Introduction: In a significant ruling by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Ahmedabad, chemically modified High-Density Polyethylene (HDPE) was granted exemption from customs duty. The court opined that even though the HDPE was chemically modified, it still retained its original character, and thus, was covered under exemption Notification No. 12/2012-Cus dated 17.03.2012.
Analysis: The case involved Vikram Plasticizers, who had imported chemically modified HDPE granules. The department argued that the modification meant the HDPE no longer remained as such, and hence, should not benefit from the exemption notification. However, the counsel for Vikram Plasticizers successfully argued that the chemically modified HDPE still retained its character. The Tribunal agreed, pointing out that though the HDPE was mixed with a minuscule percentage of different chemicals, it remained predominantly HDPE. Therefore, it was eligible for the exemption outlined in Notification No. 12/2012-Cus. This judgement provides valuable insights for industries dealing with chemically modified products, providing a clearer understanding of how such materials may be classified for taxation purposes.
Conclusion: The CESTAT ruling is a noteworthy judgement, affirming that chemically modified HDPE, despite its modification, still remains classified as HDPE and hence is entitled to the associated exemption from customs duty. This judgement adds another important layer to the understanding of how chemically modified materials should be classified and could be a vital reference for future cases involving similar circumstances.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The issue involved in the present case is that whether the high density polyethylene granules which is chemically modified is liable for exemption Notification No. 12/2012-Cus dated 17.03.2012. (Serial No. 237) or otherwise.
2. The case of the department is that since HDPE granules imported by the appellant is chemically modified the same does not remain as HDPE and accordingly, the exemption Notification No. 12/2012-Cus dated 17.03.2012. will not be available to the appellant.
3. Shri S.J. Vyas, learned Counsel at the outset submits that the sample of the imported goods were drawn and tested by Customs House laboratory and as per the report, the goods in question is not other than the high density polyethylene therefore, even though the imported HDPE granules are modified but the character of High Density Polyethylene is maintained and accordingly the goods is clearly covered under exemption notification. In support, he placed reliance on the following decisions :-
2023 (4) TMI 928 – CESTAT AHMEDABAD – C.C. -Kandla vs. PSL Limited
2013 (8) TMI 851 CESTAT AHMEDABAD – Ratnamani Metal & Tubes Limited vs. CC Kandla
4. Shri Tara Prakash, learned Deputy Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order.
5. On careful consideration of the submissions made by both the sides and perusal of record, we find that the disputed issue in the present case is the eligibility of exemption Notification No. 12/2012-Cus dated 17.03.2012. in respect of High Density Polyethylene. The said notification with the relevant entry No. 237 is reproduced below:-
|Chapter or Heading or Sub-heading or tariff item||Description of goods||Standard rate||Additional duty rate||Condition No.|
|236.||3901 to 3915 (except 3908)||All goods||7.5%||–||–|
|237.||3901||The following polymers of ethylene, namely :-
(i) Low density polyethylene (LDPE),
(ii) Linear low density polyethylene (LLDPE),
(iii) High density polyethylene (HDPE),
(iv) Linear medium density polyethylene (LMDPE),
(v) Linear high density polyethylene (LHDPE)
From the above notification it can be seen that as per the Serial No. 237, the polymers of ethylene mentioned at serial (iii), it is clear that exemption is granted to High Density Polyethylene (HDPE). Now it is to be examined that the appellant’s goods falls under the description of High Density Polyethylene or otherwise. We find that Customs department drawn sample and got it tested from Customs House laboratory, Kandla which has reported that goods are chemically modified polymers. The samples were re-tested to ascertain the goods imported are chemically modified or otherwise. The test report dated 24.12.2014 showed the report as –
“The sample is in the form of whitish transulent granules. It is composed of Polymer of ethylene (HDPE). It is chemically modified.”
It is for this reason that department has contended that the goods imported by the appellant being chemically modified is not HDPE. From the exemption entry provided under serial No. 237 of Notification No. 12/2012-Cus dated 17.03.2012., we find that in both the reports it is categorically reported that goods is predominantly HDPE. On going through the composition of the product, as per supplier’s test report, we find that composition is as under:-
From the above composition, it can be seen that the product is high density polyethylene and it consists of 98% ethylene by weight. Therefore, even though some additives in very miniscule percentage exists in the composition but chemical character of the product i.e. high density polyethylene does not get altered and the same cannot be classified in any other entry other than high density polyethylene.
6. Therefore, we are of the clear view that even though miniscule percentage of different chemicals including additive mixed with HDPE, the goods remain as high density polyethylene and therefore clearly covered under the exempted entry in Notification No. 12/2012-Cus dated 17.03.2012.. The judgments cited by the learned Counsel also support their case. Accordingly, we are of the view that the appellant is entitled for exemption under Notification No. 12/2012-Cus dated 17.03.2012. in respect of their imported goods i.e. High density polyethylene. Hence the impugned order is set-aside and the appeal is allowed.
(Pronounced in the open court on 24.07.2023)