REPORTABLE          IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 6334-6335 Of 2003

Commissioner of Customs, Calcutta            …. Appellant

Versus

G.C. Jain & Anr.                                   …. Respondents        

    WITH

CIVIL APPEAL NO. 1757 OF 2004

JUDGMENT

Dr. MUKUNDAKAM SHARMA, J.

1. These appeals  are  directed against  the  judgment  and order  

dated 17.02.2002 passed by the Customs,  Excise and Gold  

(Control) Appellate Tribunal, Eastern Bench, Kolkata in appeal  

Nos.  CRV-75  and  74  of  1999,  whereby  the  Tribunal  had  

allowed the appeal of the Respondents and set aside the order  

passed by the Commissioner of Customs on the ground that  

the Butyl Acrylate Monomer i.e. the chemical imported by the

Respondents can safely be held to be an adhesive and was  

covered by the advance licences produces by the Respondents.  

2. As  per  the  facts  on record  the  Respondents,  M/s.  Sanghvi  

Overseas  imported  14  consignments  of  Butyl  Acrylate  

Monomer (hereinafter referred to as ‘BAM’) between April and  

December,  1997  and  cleared  the  same  against  advanced  

licenses by availing the benefit  of  customs Notification Nos.  

203/92  and  79/95,  without  payment  of  duty.  Another  

consignment of BAM was cleared by the Respondents under  

bill  of  entry  dated  06.03.1998  and  thereafter  one  more  

consignment was imported. The last two consignments were  

warehoused and not cleared by the authorities.  

3. In all these consignments of BAM, the Respondents declared  

the  product  as  Butyl  Acrylate  Monomer  and  claimed  the  

classification under heading 2916.12. The assessments were  

sought  by  the  Respondents  as  adhesives  under  the  DEEC  

license.

4. Enquiries  were  initiated  by  the  Revenue  against  the  

Respondents on the belief that the product imported by the  

Respondents  was defined organic  chemical  and was not an  

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adhesive.  The  Revenue/appellant  took  a  stand  that  the  

advanced licences covering imports of adhesives submitted by  

the  Respondents  for  clearance  of  the  consignments  under  

DEEC  scheme,  availing  the  benefit  of  customs  notification  

were not applicable in the matter of clearance of the goods in  

question  inasmuch  as  the  said  licences  were  for  import  of  

adhesives  and  the  product  imported  was  not  adhesive.  

Accordingly,  searches  were  conducted  in  the  offices  of  the  

Respondents  and  their  statements  were  recorded.  The  

customs clearing agent was also interrogated and efforts were  

made to find out as to whether the product in question was  

used  as  a  bonding  agent  or  not.  Shri R.K. Jain,  in  his  

statement, recorded during such investigations, deposed that  

the  product  was  used  as  a  bonding  agent  and  on  

polymerisation the same become an adhesive.  

5. The Revenue also drew the samples and sent it for testing. The  

Revenue also sought the opinion of the various experts as also  

the  persons of  the  trade  dealing  in  identical  items.  On the  

basis  of  the  material  collected  during  the  investigation  the  

Revenue formed an opinion that the BAM was not adhesive  

but was one of the raw materials for adhesive formations. As  

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such Revenue was of the opinion that the exemption had been  

wrongly claimed by the Respondents. In addition, the Revenue  

also disputed the value of the goods in question.

6. Accordingly, on the above basis the Respondents were served  

with a show cause notice proposing confirmation of demand of  

duty,  as  also  confiscation  of  the  imported  product  and  

imposition of personal penalties upon the various persons.

7. During the adjudication proceedings the Respondents took a  

specific  stand  that  the  BAM in  question  is  a  liquid  which  

becomes adhesive on polymerisation upon coming into contact  

with  light  and  heat.  It  was  argued  on  behalf  of  the  

Respondents that to prevent spontaneous polymerisation BAM  

is normally stabilised by some inhibitor and that since BAM  

polymerises readily without much requirement of processing  

and  as  after  polymerisation  the  same  shows  adhesive  

properties  it  should  be  treated  as  adhesive  only.  They  also  

placed reliance on the manufacturer’s printed literature and  

contended that it is clear that BAM is used as an adhesive.  

The  Respondents  clarified  that  BAM  does  not  possess  any  

adhesive properties in the Monomer form, but the same is an  

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adhesive in the polymer form, which process is  undertaken  

naturally when the Monomer form comes in contact with heat  

and light. The Respondents pleaded that it is not feasible and  

practicable  to  import  the  item  in  polymer  form  as  after  

polymerisation, the product immediately becomes an adhesive  

which  does  not  has  much  shelf-life.  The  Respondents  also  

pleaded their case on the point of time-bar by submitting that  

they had declared the goods in the bill of entry correctly and  

the  clearances  were  given  by  the  customs authorities  after  

drawing samples and satisfying themselves that the product  

was  an  adhesive  and  squarely  covered  by  the  advance  

licences. Their advance licences were accordingly debited by  

the  customs  authorities.  As  such  they  submitted  that  the  

longer period of limitation could not be invoked against them  

inasmuch as there was no mis-declaration on the part of the  

Respondents.

