1987 (1) TMI 84 - HC - Customs

Court classifies Hypalon-40 as Synthetic Rubber under Customs Tariff Act 1975. Writ petitions allowed for duty refund.

The Court classified Hypalon-40 as Synthetic Rubber under the Customs Tariff Act, 1975, based on a scientific report from IIT Kharagpur. Writ petitions ... Rubber and articles thereof Issues Involved:1. Classification of Hypalon-40 under the Customs Tariff Act, 1975.2. Whether Hypalon-40 is Synthetic Rubber or Synthetic Resin.3. Validity of testing procedures and reports.4. Exhaustion of alternative remedies before filing writ petitions.5. Maintainability of writ petitions without demand justice notice.Detailed Analysis:1. Classification of Hypalon-40 under the Customs Tariff Act, 1975:The primary issue addressed by the Court was the proper classification of Hypalon-40 for the purpose of customs duty assessment. The petitioners argued that Hypalon-40 should be classified as Synthetic Rubber under Item No. 40.01/04 of the Customs Tariff Act, 1975, while the respondents contended it should be classified as Synthetic Resin under Chapter 39 of the same Act.2. Whether Hypalon-40 is Synthetic Rubber or Synthetic Resin:The petitioners, National Insulated Cable Company of India Limited, claimed that Hypalon-40, a chemical compound used in manufacturing electric cables, is known globally as Synthetic Rubber. The Customs authorities, however, classified it as Synthetic Resin, demanding higher customs duty. The Court examined the testing reports from both the Customs authorities and the Indian Institute of Technology (IIT) Kharagpur. The Customs report concluded Hypalon-40 is Synthetic Resin based on its composition and characteristics, while the IIT report indicated that Hypalon-40 exhibited several key properties of Synthetic Rubber, such as being vulcanizable by sulfur and transforming into a non-thermoplastic substance.3. Validity of Testing Procedures and Reports:The Customs authorities tested Hypalon-40 to determine whether it met the definition of Synthetic Rubber and concluded it did not. However, the Court noted that the Customs report did not specifically test whether Hypalon-40 was Synthetic Resin. In contrast, the IIT report, which was more detailed and scientific, found that Hypalon-40 exhibited properties akin to Synthetic Rubber, despite not being an unsaturated substance as per Note 4 to Chapter 40 of the Tariff Act. The Court found the IIT report more reliable and scientific, leading to the conclusion that Hypalon-40 is more akin to Synthetic Rubber.4. Exhaustion of Alternative Remedies Before Filing Writ Petitions:The respondents argued that the petitioners had not exhausted alternative remedies provided under the Customs Act, 1962, such as appeals before the Collector of Customs and the Appellate Tribunal. The Court rejected this contention, citing the Supreme Court decision in Hriday Narain v. Income-tax Officer, which held that once a High Court entertains a writ petition and hears it on merits, it cannot be rejected on the ground of non-exhaustion of statutory remedies.5. Maintainability of Writ Petitions Without Demand Justice Notice:The respondents also contended that the writ petitions were not maintainable as no demand justice notice was given before filing. The Court dismissed this argument, noting that the Customs authorities were rigid in their stance from the beginning, and a formal demand justice notice would not have served any reasonable purpose.Conclusion:The Court concluded that Hypalon-40 should be classified as Synthetic Rubber under Item No. 40.01/04 of the Customs Tariff Act, 1975, based on the more reliable and scientific testing report from IIT Kharagpur. The writ petitions were allowed, and the Customs authorities were directed to assess Hypalon-40 as Synthetic Rubber. Any excess duty charged was ordered to be refunded, and any security furnished was to be discharged. The Court also noted that the views of the Appellate Tribunals and previous unreported decisions were not binding in this case, as the Court's decision was based on a different factual footing. The verbal prayer for a stay of the order was rejected, and there was no order for costs.