TaxTMI 
TaxTMI 
1996 (8) TMI 360
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....the Act, 1962 for misdeclaration of the description. However, he has not imposed any redemption fine but has imposed a penalty of Rs. 2,00,00,000/- (Rupees Two Crores only) under Section 112(a) of the Act and while imposing this penalty the learned Collector has taken into account the fact that the goods which are liable for confiscation are not physically available. He has imposed personal penalty under Section 112(a) of the Act on the following persons: Names Amount of Penalty (i) Shri J.S. Chowdhari (Import Executive) Rs. 5,00,000/- (Rupees Five Lakhs only) (ii) Shri S.M. Jayawant (Import Assistant) Rs. 4,00,000/- (Rupees Four Lakhs only) (iii) Shri P.S. Ramachandran (Manager R & D) Rs. 2,00,000/- (Rupees Two Lakhs only) (iv) Dr. R.K. Sharma (Lab. Incharge) Rs. 1,00,000/- (Rupees One Lakh only) He has not imposed any penalty on the indentor M/s. Chemrub and S/Shri S.L. Tibrewala, D.R. Bansal, R.K. Mirani and S.K. Sureka. 3. (i) These orders have arisen out of adjudication of four show cause notices issued to the importers under the proviso to Section 28(1) read with Section 124 of the Customs ....
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....ch was being regularly assessed to customs duty under CTH 39.01 at the rate of 100% Basic and 40% Additional Duty. On the basis of the information, the Customs authorities sent a representative sample of TS-430 material out of a consignment of the importer which was sought to be cleared by them under IGM/Item No. 812/31 (B/E Thoka No. 10151 dt. 26-4-1994). In the mean time, the importer through their Customs House Agents, submitted a single page copy of purported technical brochure that TS-430 grade was Polychlorobutadiene Rubber. To further substantiate their case the importer also submitted a test report prepared by their own Research & Control Lab. at Satna claiming that TS-430 material satisfied the expression Synthetic Rubber as per Note 4 (a) of Chapter 40 and they reiterated that TS-430 material was unsaturated Synthetic Rubber. On the basis of such claims by the importers, 60% of the goods were released pending further enquiry and report of Dy. Chief Chemist on the sample forwarded to them. On being tested vide its order No. 216/2-7-1992, the Dy. Chief Chemist gave an opinion on the nature of TS-430 material as under: - "The sample forwarded along with the file has been ....
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....g/suppressing the relevant documents in respect of TS-430 before the Customs authorities with a motive to evade the Customs duty over the last eight years inasmuch as "Hypalon" had been charged to an aggregate duty of 200% Adv. as against about 100% Adv. levied on TS-430. These inter alia included: (a) A common folio under the nomenclature CSP maintained in the raw material. (b) The trend of import of Hypalon showed decreasing quantities from 27 MTs in 1984-85 to nil in 1990-91 and 1991-92 whereas import of TS-430 showed a rising trend from one MT in 1984-85 to 65 MTs. in 1990-91. Again in 1992-93 (till November, 1992) Hypalon imported was 30 MTs. as against TS-430 nil quantity which was attributed in the Show Cause Notice to high profitability in TS-430 import owing to duty evasion. (v) The Department also relied on two reference books in Annexure H to the show cause notice to bring out the difference between Polychlorobutadiene and CSP and to prove that CSP was fully saturated polymer not covered under Chapter 40 of the Customs Tariff. 4. (i) The appellants have taken their stand against the Department's allega....
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....d the Bill of Lading, Bill of Entry dt. 23-11-1984 before the Customs department, Bombay. (ii) In the Bill of Entry dt. 23-11-1984, the Department had made the following endorsement on the Bill of Entry : "TR No. 1655A Lab No. 10070 M/s. Sohwa Trading Co. Ltd., Japan Des. Synthetic Rubber TS 430 Sample is Synthetic Rubber (Polychlorobutadiene Type) In the form of coloured soft lumps. It is free from added ingredient." Although the importer had described the said goods as "Synthetic Rubber TS 430", the Department by way of the said endorsement in the said Bill of Entry described the said goods as "Synthetic Rubber (Polychlorobutadiene Type)". The importer has taken a stand that they never described the said goods as "Synthetic Rubber (Polychlorobutadiene Type)". The Department in all the imports made by the importer from time to time from 1984 classified the said goods as "Synthetic Rubber (Polychlorobutadiene Type)" under heading 40.02 of the Tariff. The appellant had taken the stand up to January, 1986, that they described the goods as Synthetic Rubber TS 430 only, imported by them in their Bill of Entries. On the other hand in all the said Bill of Ent....
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....suppliers in their respective invoices, Test and Analytical Certificates and Bills of Lading. They also submitted that in view of the relevant rules and practices followed by the Customs Department, they had no choice in the matter but to adopt the description appearing in the relevant invoices, bills of lading and Test and Analytical Certificates. In the circumstances, they stated that in respect of all imports made from and after September, 1986 right up to 1991, the said goods were described as "Synthetic Rubber Grade TS 430 (Polychlorobutadiene Type)" in the bills of entry filed by them. They also submitted that the Bill of Entry filed by them on 1-12-1989 the Department made the following endorsement :- "T.No. 1444 dated 8-1-1988 Synthetic Rubber Grade TS 430 As seen from the literature submitted by the party, this is claimed to be Synthetic Rubber of Polychlorobutadiene Type. This is confirmed by the Test obtained here. Party' s claim may therefore be accepted. It is free from added ingredient." (iii) On the basis of the said endorsement, the said goods were classified by the Department under heading 40.02 of the Tariff and assessed on 5-12-1989 and the same wer....
