Full Judgment
2. E/A 265/85-C : This appeal relates to the classification and rate of duty applicable to 3-ply laminated film, 5-ply laminated film, 7-ply laminated film and plastic collapsible multi-laminated tubes obtained from 7-ply laminated film. The facts of the case are that the appellants filed classification list 22/84 w.e.f. 2-8-1984 for the classification of the above mentioned products. A show cause notice was served upon them, (1) alleging that 7-ply laminated film and collapsible tubes being composite articles are not eligible for exemption under Notification 182/82, CE dated 11-5-1982.
(2) seeking to classify 5-ply laminated films under T.I. 27 (7). No question was raised regarding classification of 3-ply laminates. The appellants replied that 5-ply and 7-ply laminated films are known as such in the trade and never known as aluminium foil and hence they cannot be classified under T.I. 27 (7), that aluminium foil is covered on both sides with plastic material and hence it cannot be held that aluminium foil has been backed by either paper or any other reinforcing material, and that all the items are eligible for the benefit of Notn.
182/82 CE dated 11-5-1982 as they are all known as plastic articles.
(3) After adjudication the Asst. Collector passed an order in May 1985 classifying (a) 3-ply and 7-ply laminated film and plastic collapsible tubes under T.I. 68 but denying the benefit of Notn. 182/82 C.E., dated 11-5-1982 on the ground that these items are not solely made out of material falling under T.L 15A (i); (b) in respect of 5-ply laminate he held that it is an intermediate product in continuous process without removal and is not liable to duty under T.I. 27 (7). He however, held that, if at any stage it is found to be removed from the machine, it will attract duty under T.I. 27 (7); (c) as regards 3-ply laminate, he also held that if the product is used internally for manufacture of collapsible tubes, it will be exempted under Notn. 118/75.
(4) In appeal, the Collector classified collapsible tubes under T.I. 68 denying the benefit of Notn. 182/82 on the ground that they were composite articles. He classified 3-ply and 7-ply laminates under T.I.68 and upheld the claim for eligibility to benefit of Notn. 118/75 as they are used in the factory of production.
(5) E/A 239/88-C - The classification of 7-ply laminated sheets is in dispute in this appeal.
The appellants filed classification list 22/84 for classification of the following products :- (2) Plastic shoulders for plastic 7-ply multilayer collapsible tubes.
They also claimed benefit under Notn. 118/75 dated 30-4-1975 (captive consumption) and Notn. 182/82 dated 11-5-1982 (articles of plastic).
(6) In respect of items 1 and 2, provisional approval was granted and item 3 was classified under T.I. 68 but benefit of Notn. 182/82 was denied. Upon representations by the appellants, the Asst. Collector provisionally approved the classification of item 3 under T.I. 68 permitting clearance under nil rate of duty.
(7) A show cause notice was issued on 1-2-1985 for proposed classification of (1) 3 ply laminate emerging as extrudate LDPE intermediate product and becoming 5-ply laminate under T.I. 27 (7) as aluminium foil.
(2) 7-ply plastic laminated collapsible tubes under T.I. 68 and disentitling them from the benefit of Notn. 182/82 as tubes contained aluminium, paper etc. A corrigendum was issued for proposed classification of 3-ply laminate under T.I. 68.
(1) 3-ply laminate under T.I. 68 and eligible to benefit of Notn.
118/75 if used captively.
(2) 5-ply laminate backed with aluminium under T.I. 27 (7) if removed outside the factory.
(3) 7-ply laminates as composite articles under T.I. 68 but disallowing benefit of Notn. 182/82 (5) Shoulders of duty paid plastics under T.I. 68 and covered by Notn. 182/82.
(9) Against this order, the assessees filed an appeal before the CCE in July 1985. The Collector, by order dated 29-10-1985, rejected the appeal and against this order, E/A No. 265/86-C has been filed.
(10) In the meanwhile, a fresh show cause notice was issued in June 1985 for proposed classification of 7-ply laminated sheets under T.I.27(7) instead of T.I. 68 and the classification was done accordingly by the Asst. Collector which was upheld by the Collector in October 1987.
Aggrieved by the classification of 7-ply laminates under T.I. 27(7), E/A 239/88 has been filed.
(11) E/2215/89-C - This appeal has been preferred against the order dated 8-6-1989 upholding the order of the lower authority confirming demand of duty pursuant to the order of the Asst. Collector of classification of 7-ply laminates under T.I. 27(7).
(12) The entire dispute in all 3 appeals relates to the period from August 1984 to January 1986.
(13) We have heard Shri J.S. Agarwal learned counsel for the appellants and Shri M.S. Arora for the respondents.
