Classification of PET flakes from used bottles: mechanical crushing does not make them primary forms or exempt plastic material.

PET flakes obtained by mechanically crushing and washing used PET bottles are not classifiable as primary forms under Heading 3907, because Chapter Note 3 confines headings 3901 to 3911 to goods produced by chemical synthesis and the material here was not obtained through polymerisation or other chemical synthesis. Although Chapter Note 6 recognises flakes as primary forms, that note does not override the chemical-synthesis requirement. The flakes therefore remain outside the scope of the exemption in Sl. No. 78 of Notification No. 4/2006-CE, which applies only to plastic materials reprocessed in India out of scrap or waste and falling within Chapters 3901 to 3914. They are not treated as exempt primary grade plastic material merely because they are used for further processing.

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Issues: Whether PET flakes obtained by crushing and washing used PET bottles are classifiable as primary forms under Heading 3907 so as to qualify for exemption under Sl. No. 78 of Notification No. 4/2006-CE, or are classifiable as waste, parings and scrap under Heading 3915.

Analysis: Sl. No. 78 of Notification No. 4/2006-CE grants exemption only to plastic materials reprocessed in India out of scrap or waste, and only where the resultant goods fall within Chapters 3901 to 3914. Chapter Note 6 to Chapter 39 explains that primary forms include flakes, but Chapter Note 3 limits headings 3901 to 3911 to goods of a kind produced by chemical synthesis. The materials in question were produced only by mechanical crushing and washing of used PET bottles, without any chemical synthesis or polymerisation. The fact that the flakes are later used by another manufacturer for further processing does not convert them into primary grade plastic material for classification under Heading 3907. Chapter Note 7 does not assist the assessee because Heading 3915 excludes waste, parings and scrap only when they have been transformed into primary forms under headings 3901 to 3914.

Conclusion: PET flakes of this kind are not classifiable under Heading 3907 and do not qualify for the exemption under Sl. No. 78 of Notification No. 4/2006-CE.

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