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.... irreversibly transferred by vulcanisation with sulphur into non-thermoplastic substance, which at a temperature between 18°C and 29°C will not break on being extended to three times their original length and will return, after being extended to twice their original length within a period of five minutes to a length not greater than one and half times their original length. In the premises, the said goods must be regarded as "Unsaturated Synthetic Substance" within the meaning of the said Note 4(a) of Chapter 40". They also submitted the report dt. 23-4-1993 of the Indian Institute of Technology, Powai, Bombay; Report dt. 21-1-1992 of the University of Calcutta, and Test Report dt. 14-2-1992 of Professor Abhijit Banerjee of the Calcutta University, all of which stated that the goods are of unsaturated substance, and as such, clearly fall within the said Note 4(a) of Chapter 40. They also submitted the affidavit of several experts namely : (i) Dr. A.S. Bhattacharya (ii) Dr. Varinder Kumar Tikku (iii) Shri Damodar Hari Pal (iv) Shri P.K. Sen Gupta All the said affidavits o....
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....n and has totally rejected the entire evidence placed by the appellants as well as the results of the Test Reports, which had been obtained by the Department from 1984 onwards, in respect of consignment imported by the importer from time to time. The ld. Collector has held that the goods are classifiable only under Chapter 39 and not under Chapter 40, as the latest test results dt. 8-7-1991 obtained by the Department had indicated that the item is Chloro- sulphonated Polyethylene Polymer, a modified Polyethylene Polymer and that it is saturated polymer and not Synthetic Rubber. The ld. Collector has drawn his own conclusion and has challenged the experts evidence and test results of the appellants by reading page 484 of Encyclopaedia of Chemical Technology by Kark-Othmer, wherein it is stated that the Polyethylene is essentially Synthetic Polymer. He has come to the conclusion that the item is made from base material Polyethylene chemical synthetic Rubber and the product of this polymerisation reaction is chemically modified form of original Polyethylene. In this regard the ld. Collector has also noted the definition of Polyethylene from Hawley's Concise Chemical Dictionary and als....
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.... nature of the sample and quantum of the unsaturation cannot be determined by such spectroscopy method alone nor have such authorities attempted to do so. He has held that the Scientific test and analysis is supposed to be carried out by taking appropriate precautions, ruling out confusing/ambiguous/false data/signals and applying appropriate controls to rule out false signals. He has held that the none of the learned professors chose to determine, spectroscopically or otherwise the chemical nature, its composition and purity before subjecting the same to spectroscopy or bromination test. He has held that the previous objective was always restricted to determine saturation/unsaturation, if any, in the sample and never to determine the actual chemical composition of the sample. He has held that the procedure applied and the inferences given therein, therefore, cast serious doubts about their acceptability as the last word in the present circumstances. He has also held that on comparison of the three reports, it can be seen that NMR report indicates two signals indicating a double bond, whereas FTIR report indicates 1 signal indicating a double bond terminal vinyl type and IR report ....
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.... in the molecule. He has held that in the absence of reliability of the test report submitted by the importers, the only alternative is to rely upon authentic literature of the manufacturer which leads to believe that TOSO-CSM is fully saturated Chlorosulphonated Polyethylene. He has rejected the various arguments raised by the importer with regard to two or more Chapters being applicable then most appropriate chapter is only Chapter 40. The ld. Collector has also rejected the appellant's plea that the case is fully covered by the Calcutta High Court's judgment in the case of National Insulated Cable Company as reported in 1987 (28) E.L.T. 248, which has considered the three previous judgments of the Tribunal and held that the product Hypalon-40 is classifiable under Chapter 40, on the ground that the goods before him for adjudication are TOSO-CSM TS-430 & with an allegation of wilful mis-statement and suppression of facts. He has held that he can take a different view from the view expressed by the Calcutta High Court. He has also rejected the arguments that there are no mala fides and there was no mis-declaration. The ld. Collector has held that the importers had knowledge of the....
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....'Chlorosulphonated Polyethylene Plastomer', which were to be classified under Chapter 39, as they were plastics and not Synthetic Rubber. On the basis of some investigations carried out and the test results obtained in the other imports of the other case, (namely, the importers of M/s. Universal Cable Ltd.), the department issued a show cause notice dt. 12-4-1993 to appellants. It is alleged in the show cause notice that none of the Bill of Entries filed by the department, they had declared the chemical composition of the Synthetic Rubber and they had described the goods as "Synthetic Rubber TS-430 and TS-530" only. It is stated that such Bills of entries were apparently cleared/assessed by the customs Department on the basis of a Test Report pertaining to a certain previous consignments imported by a certain other party. These test reports appear to be erroneous in as much as these reports indicated that the TS-430 and TS-530 materials were Polychlorobutadiene Type Synthetic Rubber. It is alleged that the Assistant Collector of Customs vide a communication F.No. S/26-497/91 2B, sought an advice from the Dy. Chief Chemist of the New Customs House as to whether the sample of TS-430 ....
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....00-91 of a catalogue seized from the premises on 10-1-1992 under a panchnama it was observed that the importers were well aware that TOSO-CSM material of M/s. Toyo Soda Manufacturing Co. Ltd., was Chlorosulphonated Polyethylene, product chemical name was 'Hypalon'. (emphasis supplied). It is alleged that in spite of such complete knowledge about the chemical nature of TS-grade material, the said importer had deliberately suppressed by not declaring the actual chemical nomenclature of the TS-grade material and took undue benefit of the lower rate of Customs duty on the basis of an incorrect previous test reports, which the importer had reason to believe that the same was incorrect. 8. The appellant filed their reply denying all the allegations and reiterating that they were importing TS-430, TS-530 from 1988. They denied having been in possession of any literature and having suppressed any facts. They have stated that the products are synthetic rubber as has been found on test by the department and its classification has to be under Chapter 40, they have relied on test report dt. 17-5-1989 which states that the goods are synthetic rubber. They have also submitted that by tec....
