- (1.) THE dispute raised in the aforesaid petitions is with regard to the question whether HDPE/PP tapes are classifiable under heading No. 39.20 or heading No. 39.22 or Heading No. 39.26 of Section VII of the Schedule to the Central Excise Tariff Act, 1985. Since the controversy in all these writ petitions is the same we may notice the facts of D.B. Civil Writ Petition No. 3737 of 1989 with a view to understand the background in which these matters arise.
(2.) THE petitioner in D.B. Civil Writ Petition No. 3737/1989 is M/s Kay Poly Plast Pvt. Ltd. It is engaged in the business of manufacture of High Density Poly Ethylene tapes (for short, `HDPE tapes') and Poly Propylene tapes (for short, `PP tapes'). It appears that the petitioner purchases HDPE/PP granules. In order to convert the HDPE/PP granules into HDPE/PP tapes, the granules are poured into a machine called Extruder. In the extruder these granules are melted by heating. Due to heat the granules polymerize into a molten mass. Simultaneously with heating, mechanical pressure is applied by rotation of screw. By application of appropriate pressure a film or strip of desired gauge is obtained. This film or strip thus obtained is in a semi- finished condition. THE film or strip is cooled with the help of air in the open and is slit into tapes with the help of blades fixed in a machine called Godet machine. After silting, the tapes are stretched with the help of heat generated by heaters and by mechanical force. This not only imparts strength to the tapes but it also results in reducing the width of the tape. By this process the desired width of the tapes can be obtained. In the instant matter, we are concerned with width of the tapes not exceeding 5 mm. THEse HDPE and PP tapes are manufactured from raw materials composed exclusively of plastic. The petitioner filed a classification-list effective from 1.03.1989. Relevant part of the list reads as under: "1. HDPE/PP Tape of apparents width not exceeding 5 mm produced with or without admixture of LLDPE in small portion & used in the weaving of fabric or manufacture of sacks SECTION XI CHAPTER 54 CH. HEADING 5406 CH. SUB. HEADING 5406.90" Thus it is clear that the petitioner itself classified the product under sub-heading 5406.90. Subsequently, the petitioner filed classification-list effective from 11.08.1989 classifying the product HDPE/PP for weaving of fabric or manufacturing of sacks under Section VII Chapter 39 Heading 39.26 and sub-heading 3926.90. The petitioner on 11.08.1989 sent a letter to the Superintendent, Central Excise Range, Udaipur alongwith the revised classification for seeking approval for the change effected in classification list. On 14.08.1989, the Superintendent, Central Excise Range, Udaipur returned the revised classification list on the ground that the petitioner had not indicated the reason for change in the classification. The Superintendent, Central Excise Range, Udaipur also directed the petitioner to act according to the earlier classification. On receipt of the letter dated 14.08.1989 the petitioner, vide its letter dated 16.08.1989, deposited the excise duty according to the earlier classification. According to the petitioner, the letter dated 14.08.1989 of the Superintendent, Central Excise Range, Udaipur returning the revised classification and directing the petitioner company to clear the goods in question under earlier approved classification list amounted to rejection of the revised classification list without specifying any reason or granting any opportunity of personal hearing to it. The petitioner, aggrieved by the letter of the Superintendent, Central Excise Range, Udaipur, dated 14.08.1989 filed the instant writ petition on 6.10.1989 claiming the following reliefs: "i) allow the above writ petition of the petitioners. ii) Quash impugned order dated 14.8.89 passed by non- petitioner No. 4 as well as instructions issued by the Central Board to all collectorates directing them to classify the HDPE/PP tapes under Chapter 54 of the Schedule to the Tariff Act, 1985 by issuing a writ of certiorary or any other writ, order or direction after summoning relevant records from the non- petitioners; iii) Hold and declare that HDPE/PP tapes are classifiable under Heading 39.22/39.26 of chapter 39 of the Schedule to the Tariff Act, 1985; iv) Prohibit the non-petitioners from levying and recovering the excise duty on HDPE/PP tapes under Chapter 54; v) Direct the non-petitioners to refund the excise duty recovered from the petitioner company on HDPE/PP tapes under Heading No. 54.06 with interest atleast @ 18% from the date of payment till its refund by issuing a writ of mandamus or any other writ, order or direction; vi) An ad interim relief in terms of relief (iv) mentioned above be also granted; vii) Grant any other relief/reliefs which may do complete justice to the petitioners in the facts and circumstances of this matter; viii) Award costs of this writ petition from the non- petitioners." Subsequently, on 26.02.2001 the petitioner filed an application to amend the writ petition. The permission to amend the petition was