TaxTMI 
TaxTMI 
1984 (7) TMI 332
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....thorities classified the product under Chapter 39 and not under Chapter 29 as claimed by the appellant's (referred to hereinafter for bravity's sake as 'HOECHST'). 4. The refund claim filed by 'HOECHST' claiming re-assessment of the product under Chapter 29 was rejected by the Assistant Collector of Customs, Bombay and the appeal against the Assistant Collector's order was rejected by the Appellate Collector of Customs, Bombay, by a detailed order. It is this order of the Appellate Collector that is now under challenge before us. 5. We have heard with considerable interest the arguments addressed by the learned Counsel for 'HOECHST' and the learned Representative of the Respondent. We have also perused the record of the case. 6. The submissions for 'HOECHST' before us may be summarised thus :- (a) The product "MOWIOL S 50B" (the record uses the names : "MOWIOL" and "MOVIOL" interchangeably) is not the same thing as normally Poly vinyl alcohol (PVA) in that 'Sulpho' groups are added to the PVA chain by the process of Sulphonation resulting in "MOWIOL". (b) The Cust....
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....CCCN are of considerable persuasive value in the matter of interpreting expressions occurring in the Customs Tariff Schedule as well as ascertaining the scope of headings therein. Reliance was placed also on the Tribunal's decision in the case of Tamil Nadu Electricity Board reported in 1983 (12) E.L.T. 174 in which it was held that resins classified under Chapter 39 have, among other things, characteristics of plasticity. (e) The Sulpho group which is introduced in the PVA molecule is present only in a few positions and not all along the chain as should be the case in a polymer. This would be evident by reading of the patent (a copy of which has been filed) which states that PVA shows the effect described in the patent even if, for instance, only one atom of sulphur is present for 500 'CH2 - CH - OH - groups. (f) The classification of the subject product had come up for consideration by way of a revision application before the Central Government and, by an order dated 7-5-1971, the Government had come to the conclusion that "MOWIOL S 50B" was not a plastic article and, therefore, fell o....
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....Acetate stage. Thereafter, what is done is hydrolysis or alcoholysis resulting in PVA and sulphonation of PVA. (j) Turning to the question at para 6(c)(ii), it was submitted that the process of hydrolysis or alcoholysis is not chemical synthesis. Sulphonation is a substitution reaction. It should be mentioned here that this point was not pressed much by the learned Counsel for Hoechst who submitted that the other two questions (i) and (iii) were, the more important ones. (k) The correct classification of the product is under Chapter 29. Chapter note 1(a) would not stand in way of this classification even though the structure of the product is not well defined. (l) If, however, it is held that Chapter 29 is not appropriate, then the next appropriate heading would be 38.01/19(1). 7. The submissions of Shri Sunder Rajan, on behalf of the Respondent, may be summarised as follows :- (a) Hoechst has not produced any ....
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....plasticity since it can be cast into films. Reference was also made to other technical authorities to show that PVA can be compression-moulded. (g) Reference was made to an order of the Central Government in Review in the case of Ahura Chemical Products - 1981 (8) E.L.T. 824 in support of the contention that plasticity is not a must for classification of a product under Chapter 39. Reference was also made to the Bombay High Court decision in the case of Chemicals & Fibres India Ltd. - 1982 (10) E.L.T. 917 in which the Court has held that addition of delustrant would not take out polymer chips from the scope of Chapter 39 of the Customs Tariff Schedule and item No. 15A of the Central Excise Tariff Schedule. The ratio applies in the present cases. Reference was also made to the Tribunal's order of 12-4-1983 in the case of Elpro International (Appeal No. 599/80-C) (un-reported decision) holding that chloro-sulphonated polythelene, even though a rubber, would still fall under Chapter 39. (h) There is nothing on record to show th....
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.... the note itself and there can be no doubt that the note is meant to apply only to Headings 39.01 and 39.02 of the CCCN. (c) Even if the subject product is a PVA derivative, it is not a polymerisation product in that its molecule is not an agglomeration of identical monomer molecules. (d) The decision in 1981 (8) E.L.T. 824 is not relevant here. For products like silicones and resols, plasticity is not relevant, but not to the products which are sought to be bought under the description "artificial plastics including artificial resins". Similarly, the decision in 1982 (10) E.L.T. 917 is not relevant since it pertained to a situation where a physical and not a chemical addition had taken place. (e) Notification No. 29-Cus., dated 1-3-1981 and 129-C.E., dated 27-6-1981, again, are not relevant here since those Notifications are with respect to normal PVA. 9. We have carefully considered the submissions of both sides. We have also perused the record. 10. The issue arising for determination in the present proceedings is whether the produ....