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....e said goods are akin to synthetic rubber, having all characteristics and uses of synthetic rubber. They submitted that even for ITC purposes, the goods are treated and classified as Synthetic Rubber. They pointed out to the Notification No. 345/86-Cus., dt. 16-6-1986 where the goods including Chlorosulphonated Polyethylene (CSP) falling under Chapter 39 or 40 of CTA are eligible for benefit thereof. They submitted that the said notification issued under Section 25 of the said Act reflects Government's understanding. They submitted that even according to the Government, CSP can fall only as Synthetic Rubber and thus the goods are classifiable under Chapter 40. They have submitted that 'Hypalon' has been held to be classifiable under Chapter 40. Therefore, the goods have to be classified under Chapter 40 only. They also submitted that the demands are all time-barred as they have not suppressed any fact. In all Bills of Entry they have only described the goods as 'Synthetic rubber TS 430'. Therefore, the Department having earlier obtained test results and confirmed the goods as synthetic rubber cannot change its opinion by alleging that they had been suppressing facts and that the go....
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.... the Collector had proceeded on the ground that the goods were saturated polymer and as per Note 4(a) of Chapter 40 the goods would not be covered under synthetic rubber. He submitted that the department had proceeded on these lines in the show cause notice, but had proceeded on the footing that the goods were akin to 'Hypalon' and as Hypalon had been classified under Chapter 39, the impugned goods also were required to be cleared as Plastics under chapter 39. He submitted that the controversy had been settled by the Division Bench ruling of the Calcutta High Court rendered in the case of Collector of Customs, Calcutta and Others v. National Insulated Cable Co. Ltd. and Another as reported in 1994 (46) ECC 101. The Hon'ble Calcutta High Court had dealt at great length on the technical aspects of the matter and had accepted the test reports from the I.I.T. Kharagpur, which had confirmed Hypalon-40 as a synthetic rubber. He also submitted that merely because the chemical report stated that the goods to be saturated that by itself is not sufficient for classifying it under Chapter 40, as the Calcutta High Court had rejected this plea on the enormous evidence placed by the importer for....
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.... plastics. He submitted that there is no misdeclaration or suppression in their case and, therefore, the order is required to be set aside. (iv) The ld. advocate Khaitan relied on the evidence, literature and on the Division Bench's judgment of the Calcutta High Court which had confirmed the goods 'Hypalon' as synthetic rubber. He submitted that the department had proceeded on the basis that the goods were similar to 'Hypalon' and as Hypalon is classifiable under Chapter 39, the imported goods were also required to be classifiable likewise. He submitted that the party had been importing the goods from 1984 and it is only the department after carrying out the test had confirmed the goods as synthetic rubber and it is the Department who had described the same as "Polychlorobutadiene Type". He submitted that the appellant had accepted the test results of the Department time and again and that they had continued to describe the goods likewise. The manufacturer had also accepted the said description and had continued to describe the same in their documents. Therefore, when the ld. Collector found the earlier test report to be wrong, then it is the department, which is to be blam....
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....Although there was no serious challenge from the department with regard to the criterion which has to be fulfilled under Note 4(a) of Chapter 40, but the ld. Collector only proceeded on the basis that the goods were saturated synthetic substance. Therefore, saturated synthetic substance cannot come within the expression 'Synthetic Rubber' as defined under Note 4(a) of Chapter 40. He submitted that the basis for the Collector to proceed was also from the reading of the text books. The experts had not obtained their test results properly and not stated categorically as to whether the goods were unsaturated or saturated synthetic substance and, therefore, the experts evidence losses its evidential value. Even if the goods were marketed as synthetic rubber yet as they were 'saturated synthetic substance', their inclusion under Chapter 40 would not be in terms of chapter notes. He agreed that the synthetic rubber is made of polymer and composed of polyethylene as in the case of plastics. The ld. Collector's ground for excluding it from the Chapter 40 was on the basis of the admission that the goods were saturated synthetic rubber substance. He submitted that the collector did not have t....
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....imenaph Chemicals v. Union of India [1993 (68) E.L.T. 77]. (ii) Jaishri Engineering Co. (P) Ltd. v. Collector of Central Excise [1989 (40) E.L.T. 214 (S.C.)] (iii) Lucas TVS Ltd. v. Collector of Central Excise, 1989 (41) E.L.T. 267. These judgments were relied in support of the ground for invoking larger period under Section 28 of the Customs Act. 11. Countering the arguments of the ld. SDR, ld. advocates pointed out that the literature relied by the ld. Collector to hold that the goods had no 'double bond' is on the basis of his reading of the literature on TS-530 and not on TS-430. Imports pertains to TS-430 only and hence the reliance on the said literature is totally misconceived. The ld. Advocate also submitted that there is no occasion to protest with regard to the test results obtained by the department, as the test results pertained to separate proceedings, and even in those proceedings protest has been lodged. In these circumstances, there was no test results to be relied and, therefore, the department had proceeded on a totally erroneous consideration. However, the importer had obtained all the expert's evidence t....
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.... on the basis that the imported goods were 'Chlorosulphonated Polyethylene (CSP)" and that they were similar to 'Hypalon' which had been classified under Chapter 39 and, therefore, the goods not being synthetic rubber (Polychlorobutadiene Type) were saturated synthetic substance, hence they cannot be classified under Chapter 40. The ld. Collector has clearly accepted the fact that all the test results during the 1984-89 certified the product to be synthetic rubber classifiable under Chapter 40 of the Customs Tariff Act. However, he has proceeded solely on the basis of subsequent report of Dy. Chief Chemist which has already been extracted above. Thus, the report dt. 2-7-1992 of Dy. Chief Chemist states that the goods were not Polychlorobutadiene Synthetic Rubber, but it was Chlorosulphonated Polyethylene Polymer, a modified Polyethylene Polymer. It also stated that it is a saturated polymer and not a synthetic rubber. The ld. Collector had also relied on one pamphlet of the supplier which had been seized from the premises of the partner of M/s. Skytone Electrical (India), which had stated that 'TOSO-CSP' contains "no double bond in the molecule". The literature had also described t....
