1. The question for decision in these appeals by Revenue is classification for the purpose of customs of Crystex 20 which the respondents have described as insoluble sulphur also called Sulphur whether it falls under heading 38.01/19( 1) - Misc. Chemicals products - Chemical products and preparations of the chemical or allied industries not elsewhere specified as claimed by appellants or under Chapter 25 - Salt, Sulphur, earth and stone plastering materials, lime and cement heading 25.01/32 Minerals substances not elsewhere specified (including sulphur...) (10) insoluble sulphur as claimed by respondents are found by Collector of Customs (Appeals) in the impugned order. It may be stated that Chapter 28 of the First Schedule to Customs Tariff Act, 1975. Chapter Note 2(13) provides for sulphur sublimed or precipitated, colloidal sulphur being classified in this chapter. But both the parties agreed that classification under this chapter for the goods imported is ruled out. The competition thus is between Chapters 25 and 38.
2. A sample of the product was referred by Revenue to Keshav Prasad, Chief Chemist, Central Revenues. He by his opinion dated 27-4-1987, after referring to Encyclopedia of Chemical Technology, 3rd Edition, Vol. 22 by KIRK-OTHMER Page 97 on the meaning of Insoluble Sulphur (Crystex) and Flowers of Sulphur (sublimed sulphur) opined as under - "The mineral oil used to the extent of 20% or 33-1/3% are aromatic oils or naphthenic oils which enable easier dispersion of the insoluble sulphur in rubber mixes. The oil thus is also a functional material".
At the time of Import, the goods were assessed under headintg 38.01/19 (as chemical). The respondents claimed reassessment under heading 25.01/32 (10) as insoluble sulphur. The Assistant Collector by different orders in case of each import held that imported sulphur is oil treated insoluble sulphur and would merit classification as chemical under heading 38.01/19(1) and rejected the claim for refund as untenable.
3. The Collector of Customs, Bombay by the impugned order referred to heading 25.03 of CCN and following the reasoning held that merged heading 25.01/32 (10) of CTA, 1975 would include sulphur even if treated with oil because it does not cease to be insoluble sulphur.
4. Parties agreed that if the imported sulphur be held classifiable under Chapter 25 as found by the Collector of Customs (Appeals); the goods would earn the exemption under notification No. 48/79-Cus. as amended.
5. At the hearing of the appeal, both the parties referred to KIRK OTHMER Encyclopedia of Chemical Technology, 2nd edition about allotropic of sulphur at page 361, under heading 'Specifications and Standards about insoluble sulphur', the following is found - "Insoluble Sulphur - This form of sulphur contains up to 90% of the amorphous allotrope of sulphur and is insoluble in carbon disulfide.
It is used for vulcanization of special rubber products, rubber cements, cutting oils, and high pressure lubricants." Sh. Sunder Rajan referred to Note 1 of Chapter 25 and urged that the chapter is to be taken to apply only to goods which are in the crude stage and urged that the oil treated insoluble sulphur imported by the appellants could not be said to be in crude stage. He also referred to Note 2 (a) under which sublimed sulphur, precipitated sulphur or colloidal sulphur falling under Chapter 28 do not fall under this chapter. He argued that the goods in question were one step ahead of sulphur. To elaborate his argument he also referred to Note 2 of Chapter 28 Clause XIII and urged that there could be a case where sulphur not covered by the two chapters would merit classification under Chapter 38. (In para 1, it has already been observed, that both the parties agreed that classification under Chapter 28 of the imported goods was ruled out). During his arguments, he also referred to rules of interpretation of tariff schedule. He also submitted that in the goods imported both insoluble sulphur and oil contained therein, have a functional role and therefore, the goods would not be classifiable as insoluble sulphur. During arguments, he also referred to Supreme Court decision in Khandelwal Metal & Engg. Works v. Union of India [1985 (20) E.L.T. 222 (SC)] on the question as to how rules of interpretation on Import Tariff are interpreted and applied. On these grounds, he urged that classification under Chapter 25.01/32(10) should be set aside and Chapter 38 Heading 38.01/19 be restored and the claims for refunds be dismissed as was ordered by the Assistant Collector.
