TaxTMI 
TaxTMI 
2025 (6) TMI 547
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....d 16.06.2017 and availed the benefit of Sr. No. 239 of Not No. 12/2012-Cus dated 17.03.2012. During the course of verification of records and on perusal of EDW data, it was noticed that the importer had mis-classified Styrene Butadiene Copolymer under CTH 39039090 instead of CTH 40021990 and wrongly availed benefit of Sr. No 296 instead of Sr No. 322 of Not. No. 69/2011-Cus dated 29.07.2011 on goods imported from Japan on the basis of country of origin certificate. 1.3 The following three Show Cause Notices dated 08.06.2022, 21.02.2023 and 18.04.2023 were issued to the importer proposing the following: (a) Classification of "Styrene Butadiene Copolymer (SBC)" imported by them be not reassessed under CTH 40021990 instead of CTH 39039010/ 39039090. (b) Exemption of benefit of Sr. No.262/66 of Not. No. 50/2017-Cus dated 30.06.2017 & Sr. No. 296 of Not. No. 69/2011-Cus dated 29.07.2011 be not denied. (c) Diff. duty alongwith interest be not demanded under Section 28(4) & 28AA respectively of the Customs Act, 1962. (d) Goods imported by them by misclassifying the same be not confiscated under section 111(m) & 111 (o) of the Customs Act, 1962. (e) Penalty under section 112 (a)....
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.... held that when specific heading exists, goods not classifiable under residuary heading and such principle hardened into a rule of law by reason of consistent view taken by the Court. He found that there is a specific heading 4002 for 'Styrene-butadiene Rubber (SBR), carboxylated styrene-butadiene rubber (XSBR) and it is not disputed that the impugned goods contain the monomer of styrene with monomer of butadiene, hence the impugned goods are appropriately classifiable under CTH 40021990. 1.7 With regard to the Certificate dated 29.09.2023 issued by foreign supplier INEOS Solutions, Singapore who is a manufacturer of "Styrene Butadiene Copolymer with the proprietary name KR99HG, the Adjudicating Authority found that the same cannot be relied as the importer has not produced any evidence that the goods covered in the present 03 Show Cause Notices were supplied by INEOS Solutions of Singapore. The said Certificate is of dated 27.09.2023 whereas the goods were imported during the period from 16.06.2017 to 18.10.2022. The importer has not adduced any technical literature / chemical composition/Test Reports which can say that the imported goods viz "Styrene Butadiene Copolymer....
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....der United States Harmonized Tariff Schedule Chapter 40, K-resin must be tested and should meet following 2 requirements:- (1) Specific composition requirement:- Definition for section 4002 is given for polymer composition, 'by containing over 50% styrene by weight of dry polymer All K-resin SBC grades are greater than 60% styrene by weight of dry polymer. (2) Elastics recovery requirements:- The elastics recovery of a vulcanized sample is described within 4002. This testing is performed by an outside / independent laboratory (University of Louvain) which is the official Harmonized Tariff Classification Testing Lab for Belgium. The K-resin SBC that meets the elastics recovery requirements described in Chapter 40 are KR03, KR03NW KR05, KR05NW, KR10, KK38, XK40, BK11 CK02 DK11. DK13. DK15, KR99HG, SKR14, SKR15 and SKR40 K-resin SBC Grades KR01, BK10 BK12, BK13, BK15. BK18 XK41 and SKR13 meet the requirements of United States Harmonized Tariff Schedule under the Heading /Subheading 3903 "polymers of styrene" and are further described under Section 3903 90 50 as "Other". 1.9.2 From plain reading of the aforesaid information provided by M/s Chevron Philips Chemical Asia Pte....
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....classified them under CTH 3903, whereas revenue has classified it as synthetic Rubber under CTH 4002 with confirmation of consequential differential duty along with penalty/redemption fine on account of alleged mis-classification in the impugned OIO. Sr. No. Description of product (SBC) Classification claimed by Appellant Classification claimed by Revenue 1. SBC PB 587 Chapter 39: Plastics CTH 3903 [Polymer of Styrene] Tariff Entry: 39039090 as Copolymer of styrene Chapter 40: Rubber CTH 4002 [Synthetic Rubber] Tariff Entry: 40021990 as Styrene-Butadiene Rubber (SBR) 2. PB 585 3. ASAFLEX 825 4. ASAFLEX 830 5. K RESIN OFF SPECS 6. PB 5302 7. SAN 300 H 8. KR 99 HG 9. CN 08 * Definition of the imported product (SBC) and concept of 'thermoplastic vs Non-thermoplastic (Thermosetting) materials', 'Plastics Vs. Rubber' & 'SBR vs TPR' 2.2 ScienceDirect.com defines Styrene-Butadiene Copolymer (SBC) as an engineering thermoplastic material derived from a copolymer of styrene and butadiene, with styrene content of at least 70%. It is transparent, easily melted, and highly colorable, offering a good balance of stiffness, rigidity, and toughne....
