Delhi High Court
Innova Polypack P. Ltd. And Cigfil ... vs Union Of India (Uoi) And Ors. on 7 April, 2004
Author: B D Ahmed
Bench: B Patel, B D Ahmed
JUDGMENT
Badar Durrez Ahmed, J.
1. These writ petitions have been filed seeking the issuance of an appropriate writ, order or direction to quash and set aside the impugned orders dated 28.6.2002 which have been passed by the Joint Secretary to the Government of India, Ministry of Finance, whereby the petitioners' Revision Applications under Section 129DD of the Customs Act, 1962 were rejected. The said Revision Applications were filed by the petitioners against the orders-in-Appeal No. 639/2001 and 640/2001 (respectively) both dated 9.10.2001 passed by the Commissioner of Customs (Appeals), Chennai. The facts in both the petitions are identical. The common issue involved in the present petitions is whether the item exported by the petitioners falls under heading 39.29(a) or heading 39.25(a) of the Duty Drawback Sschedule of 2000-2002?
2. The petitioners had exported P.P. Woven UV Stabilized Big Bags/FIBC Bags/Jumbo Bags and claimed drawback under sub-heading No. 39.29(a) at Rs. 23 per kg on the net weight of exports. The Deputy Commissioner of Customs (Drawback) restricted the claim at Rs. 18 per kg holding that entry under heading No. 39.25 (a) was more specific for Woven Bags and bags made of plastic material other than reinforced plastics. Being aggrieved the petitioners filed their respective appeals against the said orders before the Commissioner who upheld the conclusions of the Deputy Commissioner of Customs by separate (but identical) orders-in-appeal No. 639/2001 and 640/2001 (respectively) both dated 9.10.2001. Thereafter, the petitioners filed Revisional Applications which were rejected by the Joint Secretary to the Government of India by the impugned orders dated 28.6.2002.
3. The relevant entries of the Duty Drawback Schedule of 2000-2001 are extracted as below:
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Serial/ Customs Tariff Description of goods Rate of Allocation Cus. C.Ex.
Sub-Serial Heading/Sub-heading No. Drawback
No.
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39.25 C. Woven sacks and bags
made of plastic materials
other than reinforced plastics
39.25 (a) When CENVAT facility
has not been availed.
Rs. 18.00 (Rs. 12.00 6.00
eighteen only)
per kg. of net weight
of export product
39.29 F. Jumbo bags/Box bags/Flexible
Intermediate bulk Containers (FIBC)
made of plastic materials other
than reinforced plastic
39.29 (a) When CENVAT has not been availed
Rs. 23.00 (Rs. twenty 16.00 7.00
three only) per kg. of
net weight of export product.
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The petitioners' claim is that the product exported by them should be classified under heading 39.29 covering "Jumbo Bags/box-bags/flexible intermediate bulk containers (FIBC) made of plastic materials other than reinforced plastic" whereas the contention of the department is that the products are to be classified under heading 39.25 which cover"Woven sacks and bags made of plastic materials other than reinforced plastics".
The admitted facts are that the petitioners exported "P.P. Woven UV Stabilized Big Bags/FIBC Bags/Jumbo Bags". From this it would appear that the product which has been exported by the petitioners clearly falls under heading 39.29. However, since the bags are woven it is the contention of the respondents that the said product also falls under heading 39.25 and, that being the case, it is their contention that heading 39.25 is the most specific entry and, therefore, the rate of Duty Drawback would be Rs. 18 per kg. rather than Rs. 23 per kg as specified under the heading No. 39.29. In fact, the respondents have merely reiterated the reasoning of the Joint Secretary given in the impugned Revisional Orders.
4. It is to be noted that the new All Industry Rates of Drawback were announced vide Notification No. 41/2000-Customs (N.T.) dated 1.6.2000. The rates notified were to come into effect on 1.6.2000. Under the new Drawback Table nine entirely new entries had been introduced which included plastic Jumbo Bags. A circular to this effect was issued being Circular No. 52/2000-Cus. Dated 1.6.2000. It is further relevant to note that prior to 1.6.2000 heading 39.25 was in existence. However, to cover Jumbo Bags/FIBC etc. heading 39.29 was introduced with effect from 1.6.2000.
