TaxTMI 
TaxTMI 
2025 (6) TMI 547
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....TH 40021990 in Bill of Entry No 2124869 dated 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(....
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....mmissioner of C. Ex, Bhubaneshwar vs Champdany Industries Ltd reported at 2009 (241) E.LT. 481 (SC) wherein it was 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 litera....
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....rrently shipped using two different Harmonized Tariff codes. 4002 19.00. 20 3903.90.50. 00 For K-resin SBC grades to be shipped under 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 "pol....
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....ents, Learned Advocate for the appellant submitted as follows:- 2.1 The appellant had imported following grades of Styrene Butadiene Copolymer (SBC) from different manufacturers/suppliers and 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 Copol....
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....es. While most elastomers are thermosets, thermoplastic elastomers are not, in contrast making them relatively easy to use in manufacturing. 2.6 Learned Advocate submitted that for classifying the imported products under CTH 4002, revenue has not done any 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 syntheti....
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....n relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3 (a), shall be 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, a....
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....he requirements concerning vulcanisation, elongation and recovery in (a) above. Therefore, for classification of imported products under CTH 4002 following conditions (all) must be satisfied: a. It must be unsaturated. b. It must not contain any substances not necessary for the cross-linking such as extenders, plasticisers and fillers. c. It should 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....
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....canized with sulphur It cannot be irreversibly transformed by vulcanisation with sulphur into non-thermoplastic substances NO 6. PB 5302 Saturated synthetic substances Yes, it has substances other than SBC which does not play any role in cross linking No. It breaks at 850% elongation Yes. Final length is 28 mm which is less than one and a half times of the original length NO 7. SAN 300 H Saturated Synthetic Substance Yes, 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 abo....
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....ime barred. Reliance is placed on the following case laws: i. Northern Plastic Ltd. v. Commissioner [1998 (101) E.L.T. 549 (S.C.)] ii. O.K. Play (India) Ltd. v. Commissioner [2005 (180) E.L.T. 300 (S.C.)] iii. National Radio & Electronics Co. v. Commr. [2000 (119) E.L.T. 746] 2.18 For the reasonings given, the goods are not liable to confiscation. The present case relates to classification which is an interpretational issue and thus, no penalty can be imposed under section 112(a) & (b) and section 114A, 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 consignme....
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....e Court. The importer does not dispute that the impugned goods do not contain butadiene rubber. Thus, the impugned goods are appropriately classifiable under CTH 40021990. 3.4 Vide letter dated 19.08.2021, the Importer submitted as under: "From 1st August 2019 Customs rolled out new version of EDI system SCMTR 2018 where sea arrival manifest has to be filed and the 6-digit HSN code was mandatory in Bill of Lading description. In the Bill of Lading, the foreign supplier from Japan started classifying the SBC under CTH 4002 and based on that, 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,....
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.... of HSN explanatory notes to CTH 3903, between styrene and butadiene, styrene being more than 70%, it cannot be said that butadiene is substantial compared to styrene. 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, in the context of HSN explanatory notes to CTH 3903, butadiene component should be of a such higher quantity, so that the product 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 Ta....
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....r product is covered under CTH 3903, even as per HSN Explanatory Notes of the contemporary period. There has been no test report of the department on record but admitted position is Styrene-Butadiene Copolymer as Styrene Monomer is more than 70% and Butadiene monomer is less than 30%. Due to pre-dominance of styrene monomer, it deserves to be classified as polymer of styrene. As far as classification by revenue is concerned which is under Tariff Entry 40021990 as styrene butadiene rubber (SBR), the product is required to be shown as rubber rather than styrene-butadiene copolymer. The 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 ove....
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....t dated 08.04.2008 whereas, the appellant have relied upon the test report from an autonomous lab operating under Ministry of Commerce. Therefore, greater evidential value needs to be attached to the report produced by them. It was further submitted that styrene butadiene copolymer (SBC) is a synthetically produced polymer, whereas monomer units are styrene and butadiene. Therefore, even as per Rule 2(b) of the General Rules for the interpretation of Import Schedule, the product can be classified as styrene polymer as well as butadiene polymer. Again, Note 4 of the Chapter 39 says that 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 gene....
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....various certificates provided by the appellant on the ground of same being not related etc. We also find that the earlier product classification entry 39039010 is not in contention before us as neither the appellant nor the respondent is seeking classification under this entry. Appellant submitted that only due to clerical mistakes, the old tariff entry was indicated on some of the Bills of entry though revenue wise there is no difference in classification now being treated under Tariff Entry 39039090 or the earlier entry of 39039010 if taken into consideration but it was pleaded that the Tariff 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 oth....
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....her materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of rule 3." 6.3 However, HSN Explanatory Notes to CTH 3903 as extracted above itself creates an exception for a specific type of SBC copolymer which shall be classified under Chapter 40 as a synthetic rubber provided it satisfies the following requirements: a. Butadiene component must be substantial (though what is substantial in the 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 Ther....
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....) thioplasts (TM), and (c) natural rubber modified by grafting or mixing with plastics, depolymerised natural rubber, mixtures of unsaturated synthetic substances with saturated synthetic high polymers provided that all the above-mentioned products comply with the requirements concerning vulcanisation, elongation and recovery in (a) above." 6.6 Note 4 extracted above shows that for classification of the imported product under CTH 4002, following conditions must be satisfied: a. It must be unsaturated. b. It must not contain any substances other than styrene butadienе со polymer, which is not necessary for the cross-linking c. It must be irreversibly 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 gr....