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....d not be sufficient in themselves to determine the unsaturation reliably. He has also held that the doubt arises about the genuineness of the samples forwarded to the three different authorities. He has also stated that the test in the books, by no means prove that there is no Polyethylene without a double bond even by way of deviation. He has held that even if it is presumed that there is no polyethylene without unsaturation, the importers have not submitted any published work to prove unsaturation in the Chlorosulphonated Polyethylene. With all due respect to ld. Collector we have to hold that this type of approach adopted by the ld. Collector, with utter disregard to the technical opinion of the expert/institutions is totally erroneous and unfortunately is without any sound basis. The ld. Collector ought to have to put his doubts to the technical experts to seek clarification from them or he could have sent the evidence produced by the importers to the departmental experts for clarification and opinion. Having failed to do so and also having failed to obtain further test results of the remnant samples, the findings arrived at are, therefore, totally fallacious and unsustainable ....
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....verse order against the importers. It is a well settled that a quasi-judicial authority should act without bias and with impartiality and fairness and without prejudice and should consider all the evidence on record, also by giving full opportunity to the importer to establish their case and exonerate themselves from the charges brought forth by the prosecuting agencies. In this case the ld. Collector has not performed this function and has not assisted the Tribunal in this matter. (iii) The department's charges are that the material imported are akin to Hypalon and as Hypalon is classified under Chapter 39, the same is required to be classified under Chapter 39 and not under Chapter 40. The Department has also proceeded on the presumption that the goods are saturated synthetic substance and hence, they are eliminated from Chapter 40. This aspect of the matter has been concluded by the Hon'ble Calcutta High Court in the case of National Insulated Cable Company [1994 (74) E.L.T. 568 (Cal.) = 1994 (46) ECC 101]. The Hon'ble Calcutta High Court has held that even if the goods are saturated synthetic organic polymer they continue to fall under Chapter 40 and not under Chapter 3....
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....nder Note 4 to Chapter 40 of the Customs Tariff Act, 1975. The Test Report of I.I.T., therefore, clearly shows that Hypalon-40 specifically corresponded with the qualities of synthetic rubber as specified under Note 4 to Chapter 40 of the Customs Tariff Act, 1975. The rubber technology centre of I.I.T. also stated that "Hypalon is a polymer (a new synthetic rubber)....." 10. If we adjudge the relative merits and demerits of the two reports, we find that the departmental testing was negatively and selectively oriented. The test was directed only for the ouster of Hypalon-40 from the classification of synthetic rubber. There is another loophole in the report. It made a leap for the conclusion that it was synthetic resin, though exclusion from synthetic rubber does not necessarily bring the item under synthetic resin. An item not being synthetic rubber has again to be proved by test whether it is synthetic resin. It is not in dispute that the Customs authorities conducted no test in that direction. To our mind, the report of the Indian Institute of Technology merits more attention and credibility. It conducted the test in a more comprehensive manner. It found Hypalon to be ....
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....ers suffer from infirmity, requiring to be set aside. 14. We notice that Hon'ble Calcutta High Court in the case of National Insulated Cable Co. Ltd. v. Union of India as reported in 1994 (69) E.L.T. 465; on this very point has held that the chemical report of the said chemist cannot be relied as a decisive factor, being not conclusive. The findings given by the single Judge in this matter has been confirmed by the Division Bench and, therefore, the finding given in paras 24 to 26 of the single Judge also requires to be quoted in order to disposal the doubts raised by the ld. Collector on this point. The same is noted herein below : "24. On the state of records, the case of the customs authorities appears to be based mainly on the chemical report. This chemical report is not conclusive of the stand taken by the customs authorities. The test results do not indicate anything positive in support of the contention of the customs authorities. A note is attached to the test memo. This note is dated 23rd August, 1984 which invites attention to Customs T.O. No. 1 of 82-83 dated 2nd April, 1982 of the Deputy Collector of Customs as regards the assessment of Hypalon-40. Accor....
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....world as synthetic rubber. It was also submitted that Hypalon is specifically classified as synthetic rubber in the Import Trade Control Policy". 15. Before the ld. Collector, the appellant had relied the single judgment of Hon'ble Calcutta High Court in the case of National Insulated Cable Company Ltd. as reported in 1987 (28) E.L.T. 248. In this case, the Hon'ble High Court had dealt in great details on the chemical composition of the product and had noticed the reports of the experts, more particularly those of I.I.T., Kharagpur. The Court had also applied the rule 4 of the Rules for the Interpretation. Therefore, the ld. Collector in the light of these findings of the Hon'ble High Court, ought to have decided in favour of the appellants. Somehow he has emboldened himself, to differ from this judgment, which we do not find it to be in keeping with the judicial discipline. Although the ld. Collector has got liberty to distinguish the judgment but in a case like this, where the Department has proceeded on the basis that the item is equivalent to Hypalon, this judgment should have been applied as it had gone in very great detail on all technical aspects including Note 4(a) ....
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....0. Several evidences produced by the importer are from reputed Government Organisations and the affidavits filed are from the professors and experts in the field, therefore, the entire evidence merits consideration and acceptance. 17. Earlier classification for licensing purpose had come up in the case of Cable Corpn. of India v. Collector of Customs as reported in 1993 (67) E.L.T. 611. In this case the Department had challenged the classification of Hypalon-40 as synthetic rubber under Open General Licence, Appendix 6, List 8, Part I Serial No. 537 of Import Policy 1990-93, as not permissible. The Tribunal had gone into great detail on this matter and after examining the issue had held that Hypalon-40 is a synthetic rubber. The Tribunal examined Appendix 3 Part A at Serial No. 482, which read as follows : "482. Synthetic rubber, the following :- (i) Styrene Butadiene Rubber (SBR); and 34-1193-00-3 (ii) Poly Butadiene Rubber (PBR)-34-1192-00-7". The Serial No. 537, Appendix 6, List 8, Part I of the Import Policy for 1990-93 had covered "Synthetic rubber other than those appearing in Appendix 3, Part A". Therefore, the Department had alleged that the Hy....