5. It would also be worthwhile to examine the Harmonized System of Nomenclature (HSN) which is accepted as a guide for classification worldwide. In CCE Shillong v. Wood Craft Products: 1995 (77) ELT 23 the Supreme Court emphasized the importance of HSN in the following words:-
"18. We are of the view that the Tribunal as well as the High Court fell into the error of overlooking the fact that the structure of the Central Excise Tariff is based on the internationally accepted nomenclature found in the HSN and, therefore, any dispute relating to tariff classification must, as far as possible, be resolved with reference to the nomenclature indicated by the HSN unless there be an express different intention indicated by the Central Excise Tariff Act, 1985 itself. The definition of a term in the ISI Glossary, which has a different purpose, cannot, in case of a conflict, override the clear indication of the meaning of an identical expression in the same context in the HSN. In the HSN, block board is included within the meaning of the expression "similar laminated wood" in the same context of classification of block board. Since the Central Excise Tariff Act, 1985 is enacted on the basis and pattern of the HSN, the same expression used in the Act must, as far as practicable, be construed to have the meaning which is expressly given to it in the HSN when there is no indication in the Indian Tariff of a different intention."
Similar observations have been made by the Supreme Court in paragraphs 16 and 17 of its decision in CCE Hyderabad v. Bakelite Hylam Ltd: 1997 (91) ELT 13 as under:
" 16. For the correct interpretation of the New Tariff some relevant factors have to borne in mind. The Statement of Objects and Reasons accompanying the Central Excise Tariff Bill, 1985 which later became the Central Excise Tariff Act, 1985, inter alia, states:
"The Technical Study Group on Central Excise Tariff which was set up in 1984 to conduct a comprehensive inquiry into the structure of the Central Excise Tariff has suggested the adoption of a detailed Central Excise Tariff based broadly on the system of classification derived from the international Convention on the Harmonised Commodity Description and Coding System (Harmonised System) with such contractions or modifications thereto as are necessary to fall within the scope of the levy of Central Excise Duty. The Group has also suggested that the New Tariff should be provided for by a separate Act to be called the Central Excise Tariff Act."
17. Hence for the interpretation of the New Tariff harmonised system of nomenclature and its explanatory notes are relevant. In the case of Collector of Central Excise, Shillong v. Wood Crafts Products Ltd. - 1995 (77) ELT 23 (S.C.) = [1995 (3) SCC 452], this Court, while considering the Central Excise Tariff Act of 1985, has held that looking to the Statement of Objects and Reasons the Central Excise Tariff under the 1985 Act is based on the Harmonised System of Nomenclature (HSN) and the internationally accepted nomenclature has been adopted to reduce disputes on account of tariff classification. Accordingly, for resolving any dispute relating to tariff classification, the internationally accepted nomenclature emerging from the HSN is a safe guide, this being the expressly acknowledged basis of the structure of the Central Excise Tariff in the 1985 Act and the tariff classification made therein. In case of any doubt, the HSN is a safe guide for ascertaining the true meaning of any expression used in the Act."
In CCE Bombay v. Business Forms Ltd : 2002 (142) ELT 18, the Supreme Court observed as under:
" 2. This Court in Collector of Central Excise, Shillong v. Wood Craft Products Limited [1995 (77) ELT 23] has said:
"We are of the view that the Tribunal as well as the High Court fell into the error of overlooking the fact that the structure of the Central Excise Tariff is based on the internationally accepted nomenclature found in the HSN and, therefore, be resolved with reference to the nomenclature indicated by the HSN unless thee be an express different intention indicated by the Central Excise Tariff Act, 1985 itself. The definition of a term in the ISI Glossary, which has a different purpose, cannot, in case of a conflict, override the clear indication of the meaning of an identical expression in the same context in the HSN. In the HSN, block board is included within the meaning of the expression `similar laminated wood' in the same context of classification of block board. Since the Central Excise Tariff Act, 1985 is enacted on the basis and pattern of the HSN, the same expression used in the Act must, as far as practicable, be construed to have the meaning which is expressly given to it in the HSN when there is no indication in the Indian Tariff of a different intention."
Clearly, therefore, the HSN Explanatory Notes are entitled to far greater consideration than the Tribunal has given there."
