Case: Chemical And Fibres Of India Ltd. Collector Of Central Exci Vs. Union Of India &amp; Ors. M/S. J.K. Synthetics Ltd., Kota Nirl

These appeals and the transferred appeal raise a common question : whether polymer chips manufactured by the assessees and used by them in the manufacture of nylon yarn can be classified, for the purpose of levy of excise duty, under Item 15A in Schedule I to the Central Excises and Salt Act, 1944, as it stood during the period 1962 to 1972. For the sake of convenience we are setting out the facts in relation to the transferred appeal pertaining to M/s. Nirlon Synthetic Fibres and Chemicals Ltd.2. At all material times the company manufactured nylon yarn, a synthetice fibre under an industrial licence granted by the Government of India. For the manufacture of nylon yarn, the company imported caprolactum monomer. The company paid customs duty as well as countervailing duty on its import of caprolactum monomer. This raw material was used by the company for manufacture of nylon yarn. In the course of processing of caprolactum monomer the company obtained at an intermediate stage a product called Polymer Chips, also known as Nylon 6 Chips, which were consumed in the manufacture of the finished product, namely, nylon yarn. The question relates to the levy of excise duty on these polymer chips. The only question which now survives for our determination is whether these polymer chips can be classified under Item 15A of Schedule I to the Central Excises and Salt Act, 1944 as it stood during the period, since this period covers all the appeals3. The assessee has described the process employed in its factory for polymerisation of caprolactum monomer. Once caprolactum is polymerised, it becomes nylon. In order to change the form of this substance and give it the required properties which enable textile yarn to be produced from it further processing is required in the course of which, at an intermediate stage, polymer chips are produced. The chips are obtained for the purpose of removing the remnant monomer so that the subsequent processing becomes more convenient. these chips which are otherwise called Nylon 6 Chips, are then dried, melted and spun into continuous filament by the process of extrusion. The spun filament undergoes further processing in order to get yarn in a saleable form. Polymer chips which are produced by the assessees companies have a relative viscosity of 2.22 to 2.30. The average molecular weight ranges from 10, 000 to 18, 000. These chips are suited only for the manufacture of textile fibres and are used exclusively for that purpose.

Reasoning:
17. In the present case, since Entry 15A as it then stood, uses a commercial term "plastics" which is well known in the trade and is used in the trade, we should not go into the technical analysis of the composition and character of a plastic product. We should go by the meaning which is attached to the term plastics in the trade parlance. Plastics as understood in the trade cover all kinds of synthetic materials. As the Encylopaedia Britannica sets out very clearly, there is a distinction made in commercial parlance between materials used in the production of plastics and materials used in the production of fibres, films or rubber although they may share certain structural features. The assessee has also filed affidavits from people in the trade to say that polymer chips of the kind manufactured by the assessee are not considered as plastics by those dealing in plastics26. In other words, "synthetic resin" is a term used in plastic industry and possibly in other industries, but not in the textile industry to refer usually to unfabricated material out of which the end product is made27. While the first three descriptions/definitions of synthetic resins emphasise the plastic quality of synthetic resins, the last description clearly brings out the fact that in the synthetic fibre industry, polyamides which are used as raw material would not be termed as resins. The term synthetic resins, therefore, appears to be used in connection with plastic materials. The British Plastics Year Book of 1967 quoted earlier also emphasises that the term synthetic resins is now generally applied to all polymeric plastic materials with the possible exception of cellulosic and casein materials. Websters Dictionary (supra) has also described synthetic resins as those which may be thermoplastic ore being typical characteristics of plastic material and has clearly said that synthetic resins are used chiefly as plastics or essential ingredients of plastics as also in varnishes and other coatings and in adhesives and ion exchanges. There is no reference here to their being used in the manufacture of yarn. Websters Dictionary also states that the terms resin and plastic are interchangeable and some times the unfabricated material is called resins and the fabricated material is called a plastic. This perhaps explains why the words "artificial or synthetic resins" were added in Entry 15A to "plastics" in order to refer to and cover the raw material which goes into the manufacture of plastic material. Encyclopaedia Britannica also which was quoted earlier by us, states that while the designation "plastic" is broader generally than the term "resin", both terms are used indiscriminately with respect to synthetic products. Therefore, the reference material which is produced before us indicates that synthetic resins are used in connection with plastic material and that often the unfabricated material is referred to as resin while the fabricated article is referred to as a plastic. Polyamides which are used for the purpose of manufacture of yarn are not referred to as synthetic resin in the textile industry28. The term synthetic resin or artificial resin, therefore, far from being scientifically precise, seems to be as elusive to define as the term "plastic". The preponderance of view appears to be, however, that the term synthetic resin is used in connection with material which is used for producing articles of plastic and is not used to refer at least to material used in the textile industry29. Our attention has been drawn to "Concise Guide to Plastics" by Simmonds and Church in which a passage under the heading Polyester Resin is as follows :"In the broad sense of the term polyester resins include many types of resinuous condensation products and collectively represent a broad and expanding field in the plastics industry...... As indicated in other section, alkyd resin are basically polyester. Saturated liner polyester resins can be film or fibre forming material, for example, polyethelene, terephathalate." *This passage, however, does not assist us in the sense that it does not tell us what the terms "synthetic resins" or "artificial resins" generally refer to. It does, however, indicate that the term "polyester resin" represents the broad and expanding field in the plastic industry and saturate liner polyester resins can be fibre forming. From the passage it is not clear whether the latter are commonly referred to as synthetic resins or not. By and large, therefore, one can come to the conclusion that the term artificial and synthetic resin is used in the plastic industry to refer to various materials derived by the processes which are referred tos (i), (ii) and (iii) of Entry 15A for the purpose of producing material or products which are suitable in the manufacture of plastics. The processes which are described ins (i), (ii) and (iii) are undoubtedly technical, scientific or chemical processes and the products which are derived as a result of these processes are also described in technical terms in the said. Polyamides, for example, which are relevant in the present case, would cover, by themselves a wide range of products. However, theses come under the main heading of artificial or synthetic resins or plastic materials. Polyamides or textile grade are not plastic materials not are they referred to as synthetic resins in the textile trade. Hence polyamides of textile grade would not fall under either "Artificial or synthetic resins" or under "plastic material". They would be outside the ambit of Entry 15A. The polymer chips which are manufactured by the assessee would not, therefore, come under the category of artificial or synthetic resins also. Polyamides, however, are capable of producing plastic materials are known in the plastic trade as synthetic resins and would be covered by Item 15A.30. Since the technical literature and dictionaries which have been cited by us have emphasised the conjunction of artificial or synthetic resins with plastics, it is not possible for us to ignore this association. Therefore, even if the term "Artificial or synthetic resin" is construed as covering products derived by processes technically described ins (i), (ii) and (ii) of Clause (1) of Entry 15A, that product must answer the basic description as artificial or synthetic resin". Polyamides in the form of polymer chips of textile grade are not known as synthetic resins. They are also not plastics. Hence Entry 15A does not cover them. The assessee is, therefore, entitled to succeed.