(14) Learned counsel takes us through the process of manufacture of the products: (i) The 3-ply laminated film consists of two layers of plastic and one layer of paper. (ii) The 5-ply laminated film consists of the following layers:- 2. The appellants make plastic multi-laminated collapsible tubes out of laminate of a number of plastic films layers, paper and aluminium foils and the body is moulded on a plastic mould. The process of manufacture of the said tubes, is as under :- 1. At the first stage, various layers of plastic and plastic films, paper and aluminium foil are laminated by a machine called 'Extruder Laminator'. The extruder laminator has two extruders. Different types of plastic granules like polyethylene or co-polymer are fed to the extruders. These granules are heated upto melting temperatures. The molten plastic is then forced through a narrow slit of the extruder giving a thin plastic film. This extruded film can be extruded between two different layers like paper, aluminium foil or polyethylene film etc. and pressed with rollers to give a laminate of various layers. The extruded film being hot ensures good bonding between the layers. The extruded layer is called as 'extrudate'. For the multi-laminated collapsible tubes, a 7-layer laminate is used having the following composition :- This 7-layer laminate is produced in 2 stages. In the first stage only three layer laminate is produced consisting of first three layers shown above namely white polyethylene film, LDPE extrudate and paper. Paper roll is mounted on the machine at one end. A roll of white polyethylene film is mounted at an intermediate stage on the machine. Between the paper and white polyethylene film a layer of Low Density Polyethylene (LDPE) is extruded. The three layers are pressed together with rollers to form a 3-layer laminate. These 3-layer laminate rolls are taken out from the machine in the first stage. In the second stage, remaining layers are added to the 3 layer laminate as obtained above. The 3-layer laminate obtained from Ist stage of manufacture is mounted at one end.
This goes to extruder No. 4 where aluminium foil is laminated to it with a co-polymer extruded film from the extruder. This 5-layered film then goes upto extruder No. 2 in a continuous process where a LDPE film is bonded to the "nil" side of laminate with an extruded film of co-polymer in between. Thus aluminium foil gets sandwiched between different layers of plastics and paper on both sides in a continuous process.
SLITTING : The 7-ply laminates as produced above are in rolls of large widths of around 800 mm. These rolls are slit on "SLITTING MACHINES" into rolls of smaller widths to suit various sizes of tubes.
PRINTING : The slit rolls are printed on a 'Printing Machine' as per designs of various tubes.
TUBE MAKING: The printed laminated rolls are loaded on the 'Fully Automatic' Tube Making Machines. The laminate is first cut to required size. The piece is rolled and sealed at the side to form the body of the tube. The tube body is then moulded on to High Density Polyethylene and shoulder with neck. The High Density Polyethylene and moulding to the required shape in the machine. The body is also simultaneously moulded to it. The tube so formed is fitted with plastic caps automatically on the machine. The complete tubes with caps coming out of the machine are then packed and sent to finished goods godown.
The tubes with caps manufactured as above have raw material composition as follows: 15. He says that the final product is toothpaste tube containing aluminium foil in between the upper and lower layers of plastics and that plastic is predominant in the final product - 76%.
16. He emphasises that the order of the Collector dated May 1985 classifying 3-ply, 5-ply and 7-ply laminates and collapsible tubes under T.I. 68 and extending the benefit of Notification 118/75-CE has not been appealed against by the Department and has therefore become final and binding. He submits that the 3-ply, 5-ply and 7-ply laminates are not ordinarily bought and sold in the market and therefore do not satisfy the test of marketability and consequently, excisability. He cited the decisions of the Supreme Court reported in 1986 (24) ELT 169 (Union Carbide v. UOI) and 1989 (40) ELT 280 (Bhor Industries Ltd. v.CCE) in support of the proposition that marketability is the essential ingredient of excisability. Mr. Agarwal relies upon the decision in the case of 1989 (43) ELT 293 (India Foils Ltd. v. CCE). According to that decision of the Tribunal, aluminium foils backed with reinforcing materials were held to be liable to excise duty at the point of clearance. He argues that even if it is held that 7-ply laminate is aluminium foil falling under T.I. 27 (7), the appellants have purchased duty paid aluminium foil and therefore cannot be charged to duty once again. He cites the decision in Swastik Packaging v. CCE Bombay (1986 (23) ELT 217) relating to double taxation on aluminium foils.
17. According to Mr. Agarwal the benefit of Notification 182/82 has wrongly been denied to goods falling under T.I. 68 relying upon the Geep Flashlight Industries case -1985 (22) ELT 3 because the issue of granting benefit to T.I. 68 goods under that notification was not an issue before the Supreme Court in that case as T.I. 68 was introduced in the CE Tariff only in 1975 while the Geep Flashlight case pertained to the year 1972.
18. The alternate argument, of the counsel is that if the appellants products' are held to fall outside the purview of T.I. 68, then they would fall under T.I. 15 and they would be entitled to benefit of exemption under Notification 149/82, dated 22-4-1982.
19. He contends that the goods are not aluminium foil for the reasons that (a) they are of less than recognised thickness (b) they are sandwiched between paper and plastic, not backed.
