Commissioner Of Central Excise, Calcutta-I v. India Foils Ltd.

[Order per : Lajja Ram, Member (T)]. - In these two appeals filed by the Revenue, in which the respondents are M/s. India Foils Ltd., the matter relates to the classification of the product in which Aluminium Foil was backed on one side with printed polyester film, and on the other side was backed with High Density Polyethelene (HDPE) film. The second appeal relates to the consequential demand of Central Excise duty. The Asstt. Commissioner of Central Excise, Calcutta in his Order-in-Original, dated 31-7-1996 classified the said product under sub-heading No. 3920.39 of the Central Excise Tariff, which covered plastic sheets. Under an earlier Order-in-Original, dated 26-6-1996, the demand of Rs. 55,95,979/- had been confirmed. On appeal, the Commissioner of Central Excise (Appeals), Calcutta under his Order-in-Appeal, dated 26-5-1998 held that the subject goods were correctly classifiable under sub-heading No. 7607.60 of the Central Excise Tariff, which covered Aluminium Foil - backed.

In appeal, the Revenue had pleaded that in the product in question the Aluminium Foil was only a constituent material, and that therein plastics predominated in weight and it retained its character in the said product. It has also been pleaded that sub-heading No. 7607.60 would not cover Aluminium Foil which was laminated on both the sides. It was also submitted that the reliance placed by the adjudicating authority on the Explanatory Notes to the Harmonised Commodity Description and Coding System (HSN) was correct, and that the decisions rendered in the context of old Central Excise Tariff were not relevant for interpreting the entries in the new Tariff. Reference had been made to the Tribunal’s decision in the case of Indian Textile Paper Tube Co. v. Collector of Central Excise - (Tribunal) wherein it has been observed that entry in the old CET was not to be interpreted with reference to new Central Excise Tariff, effective from 28-2-1986. The Tribunal’s decision in the case of BPL Pharmaceuticals Pvt. Ltd. v. CCE, Baroda - (Tribunal) was also mentioned in which it was observed that the classification of the goods as medicines under old CET was not conclusive of classification of goods under new Tariff, Headings covered under both the Tariffs being different, and new Tariff incorporated Rules of Interpretation, which were not mentioned under the old Tariff. It was also pleaded that the Board’s Circular No. 6/89-CX. 3, dated 16-3-1989 was not applicable to the product in question as herein the lamination was on both the sides of the aluminium foil. It was also mentioned that the ratio of the Tribunal’s decision in the case of Hindustan Packaging Co. Ltd. v. CCE, Vadodara - (Tribunal) was not applicable to the case, and similarly the ratio of the Tribunal’s decision in the respondents’ own case in India Foils Ltd. v. CCE, Calcutta-II - (Tribunal) was not applicable as the goods in the two decisions are not the same. In the appeal filed by the Revenue, it had been prayed that the Order-in-Appeal, dated 26-5-1998 be set aside and the two Orders-in-Original passed by the Asstt. Commissioner of Central Excise be restored.

2. The matter was heard on 21-12-1999 when Shri T. Prem Kumar, SDR appeared for the appellants/Revenue. Shri J.P. Khaitan with Shri C.M. Gehorawat and Shri S.B. Saraf. Advocates represented the respondents, M/s. India Foils Ltd.

Shri T. Prem Kumar, SDR submitted that the product in dispute was a composite article in which aluminium foil was covered on one side with HDPE film, and on the other side with polyester film. The essential character to the product in dispute was given by the plastic component. He referred to the HSN Explanatory Notes wherein it is explained that the products consisting of plastic plates, sheets, etc. separated by a layer of another material such as metal foil, paper board, etc., remained classifiable under Chapter 39 of the Tariff. As regards the Board’s Circular No. 6/89-CX. 3, dated 16-1-1989 (which provided that if the Aluminium foil was not exceeding 0.2 mm then it would fall under Heading No. 76.07 irrespective of whether it was laminated with plastic or paper, and that in other cases, the classification would depend upon the pre-dominancy of paper or plastics), the ld. SDR was of the view that it was not relevant. While pleading for restoring the Order-in-Original, dated 31-7-1996 and 26-6-1996, he admitted that the authorities below had not looked into the product characteristics carefully. He referred to the Supreme Court’s decision in the case of Commissioner of Central Excise, Trichy v. Neycer India Ltd. - (S.C.) = 1999 (35) RLT 660 (SC) and pleaded for remand of the matter.