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....testing of the product and has solely relied upon a document dated 08.04.2008 issued much earlier than the period of dispute and that too, with respect to just one grade by a private third-party M/s Chevron Philips Chemical Asia Pte. Ltd, Singapore, who is not supplier of the products in question. The said document of 2008 related to KR99HG cannot be applied for classifying the product firstly on creditability issues and secondly because every product formulation keeps on changing with time depending on the evolving requirement of industry. This document dated 08.04.2008 has been firstly treated as gospel truth without any examination of product in question. Secondly, it has been extrapolated for the period 9 to 14 years later and that too for all grades of SBC to classify them under CTH 4002 without any kind of testing and without referring to any product literature. 2.7. Styrene Butadiene Copolymer (SBC) is a synthetically produced polymer, where monomer units are styrene and butadiene. Thus, by referring to rule 2(b) of the General Rules for interpretation of Import Schedule, it can be classified as Styrene polymer as well as Butadiene polymer. 2(b) Any reference in a heading ....
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....classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable." Therefore, by referring to Rule 3 (a) and 3(b) read with Section/Chapter Notes read with HSN explanatory notes, CTH 3903 covers Polymers of Styrene, in primary forms, whereas CTH 4002 covers Synthetic Rubber, in primary forms. Thus, CTH 3903 describes the product specifically, whereas description under CTH 4002 is generic in nature. The product in question acquires its essential characteristics of plastics from styrene and thus, on this count also needs to be classified under CTH 3903. 2.10 Further, in the context of SBC, based on the essential characteristics as explained in HSN, one subset of SBC with properties akin to plastic falls under 3903 and another subset of SBC with properties akin to rubber falls under 4002, and these two subsets are mutually exclusive. The HSN explanatory notes to CTH 3903 (extracted below) specifically states that a subset of "Styrene Butadiene Copolymer" shall be classified under CTH 3903. "This heading covers polystyrene and copolymers of styrene. The most important copolymers of styrene and styrene-a....
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.... be capable of irreversibly transformed by vulcanisation with sulphur into non-thermoplastic substances which at a temperature between 18 degree C and 29 degree C i. Will not break on being extended to three times its original length. [Breaking Test] ii. Must return after being extended to twice its original length, within a period of five minutes, to a length not greater than one and a half times its original length. [Elastic Recovery Test] 2.12 Learned Advocate submitted that they supplied above requirements and technical data sheets during the investigation but the department has neither conducted any test nor taken any opinion from any expert to confirm above parameters. The samples of the imported products were sent by the Importer for testing on the above parameters to Indian Rubber Manufacturers Research Association (IRMRA), an autonomous body operating under the administrative control of Department for Promotion of Industry and Internal Trade, Ministry of Commerce & Industry, Govt. of India. The Learned Advocate submitted copy of the test reports alongwith synopsis. Summary of the test results as mentioned in the test reports is reproduced below: Sr. No. Product Nam....
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....es, it has substances other than SBC which does not play any role in cross linking YES. It breaks at 10% elongation itself. No. It breaks at 10% elongation itself. NO 8. KR 99 HG Saturated Synthetic Substance Yes, it has substances other than SBC which does not play any role in cross linking NO. It breaks at 450 % elongation. NO. Final length is 47.33mm which is greater than one and a half times of the original length. NO 9. CN 08 Saturated synthetic substances Yes, it has substances other than SBC which does not play any role in cross linking Yes. It breaks at 30% elongation. No. it breaks at 30% elongation itself. NO 2.13 As per above table, except the product at sr. no. 3, all the remaining 8 products are "saturated synthetic substance" which do not satisfy the first criteria of chapter note 4 of chapter 40. The product "ASAFLEX 825" mentioned at sr. no. 3 of the above table fails the "breaking test" and "elastic recovery test" as prescribed under note 4 of chapter 40 of the Customs tariff Act, 1975. Thus, none of the imported products fulfill the conditions of chapter note 4 of chapter 40 and hence, do not merit for being clas....