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.... (Control) Order has been revised in alignment with the first Schedule to the Customs Tariff (Amendment) Act, 1985. Even though the two are aligned, there is little doubt that the purpose of classification in two enactments is distinct and separate. Since the Open General Licence is a document which provides for import of goods without an import licence and categorises innumerable varieties of goods under different categories for the purpose of regulating their imports, the considerations which go into this classification are very different from those which decide classification for purposes of levy of Customs duty. We are, therefore, unable to accept this view of the learned Additional Collector. We would also like to mention that during the hearing the learned Departmental Representative had referred to the decision of the Tribunal in the case of National Insulated Cables Co. of India Ltd. v. Collector of Customs, Calcutta [1985 (21) E.L.T. 793] in which it was decided that Hypalon-40 & 40E were classifiable as Synthetic Resins under Heading No. 39.01/06 of the Customs Tariff and not as Synthetic Rubber under Heading 40.01/04 ibid. Since the question of classification of the good....
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....nt Chief Controller of Import and Export, Bombay. 10. It appears from paragraph 27(3) of the Import policy that it is permissible to obtain clarification on any item-wise entry by Actual Users from the Regional Licensing Authority at Delhi (CLA), Bombay, Calcutta & Madras and that such clarification can be given in consultation with the concerned Technical Authority or the Regional Clarification Committee, wherever considered necessary. There is a procedure prescribed for obtaining such clarifications and the appellants have submitted copies of their application as well as the clarification furnished. In view of this, we do not consider that there was any irregularity in the clarification furnished by the Joint Chief Controller of Import & Exports, Bombay. In view of the above, the impugned order is set aside and the appeal is allowed with consequential relief to the appellants." 18. Therefore, it is very clear that the importing authorities has also considered Hypalon-40 as synthetic rubber and that the Tribunal/High Court has accepted both for licensing purpose and for the classification purpose, the goods to be synthetic rubber. The Department had proceeded on th....
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....view of the fact that the goods have been classified as synthetic rubber and even going by the arguments that Chapter 39 equally merits consideration. Even by applying Rule 4 of Rules of Interpretation, the goods are to be classified under Chapter heading 40.02 as admittedly they are treated by Experts and in Trade as synthetic rubber, by virtue of its uses and characteristic as that of synthetic rubber. In that view of the matter, the Department having not established that the goods are plastic under Chapter 39, its classification therein is clearly ruled out. We have also to observe that the Department had not proved that importers have misdeclared or suppressed the correct description of the goods for the reason that the Department itself by their own test report had accepted the goods as synthetic rubber from 1984 onwards. In the case of M/s. Skytone Electrical (India), the appellants were describing the goods as synthetic rubber TS 430. They were not declaring it as synthetic rubber (Polychlorobutadiene Type). Therefore, the allegations made against them that they knew contents and yet they had misdeclared the correct contents is also not sustainable. Earlier test reports of t....
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....and Engg. McGraw Hill Encyclopedia of Science and Technology, etc. 26.  A study of these books shows that :- (i) Chlorosulfonated Polyethylene (CSM) is a saturated polymer (Hofmann P/106); (Morton P/343) (ii) It is a variety of Synthetic Rubbers (Hofmann; Morton; Kirk Othmer) (the reference here is to commercially known varieties). (iii) Synthetic rubber is of various types (including both (a) Unsaturated varieties; as well as (b) Saturated varieties (Hofmann; Kirk Othmer; Morton) (iv) Thermoplastic 'rubbers' are intermediate between rubber and plastic (Kirk Othmer P/368); (v) Elastomers are intermediate between Plastomers and Duromers (Hofmann P/4). 27.  This is evident from what follows :- - In his 'RUBBER TECHNOLOGY HANDBOOK' Dr. Werner Hofmann classifies CSM under synthetic rubbers and indicates it as commercially important. - At page 106 (3.3.11) he indicates the structural formula of CSM as follows : -CH2-CH-CH2-CH2-CH-CH2- | | Cl SO2Cl &n....
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.... yielding a nearly plastic material." ________"and they are used in some applications without cure." (e.g. Hypalon 48 and 4SS) (iv) Branched CSM Polymers which show Low Moony and Solution Viscosities e.g. Hypalon 20 and 30. It is also noteworthy that the description of commercial synthetic elastomers of CSM type given in this Encyclopedia is mainly with reference to Hypalon of Dupont trade mark and the fact that TOYO SODA has also introduced CSM polymers has been taken note of. 30. MAURICE MORTON in his "RUBBER TECHNOLOGY" concentrates on Hypalon and mentions various grades of Hypalon. He indicates that uncompounded and uncured Hypalon is a thermoplastic elastomer. He also indicates that conventional curing and melting techniques apply to composition of Hypalon. At the same time, he also mentions various other modern techniques. He specifically refers to Hypalon-40 and describes it as a general purpose type and notes that Hypalon-45 and 48 are more thermoplastic than Hypalon-40. Significantly, it mentions, inter alia, that antioxidants are not required as a compounding ingredient for Hypalon since the polymer is chemically saturated and contains n....
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....ulcanising with sulfur. Designated vulcanising agents prescribed by the manufacturer are other chemicals (although sulfur donors could be used as components of accelerator system). It is also noteworthy that TOYO SODA Technical Bulletins No. 1 & 2 between themselves refer to various grades of their TOSO-CSM including both TS-530 and TS-430 and indicate their characteristic properties and main applications. (It may also be mentioned at this stage that technically there is a distinction between vulcanisation agents (per se) and vulcanising accelerators or activaters; and this distinction is recognised by HSN and the Customs Tariff as well). 34. In view of the above technical position, we are now required to see whether the products satisfy Chapter Notes of Chapter 40 relating to 'Rubber and Articles thereof'; And we find that following Chapter Notes state that : 1. Except where the context otherwise requires, throughout this Schedule, the expression 'rubber' means the following products whether or not vulcanised or hard natural rubber, balata, guttapercha, guayule, chicle and similar natural gums, synthetic rubber, factice derived from oils, and such substances rec....
