06 November 1996
Supreme Court


Case number: Appeal Civil 453 of 1986






DATE OF JUDGMENT:       06/11/1996




JUDGMENT:                           W I T H [Civil Appeal  Nos.2162-70/88; 1942-53/88; 3657-72/90; 3284- 85/90; 1507/84; 3105/88; 5929/90; 6263/95; 1768/90]                       J U D G M E N T      S.B Majmudar, J.      This group  of  appeals  arising  from  diverse  orders passed  by   Customs,  Excise  &  Gold  (Control)  Appellate Tribunal  (hereinafter   referred  to  as  ’CEGAT’)  can  be conveniently classified  into  three  categories  of  cases. Category (1)  consists of  Civil Appeals  Nos.3105  (NM)  of 1988; 1768  (NM) of  1990; 3284-85 (NM) of 1990 5929 (NM) of 1990; and  6263 (NM)  of 1995  filed on behalf of Revenue by the Collectors  of Central  Excises concerned, wherein it is contended that preparations from silicone as manufactured by the  respondent-manufacturers  at  the  relevant  time  were covered by  Central Excise  Tariff Item  15A(l) and  not  by Tariff  Item   15AA  as   contended   by   the   respondent- manufacturers and  as upheld  by the  Tribunal. Category (2) consists of  Civil Appeals Nos.1942-53 of 1988; 2162-70 (NM) of 1988; and 3657-72 (NM) of 1990 moved by M/s Hico Products Ltd. being  aggrieved by  the diverse orders of the Tribunal which has  taken the  view that silicone oil manufactured by them and/or imported by them, as the case may be, was liable to be brought to tax under Central Excise Tariff Item 15A as applicable at the relevant time of manufacture or import, as the case  may be,  and not under residuary Tariff Item 68 as contended  by  them  for  the  purpose  of  determining  the appropriate   excise    duty   payable    by   them   and/or countervailing duty payable by them on these goods. Category (3) consists  of Civil  Appeal No.453  of 1986  moved by M/s Reliance Silicon  (I) Pvt.  Ltd. and Civil Appeal No.1507 of of 1984 moved by M/s Hico Products Ltd. These two appellants are  manufacturers  of  preparations  out  of  silicone  The grievance of the appellant in Civil Appeal No.453 of 1986 is against  the   Tribunal’s  order   holding   that   silicone preparations prepared  by them  are covered  by Tariff  Item 15A(1) and  would not  be covered  by Tariff  Item  68.  The grievance of  the appellant  in Civil Appeal No.1507 of 1984 is of  a similar  nature, namely, that silicone preparations manufactured by  the wrongly held exigible to Central Excise