In reply Shri J.P. Khaitan, Advocate referred to the product characteristics and submitted that the product in question was for packing of the food articles and that the essential character to the same was provided by the Aluminium foil. The backing of the plastic/polyester film on both the sides of the aluminium foil was for re-inforcing the foil which in its nature was a thin material for use in the preparation of pouch. He submitted that the product in question was not a plastic plate/sheet, etc., but was aluminium foil backed on both the sides by other materials and that the Explanatory Notes under Chapter 39 referred to by the adjudicating authority were not applicable to the product in question. It was his submission that as all the facts are before the Tribunal and as there is no dispute on facts, there was no ground for remanding the matter. He pleaded for rejection of both the appeals filed by the Revenue.

After hearing, both the appellants/Revenue had filed written submissions, which have been taken on record.

3. We nave carefully considered the matter. M/s. India Foils Ltd. were registered with the Central Excise Deptt. for manufacture of aluminium foil, including aluminium foil backed with plastic and/or paper. They filed a classification list for approval of a product in which aluminium foil was backed on both sides; on one side the aluminium foil was backed with printed polyester film, and on the other side, it was backed with a transparent HDPE film. It was a special product for packing of food stuffs. The strength and stability to the product was provided by the aluminium foil, while feel and beauty was imparted by the printed polyester film. The transparent HDPE film was only a protective cover to the foil. The protective transparent HDPE film also ensured that the food stuff did not come in direct contact with aluminium foil. The food stuff was packed in the product in question after it was made in the form of a pouch. The HDPE film was having heat sealing property, and this property of the HDPE film helped in sealing the pouch after the packing of the food stuff in the same.

4. According to the facts on record, the usage of the product in question was for the purpose of providing protection to the food stuff like coffee, horlicks, lactogen, etc., against the transmission of moisture, vapour, etc., and also for protection against light/radiation. According to the respondents, the aluminium foil acts as a moisture/vapour barrier, light/ radiation barrier, oxygen barrier, etc. It preserves the food which is packed in the pouch made therefrom, and prevents its deterioration. After referring to the moisture vapour transmission rates of the aluminium foil and the plastic materials, the respondents have submitted that the aluminium foil was much more resistant to moisture/vapour as compared to the plastic materials.

5. From the product description, it is seen that the polyester film was printed with the description of the goods which were to be packed after the product under consideration, in the running length was converted into the form of a pouch. HDPE film was transparent and the aluminium foil was visible therefrom. For the purpose the product was meant, the HDFE film protected and reinforced the aluminium foil. The characteristics for which the product was valued were neither imparted to it by the polyester film nor by the transparent HDPE film. It was valued for its aluminium foil component.

6. The issue for consideration is the classification of such a product. The ld. Commissioner of Central Excise (Appeals) had held that the product in question was correctly classifiable under sub-heading No. 7607.60 of the Central Excise Tariff. The Asstt. Commissioner of Central Excise, who had earlier adjudicated the matter had classified the same under sub-heading No. 3920.39 of the said Tariff.