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....sion "plastics" means those materials of heading Nos. 39.01 to 39.14 which are or have been capable, either at the moment of polymerisation or at some subsequent stage, of being formed under external influence (usually heat and pressure, if necessary with a solvent or plasticiser) by moulding, casting, extruding, rolling or other process into shapes which are retained on the removal of the external influence. Throughout this Schedule, any reference to "plastics" also includes vulcanised fibre. The expression, however, does not apply to materials regarded as textile materials of Section XI. 2.(g) Synthetic rubber, as defined for the purposes of Chapter 40, or articles thereof; 3. Heading Nos. 39.01 to 39.11 apply only to goods of a kind produced by chemical synthesis, falling in the following categories : (c)  Other synthetic polymers with an average of at least 5 monomer units; 5.  Chemically modified polymers, that is those in which only appendages to the main polymer chain have been changed by chemical reaction, are to be classified in t....
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....us relating to specific gravity or the exact sub-heading. However, the technical material before us shows that specific gravity varies from grade to grade and the technical bulletins of TOYO SODA show specific gravity of 1.18 in case of TS-430 as well as TS-530. Therefore, the products were classifiable under 3901.20 (and not 3901.90 indicated by the Collector). 41. A question which still remains to be answered is that if this was the situation technically what about: (i) the test reports produced by the appellants and (ii) the case law in particular, the judgment of the Hon. Calcutta High Court cited and heavily relied upon by the ld. Counsels. 42. (i) In so far as the reports of the tests privately got conducted by the appellants on their own are concerned, these certificates procured unilaterally are of no evidentiary value for a variety of reasons. First and foremost the analysis of those samples alone is acceptable which are drawn by or in the presence of the officers before clearance of the goods as per the prescribed procedure and not otherwise and the Collector could have rejected them on this gr....
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.... "where no definition is provided in the statute itself" as noted by their Lordships of Calcutta High Court; And in the present case the definition (s) have been provided and a clear distinction has been made between Polymers classifiable under Chapter 40 and those of the type includable under Chapter 39. 47. It is also clear that the internationally accepted standard technical literature discussed above was not placed before that Court and therefore did not receive the attention of the Hon. High Court. 48. And it is noteworthy that realising that full facts had not been brought to light, the Hon. Judges took the precaution of recording that "none of the said two test reports could be said to be conclusive regarding actual character and composition of the Hypalon-40" (and very rightly so as the technical literature including the Hofmann and the Morton's book shows the actual character in a different light than presented to their Lordships). Obviously in the absence of sufficient material their Lordships were constrained to proceed on the basis of the commercial parlance and the criterion of most akin as per the interpretative rules. In view of such grave limiting fa....
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....e latest Customs Test Report in our case has been found to be fully correct and therefore, could be relied upon; Whereas it is the I.I.T. (and other Test Reports produced by the Appellants which were not acceptable for reasons recorded above (so the situation was virtually reverse of the Hypalon case in this regard). Therefore, the Hypalon-40 case does not come to the rescue of the appellants in any way. 51. It is further noticed that Chapter note 4 (a) excludes substances which can be converted by vulcanisation into thermoplastic substances; Whereas Chapter 39 note 1 includes plastic substances including those polymers which are capable of being formed under external influence by moulding, casting or other processes into shapes which are retained on the removal of external influence and TOYO SODA shows that grade TS 430 has general use for mouldings, electric cables, machine parts etc. (In fact TS 320 is described as a thermoplastic applicable without vulcanisation and its applications include floor tiles). 52. In view of the above discussion two things become clear : (i) That according to commercial understanding for trading pur....
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....ellants. The import/export policies of 1985-88, 1988-91 and 1990-93 also distinguish between synthetic rubbers of various types (allowing only some varieties under OGL and restricting others under different Appendices; And the exemption notification 345/80-Cus. (as amended) goes to the extent of showing two different tariff headings (39 and 40) even for Hypalon itself). This itself goes to show that merely describing the product a 'synthetic rubber' or giving a general commercial description was by itself not sufficient for these purposes as well. 54. Now, we come to the responsibility and liability of each of the appellants in the circumstances of these cases. 55. In case of M/s. Universal Cables Ltd. counsel has pleaded that appellants had placed first trial order in 1984 to import TOSO CSM grade TS 430 as the same was equivalent to Hypalon marketed by M/s. Dupont of U.S.A. 56. It is also not disputed that CSP under brand Hypalon imported by various importers was being assessed under CTA 39.01 or its equivalent heading under CTA 75 despite the fact that Hypalon was commercially known and used as synthetic rubber. The judgment of Calcutta High Court changed....
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....diene) all through (and now admittedly so). This was not a case of change of opinion as pleaded but the result of inquiry/investigation which led to the discovery of a wrong which was being perpetuated and an attempt by the Department to take corrective action. Since according to their own admission the appellants were aware that it was an equivalent of Hypalon, a chlorosulfonated polyethylene, therefore, it was their duty to describe it fully and correctly in the first instance. By not doing so they became guilty of suppression and mis-declaration and the fact that the Chemical Examiner or Chemist also blundered along does not alter this position and does not reduce or mitigate their culpability or liability. The fact that they had initially described their product merely as synthetic rubber TS 430 does not help them because that amounts to deliberately giving an incomplete description and trying to take shelter behind a commercial brand name knowing full well that for customs purposes chlorosulfonated rubber was distinguishable from other synthetic rubbers classifiable differently. 60. We have already held in a number of cases that in the basic assessment documents (such ....
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.... it requires vulcanisation by other agents. It is also interesting to note that when the Lab. was asked to give the certificate with reference to Chapter Note 4 of Chapter 40, it merrily certified it to be an unsaturated synthetic rubber whereas the manufacturer's technical bulletin itself describes it as a product with no double bond (i.e. a saturated rubber) and the entire technical literature referred to above confirms that it was indeed a saturated rubber. That itself shows that this procured test report is false, wrong and not worth the paper on which it is written. (ii) The test report of Indian Rubber Manufacturer's Research Association (affiliated to the Ministry of Industry) also does not help the appellants as it shows the test was required to be conducted only for certain specified properties. And the saturation vs. unsaturation point and curing with chemicals specified by manufacturers was not covered, for obvious reasons. However, the Scientific Officer could not be falted if the party itself sought verification of a few properties only and left out deliberately crucial properties essential for customs purposes but the appellants cannot escap....