duty under  Tariff Item 15A(1) by the to Tribunal. As common questions arise  for our  consideration, these  matters were heard together  and are  being disposed  of by  this  common judgment.      Category (1)      For the sake of convenience we will first deal with the grievance voiced  on behalf of the Revenue by the Collectors concerned in  their appeals  against the  decisions  of  the Tribunal. It  must be  noted at  the outset that five Member Bench of  the Tribunal  in  its  judgment  in  the  case  of Collectors  of   Central  Excise,  Bombay  III  v.  Auxichem reported in  1988 (34) E.L.T. 637 has exhaustively gone into the entire  factual data  dealing with  this controversy and has taken  the  view  that  silicone  preparations  are  not silicone but  only preparations  containing silicone for use in  textile  processing  and  by  their  very  nature  these preparations  are   akin  to  surface  active  preparations, wetting agents,  softeners and  as such  classifiable  under Item 15AA  of the Central Excise Tariff. As the question for consideration is  of a highly technical nature depending for its answer  on the  chemical characteristics of the products on the  anvil of  scrutiny, the  decisions rendered  by  the Tribunal which  is an  expert body  on the subject cannot be lightly interfered with in appeals unless it is demonstrated that the  findings reached and the conclusions arrived at by the  Tribunal   are  such   which  no  reasonable  man  well acquainted with the subject could arrive at or are otherwise erroneous in  law or  based on  no evidence. Keeping in view these contours  of enquiry in these statutory appeals we may now proceed  to deal  with the main contentions canvassed by learned counsel  for the  Revenue in support of its appeals. It was  vehemently contended  before us that the five member Bench of  the Tribunal  had erred  in taking  the view  that silicone preparations  were covered by Central Excise Tariff Item 15AA and not Tariff Item 15A(1) which held the field at the relevant time when the concerned goods were manufactured and when  their exigibility  to duty  was to  be considered. Tariff Item  15A(1) as  applicable at the relevant time read as under:      "15A.     Artificial  or  Synthetic      resins and  plastic materials;  and      other   materials    and   articles      specified below :      (1)   Condensation polycondensation      and Fifty  poly-addition  products,      whether or  percent not modified or      Polymerised, and  ad whether or not      linear   (for    example,   valorem      pheno-plasts, amino plasts, alkyds,      polyallyl    esters    and    other      unsaturated polyesters, silicones);      polyethylene and  co Polymerisation      products       (for        example;      polyethylene,      polytetrahaloethylenes,      polyethylene,          polystyrene,      polyvinyl    chloride,    polyvinyl      acetate,  polyvinyl   chloroacetate      and  other  polyvinyl  derivatives,      polyacrylic   and   polymethacrylic      derivatives,        coumaroneindene      resins);   regenerated   cellulose;      cellulose    nitrate,     cellulose      acetate and other cellulose esters,      cellulose ethers and other chemical



    derivatives      of      cellulose,      plasticised or  not  (for  example,      collodions, celluloid);  vulcanised      fibre;   hardened   proteins   (for      example,   hardened    casein   and      hardened gelatin);  natural  resins      modified  by   fusion  (run  gums);      artificial   resins   obtained   by      esterification of natural resins or      of  resinic   acids  (ester  gums);      chemical  derivatives   of  natural      rubber  (for  example,  chlorinated      rubber,    rubber    hydrochloride,      oxidised rubber,  cyclised rubber);      other  high   polymers,  artificial      resins   and   artificial   plastic      materials, including  alginic acid,      its  salts  and  esters;  linoxyn." Relevant Explanations to this Tariff Item read as under:      "Explanation II;  In sub-item  (1),      "Condensation,    polycondensation,      polyeddition,  polymerisation   and      co- polymerisation products" are to      be taken  to apply only to goods of      a   kind   produced   by   chemical      synthesis answering  to one  of the      following descriptions :-      (a) artificial  plastics, including      artificial resins;      (b) silicones;      (c) resols  liquid polyisobutylene,      and       similar        artificial      polycondensation or  polymerisation      products.      Explanation III: Sub-item (1) is to      be taken  to apply  to materials in      the following forms only:-      (a)  liquid   or  pasty  (including      emulsions,  dispersions   and   and      solutions);      (b)    block,     lumps,    powders      (including    moulding    powders),      granules, flankes  and similar bulk      forms;      (c) waste and scrap "      Tariff Item 15AA on the other hand reads as under :      "15AA.    Organic    surface-active      agents Twenty  (other  than  soap);      surface-active percent preparations      and washing preparation, ad whether      or  not  containing  soap.  valorem      A mere  look at  the Tariff  Item 15A shows that if the commodity manufactured  is artificial  or synthetic resin or any plasitc  material it  would be  covered by  the sweep of this Item.  But the  Item goes  further and  refers to other materials and  articles specified  therein. It is of course, true   that    Item   15A(l)    refers   to    condensation, polycondensation and  poly-addition products  whether or not modified or  polymerised and also refers to esters and other unsaturated polyesters, silicones. The products prepared out of silicones  by mixing them with other diluting agents like water etc. are not within the sweep of the said Item. On the other hand  if such  imported silicone  oil is  diluted  and mixed with  water so  that the  mixture can  be utilised  as organic surface  agent or as surface-active preparations and