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...., 114AA of the Customs Act. In the case of Commissioner of Customs Vs Vodafone Essar Gujarat Ltd. 2020 (373) ELT 421 [para 7], Hon'ble CESTAT held that in cases of classification, penalty under Section 112 cannot be imposed. In the case of Kores (India) Ltd Vs Commissioner of Customs (I), Nhava Sheva 2019 (370) ELT 1444 [para 5.6], Hon'ble CESTAT Division Bench held that in cases where only dispute is with respect to classification, penal provisions of Section 112 cannot be invoked. In the case of Sirthai Superware (Supra) [para 4.9 & 4.10], the Hon'ble CESTAT Mumbai held that in cases where description of goods matches the actual content of the consignment and if the issue is with respect to classification, penalty cannot be imposed either under Section 112 or 114A of the Customs Act, 1962. 2.19 It is a trite law that when goods are not available for confiscation, imposition of redemption fine is not sustainable at all. There is nothing which can be redeemed in the present case and thus, legally no redemption fine can be imposed. The Appellant rely on the decision of Hon'ble Tribunal in M/s Shiv Kripa Ispat Pvt. Ltd. V/s Commissioner of C. EX. & CUS. Nasik, 2009 (235) E.L.T.....
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....t, we have classified the product under CTH 4002 which also attracts NIL duty under Notification No. 69/2011-Cus". 3.5 During the relevant period of the impugned SCN, the importer had imported Styrene Butadiene Copolymer under CTH 39039010 as well as 39039090. They had also started classifying the same product under CTH 4002 for imports from Japan which indicates that the importer has been regularly changing classification of the subject goods with a view to claim exemptions from Customs duty. 3.6 The importer had, along with their letter dated 19.08.2021 addressed to the Superintendent (PBA-2), Customs Audit Commissionerate, NCH, New Delhi, enclosed a Certificate from Chevron Phillips Chemicals Asia Pte Ltd, Singapore (foreign supplier) attaching the procedure "Evaluations of Elastics Recovery of Vulcanized K-resin SBC" which is performed by an outside / independent laboratory (University of Louvain) which is the official Harmonized Tariff Classification Testing Lab for Belgium as per which Styrene Butadiene Copolymer of grade KR99HG (which has been the import product of the importer) meets the elastics recovery requirements described in Chaper 40. M/s. Cheveron Phillips ha....
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....ct satisfies requirements of Note 4 to Chapter 40, and then only butadiene can be said to be in substantial quantity. As long as requirements of note 4 are not satisfied, it cannot be said that butadiene is in substantial quantity. 4.4 This tribunal vide Final Order No. A/10666-10671/2022, pronounced on 07.06.2022 in the case of Astral Limited vs. C.C. Ahmedabad Customs has decided classification under an entry corresponding to predominant material which was more than 50%. Similarly, in Samson Rubber Industries vs. C.C. Chennai MANU/CC/0132/2005, the tribunal classified the goods under Chapter 47 of the Customs Tariff Act, based on predominance of hardwood pulp constituting 60-70% of the product and rejected classification under Chapter 38 as a plasticizer. 4.5 Vide submission dated 08.05.2025, the department mentioned that not ordering for confiscation of goods is a technical omission in the sense that Ld. Adjudicating Authority has not specifically mentioned that these goods are liable to confiscation. In fact, in para 9 of the Show Cause Notice dated 03.06.2014, it is mentioned that: *9. It further appears that the Noticee No.2 and Noticee No.3 were the persons who devised w....
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....appellants were seeking to rely on the certificate issued by the supplier regarding composition by seeking help of bill of lading, bill of entry, commercial invoice to show during relevant time INEOS Solution has supplied KR99HG with respect to which the certificate has been issued. 5.1 He also pleaded that the certificate of Chevron Singapore of 2008 is not relevant because the same is of 2008 vintage whereas the dispute is of 2017 onwards and also because Chevron Philips stopped their K-Resin SBC business including KR99HG manufacturing in 2016 and the entire business of manufacturing was taken over by INEOS Solution. He refers to a press release dated 01.03.2017 which has been placed on record. He also stated that certificate of 2008 is per curiam because out of five to six parameters to be satisfied under Note 4 of Chapter 40, the certificate discusses just one parameter of elastic recovery. Therefore, the product fails even on the ground of keenness. The certificate of 2008 which was stated treats predominance of styrene as parameter under Note 4 which is factually incorrect. He also referred to test report issued by Indian Rubber Manufacturers Research Association (IRMRA....