6. Controverting Sh. Sunder Rajan's submissions, Sh. V. Lakshmi Kumaran learned advocate for the respondents submitted that the issues were not property understood by the appellants. In that connection, he drew attention to the grounds of appeal from which it appears that according to appellant, sulphur should be soluble in water. (It is well known that sulphur dissolves only in carbon di sulphide.) He submitted that treatment of insoluble sulphur with oil is not a chemical reaction and insoluble sulphur in spite of treatment with oil continues to remain sulphur. He submitted that such treatment with oil could not even properly be described as mechanical or physical process. He also relied on Note 1 of Chapter 25 which permits washing even with chemical substances eliminating the impurities without changing the structure of the products and certain other processes without affecting the classification. He also referred to subheading (11) of Heading 25.01/32 and submitted that cumulative reading of sub-heading (10) and (11) and Note 2(13) of Chapter 28 point to proper classification of the goods even though treated with oil being under Heading 25.01/32(10). He also relied on rules of interpretation - Rule 3(b) in support of his claim for classification under Heading 25.01/32(10) on the ground that the essential character emanated from insoluble sulphur. During arguments, he referred to and relied on a text book on Inorganic Chemistry by Ladlimohan Mitra, Forty-fourth Edition published by Ghosh & Co. Page 457 to 459 dealing with sulphur and its allotromic forms. Reliance was placed on ASTM D-4528-45 ASTM duly standard classification for Rubber Compounding materials - sulphur. Reliance was also placed on Encyclopedia of Chemical Technology by Kirk Othmer; On Vulcanization and Vulcanizing Agents by W. Hofmann (photostat copies supplied) (This inter-alia deals with insoluble sulphur); and on Test Report Bulletin for the month of December 1983 at Serial No. 76 - Bulletin deals with Crystex OT 20.
7. Before the relevant legal provisions are referred to, literature on the point placed before the Bench may be referred to (the report of the Chemical Examiner has already been referred to in para 2 above).
Extract on Ladlimohan Mitra's Text book of Inorganic Chemistry (not very helpful for deciding the present appeals) inter-alia refers to Allotropic modifications of sulphur, their preparation and physical properties. It refers to the two broad forms (A) Crystalline forms and (B) Amorphous or non-crystalline forms. The two have further two forms each - (1) Rhombic or Octahedral sulphur (2) Prismatic or monoclinic sulphur and (1) Plastic sulphur and (2) Milk of sulphur. The learned author refers to one more variety - Colloidal sulphur.
8. Relevant ASTM No. D-4528-85 dealing with Standard Classification for Rubber Compounding materials - Sulphur to the extent material for the present appeals has about insoluble sulphur following to say -Significance and use 2.4 Insoluble sulphur is an important form of sulphur used only in the rubber industry. It is insoluble in any type of rubber-hydro. When it is mixed in rubber, it disperses but remains undissolved in the rubber.
The use of insoluble sulphur prevents the development of a super-saturated solution of sulphur in rubber that occurs, when rhombic sulphur is used. No sulphur bloom will develop on the surface of uncured rubber pieces when the rubber cools after mixing or processing; therefore building tack is preserved. At curing temperatures, insoluble sulphur rapidly transforms the soluble species, dissolves in rubber and enters into the vulcanisation process.
3.1 Rhombic sulphur (ordinary ground sulphur) - Rhombic sulphur, which is the ordinary form of sulphur under normal conditions, is ground and classified to meet specific particle sizes requirements. The various grades of this type of sulphur contain less than polymeric sulphur, the ground types may also contain additives to enhance performances. Oil is added to sulphur to help control sulphur dust and improve dispersion in rubber. Finally, ground solid minerals are also added to improve dispersion in rubber. Ordinarily, the total additive level is 5% or less of the sulphur formulation. Many of these types of sulphur may be added to rubber compounds as 100% sulphur.
