Holding

The Tribunal's order is upheld because the notes to Chapter 48 exclude paper‑plastic composite articles, making the goods liable to duty under heading 39.01/06, and the counter‑vailing duty under item 68 is lawful.

Summary

Raja Radio Co imported Class‑E high‑temperature resisting material consisting of presspahn paper laminated with polyester film and paid customs duty under heading 39.01/06 of the Customs Tariff Act, 1975, together with counter‑vailing duty under tariff item 17(2). The company later claimed a refund, arguing that the goods were electrical‑grade insulation paper covered by Notification No. 37 and therefore dutiable under heading 48.01/21. The Assistant Collector and the Collector (Appeals) rejected the claim, classifying the goods under heading 39 based on the plastic content and weight. The Customs, Excise and Gold (Control) Appellate Tribunal upheld the classification under heading 39 and the levy of counter‑vailing duty under item 68. Both the importer and the Revenue appealed to the Supreme Court. The Court held that the notes to Chapter 48 expressly exclude paper reinforced with plastic from that chapter, so the goods fall under heading 39.01/06, and found no error in the counter‑vailing duty under item 68. Consequently, both appeals were dismissed.

Issues considered

Whether the imported Class‑E insulating material should be classified under heading 39.01/06 (artificial resins/plastics) or heading 48.01/21 (paper and paper board) of the Customs Tariff Act, 1975.
Whether the counter‑vailing duty on the goods should be levied under tariff item 68 or under item 17.

Legislation cited

Customs Act, 1962s. Section 25
Customs Tariff Act, 1975

Subjects

customs dutyclassificationtariff headingspaper‑plastic compositecounter‑vailing dutynotification 37interpretation of scheduleelectrical insulation paper

Judgment

t
MIS. RAJA RADIO CO., BOMBAY A
v.
•l. COLLECTOR OF CUSTOMS, BOMBAY

MAY 2, 1995
B
[R.M. SAHAI, S.B. MAJMUDAR AND SUJATA V. MANOHAR, JJ.]

Customs Tariff Ac~ 1975:

...
~""' Excise-import of Class E high temperature resisting materiaf-Paper
with plastic coatings and electrical insulating paper-Levy of duty-Held c
leviable under heading 39.01/06 and not under 48.01/21-Levy of counter
vailing duty under Tariff Item 68 held proper.

The appellant-Company imported a consignment of Class E and
other high temperature resisting material comprising of either a sheet of D
temperature resisting paper (popularly known as presspahn) which Is
coated on one side with a thin layer of polyester Olm or two layers of
;.. presspahn in which a polyester Olm is inserted for rigidity and added
Insulation. The polyester film so used enhances the lnsnlating property of
the presspahn and serves the same basic function of insulation as is
Imparted by the presspahn. These goods are used to provide insulation E
against the high temperature generated in the coils of electric motors. the
appellant paid duty on these goods under Heading 39.01/06 of the Customs
Tariff Act with Counter-vailing duty under Tariff Item 17(2) of Central
Excise Tariff but later claimed refund on the ground that these goods were
,.I., dutiable under Heading 48.01/21 of Customs Tariff Act read with notifica· F
lion No. 37-Customs dated 1.3.1978. The claim was dismissed by the
Assistant Collector on the ground that E-class paper coated with plastic
is considered as plastic material assessable under Heading 39.01/06. The
Collector (Appeals) held that the weight of imported material being far in
excess of 180 grams per sq. mt it was paper board to which the notification
was not applicable. On further appeal .the Customs, Excise and Gold G
(Control) Appellate Tribunal held that the plastic component being more
... active in the case of E class insulating materials the goods were to be
treated as resin or plastic material covered by Entry 39. As regards the
counter-vailing duty the Tribunal held that it was leviable under Item 68
of the Customs Tariff. H
1037
1038 SUPREME COURT REPORTS (1995] 3 S.C.R.

A Against the decision of the Tribunal both the assessee and the
Revenue preferred appeals before this Court. <·

Dismissing the appeals, this Court

HELD : 1. The order of the Tribunal is upheld but for different
B reasons. In view of Rule I of the Rules for interpretation of the Schedule, as
it stood, the headings in Chapters 39 and 48 have to be determined accord-
ing to notes. They cannot be ignore. There is nothing either in the notes or
in the heading of 39.01/06 to suggest that it applies to paper coated with
plastic. In fact the word such as to amplify the words 'artificial resin' in the
c heading has not been used before artificial plastic material. Read on its own
probably it would have been difficult to include paper laminated with
polyester lilm. But when the notes in Chapter 48 dealing with paper and
paper board are examined, then the entire picture changes. The entry under
heading 48.01/21 during relevant period was very wide. It included com-
posite paper and impregnated or coated paper. When the notification No.
D 37 exempted electrical insulating paper falling under Chapter 48 then it
obviously meant that such material fell under the entry. The Tribunal lost
sight of the fact that the notes to Chapter 48 mentioned that the Chapter did
not cover certain items, one of them being mentioned at (e). The effect of .
note(e) was two-fold, one that it excluded such papers which were coated
E with plastic or laminated with polyester lilm from heading 48 and other that
they were covered in Chapter 39. Therefore, paper of the type imported by
the appellant which had plastic coating and were electrical insulating paper
was properly subjected to duty under 39.01/06. (1043-D, E, 1044-B-D, Fl