allowed on 23.02.2001. In the amended petition, the petitioner sought the following reliefs: "(I) allow the above writ petition of the petitioners; (II) quash the impugned order dated 14.08.898 (Annexure No. 4) passed by the non-petitioner No. 4 as well as instructions issued by the Central Board to all Collectorates directing them to classify the HDPE/PP tapes under Chapter 54 of the Schedule to the Tariff Act, 1985 by issuing a writ of certiorari or any other writ, order or direction after summoning relevant records from the non-petitioners. (III) Hold and declare that HDPE/PP Tapes are classifiable under Headings 39.22/39.26 of Chapter 39 of the Schedule to the Tariff Act, 1985; in the alternative hold that HDPE/PP tapes are classifiable under sub-heading 3920.32; (IV) Prohibit the non-petitioners from levying and recovering the excise duty on HDPE/PP tapes under Chapter 54; (a) direct the respondents to allow all consequental benefits including MODVAT benefits to the petitioner with restrospective effect; (b) direct the respondents to allow the petitioner to avail MODVAT credit without complying with the formalities regarding MODVAT benefit for the past period and consequently allow petitioner such credit as regards the duty paid by them on inputs on the basis of audited accounts produced by the petitioners before the jurisdictional authorities. (V) Direct the non petitioners to refund the excise duty recovered from the petitioner company on HDPE/PP tapes under Heading No. 54.06 with interest atleast @ 18% P.A. from the date of payment till its refund by issuing writ of mandamus or any other writ, order or direction; (VI) Grant an interim relief in terms of reliefs No. (iii) and (iv) mentioned above. (VII) Grant any other appropriate relief/reliefs which may do complete justice to the petitioners in the facts and circumstances of this matter; and (VIII) Award costs of this writ petition from the non petitioners." Before we proceed to determine the questions argued before us it needs to be noticed that the Madhya Pradesh High Court in Raj Packwell Ltd. vs. Union of India (1), held that HDPE strips and tapes fall under Section VII Heading No. 39.20 sub-heading No. 3920.32 and not under Section XI Chapter 54 Heading No. 54.06, sub-heading No. 5406.90 of the Schedule to the Central Excise Tariff Act, 1985. It was also held that HDPE sacks are classifiable under the Heading No. 39.23, sub-heading No. 3923.90. While coming to the aforesaid conclusion the Madhya Pradesh High Court referred to the decision of the Central Excise & Gold Appellate Tribunal (for short CEGAT) in Shellya Industries, Bangalore vs. Collector of Central Excise (2), wherein it was held that HDPE woven sacks were articles made of plastic and were classifiable under old Schedule Item No. 15A (2) of the Central Excise Tariff. Tariff Item 15A (2) at the material time was as under: "Articles made of plastics, all sorts, including tubes, rods, sheets, foils, sticks other rectangular or profile shapes, whether laminated or not, and whether rigid or flexible including lay flat tubings and polyvinyl chloride sheets, not otherwise specified."
(3.) THE Madhya Pradesh High Court also noticed that there were two conditions for a product to be classified under tariff item 15A (2) One was that the article should be made of plastic and the second was that it should not be specified elsewhere in the Central Excise Tariff. It was further noticed by the Court that there was no dispute before the Tribunal that the HDPE woven sacks were entirely made of plastic, therefore, it was held that the HDPE sacks did not fall within the purview of Tariff Item 68 (old) corresponding to new tariff entry 54. THE Madhya Pradesh High Court also referred to the decisions of the CEGAT in Shree Radhe Industries vs. Collector of Customs & Central Excise (3), wherein it was held that since the HDPE tapes are neither man- made filament yarn nor cellulosic spun yarn, they do not fit into any of the categories of Item 18 (old). After a detailed discussion, the Division Bench of the Madhya Pradesh High Court came to the conclusion that the HDPE strips/tapes fall under the Heading No. 39.20, sub-heading No. 3920.32 and not under Heading No. 54.06, sub-heading No. 5406.90. It was also held that HDPE sacks fall under the Heading No. 39.23, sub-heading 3923.90. Subsequently, on 24.09.1992, the Central Board of Excise & Customs issued a circular under Section 37B of the Central Excise Act, 1944 whereby it was ordered that HDPE strips and tapes not exceeding 5 mm were classifiable under Heading No. 39.20. This circular was issued by the Board in consonance with the decision of the Madhya Pradesh High Court to bring about uniformity in the treatment of HDPE strips and tapes by the concerned authorities. Learned counsel for the petitioners submitted that the HDPE/PP tapes fall under Heading No. 39.26, sub-heading No. 3926.90 and are not covered under Heading No. 39.20. According to the petitioners, the HDPE/PP tapes are not strips and, therefore, cannot be covered under heading 39.20 which does not specifically mention the word "tape". ;