3.2 Insoluble sulphur (Polymeric) - There are two general types of insoluble sulphur and the general description of each is detailed as follows - 3.2.1 Low insoluble content sulphur or flowers of sulphur This product is made by vaporizing pure sulphur and quenching the vapours in an inert gaseous atmosphere. A select grade of this product contains between 30 and 40% of polymeric sulphur. This level of insoluble sulphur is often insufficient to prevent bloom, and its use is restricted to rubber compounds containing high levels of fillers or rubber compounds using modest amounts of sulphur. Historically, this was the first commercial insoluble sulphur available.
3.2.2. High insoluble content sulphur - In this type of insoluble sulphur, the major constituent is polymeric sulphur. The polymeric sulphur level ranges from 60 to over 95%. The product is made by heating sulphur to temperatures greater than 180C with subsequent rapid quenching. The polymeric sulphur content is increased by extracting rhombic sulphur from the solid with an appropriate solvent.
The amount extracted is determined by the particular insoluble sulphur specification.
3.2.3. Insoluble sulphur also contains added oil and occasionally finely ground minerals. These are added to aid dispersion in rubber and to limit sulphur dusting. However, the additive levels are much higher than those used in rhombic sulphur. Oil treatment may range as high as 35% of the total mineral. Mineral additives may amount to as much as 25% of the final sulphur formulation. The treatment levels are always significant enough to require adjustment in the formulation to provide the necessary sulphur for complete vulcanisation".
9. The manufacturers literature about Crystex, the subject goods has inter-alia following to say - Crytex is a commercially pure (99.5% min.) sulphur which contains 90% min. Insoluble Sulphur. This allotropic form is variously described in the literature as plastic sulphur, elastic sulphur, amorphous sulphur or sulphur 'mu'. Crystex is insoluble in all known solvents and in appearance is a fine, bright yellow powder.
Crystex 90% insoluble sulphur is a true, high polymer of sulphur in the form of long spiral chains containing many thousands of sulphur atoms. The molecular weights are on the order of several hundred thousand. As such, crystex possesses many of the properties expected of plastics and elastomers. Typically, it does not have a definite melting point but softens appreciably at 70C and is a very cis-cous flud at 90C. At the latter temperature, reversion to the soluble rhombic form of sulphur sets in over a period of several hours where upon the melting point characteristics approach those of ordinary sulphur, melting at about 114C".
10. Kirk Othmer Encyclopedia of Chemical Technology on which both the parties place reliance after referring to various Allotropic modifications of sulphur - about insoluble sulphur has following to say - "Insoluble Sulfur - This form of sulfur contains upto 90% of the amorphous allotrope of sulfur and is insoluble in carbon disulfide.
It is used for vulcanization of special rubber products, rubber cements, cutting oils, and high pressure lubricants".
11. The Vulcanization and Vulcanizine agents by W. Hofmann has about insoluble sulphur the following to say - "Another way of preventing sulphur blooming is to use a special modified sulphur known as 'insoluble sulphur'. The insoluble sulphur available on the market contains abbout 65-95% of material which is insoluble in carbon disulphide. Sulphur that is insoluble in carbon disulphide is also insoluble in rubber and therefore has no tendency to bloom.
However, insoluble sulphur is not stable. Instead it changes into the normal soluble form, which is again capable of blooming, doing so very slowly at room temperature, faster when the temperature is raised and within 10-20 minutes at temperature above 110C. Insoluble sulphur therefore, has to be stored at the lowest possible temperature. In the couse of compounding and processing, care should be taken to keep the temperatures low and thus to prevent transformation into the stable, soluble form. If insoluble sulphur is incorporated at an excessively high temperature or the compound is exposed to heat for a fairly long time, even though the temperature may be considerably below the conversion temperature, the use of insoluble sulphur is pointless.
In most cases it is not necessary to replace the entire proportion of sulphur with insoluble sulphur because at room temperature a certain amount of sulphur is soluble in rubber and has no tendency to bloom. In general, therefore, it is sufficient to substitute insoluble sulphur for that amount which is in excess of the proportion that is soluble at room temperature. Often it is sufficient to replace 60-70% of the total sulphur with insoluble sulphur to prevent blooming.
Attempts have been made to stabilize insoluble sulphur against conversion into the stable form e.g. by adding a small amount of chlorine, bromine, iodine, sulphur monochloride, or of a terpene, which have been found to reduce the rate of transformation.