6. From these decisions it is clear that the importance of the HSN serving as a guide in classification issues cannot be denied. Moreover, in a clarification [F.No. 600/21 (Food Colours)/98-DBK dated 11.11.1999] issued in respect of Chapter 21 of the Drawback Rates it is categorically stated that "the Customs & Central Excise Tariffs are based on Harmonised System of Nomenclature (HSN) and the Drawback Table is aligned with the First Schedule to the Customs Tariff". Therefore, it becomes apparent that the Harmonized System of Nomenclature (HSN) has to be given due weightage in considering classification matters.
7. The Harmonized System of Nomenclature classifies sacks and bags under heading 39.23 [Articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics]. However, the same carries a note at the end to the following effect:-
" The heading excludes, inter alia, household articles such as dustbins and cups which are used as tableware or toilet articles and do not have the character of containers for the packing or conveyance of goods, whether or not sometimes used for such purposes (heading 39.24), containers of heading 42.02 and flexible intermediate bulk containers of heading 63.05." [underlining added]
The implications of the note are clear: from the general heading "3923.10 -- Sacks and Bags (including cones)" falling under heading 39.23, flexible intermediate bulk containers falling under heading 63.05 have been specifically excluded. Heading 63.05 of the HSN covers "Sacks and bags, of a kind used for the packing of goods". Sub-heading 6305.32 specifically includes "Flexible intermediate bulk containers". The explanatory note with regard to sub-heading 6305.32 reads as under:-
"Flexible intermediate bulk containers are usually made of polypropylene or polyethylene woven fabrics and generally have a capacity ranging from 250 kg to 3,000 kg. They may have lifting straps at the four top corners and may be fitted with openings at the top and bottom to facilitate loading and unloading. They are generally used for packing, storage, transport and handling of dry, flowable materials."
Thus, from the Harmonized System of Nomenclature, it does appear that Flexible intermediate bulk containers have been excluded from the general heading of sacks and bags and have been specifically placed under heading 63.05. It is further to be noted that flexible intermediate bulk containers are only made of polypropylene or polyethylene woven fabrics and generally have a capacity ranging from 250 kg to 3000 kg. They may have lifting straps at the four top corners and may be fitted with openings at the top and bottom to facilitate loading and unloading. They are generally used for packing, storage, transport and handling of flowable materials.
8. It is in this context that the petitioners' product requires to be examined. There is no doubt that the petitioners exported Jumbo Bags/FIBC bags. Merely because they were woven does not mean that they ceased to be flexible intermediate bulk containers made of plastic materials other than reinforced plastics. The products, therefore, clearly fall within the specific entry under 39.29 and merely because the Jumbo Bags/FIBC exported by the petitioner were woven does not, therefore, imply that they cease to fall under entry 39.29. In our opinion, entry 39.29 is the more specific entry and entry 39.25 is the more general entry and, therefore, the products ought to be placed under heading 39.29 and the Duty Drawback ought to be calculated at the rate of Rs. 23 per kg.
9. Furthermore, even if it is assumed for the sake of argument that the products exported by the petitioners fell under both entries 39.25 and 39.29, the petitioners would be entitled to avail of that entry which gave them the higher benefit. In CCE Baroda v. Indian PetroChemical: 1997 (92) ELT 13, the Supreme Court did not interfere with the Tribunal's decision when it gave the assessed benefit of an exemption notification which was more beneficial to it. Again in the case of HCL Ltd. v. Collector of Customs, New Delhi: 2001 (130) ELT 405, the Supreme Court categorically observed that "where there are two exemption notifications that cover the goods in question, the assessed is entitled to the benefit of that exemption notification which gives him greater relief, regardless of the fact that that notification is general in its terms and the other notification is more specific to the goods." Extending the same principle to the availing of Drawback we hold that the entry which is more beneficial to the petitioners, i.e. 39.29 is the correct entry and the benefit thereof ought to have been given to the petitioners. The fact that the Authorities below and in particular the Revisional Authority gave a complete go bye to the consideration of the Harmonized System of Nomenclature as well as the clear declaration of law by the Supreme Court in parallel situations clearly requires that the impugned orders be set aside. Accordingly, we set aside the impugned orders dated 28.6.2002 and direct the respondents to process the petitioners' claims for Duty Drawback under heading 39.29 and that the petitioners be given consequential benefits.
10. The writ petitions are allowed to the aforesaid extent. There shall be no order as to costs.