7. Heading No. 76.07 covered aluminium foil under the Chapter for aluminium and articles thereof. It was described in Heading No. 76.07 that aluminium foil even when backed with plastics would remain classified therein. Heading No. 76.07 covers the following : -

The respondents were registered with the Central Excise Deptt. for the manufacture of aluminium foils. There is no dispute that the aluminium foil excluding backing was of a thickness not exceeding 0.2 mm. From the product description, it is seen that in the product, the aluminium foil was backed on both the sides. The Commissioner of Central Excise (Appeals) had observed that even when aluminium foil was backed on both the sides, it would remain classifiable as aluminium foil. He had relied upon the Tribunal’s decision in the assessee’s own case in India Foils Ltd. v. CCE - (Tribunal) wherein classification of aluminium foil with multiple lamination was for consideration in the context of Item No. 27(C) of the erstwhile Central Excise Tariff. The aluminium foil was laminated on both the sides with polyester/paper/polyethelene, etc. The Tribunal held that the aluminium foil with multiple lamination was covered with the description of aluminium foil. In para-4 of the decision, the Tribunal observed that the product whether with a single lamination of a paper or multiple laminations with foil/paper/polyethelene, etc., would qualify to attract duty under Item No. 27(C). The Tribunal held that the product despite the multiple laminations would continue to be foils.

This decision was rendered with reference to Item No. 27(C) of the erstwhile Central Excise Tariff which referred to foils whether or not embossed, cut to shape, perforated, coated, printed, or backed with paper or other reinforcing material of a thickness, excluding any backing, not exceeding 0.15 mm. The present Tariff Heading covers aluminium foils whether or not printed or backed with paper, paper board, plastics or similar backing materials, of a thickness excluding any backing, not exceeding 0.2 mm.

For the purpose of the present controversy, the two entries had a close affinity and the decision rendered with reference to Item No. 27(C) of the erstwhile Central Excise Tariff will have application to Heading No. 76.07 of the present Tariff.

We also find that the matter is covered by the Tribunal’s Larger Bench decision in the case of Hindustan Packaging Co. Ltd. v. CCE, Vadodara - (Tribunal). The question for determination in that case was whether aluminium foil back by paper and polyethylene was classifiable under sub-heading No. 7606.00 or as laminated paper falling under sub-heading No. 4811.29 of the Central Excise Tariff. In that product, the base paper was 265 gm. per sq. metre, aluminium foil was 18 gm. per sq. metre, and polyethelene was 103 gm. per square metre. The product consisted of paper coated on one side with polyethelene, and the aluminium foil sandwiched between two layers of polyethelene film, on the other side. According to the report of the Chemical Examiner referred to in para-3 of the decision, the product was found to be aluminium foil backed on one side with paper and on the other side with the polyethelene film. In para-9, the Tribunal held as under : -

“9. It is seen that the production of the disputed product involves printing of paper followed by coating of the printed side with polyethylene and laminating of the other side with a combination consisting of aluminium foil sandwiched between two layers of polyethelene. Evidently the product in question can also be described as consisting of aluminium foil reinforced with plastic material (polyethelene) and backed with paper, paper-board. Under these circumstances and in view of the fact that it has not been claimed by either side that the thickness of the aluminium foil in the goods (excluding any backing) exceeds 0.15 mm. in our view the product in question has to be deemed as ‘Aluminium foil’ conforming to the definition ‘Foil’ incorporated in Note 1 (viii) of Chapter 76 of the Central Excise Tariff and accordingly its classification under Chapter 48 would be ruled out in terms of Note 1 (1) to Chapter 48 and it would be correctly classifiable as ‘Aluminium Foil’ under Heading No. 76.06.”

Foil was defined in Note I (VIII) of Chapter 76 as it stood prior to its substitution w.e.f. 1-3-1988 as under :-

“A flat product of rectangular section, of thickness (excluding any backing) not exceeding 0.15 ml. mt., whether or not embossed, cut to shape, perforated, coated, printed or backed with paper, paper board, plastics or other reinforcing materials.”

Under Chapter Note (L) under Chapter 48 of the Tariff, it was provided that the metal foil backed with paper or paper board was not covered by Chapter 48. In other words, the classification of such metal foil backed was to be considered under Section XV of the Tariff, which covered aluminium and articles thereof.