When insoluble sulphur is properly dispersed in the rubber compound its use (instead of normal soluble sulphur) causes practically no change in the course of vulcanization or in the properties of the vulcanizates. However, its insolublility sometimes makes uniform dispersion difficult. Sulphur blooming tenos to occur not only in unvulcanized compounds but also under some conditions in vulcanizates. Blooming may take place in a vulcanizate when more unbound sulphur remains after the vulcanization than was soluble at room temperature. Free sulphur which blooms after the vulcanisation generally indicates faulty formulation (too much sulphur) or under-vulcanization. Provided that the correct proportion of sulphur is used, that the compound is adequately vulcanized, and that organic accelerators are used, there is no danger of sulphur blooming. The use in natural rubber of inorganic accelerators, which were in general use before the discovery of organic accelerators, sometimes necessitated such large proportions of sulphur - in order to bring about vulcanization at all that the blooming of sulphur was an everyday occurrence. Nowadays if blooming is encountered in vulcanizates, it can usually be overcome by postcuring. Naturally the blooming of sulphur from vulcanizates is not influenced by the use of insoluble sulphur unless the vulcanization temperature is considerably below 110C." 12. The respondents Test Report Bulletin for the month of December, 1983 has following to say - "The sample is oil treated insoluble sulphur content of soils 20.1% sulphur balance." 13. The relevant provisions referred to and merits of the appeals may now be discussed. Sulphur finds specific reference in Chapter 25 Mineral products of the First Schedule to Customs Tariff Act hereinafter called 'Customs Tariff and Chapter 28 ibid. According to note 2 (XIII) of Chapter 28, Sulphur, sublimed or precipitated, Colloidal sulphur have to be classified under this chapter. Chapter 38 is concerned with classification of Misc. Chemical products. It has already been said that both the parties agree that insoluble sulphur or MU Sulphur would not merit classification under Chapter 28. Even otherwise, plainly, it is not classifiable under this chapter. The surviving competitive chapters are thus Chapter 25 claimed by the respondents and 38 claimed by Revenue. Heading No. 25.01/32(10) provides for classification of insoluble sulphur under this heading. In fact, sub-heading 11 provides for classification of sulphur of all kinds under this heading. Note 2(a) of Chapter 25 again emphasizes this inclusion of the 3 allotropics of sulphur.
14. Sh. Sunder Rajan's argument relying on chapter note 1 of Chapter 25 is that the chapter is to be taken to apply only to goods which are in the crude stage. According to him, insoluble sulphur treated with oil has been subjected to a process and therefore, would not merit classification under this chapter. Except ASTM referred to above, no other material has been placed by either party as to process of obtaining insoluble sulphur. Before the chapter note is referred to, it would be useful to refer to Materials & Technology Inorganic Chemicals by Longmans De Bussy. We have already said above that parties agree that insoluble sulphur is synonymous to Mu sulphur. The author in Chapter 8 - Sulphur, Selenium, Tellurium and their Compounds, has following to say about Mu Sulphur - "A further allotropic sulphur modification is the 'mu' form, which has become important in the last twenty years. This is prepared by dissolving rhombic sulphur in carbon disulphide. The solution is rapidly chilled so that a polymerized variety of sulphur (with a molecular weight probably of several hundreds of thousands) is precipitated. This modification is insoluble in all solvents. By the application of heat the 'mu' form is converted back to rhombic sulphur. It is used especially in the rubber industry, where ordinary sulphur would begin vulcanisation prematurely, giving rise to 'blooming'." 15. Note 1 of Chapter 25 on which Sh. Sunder Rajan heavily relies is in the following words - "Except where the context otherwise requires, this chapter is to be taken to apply only to goods which are in the crude state, or which have been washed (even with chemical substances eliminating the impurities without changing the structure of the product), crushed, ground, powdered, levigated, sifted, screened, concentrated by flotation, magnetic separation or other mechanical or physical processes (not including crystallisation) but not calcined or subjected to any further process other than a process specially mentioned in respect of the goods described in Note 3." 16. It would be seen that the note opens with the words "Except where the context otherwise requires". It can be safely be presumed that when legislature provided for classification of insoluble sulphur under Heading 25.01/32 of the chapter, they must have been aware of the process by which this sulphur is obtained. Thus even if insoluble sulphur be not in the crude stage, it would not go out of the chapter because in the context of insoluble sulphur even if not in crude state, specific enumeration in the chapter and heading is there.