2. Revenue has failed to demonstrate that the order levying counter-
F vailing duty under Tariff Item 68 suffers from any error of law. (1045-B]

Sumise Electric Corporation, Bombay v. Collector of Customs, Born-
bay, (1983) 13 ELT 1038 and [1983) 14 ELT 2465 and Collector of Customs,
Bombay v. Wash Udyog Sawa11twadi, (1987) 31 ELT 73, referred to.
G CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 32-39 of
1986 Etc.

From the Judgment and Order dated 13.2.85 of the Central Customs
•
Act, 1962 of the Customs Excise and Gold (Control) Appellate Tribunal,
H New Delhi in Order No. 42 to 49 of 1985-0.
t
RAJA RADIO CO. v. COLLECTOR OF CUSTOMS [R.M. SAHA!, J.] 1039

Dushyant Dave, U.A. Rana, Rajiv Tyagi, Anand Prasad and B.R. A
Atre for Gagrat & Co. for the Appellant.

M. Gourishankar,. R.P. Srivastava and V.K. Verma for the Respon-
dent.

The Judgment of the Court was delivered by

R.M. SAHA!, J. These are two sets of appeals, one filed by the
importer and the other by the Department against the order of Customs,
Excise and Gold (Control) Appellate Tribunal, New Delhi. The appellant
imported consignment of Class-E and other high temperature resisting C
materials between 1.3. 78 and 31.8. 78. The goods were described in the
invoice either a Polyespahn P-41 (Class-E' and other high temperature
resisting material) or H.P. (Class E and other high temperature resisting
. material). They are composite goods comprising of either. a sheet of
/.: temperature resisting paper (popularly known as Presspahn) ~hich is D
\ coated on one side with a thin layer of polyester film or 2 layers of
•· presspahn in which a polyester film is inserted for rigidity and added
' insulation. These goods are used to provide insulation against the high
temperature generated in the coils of electric· motors. The polyester film
so used enhances the insulating property of the presspahn and serves the E
sam~ basic function of insulation as i• imparted by the presspahn.

The goods were subjected to duty under Heading 39.01/06 C.T.A.
with Counter-vailing duty under T.I. 17(2) CET. The appellant paid the
duty. Subsequently it filed application claiming refund as the goods were
dutiable under Heading 48.01/21 CTA read with notification No. 37-Cus· F
toms dated 1.3.1978. These applications were dismissed by the Assistant
Collector as the E-Class paper coated with plastic is considered as plastic
material assessable under Heading 39.1/06. The appellant filed appeal. The
Collector (Appeals) held that the weight of imported material was far in
exeess of 180 grams per sq. mt. Therefore, it was paper board and the . G
notification no. 37 dated 1.3.78 applied to electric grade insulating paper
and not to pap~r board. It was observed that a notification was is~ued on
7th September 1978 extending the benefit of notification to pape: board as
well. But since the consignment of the appellant had been imported prior
to this date it was not entitled to exemption under the amended notification H
1040 SUPREME COURT REPORTS [1995]3 S.C.R.

A as the amended notification was prospective in operation. In further appeal
the Tribunal held that the material involved in the appe;ls was by way of
lamination of a polyester film or sheet over a layer of presspahn paper.
The Tribunal' did not agree that the composite article consisting of paper
laminated or sandwiched with plastic sheet or film having a specific
description were to be preferred to a more general description and.
B
therefore, it was interpretative Rule 3(a) of the Customs Interpretation
Ru!es which applied. It further held that the plastic component being more
active in the case of E-Class insulating materials the goods were to be
treated as resin or plastic material covered by Entry 39. The Tribunal,
however, while classifying the goods under Heading 39.01/06 held that so
c far the counter-vailing duty was concerned it was leviable under Item 68
of the Customs Tariff. The appellant is aggrieved by the classification of
goods under Heading 39 whereas the Department is aggrieved by levy of
counter-vailing duty under Item 68 instead of 17.

