By TIOL News Service

MUMBAI, MAR 26, 2014: THE appellants are importing plywood. At the time of import these are being classified under heading 4412 3110 and being cleared on payment of Customs duty including CVD. After import of the said goods, these are subjected to a process of manually dipping them individually in a tank containing a solution of chemicals namely Sodium Bicarbonate, Boric Powder and Copper Sulphate mixed in water. The solution is heated to boiling point and thereafter imported plywood is removed and kept for drying. The original plywood gets coated with the chemicals. Thereafter appellant puts labels, stickers on the plywood indicating it as “Marine Plywood” and sell in the market.

Revenue's contention is that the imported goods are Decorative Plywood while the final product is marine plywood and which is classifiable under 4412 3140 if meeting ISI specification. However, since the plywood in this case is not meeting the Indian Standards Specification, these are classifiable under 4412 3190. According to Revenue the final product is “marine plywood” and since a new commodity with different name, character and use has emerged, activity of the appellant amounts to manufacture and final product is chargeable to excise duty.

The CCE, Thane-I confirmed the duty demand and hence the appellant is before the CESTAT.

It is submitted that -

++ They have imported marine plywood only and it is by mistake that the CHA has classified these under 4412 3110 instead of correct classification under 4412 3190.

++ The goods imported by them are not decorative plywood inasmuch as Decorative plywood is thinner in thickness and decorative on one side. What they have imported is marine plywood but since it is not confirming to IS specifications “IS 710-1976” these cannot be considered as marine plywood so as to be subject to classification under 4412 3140 in view of the Supplementary Note 1 to Chapter 44 of the Central Excise Tariff.

++ The imported goods are correctly classifiable under 4412 3190 and after undergoing the process mentioned continues to be classifiable under the same heading as the process undertaken by them does not amount to manufacture. The process undertaken by them improves the quality of the plywood and the plywood become powder free, borer free & termite free. That Plywood continues to be plywood but only quality improves and even applications of the product are also same.

++ Reliance is placed on a couple of case laws Osnar Chemicals Pvt. Ltd. 2012-TIOL-03-SC-CX; Shyam Oil Cake Ltd. 2004-TIOL-93-SC-CX-LB, Bharat Petroleum Corporation Ltd. 2012-TIOL-541-CESTAT-KOL, Tega India Ltd. 2004-TIOL-17-SC-CX.

The Revenue representative submitted that the appellant have imported decorative plywood and after the process it was subjected to, it becomes marine plywood; both are commercially different products and usage are also different; since a new commodity with different name, character and use has come into existence, process undertaken amounts to manufacture and hence new product is chargeable to duty. In support, the following decisions were cited - Empire Industries Ltd. 2002-TIOL-27-SC-CX, Relax Safety Industries 2007-TIOL-84-SC-CUS.

The Bench observed -

"6. We have considered the rival submission. The short point to be decided is whether the process undertaken by the appellant amounts to manufacture. There is no dispute that the goods imported are plywood. The process undertaken is only dipping the imported plywood into a boiling hot chemical solution consisting of Sodium Bicarbonate, Boric Acid and Copper Sulphate mixed in water and thereafter drying. Undoubtedly, the quality of the imported plywood improves. Final Product thus obtained is being sold as marine plywood. We find that learned Advocate for the appellant has quoted the Hon'ble Supreme Court judgement in the case of Commissioner of Central Excise, Bangalore-II Vs. Osnar Chemicals Pvt. Ltd. - 2012-TIOL-03-SC-CX. In the said case polymers and additives were added to heated bitumen resulting in emergence of polymer modified bitumen and crumbled rubber modified bitumen. The resultant products have additional properties and make bitumen more suitable for road making. In this context, the Hon'ble Supreme Court observed as under:

"x x x"

7. In our view the present case squarely falls within the scope of above mentioned Hon'ble Supreme Court decision. Here initial as well as final product are both plywood. The process only improves the quality of plywood. By coating of chemical it becomes termite free etc. We do not consider it necessary to go into the other decisions quoted by the learned Advocate for the appellant. We have also gone through the three case laws quoted by the Learned A.R. The first case is in respect of recording of the software on the CD amounts to manufacture. The question of manufacture has to be examined in the facts and circumstances of the each case and the said case does not help the cause of Revenue in the present facts and circumstances. Similar is the position relating to remaining two cases quoted by the Learned A.R."

Holding that the process undertaken by the appellant does not amount to manufacture, the demands and penalties were set aside and the appeals were allowed.

(See 2014-TIOL-449-CESTAT-MUM)