17. As for the other argument that sulphur has been treated with oil and has thus been subjected to a process not permitted by the note, it is sufficient to say that the note permits a number of treatment like washing even with chemical substances eliminating the impurities without changing the structure of the product crushing, grounding, powdering, levigating, sifting, screening concentration by flotation, magnetic separation or other mechanical or physical processes. It prohibits calcination or subjecting to any further processes other than the process specifically mentioned in respect of goods described in Note 3. Having regard to the processes permitted by the note, it does not appear that process of treatment with oil will take out insoluble sulphur specially enumerated in the chapter from out of it.
18. As for Sh. Sunder Rajan's reliance on processes permitted by Note 3, it is seen that Note 3 and the processes mentioned therein refer to goods other than insoluble sulphur and therefore, Note 3 would have no relevance in the context of insoluble sulphur.
19. One further argument is that according to the report of the Chemical Examiner, oil has a fundamental role to play inasmuch as it leads to proper dispersal of sulphur. Both the parties in this connection, have referred to rules for interpretation of the Schedule to Customs Tariff Act. Rule 3 of the Rules of interpretation to the extent material for the present appeals, is reproduced below - "When for any reason, goods are prima facie, classifiable under two or more Headings, classification shall be effected as follows - (a) The Heading which provides the most specific description shall be preferred to Headings providing a more general description.
(b) Mixtures and composite goods which consist of different material or are made up of different components and which cannot be classified by reference to (a) shall be classified as if they consisted of the material or component which gives the goods their essential character, insofar as this criterion is applicable".
It would be seen that Chapter 38 deals with Misc. Chemical products.
Note 1(a) of this chapter states that the chapter does not cover separate chemically defined chemicals or compounds with the exception of certain materials enumerated therein. Insoluble sulphur would not come under these. Note 2 enumerates certain goods which would be taken to fall within chapter and insoluble sulphur and for that matter sulphur is not enumerated therein. Chapter 38 and Heading 38.01/19 would as compared to Ch. 25, be general and residuary in nature and Chapter 25 Heading 25.01/32(10) would be specific.
20. As for the argument that insoluble sulphur has been treated and is fixed with oil, Rule 2(b) of the Rules of Interpretation of Customs Tariff Schedule inter alia provides that the classification of goods consisting of more than one material or substance, shall be according to the principles contained in Rule 3. Material portion of Rule 3 has been reproduced above. We have already said above how description insoluble sulphur under Chapter 25 Heading 25.01/32.10 is more specific to general or residuary descriptions under Chapter 38. Its classification under Chapter 25 would be in conformity with Rule 3(a).
Further Rule 3(b) is clear as to classification of mixtures and composite goods which consists of different materials or made up of different components and which cannot be classified by Revenue to Sub-rule (a). In such a case, the classification has to be on the basis of material or component which gives the goods their essential character and in the present case, there can be no doubt that essential character to the goods is given by insoluble sulphur.
21. In view of our finding above that applying Rule 3(a) classification under specific Heading 25.01/32.10 - Insoluble sulphur would be more appropriate and preferable to Chapter 38 Misc. Chemical Products, recourse to Rule 3(b) would appear un-necessary. But if for any reason, Sub-rule 3(a) was held to be not applicable, then Sub-rule 3(b) would be attracted. Applying this sub-rule, there can be no doubt that oil treated insoluble sulphur, a mixture of oil and insoluble sulphur - essential character of vulcanization in rubber is given by insoluble sulphur, oil merely acts, even according to the Chemical Examiner, in dispersal of the sulphur-and on this reasoning also, Heading 25.01/32.10 would be more appropriate classification for insoluble sulphur or Mu-Sulphur.