8. The  said  show cause  notice  culminated  into  the  impugned  

order passed by the Commissioner, whereby, it was held that  

BAM was not adhesive and the benefit of the advance licences  

and  the  notification  in  question  was  not  available  to  the  

importer. Accordingly, the demand of duty was confirmed by  

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invoking  the  extended  and  longer  period  of  limitation  in  

respect  of  14  bills  of  entries  on  the  ground  that  the  

Respondents had mis-declared the product in question.

9. It was also held by the Commissioner that the goods are liable  

to confiscation, but inasmuch as the same were not available,  

no  redemption  fine  had  been  imposed  by  him.  Penalty  of  

equivalent amount was imposed upon M/s. Sanghvi Overseas.  

The goods covered by the bills of entry dated 08.05.1997 and  

19.03.1998 which were under  seizure  by the Revenue were  

confiscated with an option to the Respondents to redeem the  

same  on  payment  of  redemption  fine  of  Rs.  6,00,000/-  

(Rupees six lakhs). Further penalty of Rs. 3,00,000/- (Rupees  

three  lakhs)  was  imposed  upon  M/s.  Sanghvi  Overseas  in  

relation to the importation of the goods under the above two  

bills of entries. Penalty of Rs. 65,00,000/- (Rupees sixty-five  

lakhs)  was  imposed  on  the  second  Respondent  

Shri R.K. Jain on the findings that he was the main person  

behind the imports which led to evasion of huge amount of  

customs duty and was an adviser to the importers. It was also  

observed that the evidence on record showed his active and  

financial involvement in the matter.  

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10.Aggrieved by the abovementioned order, the Respondents filed  

an appeal before the Central Excise Gold (Appellate) Tribunal,  

Kolkata submitting that the BAM in question can be classified  

as  an  adhesive  and  the  Respondents  had  rightly  claimed  

clearance of the goods on the basis of the advanced licences  

which allowed adhesive to be cleared duty free. It was pointed  

out that the Revenue also drew samples before clearance of  

the goods and it is only thereafter that the clearances were  

permitted  by  them.  The  Tribunal  by  its  order  dated  

17.02.2003 allowed the  appeals  of  the  Respondents  stating  

that  BAM  can  be  rightly  classified  as  an  adhesive  and  

therefore,  the  Respondents  had  rightfully  claimed  the  

clearance of goods on the basis of advanced licences. Hence,  

the present Special Leave Petitions have been preferred by the  

Appellant.

11. The  learned  counsel  appearing  for  the  Appellant  submitted  

before  us  that  the  Tribunal  made  a  fundamental  error  in  

ignoring  the  fact  that  the  BAM was  required  to  undergo  a  

further industrial  process to become an adhesive,  and thus  

the imported item under no circumstances could be classified  

as an adhesive. The contention is that the imported chemical  

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is  a  Monomer  organic  chemical,  which  is  one  of  the  raw  

materials used in the manufacture of adhesives, the opinion  

which  has  been  substantiated  by  various  experts  from the  

field of Industry. The appellant has alleged that the imported  

material  i.e.  BAM  (inhibited),  is  a  colourless  liquid,  lighter  

than  water,  monomer  organic  chemical  having  wide  use  in  

paint, textile and leather industry as raw material and can in  

no way be compared with other ployurathene adhesives of well  

known brands. It was further contended that in the product  

literature submitted before the Tribunal, the portion specifying  

that BAM was used as raw material for Adhesive Industry was  

erased  by  the  Respondent  Importers.    He  also  refuted  the  

Respondents’ claim that BAM in the Monomer form on coming  

in  mere  contact  with  heat  and  light  undergoes  self-

polymerization  and  au  contraire  it  was  submitted  that  it  

requires a specific industrial process.  

12.The next contention was that the Tribunal also failed to take  

into  account  that  the  difference  in  value  between acrylates  

and products obtained after polymerization is one and a half  

times  to  three  times  which  means  polymerization  involves  

complicated  technical  and industrial  processes.  It  has been  

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contended that various experts in the fields from industry as  

well  as renowned institutions have categorically opined that  

BAM is not an adhesive. It was also argued that taking into  

account the  product  literature of  M/s LG Chemicals  Ltd,  a  

manufacturer of the imported product, which was part of the  

appeal  petition,  revealed  that  BAM was  a  raw  material  for  

adhesive. It was claimed that BAM in inhibited state is quite  

different from product obtained after emulsion polymerisation  

through industrial process. Thus the form in which the goods  

were imported could not be termed as an adhesive.

13. The  learned counsel  for  the  Respondents  refuted  all  the  

contentions raised by the Appellant and submitted that ‘BAM’  

is  used  as  adhesive  in  leather  industry  and  that  during  

transportation and storage it is kept in a manner which would  

restrict it from self polymerisation. It was thus submitted that  

when the  chemical  BAM is  packed,  an inhibitor  is  used to  

keep the goods in storage condition and that as and when the  

container is opened and the chemical comes into contact with  

air, light and heat at room temperature, the BAM starts self  

polymerization by itself and suo moto and gets the properties  

of  adhesive.  He  also  pointed  out  the  fact  that  there  is  no  

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dispute  with  regard  to  the  fact  that  the  BAM  when  

polymerised becomes adhesive.  