washing preparations  it would  be Tariff  Item  15AA  which would squarely  get attracted  It  hes,  been  held  by  the Tribunal in  the judgment  under appeal  that  silicone  oil which was imported by the manufacturers was mixed with water and other  diluting agents  and such  silicone  preparations prepared  by   utilising  imported  silicone  oil  on  which admittedly countervailing  duty was  paid under  Tariff Item 15A(1) itself  could not  be  considered  to  have  remained silicone itself  but would  be treated to be products almost akin  to   surface-active  preparations,   wetting   agents, softeners and,  therefore liable to be classified under Item 15AA. It  has to be kept in view that the silicone oil which was imported by the concerned manufacturers was subsequently diluted and  mixed and  used in  The  manufacture  of  Their products, namely  silicone softeners 662 and silicone AU 331 etc. They manufactured no goods by the process, condensation and polycondensation  etc Such  silicone preparations out of imported silicone  oil which  underwent process  of dilution could not  be treated to have remained silicone itself so as to attract  Tariff Item 15A(l). The Tribunal was, therefore, justified in  placing the  diluted silicone  oil  and  other preparations from silicone as classifiable under Tariff Item 15AA. The amendment brought about in 1982 by amending Tariff Item 15A(1),  in our  view. would not make any difference in favour of  the Revenue for the simple reason that before the amended Item 15A(1) as reproduced hereinabove would apply it should  be   shown  that   by  the  process  of  manufacture undertaken by the concerned respondent-assessees any process of  condensation.  polycondensation  and  poly-addition  was resorted to  qua the  concerned silicones.  The Tribunal has noted as  a matter  of fact  that the  imported silicone oil which had  borne the  countervailing duty  under Tariff Item 15A(1) had  not  undergone  such  process  of  condensation, polycondensation and  poly-addition but had only got diluted by addition  of water and other dilutants so as to make it a surface active  agent. Therefore  such a  diluted product as manufactured by  the concerned respondents cannot be brought to tax  under Tariff  Item 15A(1)  but would  if at  all  be assessed to  excise duty  only under  Tariff  Item  15AA  as rightly held by the Tribunal. We have carefully gone through the judgment  of the  five  Member  Bench  of  the  Tribunal impugned in these appeals by the Revenue. In para (g) of the judgment under appeal the Tribunal has observed at under :      "9. The  only  silicones  that  are      assessable under  Item 15A  are the      synthetic polymers, the first stage      when the  silicone product, or if I      may call  it the undiluted, unmixed      silicone  polymer  is  produced  by      synthesis. Generally  speaking  the      states in  which  silicone  appears      are fluids,  resins and elastomers.      From these  three so-called primary      silicones  a   number  of   derived      products   like    sealants,   ring      washers, adhesives,  surface active      preparation,  encapsulation  cement      etc. are  obtained. Many  of  these      preparations are  in emulsions. All      these   preparations   have   other      materials,  additives,  emulsifiers      etc. added  to aid  and help in the      use  of  the  preparations  in  the      desired industry application."      We do  not find  any error  of law or any perversity in