20. In reply, the learned DR relies upon the Geep Flashlight case wherein it was held that articles of plastics must be made wholly of commodities commercially known as plastics. Regarding thickness of products to satisfy the requirement of T.I. 27 (7), he would argue that backing thickness cannot be included as backing is separate. He cites the decision in the case of Uma Laminates (1984 (17) ELT 187). He submits that backing means re-inforcing as the purpose of backing is to give strength and re-inforcement and that there is no difference between backing and sandwiching and the products are backed, and merit classification under T.I. 27 (7).
21. We have heard both the sides and have gone through the facts and circumstances of the case. The issue to be decided is classification of 3-ply laminated film, 5-ply laminated film and 7-ply laminated film and multi-laminated collapsible tubes obtained from 7-ply laminated film.
The order-in-original is dated 7-10-1985. This refers to show cause notice dated 1-2-1985 which was adjudicated by order-in-original dated 6-5-1985 classifying 7-ply laminated sheets under Item No. 68 CET. The order-in-original speaks of an error in deciding the classification since the correct classification of the goods, in the opinion of the Assistant Collector, should be under Item No. 27(7) and not 68.
Consequently, another show cause notice dated 4-6-1985 is issued, which is adjudicated by the order-in-original dated 7-10-1985 confirming classification under Item No. 27 (7) CET.23. There does not seem to be any of the circumstances which would justify the Assistant Collector's reclassification that has been brought on record or any change in the law had taken place. It is a case apparently of mere change of opinion on the part of the Assistant Collector. Incidentally, it is the same Assistant Collector who revised the classification.
24. The order-in-original dated 6-5-1985 is the one relating to appeal No. 265/85. The corresponding order-in-appeal is dated 29-10-1985 which confirms classification under Item No. 68 with benefit of Notification No. 118/75 but not of 182/82.
25. This reclassification and readjudication does not appear to be justified. In Medimpex India, Delhi v. CC Madras - 1987 (11) ECR 802 decided by the Tribunal, a proper officer had passed orders of clearance of goods in exercise of his powers under Section 47 of the Customs Act. Later on, the Additional Collector, after issue of a show cause notice and due process, passed order imposing a penalty under Section 112. The Tribunal held, following the judgment of the Delhi High Court in Jain Shudh Vanaspati and Anr. v. Union of India and Ors.
- 1982 ELT 43 (Del.) , the judgment of the Punjab and Haryana High Court in Oswal Woollen Mills Ltd. and Anr. v. Union of India and Ors.
-1984 (18) ELT 694 (Tri.) and in Industrial Cables India Ltd. and Anr.
v. Union of India - 1986 (25) ELT 33 (P & H) and an unreported judgment of the Madras High Court in Writ Petition Nos. 5296, 5297, 5653 and 5654 of 79 held that there cannot be two adjudication orders on the same issue at two different times by two different authorities under the same Act. The only difference between this case and the present case is that the Assistant Collector who adjudicated the matter in the first instance and later sought to "correct" what he felt was an "error" in the said order of adjudication by a second show cause notice followed by another order of adjudication on that notice was the same.
This difference, if anything, makes the situation worse from the point of view of the respondent. The proper remedy against the first order of adjudication, if the Revenue felt that it was not correct was to file an appeal to the proper authority. We are clear in our mind that the Assistant Collector could not have assumed powers of readjudication and proceeded to readjudicate the matter even though he may have followed the procedure of issue of show cause notice etc.
26. In the aforesaid circumstances the order-in-original dated 7-10-1985 and the relative order-in-appeal dated 27-10-1987 are not sustainable.
27. The order-in-original dated 17-10-1988 is a follow up of the order-in-original dated 7-10-1985 and consequent demand notices. The relative order-in-appeal is dated 8-6-1989. If the order-in-original of 7-10-1985 is not sustainable it would follow that the order-in-original dated 17-10-1988 and the relative order-in-appeal dated 8-6-1989 also are not sustainable.
28. There seems to be no departmental appeal on the classification except of course the fact that the same Assistant Collector has reopened the classification of 7-ply laminated sheets and changed the classification from Item 68 to Item 27(7). The prayer is for classification under Item No. 68 and the benefit of Notification No.182/82. The order-in-original and the order-in-appeal relative to this appeal proceed on the basis of the classification under Item No. 68.
Therefore it may not be necessary for the Bench to consider the correctness of this classification. It would suffice to say that there is no appeal against the classification under Item No. 68.
29. Regarding Notification No. 182/82, the explanation defining "articles of plastics" as in Item No. 15A(2) CET is there in this notification also. Applying the Supreme Court's decision in the Geep Flashlight case the subject goods do not qualify to be articles of plastic. Therefore, this notification would not apply.
30. The benefit of Notification No. 118/75 already stands extended and this is correct.
31. In the result the products fall for classification under T.I.68 of the erstwhile Central Excise Tariff, and are eligible for the benefit of exemption under Notification 118/75. However the benefit of Notification 182/82 is not available to the products.