8. Reference may also be made to the Tribunal’s decision in yet another case of the same assessee in India Foils Ltd. v. CCE, Calcutta-II - (Tribunal). The question involved in that case was whether the aluminium foil pouch was classifiable under Heading No. 76.07 or under Heading No. 76.12 of the Tariff. The Tribunal observed that the essential characteristic to the product was given by the aluminium content in the shape of aluminium foil, and the fact that the aluminium foil was backed by plastic on both the sides, both inside and outside of the aluminium metal foil as in the present case, did not take the product away from the category of aluminium foil as given in Chapter Note 1(d) of Chapter 76 which is extracted below: -

(d)  Plates, sheets, strip & foil :

Flat-surfaced products (other than the unwrought products of Heading No. 76.01), coiled or not, of solid rectangular (other than square) cross-section with or without rounded corners (including modified rectangles of which two opposite sides are convex arcs, the other two sides being straight, of equal length and parallel) of a uniform thickness, which are:

- of rectangular (including square) shape with a thickness not exceeding one-tenth of the width.

- of a shape other than rectangular or square, of any size provided that they do not assume the character of articles or products of other headings.

Heading Nos. 76.06 and 76.07 apply inter alia to plates, sheets, strips and foil with patterns (for example, grooves, ribs, chequers, tears, buttons, lozenges) and to such products which have been perforated, corrugated, polished, or coated, provided that they do not thereby assume the character of articles or products of other headings.’

It was held that the aluminium foil pouch used as container for containing tobacco, coffee, powder, etc., was classifiable under Heading No. 76.12.

The present product in question was in flat form and was usable for making the foil pouch classifiable under Chapter 76. Thus, this Tribunal’s decision confirms that the aluminium foil which is backed by plastics both inside and outside of aluminium foil will continue to be covered by Chapter 76 of the Tariff.

9. The Asstt. Commissioner of Central Excise, whose order has been reversed by the appellate authority had classified the product under consideration in sub-heading No. 3920.39 of the Tariff. Chapter 39 covered plastics and articles thereof. Heading No. 39.20 covered - non-cellular, plates, sheets, film, foil and strip of plastics. The plastic sheets even when laminated or supported or combined with other materials, remained classified therein. In the product in question, it was not the plastic film which was laminated, supported or combined with the aluminium foil but it was the aluminium foil which was backed with plastics on both the sides.

10. Chapter Note 10 of Chapter 39 provided that in Heading Nos. 39.20 and 39.21, the expression ‘plates, sheets, film, foil and strip’ applied only to plates, sheets, film, foil and strip, other than those of Chapter 54, (which relates to man made filaments and with which we are not concerned) and to blocks of rectangular geometric shape whether or not printed or otherwise surface worked, uncut or cut into rectangles, including squares, it was provided in this Chapter Note that if the products were further worked they were not to be classified in those headings.

The expresssion ‘further worked’ had come-up for consideration before the Tribunal in the case of Kerala Books and Publication Society v. CC - (Tri.). The imported rubber plates had end fittings, metal strips (bar) at the two edges of the rubber sheets and were ready for fitment conditions. They were found to be further worked for the purposes of Note 9 to Chapter 40 of the Customs Tariff, which was similarly worded as Note 10 of Chapter 39 of the Central Excise Tariff.

In the case of Collector of Central Excise v. Kasturi & Sons - (Tri.), the imported goods - rubber blankets were found to be attached with metal brackets on both the sides. This fixation of metal bars/brackets to the edges on both the sides of rubber blanket sheets was found to be ‘further worked’.

11. Reliance has been placed to the Explanatory Notes of the HSN at page 554, which provided that Chapter 39 also covered the products consisting of plastic plates, sheets, etc., supported by a layer of another material such as metal foil, paper board, etc., provided that they retain the essential character of articles of plastics. According to the HSN Explanatory Notes the factors which determined essential character will vary on between different kinds of goods and may be determined by the nature of the material or component, its bulk, quantity, weight or value or by the role of a constituent material in relation to the use of the goods. No general principles could be laid-down as to how and in what circumstances Rule 2(a) of the Rules for interpretation could be pressed into service for assessment of the particular goods. In each case the factors enumerated in the Explanatory Notes would have to be taken into consideration individually and then collectively to determine whether the article had the essential character for classification under a particular Heading (refer Tribunal’s decision in the case of Bharat Heavy Electricals Ltd. v. CC, Madras - (Tribunal).