the reasoning  adopted by the Tribunal on the facts of these cases. On  the contrary  in our  view the  decision  of  the Tribunal is  well sustained  on the  evidence on  record and calls for no interference in these appeals moved by the Revenue.      Category (2)      That takes  us to  the consideration  of appeals by the assessees comprised in Category (2). So far as these appeals are concerned  the main  grievance  was  voiced  by  learned counsel for  the appellant  in Civil  Appeal Nos.1942-53  of 1988.  The  learned  counsel  submitted  that  silicone  oil imported by  the appellant at the relevant time was governed for the  purpose of customs duty and countervailing duty not by Tariff  Item 15A(1)  but by  the residuary  Item  68  and accordingly it would be covered by Chapter 38 of the Customs Tariff of India 1985-86 which held the field at the relevant time and  would be out of Chapter 39 thereof. So far as this contention is  concerned a  close look at Tariff Item 15A(1) of the  Central Excise  Tariff which  would be  relevant for deciding the countervailing duty liability of the appellant- importer would  be apposite.  It is  true  as  contended  by learned counsel  for the  appellants that  the Head  Note of Tariff Item  15A talks of artificial or synthetic resins and plastic materials.  However  it  also  does  talk  of  other materials  and   articles  specified   in  the   said  Item. Therefore, it  is not  possible to agree with the contention of learned  counsel for  the appellant-importer  that  other articles  and   materials  must   necessarily  partake   the character of  artificial or  synthetic  resins  or  must  be resins of  any other type, as that contention would make the wide phraseology  employed in  the very  same  Item  in  its second  part   concerning  other   materials  and   articles specified in  the said  Item otios  and would  denude  these words of  their real meaning and content. Tariff Item 15A(1) as noted  earlier covers  condensation, polycondensation and poly-addition  products   whether   or   not   modified   or polymerised and  also covers  esters and  other  unsaturated polyesters  silicones.  A  bare  reading  of  the  aforesaid wordings in  Item 15A(1)  of the  Central Excise  Tariff may prima facie  suggest that  only silicone  items not in fluid state may  get covered  by  the  sweep  of  the  said  Item. However, no  doubt in  connection with the sweep of the said Item remains  once we  turn to  Explanations II  end III  as engrafted  in   the  very   same  Tariff   Item  15A(1).  To recapitulate Explanation  II  reads  that  in  sub-item  (1) condensation,     polycondensation     or     poly-addition, polymerisation and  co-polymerisation  products  are  to  be taken to  apply only to goods of a kind produced by chemical synthesis answering  to one  of the  descriptions enumerated therein which include silicones. Therefore, any condensation and polycondensation or poly-addition in connection with the silicones would bring the article within the sweep of Tariff Item 15A(1).  If any  doubt remains  in connection  with the physical appearance  of such products containing silicone it is set  at rest by Explanation III which lays down that sub- item (1)  of Item  15A is  to apply to materials even in the liquid or  pasty forms.  Consequently silicone  liquid  also would be  covered by Tariff Item 15(1) once it has undergone condensation,  polycondensation  or  poly-addition.  Learned counsel for  the appellant fairly stated that it  is not his case that  silicone liquid  which the appellant had imported had not  undergone a process of chemical synthesis by way of condensation, polycondensation,  poly-addition etc.  but his submission is  that in  the historical background of amended Item 15A(1)  it should be held that the said Item along with



its  Explanations  only  covered  those  types  of  silicone products which  resemble resins.  In order  to support  this contention he invited our attention to Chapter 39 of Customs Teriff of  India 1985-86 and submitted that Heading 39.01/06 covered only  resins  and  not  liquids  like  silicone  oil imported by the appellant. The said Heading reads as under : Heading    Sub-heading No. and        Standard    Central No.        description of article     Rate of     Excise                                       duty        Tariff                                                   Item ............................................................ (1)          (2)                      (3)           (4) ............................................................ 39.01/06   Condensation, polycondensa- 200%        15A.            tion and polyaddition                   15B,            products, whether or not                16B.            modified or polymerised,            and whether or not linear            (for example, phenoplasts,            aminoplasts, alkyds, polyallyl            esters and other unsaturated            polyesters, silicones);            polymerisation and co-polyme            risstion products (for example,            polyethylenes,            polytetrahaloethylenes,            polyisobutylene, polystyrenes            polyvinyl chloride, polyvinyl            acetate, polyvinyl chloroacetate            and other polyvinyl derivatives,            polyacrylic and polymethacrylic            derivatives, coumaroneindene            resins); regenerated cellulose;            cellulose nitrate cellulose            acetate and other cellulose            esters, cellulose ethers and            other chemical derivatives of            cellulose, plasticised or not            (for example, collodions;            celluloid); vulcanised fibre,            hardened proteins for example,            hardened casein and hardened            gelatin); natural resins            modified by fusion (run gums)            artificial resins obtained by            esterification of natural            resins or of resinic acids            (ester gums); chemical            derivatives of natural rubber            (for example, chlorinated            rubber, rubber hydrochloride,            oxidised rubber, cyclised            rubber); other high polymers            artificial resins and            artificial plastic materials,            including alginic acid, its            salts and esters; linoxyn.      We cannot  appreciate how  the said  Heading would  not cover silicone oil . Silicone which has undergone process of condensation,   polycondensation    and   poly-addition   is expressly covered by the said Heading. It cannot, therefore, be said  that the  residuary Heading  found in Chapter 38 of the said  Customs  Tariff  which  deals  with  miscellaneous chemical products  not elsewhere  specified as  indicated in Heading No  38 01/19 could be effectively pressed in service