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.... a Co-polymer where no monomer unit is more than 95% of weight, shall be classified as a polymer of that monomer which predominates by weight. Thus, as per Chapter Note 4 also, SBC with more than 70% of styrene needs to be classified as polymer of styrene under CTH 3903. Again, it was stated position that by referring Rule 3(a) and 3(b) read with Section/ Chapter Notes HSN Explanatory Notes, CTH 3903 covers polymers of styrene, in primary forms, whereas CTH 4002 covers synthetic rubber, in primary forms. Thus, CTH 3903 describes the product specifically, whereas description under CTH 4002 is generic in nature. The essential character of the impugned product comes from styrene and therefore, on this ground also, product needs to be classified under CTH 3903. 5.4 It was the submission of the learned Advocate that during the investigation above requirement and technical data sheets were submitted but the department has neither conducted any test nor has taken opinion from any expert to confirm above parameters which has led to present unnecessary litigation. Therefore, they were constrained to send the products for testing on above parameter to IRMRA which has given reports, complete....
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....entry of 40021990 being indicated by the Revenue was incorrect. The product is essentially a copolymer of styrene and butadiene where styrene monomer is more than 70% by weight. For the product KR99HG grade of SBC, which has been predominantly imported, styrene monomer is 75% and butadiene monomer is 25%. We find that Chapter Note 4 of Chapter 39 states as follows:- "4. The expressions "copolymers" covers all polymers in which no single monomer unit contributes 95% or more by weight to the total polymer content For the purposes of this Chapter, except where the context otherwise requires, copolymers (including co-polycondensates, co-polyaddition products, block copolymers and graft copolymers) and polymer bends are to be classified in the heading covering polymers of that comonomer unit which predominates by weight over every other single comonomer unit. For the purposes of this Note, constituent comonomer units of polymers falling in the same heading shall be taken together. If no single comonomer unit predominates, copolymers or polymer blends, as the case may be, are to be classified in the heading which occurs last in numerical order among those which equally merit consid....
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.... context is not defined either in the Customs Tariff or in the HSN Explanatory Notes) b. The product must comply with the requirements of Note 4 to Chapter 40 6.4 In the context of HSN Explanatory Notes to CTH 3903, and a review of product literature shows that styrene is a component which is essential for giving plasticity to the product which is essential for classification under Chapter 39 and butadiene is a component which is essential for giving properties required for rubber for classifying the product under Chapter 40 Therefore, to us, in the present context, butadiene component should be of a such higher quantity so that the product satisfied the requirements of Note 4 to Chapter 40, which are meant to be satisfied by synthetic rubbers. This inference is based on the expression used which say's "most of the SBCs with substantial amounts to butadiene comply with requirements of Note 4, meaning thereby, that if butadiene is substantial, it will definitely comply with Note 4 of Chapter 40 and shall be classified under Chapter 40 as synthetic rubber. As long as requirements of note 4 are not satisfied, it cannot be said that butadiene is in substantial quantity. Thu....
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....transformed by vulcanisation with sulphur into non-thermoplastic substances. d Further this non-thermoplastic substance, at a temperature between 18 degree C and 29 degree C [These are elastomeric properties and are most important property for Rubber] i. Must not break on being extended to three times its original length. [Breaking Test] ii. Must return after being extended to twice its original length, within a period of five minutes, to a length not greater than one and a half times its original length [Elastic Recovery Test) 6.7 Admittedly, Revenue has not conducted any tests nor sought any expert technical opinion in support of satisfaction of above requirements. Revenue has simply relied upon the document of 2008 of Chevron Phillips Singapore which is the predecessor company of INEOS Solutions Singapore which transferred its K-Resin SBC business/manufacturing facilities to INEOS Solutions in 2016. Appellant has relied upon the certificate issued by INEOS Solutions Singapore, the group which has supplied the products in question during the relevant period. Appellant has also relied upon test reports given by IRMRA as per which the conditions of Note 4 of Chapter 40 are n....