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....sing properties. Naturally, such a product is completely unsuitable for the preparation of moulded articles, because any attempts to thermal deformation lead to decomposition and charring." 13. As seen from Government of India's Order No. 1293 of 1971, dated 7-5-1971, Government got a sample of the product tested in the Central Revenues Control Laboratory, New Delhi. The Laboratory's report confirmed the presence of sulphur, in combined form. It was also found that it did not possess thermo plastic or thermo setting, property when heated in air and did not show sign of becoming fluid up to 200°C and thereafter it started decomposing. It was not possible for the laboratory to verify if the product was thermo plastic under pressure. It was also reported that it produced a stable emulsion with vegetable oil. 14. We have also seen the Italab Industrial Testing and Analytical Laboratories' report No. 2639 dated the 8th April, 1965 as also Report No. 14002 dated 9th August, 1983, both on Mowiol, S50B. According to these reports, when the product was heated to 200°C, the sample began to char and gave out strongly acidic vapours, but did not melt. The reports also s....
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....n product, in order to fall within heading 39.01/06 must answer to one or the other of 3 specified descriptions, the relevant one for the present purpose being "artificial plastics including artificial resins". The subject product is neither artificial plastic nor an artificial resin. In support of the contention that it is not an artificial resin, reference has been made to the meaning of resin from several dictionaries and other authorities to show that resins are insoluble in water whereas the present product is soluble in water. Thirdly, it is contended that the subject product is not the result of chemical synthesis inasmuch as it has been produced not by the process of synthesis as understood in technical parlance but by alcoholysis of polyvinyl acetate and sulphonation. Fourthly, it is contended that the product is not at all a polymer since a polymer is a repetitive chain of identical monomer units whereas the present product has got sulpho groups introduced in the chain, but not in every monomer unit. The learned Departmental Representative has controverted the aforesaid submissions. 18. Statutory Note 2 to Chapter 39 is very important for resolution of the disp....
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...."The Handbook of Water-Soluble Gums and Resins" by Robert L. Davindson (extracts produced by the J.D.R.), also refer to PVA as a white powder synthetic resin and further that it is the only linear polydroxy polymer that is readily soluble in water. It adds that PVA is cast into films from water solution, made into fibres and moulded or extruded into various sheets, tubes, etc. that are used where oil and solvent resistance is required. All these show that PVA is a synthetic resin having plastic properties. 20. The Explanatory Notes under 39.02 of the CCCN (Page 577, volume 2) also specifically show poly vinyl alcohols as included in the category of polyvinyl derivatives falling under Heading 39.02. 21. The question would arise whether the subject product which is not exactly the same thing as PVA is a polyvinyl derivative. The answer has to be in the affirmative because it is, according to Hoechst's admission, a sulphonated derivative of PVA, i.e. PVA in which sulpho-groups have been added by a chemical process. Heading 39.01/06 of the Customs Tariff Schedule, inter alia, includes polyvinyl acetate, polyvinyl chloro acetate and other polyvinyl derivatives. Polyvinyl....
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....ical monomer groups. Since the subject product has got sulpho-groups introduced in the chain, but not in all the monomer groupings, it is urged that it is not a polymerisation product. In this connection, we may usefully refer to the patent specification No. 513076 which has been filed in support of the appellants' case, though it does not refer to the subject product by name. The Patent states that - "Various processes are already known for the manufacture of polymerisates in dispensed form by adding to the dispersion medium a substance having a dispersing action. As such substances there are known soap-like products, especially of a synthetic kind. The effect of these substances is essentially caused by their surface activity and is due to their capacity for finely distributing the substance to be polymerised in the dispersion medium. Furthermore, substances are known which are capable of maintaining emulsified or dispersed bodies in fine distribution and preventing them from depositing. These substances are called protective colloids, such as gelatine, used for instance, for the stabilisation of a gold sol. Lately processes have become known for polymerising in the dispers....
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.... practice, however, there are used product which are partially esterified, for instance up to about 50 per cent...........". 25. It is seen from the above extracts that the inventions of the process (described in the Patent) themselves prescribe it as a process of polymerisation. It is by no means clear that they are describing the production of "Mowiol S 50B." From the reference to the presence of sulphonated polyvinyl alcohol in the polymerisation medium, it appears that the Patent describes the production of some other commodity. We do not, therefore, see the relevance of the Patent in so far as ascertaining the process of manufacture of Mowiol S 50B is concerned. All that it enables us to gather is that polyvinyl alcohol with sulpho-groups introduced in the chain has certain special properties compared to normal polyvinyl alcohol. 26. Polymersation is, as seen from page 835 of the Condensed Chemical Dictionary by G. Hawley is "a chemical reaction usually carried out with a catalyst, heat or light, and often under high pressure, in which a large number of relatively simple molecules combine to form a chain-like macromolecule". Undoubtedly, polyvinyl alcohol is a ....