by the  appellant. So  far as  the claim  of exigibility  to countervailing duty  is concerned,  as we have shown earlier Central Excise  Tariff Item 15A(1) read with Explanations II and III  clearly shows  that silicone  oil imported  by  the appellant which  has undergone  the process of condensation, polycondensation  and   poly-addition  would   squarely  get covered by  the sweep  of the  said Tariff  Item 15A(1). The view taken  by the  Tribunal in  this connection  cannot  be found fault  with Learned counsel for the appellant strongly relied upon  a decision of the Tribunal in the case of Tamil Nadu Electricity  Board, Madras  v.  Collector  of  Customs, Madras 1983  (12) E.L.T. 174. The said decision was rendered in connection with resins classified under Chapter 39 of the Customs Tariff.  It was held that if the copolymer resin had a special ability to cause exchange of ions, it could not be regarded as  merely artificial  resin  but  as  a  class  of products which  had been  given  characteristics  that  made their use appropriate only in a particular respect and for a particular purpose,  namely ion  exchange, rather  than as a general purpose  resin. On  the peculiar  facts of  the case before the  Tribunal it Was held that the products concerned could be  treated as  water treatment  chemicals and  not as artificial resins so as to attract Chapter 39 of the Customs Tariff, We  fail to  appreciate how the said decision can be of any  avail to  the appellant  on the facts of the present case. Learned  counsel for the appellant next contended that the earlier  Tariff Item  15A of  the Central  Excise Tariff which was  earlier pressed  in service by the appellants and which contention  was accepted  by the  Revenue  was  almost identical with  the amended  Item  15A(1)  save  and  except addition of some further items but for applicability of item 15A(1) it  had to  be shown  that the  concerned produce was artificial  or   synthetic  resin  or  an  article  made  up therefrom. It  is not  possible to  agree. The  whole Tariff Item 15A(1)  underwent a  sea change  when it was amended in 1992 and  came on  the Statute Book. The Explanations II and III to  this amended  Item were  not existing on the Statute Book  when  earlier  Tariff  Item  15A(1)  held  the  field. Consequently it cannot he said that the amended Item 15A was almost pari  materia with  the earlier Item 15A as contended by learned  counsel for  the appellant. It has to be kept in view that  for deciding  the  liability  to  tax  the  clear wordings of  the Item have to be considered and given effect to when  on the  express words  of the  Item  the  concerned products get  squarely covered  by the same reference to the past history  of the  said Item  as might  have existed in a different form  prior to  its amendment  would lose  all its significance and  would remain  a past event only and cannot be validly pressed in service for deciding the taxability of the product  which is  covered by  the sweep  of the amended Item. Learned  counsel for the appellant then submitted that artificial resins  and plastic  materials are the only items which are  in the  sweep of  amended Item  15A(1).  We  have already  shown   that  the   sweep  of   the  Item  is  more comprehensive and  covers materials  other  than  artificial resins and plastic materials. It was lastly contended that a Tariff Advice was issued in 1984 by the Additional Collector of Central  Excise,  Thane  which  showed  that  even  after amendment of  Tariff Item  15A of  the Central Excise Tariff Polyethylene Glycol  continued to be classifiable under Item No.68 and  not under  Item 15A(1). The said Tariff Advice is at page 118 of the Paper Book in Civil Appeal Nos.1942-53 of 1988. We  fail to  appreciate how  this  Tariff  Advice  can advance the  case of the appellant any further. Polyethylene Glycol might  have been  treated to  have  continued  to  be