D Taking up the appeals of the importer, the dispute is whether Class
E and other high temperature resisting material could be subjected to duty
under Chapter 39 or Chapter 48 of the Schedule of Customs Act. The
controversy has been subject matter of three decisions by the Tribunal, two
in Sunrise Electric C01poratio11, Bombay v. Collector of Customs, Bombay,
E [1983] 13 ELT 1038 and !1983] 14 ELT 2456 and one in Collector of
·customs, Bombay v. Wash Udyog Sawantwadi, (1987] 31ELT73. The first
decision was rendered 011 5th April, 1983. The Tribunal after going into
the JS Specification of press paper both in India and Britain held that,

F "it was abundantly clear from the technical specifications contained
in the 3 Indian Standards - IS: 1576- 1967, IS: 4661-1968 and IS:
8570-1977, and the 2 British Specifications BS: 231-1975 that
presspahn paper is electrical grade insulation paper whose thick-
ness ranges from 0.10 mm. to 0.50 mm. In the absence of any
statutory demarcating line between upaper 11 and 11 board" either in
G the tariff schedule or in the relevant notification, we have to go by
the understanding in the electrical trade and industry and, for this
purpose, the Indian Standards and British Standards relevant to
paper and board for electrical purposes amply make it clear that
the thickness of presspahn paper could range from 0.10 mm to
H 0.50 mm. In the case of the imported goods are the subject matter
RAJA RADIO CO. v. COLLECTOR OF CUSTOMS [R.M. SAHA!. J.] 1041

of thi.s batch of appeals, the thickness of the imported paper ranges A
from 0.18 mm. to 0.40 mm."

Therefore, the appellants were held entitled to the benefit of the notifica-
tion. The other decision in Wash Udyog (supra) was rendered on 24.6.1983.
This decision went in favour of the Collector and it was held that the goods
imported were composite material. They owed their essential characteristic B
of electrical insulation to the plastic portion than to the paper backing.
Further, according to the Tribunal, E Class insulating material must pos-
sess temperature resistance of 120 degree C plus higher degree of dielectric
strength etc. Presspahn paper or board was not capable of giving insulation
of such high degree. The Tribunal held that such high degree of insulation C
in 'E' Class material came only from the plastic portion of the goods,
therefore, the presspahn paper or board even though impregnated could
not become insulating material in the notification. The Tribunal held :-

"Thus, it is not the bulk but the property of giving the essential
character which is the criterion applicable to the case before us D
• and since in E class insulating material the essential characteristic
I of higher degree of insulation comes from the plastic portion, the
classification has to be under Heading 39.01/06 only".

The relevant notification No. 37 of 1.8. 78 read as under : E
"In exercise of the powers conferred by sub-section (1) of section
25 of the Customs Act, 1962 (52 of 1962), the Central Government,
being satisfied that it is necessary in the public interest so to do,
hereby exempts condenser tissue paper and Electrical grade In-
sulation Paper, falling within Chapter 48 of the First Schedule to F
the Customs Tariff Act, 1975 (51 of 1975), when imported into
India, from-

(a) so much of that portion of the duty of customs leviable
thereon, which is specified in the said First Schedule, as in G
excess of 75 per cent ad valorem; and

(b) the whole of the additional duty leviable thereon under sec-
tion 3 of the second mentioned Act.

(No. 37/F.No. Bud(Cus)/78)." H
1042 SUPREME COURT REPORTS [1995] 3 S.C.R.

A The exemption under the notification was to electrical grade insulation
paper falling under Chapter 48. What is an electric grade insulation paper
r-
is explained in Encyclopedia a Britannica, volume 12, as under :-

"Electrical insulation is nonconducting material used to hold
electrical conductors in position, separating them from each other
B and from surrounding structures. Insulation forms a barrier be-
tween energized part5 of an electric circuit and confines the flow
of electric current to wires or other conducting paths as desired.
The insulation of electric circuits is a necessctry requirement ior
the successful operation of all electrical apparatu;".
c The purpose of insulating material is to form a barrier between energized
parts of an electrical circuit. Various types of materials are used as insula-
tion. Paper is one of them. In the same Volume of Encyclopedia Britanica
it is mentioned that,

D "paper is used to insulate the small wires of telephone cables and
the conductors of high-voltage power cables; in the latter case the
paper is impregnated with insulating oil to improve the quality of
the insulation 11 •

In the material in dispute, paper is impregnated with plastic to provide it
E rigidity and toughness. Since it is used in high voltage electric motions it
was electrical grade insulation. The exemption, however, is to such goods
falling in Chapter 48 of the First Schedule. It is necessary, therefore, to
advert to the Schedule, the relevant Entry in it and the manner in which it
should be interpreted. In the scheme of the Customs Act, the rate at which
F any article is subjected to duty is provided by the First and Second
Schedules. The First Schedule has sections and chapter. Each chapter has
notes, sub-notes and headings. How they should be interpreted is provided
for by incorporating internationally recognised rules of interpretation in the
beginning of the Schedule. Rule 1 of the Rules for interpretation of the
G Schedule, as it stood at the relevant period, read as under:-

"The titles of Sections and Chapters are provided for ease of
reference only; for legal purposes, classification shall be deter-
mined according to the terms of the Headings and any relative
Section or Chapter Notes and, provided such Headings or Notes
H do not otherwise require, according to the provisions hereinafter
RAJA RADIO CO. v. COLLECTOR OF CUSTOMS [R.M. SAHA!, J.} 1043

contained. The classification of goods within a Heading shall be A
determined by applying as between sub-headings the like rules as
are applicable between Headings".