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....hloro butadiene after the department's test but even in the bill of entries in which they had refrained from indicating the composition below the description synthetic rubber TS 430 they had claimed assessment under tariff item 40.01/04 and the chapter note 4(a) which as it stood during the relevant period specified the types of rubbers included under the expression 'synthetic rubber' mentioning (IR), (BR), (CR), (SBR), (NCR), (IIR) and in view of their admission and technical literature discussed above and the technical bulletins of the manufacturers/suppliers the product fell in none of these categories. So deliberate suppression of relevant information in the earlier stages (1984-85) and explicit misdeclaration from 1986 to 1991 stands recorded in their own hand so to say is involved and the only inference possible is that it was so done with the intention to mislead and defraud; And to my mind it appears to be a case of collusion and conspiracy and the appellants deserve no quarter. 63. Therefore, I am not in a position to accept the appellant's plea that it is a case of forgivable failure. 64. In view of above analysis it is clear that the Collector was justifi....
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....the words were 'applied only to' and prayed that in view of this position the Note 4 to Chapter 40 was not restrictive or exhaustive in nature and would include all forms, types and varieties of synthetic rubber; And Shri Khaitan had concurred. 68. We have already examined the legal and technical aspects which bring to the fore, ipso facto, so to say, the fallacy of this argument; And it does not bear repetition except re-emphasise that the definition of synthetic rubber given in Chapter 40 was applicable for the purpose of the whole schedule and so also the definition of plastics given in Chapter 39 which was intended for the whole schedule and these two chapters and their chapter notes have to be necessarily read together, in particular in a situation like the present one where the legislatures intention apparently was to distinguish between the type of polymers (including synthetic rubber) to be covered by Chapter 40 and the type of polymers (including elastomers) which were to be governed by Chapter 39. Therefore, this argument of the appellants does not advance their cause in any manner and we have already seen and recorded as to how the chlorosulfonated polyethylene c....
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....ce the importing firms had from the very beginning suppressed or withheld information known to them which was material for the purpose of determining the correct classification with mala fide intention, therefore, the demands were not time-barred and could be validly issued under Section 28(1) of the Customs Act. 73. It is interesting to note that even after the issue of show cause notice, the appellants have continued to harp on the argument that the products was unsaturated, when as we have already seen they knew that it was a saturated one; And as if the attempt to mislead the customs at clearance and adjudication stage not sufficient, this was sought to be made out to be so even in the appeal memorandum filed before this Tribunal and even at the initial stages of arguments and only in response to persistent questioning from the bench and its direction to show the technical literature and the bulletins that ultimately the appellants M/s. Skytone Electricals as well as M/s. Universal Cables conceded and admitted that the product was chlorosulfonated polyethylene and a saturated type of elastomer and chlorosulfonated polyethylene was classifiable under 39.01 even under HSN....
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....on and commission for which they were personally responsible or in which they have acquiscised. These officers were fully aware of the true facts and the true nature of the goods and the true literature available and yet they withheld the information from the Customs Department and furnished wrong information. Shri Choudhary issued instructions to Satna Office, Shri Ramachandran and Dr. R.K. Sharma and these officers got the so-called laboratory test conducted in the appellant company's lab and prepared and submitted a test report which was patently false. Shri Ramachandran and Dr. R.K. Sharma had admitted that the laboratory test report was made-to-order under instructions. The test report interestingly refers to Chapter 40 of the Customs Tariff (even the chapter note in question) and this shows that the Manager (R&D) and the Lab Incharge were fully aware of the purpose for which it was being prepared, and Import Executive and Import Assistant were fully aware of the dispute and the case which had arisen and yet did not hesitate to produce a false report knowing it to be false. In view of these circumstances, it is apparent that the Collector was fully justified in taking their....
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....t is on record that the importer was clearly aware that the impugned goods TS-430 are a substitute for Hypanol by virtue of having identical chemical composition. Department, therefore, contended that since Hypanol is classifiable under Chapter 39 of the Customs Tariff, TS-430 should also be classified under the same Chapter. 82.3 In case of Collector of Customs v. National Insulated Cables Co. Ltd. - 1994 (74) E.L.T. 568 (Cal.) = 1994 (46) ECC 101, a Division Bench of the Calcutta High Court has categorically found and held that Hypanol although consisting of a saturated substance is classifiable under Chapter 40 of the Customs Tariff as synthetic rubber and not under Chapter 39. The Division Bench upheld the findings of the ld. trial judge that though Hypanol did not correspond to the definition of synthetic rubber as given in Note 4 to Chapter 40 to the extent it was not an unsaturated substance it materially corresponded with other qualities as specified in Note 4. This judgment has been accepted by the Department and no appeal has been filed to the Supreme Court. There is also no contrary judgment of any other High Court. This judgment is, therefore, binding on the Dep....
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....acts to justify extended period. Throughout the relevant period from 1984 till 1991, the Deptt. repeatedly tested the products which were imported and independently came to the conclusion that the same were synthetic rubber or polychloro butadiene. The appellants did not have anything to do with the Tests carried out by the Deptt. They did not declare Poly chloro butadine in the Bill of Entry, but it was the Deptt. itself which indicated the sample to be Poly chloro butadine type. It was only subsequently that the same was adopted by the appellant. The appellants, therefore, cannot be charged with misleading the Deptt. and there could be no question of suppression or misrepresentation on the part of appellants. In support of his contention he cited the case of Silver Chem. Industries v. C.C.E. - 1990 (49) E.L.T. 634 (T). The observations in the Order of Hon'ble Vice President. to the fact that the chemical examiner appears to have obliged by giving absolutely incorrect indeed false Test Reports describing the product as polychloro butadine are not at all supported by any evidence or material on record. It was never the case of the Department that the Chemical Examiner has given an ....