It is also seen that Rule 1 of the general rules for the interpretation of the Tariff is of general application providing that for legal purposes classification shall be determined according to the terms of the headings and any relative section or Chapter Notes. Thus, the classification has to be first determined in terms of the Headings of the schedule read with applicable section and chapter notes. Resort to the general rules other than Rule 1 can be only when the classification is not possible in terms of headings read with applicable section and chapter notes.

It has already been discussed above that the various characteristics for which the product was valued, were imparted to it by the aluminium foil, and not by the plastic component. The plastic was used by way of backing, and it was the aluminium foil which was reinforced and not the plastics. It is also on record that the aluminium foil was of comparatively higher value (refer page 6 of the Order-in-Appeal).

12. The function of an article is one of the most important criteria for determining the essential character of an article. The Supreme Court in the case of Atul Glass Industries Ltd. v. CCE - (S.C.) had observed that the identity of an article is associated with its primary function and that it was only logical that it should be so. When a consumer buys an article, he buys it because it performs a specific function for him. There is a mental association in the mind of the consumer between the article and the need it supplies in his life. It is the functional character of the article, which it identifies in his mind.

13. In the Board’s Circular No. 6/89-CX. 3, dated 16-1-1989, it has been clarified that if the aluminium foil is not exceeding 0.2 mm then the printed plastic/paper laminated with aluminium foil, printing being on either one would fall under Heading No. 7607.00 irrespective of whether it is laminated with plastic or paper. It has been further clarified that in other cases the classification would depend upon the pre-dominancy of paper or plastic. The ld. Commissioner of Central Excise (Appeals) has referred to this Board’s Circular, and in the facts and circumstances of the case, we find ourselves in agreement with the conclusions drawn by him.

14. The ld. DR had prayed for remand of the matter. We find that all the faces are on record. The matter has been discussed in detail by the appellate authority. In the facts and circumstances of the case, we find no justification for remanding the matter. In the case of Dimple Overseas v. CC, Kangla - (S.C.), the Hon’ble Supreme Court had observed that when the evidence was sufficient to record a finding on merits, it was an exercise in futility to remand the matter.

15. The case law referred to by the Revenue is not appropriate to the matter at hand. In the case of Indian Textile Paper Tube Co. v. CCE - (Tribunal), it was observed that entry in old Excise Tariff was not to be interpreted with reference to the new Excise Tariff effective from 28-2-1986. In the present case, the entries in the old Tariff as well as in the new Tariff had been discussed above. It has also been observed that there was no material difference in the two entries and thus, the general observations with reference to the entry in the old Tariff could be taken note of in deciding the matter under the new Tariff.

In the case of BPL Pharmaceuticals Pvt. Ltd. v. Collector of Central Excise, Baroda - (Tribunal), the matter related to the classification of the medicines. The Tribunal observed that the classification of the goods as indicated under old Tariff was not conclusive of the classification of goods under new Tariff. We find that the nature of the products has been clearly described and the case law referred to by the ld. Commissioner of Central Excise (Appeals) is relevant for determining the classification under the new Tariff. In the case of Commissioner of Central Excise, Trichy v. Neycer India Ltd. - (S.C.) = 1999 (35) RLT 660 (SC) the Supreme Court had observed that the Tribunal should have first decided whether items though described as fittings, were parts or accessories of flushing cistern before deciding the question of inclusion of their cost in the value of flushing cistern. The case was remanded by the Apex Court. We do not consider that the facts in that case were similar to the one in the present proceedings.

16. Keeping in view all the facts and circumstances of the case, we do not find any infirmity in the view taken by the ld. Commissioner of Central Excise (Appeals). Both the appeals filed by the Revenue are rejected. Cross objections filed by the respondents are also disposed of in the above terms. Ordered accordingly.