Therefore, the headings in Chapters 39 and 48 have -to be determined
according to notes. They cannot be ignored. Heading 39.01/06 falls in
Chapter 39. It reads as under:- B.

Heading Rate of duty
Sub-Heading no. and description of article
No. - standard
39.01/06 Artificial resins such as condensation,
polycondensation, polyaddition, polymerisation c
and copolymerisation products; artificial plastic
materials, silicones; natural resins modified by
fusion or esterification such as runs gums or
ester gums; regenerated cellulose; chemical
derivatives of cellulose; vulcanised fibre;
hardened protein: chemical derivatives of
D
natural rubber; other high polymers (including
alginic acid, its salts and esters); linoxyn 100%

There is nothing either in the notes or in the heading of 39.01/06 to suggest
that it applies to paper coated with plastic. In fact the word such as to amplify E
the words 'artificial resin' in the heading has not been used before artificial
plastic material. Read on its own probably it would have been difficult to
include paper laminated with polyster film. But when the notes in Chapter 48
dealing with paper and paper board are examined, then the entire picture
changes. Heading 48.01/21 during relevant period read as under:-
F
Rate of
Heading
Sub-Heading No. and description of article duty -
No.
standard
48.01/21 Paper and paper board, all sourts, whether in rolls,
Sheets or cut to size or shape (including cellulose G
wadding, composite paper or paperboard and
impregnated, coated, corrugated, embossed,
perforated, surface, coloured or decorated, rule or
printed paper paperboard}; filter blocks, slabs and
plates of paper pulp; building board of wood pulp or
H
1
1044 SUPREME COURT REPORTS [1995] 3 S.C.R.

A vegetable fibre whether or not bonded with nutural
or artificial resins or similar binders; stationary made '.
of paper or paperboard; articles not elsewhere
specified, of paper, paperboard, paper pulp or
cellulose wadding:

B The entry was very wide. It included composite paper and impregnated or
coated paper. When the notification No. 37 exempted electrical insulating
paper falling under Chapter 48 then it obviously meant that such material
fell under the entry. What is electrical insulation material has been ex-
plained earlier. The Tribunal in Wash Udyog (supra) and S1t111i.<e (supra)
C [latter decision] went on the composition of article and its use and then
applied rules of interpretation. In Wash Udyog (supra) it was found that
the paper contents were 10 mils as compared to the plastic which was 1
mils but held that the goods could not be classified on basis of predominant
content but on the basis as to which of the component gave the essential
D character. It is not necessary to decide whether this reasoning is well
founded or not as what was lost sight of by the Tribunal was that the notes
to Chapter 48 mentioned that the Chapter did not cover certain items, one
of them being mentioned at (e) read as under:-

"paper-reinforced stratified artificial plastic sheeting, or vulcanised
E fibre or articles of such materials (Chapter 39)".

The effect ofnote (e) was two-hold, one that it excluded such papers which
were coated with plastic or laminated with polyester film from heading 48
and other that they were covered in Chapter 39. This exclusion was
F surprisingly not noticed by any Tribunal. Therefore, paper of the type ),
imported by the appellant which had plastic coatings and were electrical
insulating paper was properly subjected to duty under 39.01/06. It may not
be out of place to mention that this tariff schedule was amended later. And
what was clause (e) in the notes of Chapter 48 in 1978 is now (I). It reads
as under:-
G
"Paper-reinforced stratified plastic sheeting, or one layer of paper
or paper-board coated or covered with a layer of plastics, the latter
constituting more than half the total thickness, or articles of such
materials other than wall covering of heading No. 48.14 (Chapter
H 39)".
RAIA RADIO CO. v. COLLECTOR OF CUSTOMS (RM. SAIW, J.) 1045

It has by implication now included in Chapter 48 paper with coating of A
plastic if the constitution of plastic was Jess than half the total thickness.
The order of the Tribunal thus is upheld but for different reasons.

In the appeal filed by Collector (Customs) the learned.counsel failed
to demonstrate that the order levying counter-vailing duty under Tariff
Item 68 suffers from any error of law. B
In the result, both the sets of appeals fail and are dismissed. But
there shill be no order as to costs.

T.N.A. Appeals dismissed.