesired ingredients. It is clear, therefore, that the product is not cellulose in its natural form but processed to a high degree of purity. In the state it is imported, it can be no longer described as a natural product but appropriately only as a manufactured product even if the source is cellulose obtained from vegetable material.
17. The imported goods, would, therefore, fall for classification under heading No. 39.01/06 of the Customs Tariff Schedule and Item No. 15A(1) of the Central Excise Tariff Schedule.
18. The Compendium of Classification Opinions published by the Customs Co-operation Council at page 57 shows Cellulose powder, finely divided, white, under heading No. 39.06 of the C.C.C.N. This would also support the view which we have taken. Shri Sogani's contention that the imported goods are used for purposes other than those described in the compendium is not of assistance to him because the compendium describes only some of the uses of cellulose powder.