classified under  Tariff Item 68 despite amendment of Tariff Item 15A.  We are  not concerned  with such  a product.  The short question  with  which  we  are  concerned  is  whether silicone oil  imported by  the appellant  is covered for the purpose of  deciding the countervailing duty payable thereon by Central  Excise Tariff Item 15A(1) or not. So far as that question is  concerned as the product was imported after the amendment of  Tariff Item  15A it  is the amended Item which will govern  the same. As we have discussed earlier the wide sweep of  the said  Item especially  in the light of the two Explanations engrafted  therein,  would  clearly  cover  the article in  question. Consequently,  no fault could be found with the  view of  the Tribunal  that the fluid silicone oil imported by  the  appellant  was  a  silicone  polymer  and, therefore, liable  to be  covered for the purpose of customs duty under  Customs Tariff Chapter 39 and also assessable to countervailing  duty  as  per  Central  Excise  Tariff  Item 15A(1).      Category (3)      That takes  us to  the  consideration  of  two  appeals comprised in Category (3). So far as the Civil Appeal No.453 of 1986  moved by  M/s Reliance  Silicon (I)  Pvt.  Ltd.  is concerned, the commodities manufactured by them which are in dispute before  us are  silicone oil and also other silicone preparations like emulsions. In view of our discussion while disposing of  Civil Appeals  comprised in Categories (1) and (2) it  must be  held that silicone oil manufactured by them would squarely be covered by Tariff Item 15A(1) while so far as silicone  emulsion and  other silicone  preparations  are concerned as  they are  made by  using silicone oil or other components of  silicone they  would not be covered by Tariff Item 15A(1) but would be covered by Tariff Item 15AA. But in no case  they would  be covered by Tariff Item 68 which is a residuary Item.  The judgment  and order  of the Tribunal as challenged  by  the  said  appellants  will  stand  modified accordingly  by   holding  that   silicone  oil  simpliciter manufactured by  the appellants  would be liable to be taxed under Tariff  Item 15A(1)  while silicone  oil emulsions and other preparations  containing silicone  manufactured by the appellant will  be covered by Tariff Item 15AA and in either case  residuary   Tariff  Item   68  would  not  apply.  The respondent authorities  are  directed  to  reframe  relevant assessments accordingly  and recompute the excise payable by the appellant  for the  relevant period.  So  far  as  Civil Appeal No.1507  of  1984  is  concerned  the  disputed  item manufactured by  the appellant consists of silicone emulsion manufactured from silicone oil. In view of our discussion in connection with  cases falling in Categories (1) and (2) and also in the light of our aforesaid findings in appeal of M/s Reliance Silicon  (I) Pvt,  Ltd. it  must be  held that  the product of  silicone emulsion  manufactured by the appellant is liable  to be  taxed under Tariff Item 15AA and not under Tariff Item  15A(1). The  judgment and order rendered by the CEGAT dated  2nd December  1983 confirming  the order of the Collector of  Central Excise (Appeals) dated 11th March 1983 and the  order of  the Assistant Collector of Central Excise dated 13th  July 1982  will be  liable to  be set aside. The respondent authorities  are directed  to re-assess  the duty liability of  the appellant  under Tariff  Item 15AA for the relevant period.      In the  result all  the appeals comprised in Categories in Categories  (1) and  (2)  are  liable  to  fail  and  are dismissed while Civil Appeal No.453 of 1986 comprised in Category (3) is partly allowed as aforesaid. In this case as detention order  dated 31st  January 1986  was based  on the



order of  the Tribunal  which is  partly set aside by us the respondent is  directed to  re-issue  appropriate  detention order, it  found necessary, in the light of recomputation of excise duty  liability during  the relevant  period as  held hereinabove by us. So far as Civil Appeal No.1507 of 1984 is concerned the same is allowed as aforesaid. There will be no order as to costs in all these appeals.