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....ubmitted that even ISI-6380 of 1984 indicates that chlorosulphonated polyethylene is synthetic rubber. 86.4 There is no basis for the allegation that correct description was suppressed. They had declared the goods as TS-530 synthetic rubber. In fact, even when Hypanol was imported, all the details of chemical composition were not given and the goods were described as synthetic rubber hypanol-40. If there was no mis-declaration in that case, describing their goods as synthetic rubber TS-530 could not be called mis-declaration. Even if they knew the impugned goods were Chloro Sulphonated Polyethylene, there was no evidence to suggest that failure to mention composition they knew would take the goods under Tariff Item 39. Mere omission does not justify extended period. 86.5 Maintaining that the goods are terminal vinyl type unsaturated product, he submitted that if Collector had any doubts about the evidence of experts he ought to have put them on Notice and called them for cross-examination. He relied upon the case reported in 1995 (79) E.L.T. 613 (sic) and 1988 (34) E.L.T. 393. 86.6 The goods ought to have been tested with reference to various criteria mentio....
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....panol, Chloro Sulphonated Polyethylene, marketed by DUPONT as plastic under Chapter 3901 while consignments of exactly similar materials, viz., TS-430 marketed by M/s. Toyosoda, Japan, were being assessed under Chapter 40.02. 89.2 Para 13 of the Show Cause Notice indicates that as Hypanol as well as TS-430 were chemically composed of chlorosulphonated polyethylene [CSP], the two products appear to merit the same classification under the Customs Tariff. Para 57 of the Show Cause Notice again refers to Chloro Sulphonated Polyethylene elastomer as being equivalent to Hypanol-40, as being within the knowledge of the appellant. 89.3 In para 3 of his Order Collector refers to information received that TS-430 Grade material imported by appellants were goods exactly similar to material Hypanol [chemical name chlorosulphonated polyethylene (CSP)] which was not synthetic rubber as defined under the Customs Tariff Chapter 40 and which was being regularly assessed to customs duty under CH 39.01. 89.3.2 Collector again in Para 69 of his order placed at page 90 of the Appeal papers, observed that it is on record that the importer were clearly aware that the impugned goods....
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....emsp;The Division Bench of Calcutta High Court in case of Collector of Central Excise, Calcutta v. National Insulated Cables Ltd. supra held that Hypanol-40 is classifiable as synthetic rubber under Tariff Item 40.02. They held that the product has all the functionalities and properties of synthetic rubber. Even going by the report of testing by Customs Authorities, which indicated Hypanol-40 is a fully saturated substance, the Division Bench held that this by itself would not preclude the classification of the item as synthetic rubber when it has all the functionalities and properties of synthetic rubber. They held that the product was known and/or found to contain qualities of synthetic rubber. They also held that the Departmental testing was negatively and selectively oriented. The Test was directed only for the ouster of Hypanol-40 from the classification of synthetic rubber. Another loophole the Court observed that "it made a leap for the conclusion that it was a synthetic resin, though exclusion from synthetic rubber does not necessarily bring item under synthetic resin" and the item not being synthetic rubber has again to be approved by Test whether it is synthetic resin. Th....
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....ct, is that the goods were exactly similar to Hypanol and it was a case of mis-declaration when the correct description of Chloro Sulphonated Polyethylene, which appellants knew was the material imported, was not given. The ld. Commissioner appears to have erred when he attempted, with reference to Calcutta High Court judgment, to distinguish Hypanol-40 from CSM Grade TS-430 without indicating essential differences in chemical composition such as would in the background of Calcutta High Court judgment take TS-430 away from Chapter 40 and place it under Chapter 39. 94. Ld. Vice President in Para 49(iii) has in this context recorded that various TS Grades such as 530, TS-430, TS-420, etc. not only differ among themselves but also differ from Hypanol in important features such as moony viscosity etc. This para, however, does not indicate what are those essential differences between the two as would, compared to Hypanol, take TS Grade 430 outside the purview of Chapter 40 when considered in the light of Calcutta High Court judgment. 95. A plea was pressed into service that Customs Notification No. 345/86, dated 16-6-1986 refers to Chloro Sulphonated Polyethylene as clas....
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....nd TS-530 have a chlorine content of 35% only. 97.3 All this points to the desirability of tests specifically conducted with reference to plastics. In absence thereof, the Test Reports submitted from the experts could not be lightly brushed aside. It was held in case of Honsur Plywood Works Limited v. C.C.E., Bangalore - 1988 (34) E.L.T. 393 (T) by Tribunal that certificates issued by Deputy Conservator of Forests, Bangalore and the Indian Institute of Plywood, Bangalore, could not be brushed aside only on the ground that the Customs were not in the know of the examinations carried out by them and that the certificates produced could have been put to test by the Addl. Collector by summoning the authorities who conducted the test or at any rate subjecting the goods to re-examination by the Customs. 97.4 In this case also the doubts raised could have been put to test by Collector through cross-examination of the persons who gave these Test Reports. 98. The position boils down to this : Hypanol, the trade mark of DUPONT, is a Chloro Sulphonated Polyethylene; TS-430 and TS-530, trade marks of Toyo Soda Manufacturing Co. Ltd. of Japan, is also admittedly Chlor....
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....e of Shiv Chand Kapoor v. Amar Bose - 1990 (1) SCC 383 cited with approval the following passage from Wades Administrative Law, "Unless the necessary proceedings are taken at law to establish the cause of invalidity to get it quashed or otherwise upset, it will remain as effective for its ostensible purpose as the most impeccable of orders". 99.4 The essence of the matter, therefore, is that the Hypanol has been held to be classifiable under Chapter 40 by Hon'ble Calcutta High Court and the impugned products alleged to be exactly similar and indeed also held to be so in the Order of Collector himself cannot be classified differently. In the result, therefore, these products have to be held to be classifiable under Tariff Item 40.02. 100. Ordinarily in the light of findings recorded by me, it would not be necessary to answer other points of difference. Since, however, the role of Third Member is limited in that he has to agree on each point of difference as framed with one or the other Member, I am proceeding to answer the remaining points of difference as framed. 101. It was forcefully submitted that the samples were drawn by the Customs and were tested and ....