14.Dispute  in  short  is  whether  BAM  can  be  said  to  be  an  

adhesive for the purpose of allowing the duty free clearances  

against  advance  license  issued  under  the  DEEC  scheme.  

Goods in packed condition are of no use. It can only be used  

when  it  is  opened  and  put  to  use.  We  are,  therefore,  to  

consider as to whether for all practical purposes BAM is an  

adhesive. It is admitted in the Show Cause that end-use of  

BAM is adhesive in leather industry. However, a distinction is  

sought to be made in the present case that until  monomer  

becomes  polymer,  it  is  not  adhesive.  It  is  alleged  that  in  

Monomer  form,  BAM  is  not  adhesive.  By  putting  such  an  

interpretation, an attempt has been made by the appellant to  

divest  BAM  from  the  coverage  of  adhesive.  The  issue  is  

whether  the  requirement of  opening  the  container,  allowing  

BAM to contact with air,  light and heat and even putting a  

catalyst could detract from its being an adhesive.  

15.Admittedly,  the  expression "adhesive"  is  not  defined in  the  

Act.  It  is  now well  settled  that  the  words  and expressions,  

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unless  defined  in  the  statute  have  to  be  construed  in  the  

sense in which persons dealing with them understand i.e. as  

per trade and understanding and usage.  

16. The word  "adhesive"  was  mentioned  in  the  ex-Bond  B/E  

inasmuch  as  the  appellant  sought  release  of  goods  under  

advance licences allowing adhesive as duty free import. In any  

event goods were chemically tested in the Customs House and  

goods were cleared after satisfaction of the proper officer that  

BAM  is  an  adhesive.  The  department  was  very  much  

conscious that goods were claimed as an adhesive and they  

were  so  satisfied  after  examination  of  the  goods  and  

deliberation  made  in  this  regard.  Therefore,  the  14  

consignments referred to in para 4 of the Show Cause Notice  

were cleared on the basis of advance licence under Customs  

Notification  No.  203/92-Cus.  or  79/95-Cus.  Customs  

authorities cleared the goods with consciousness and knowing  

fully well  that BAM is an adhesive.  There is no question of  

suppression of any fact before customs authorities because no  

fact was concealed. Each of the consignments were tested and  

chemically examined.

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17. Therefore,  the  counsel  appearing  for  the  Respondents  

submitted before us that the allegation made by the customs  

authorities  in  the  Show Cause Notice  cannot be allowed to  

stand on two counts.  Firstly,  the goods imported were very  

much covered by the licence and secondly, assuming, though  

denying that  the  goods were  not  covered under  the  licence  

even  then  customs  authorities  cannot  change  their  stand  

inasmuch  as  after  debiting  of  the  licence,  the  position  

becomes irreversible. Licence cannot be restored to its original  

position. The valid order of clearances made under Section 47  

of  the  Customs  Act  cannot  be  disturbed  because  of  the  

irreversible  situation.  Acceptance  of  advance  licences  for  

clearance of BAM as adhesive stands absolute and it cannot  

be  repudiated  as  licences  have  been  debited  by  customs  

authorities.  Assessment  orders  already  made  cannot  be  

disturbed in the facts and circumstances of the case. These  

are important factors and areas which are required to be kept  

in mind while deciding the issue falling for our consideration.

18.So the undisputed picture which emerges is that the imported  

chemical is in its Monomer form and becomes an adhesive on  

self-polymerisation.  The  Respondents’  case  is  that  the  self-

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polymerisation,  which  is  nothing  but  increase  in  molecular  

weight  takes  place  on  the  chemical  coming  out  of  the  

container.  The  question  is  that  whether  the  solution  in  its  

Monomer  form  can  be  considered  as  an  adhesive  or  not.  

According to the Respondents it is not practical and feasible to  

import the product in its polymerised form and the same is  

always  stored  in  its  Monomer  form.  In  fact  inhibitors  are  

added  to  avoid  self-polymerisation  of  the  product  during  

storage. It is the case of both the sides that the Monomer form  

becomes polymer form of the chemical suited to be used as  

adhesives,  when it  comes in contact with nature.  It  is only  

that  in  some  cases  where  bulk  polymerisation  is  required,  

extra heat i.e. more than the heat provided by the nature is  

required  to  increase  the  process  of  polymerisation,  as  has  

been opined in the opinions of experts brought on record by  

the Revenue. As such the Tribunal was of the view that the  

Butyl Acrylate Monomer, which undergoes self-polymerisation  

on coming in contact with the atmosphere, can be safely held  

to be an adhesive and covered by the various advance licences  

in question.  

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19.It is also noted that in the technical literature given by the  

manufacturer,  use  of  the  product  has  been  shown  as  

adhesives.  Even though the  Revenue has disputed that the  

said literature produced by the Respondents is not correct and  

is  manipulated inasmuch as the same is different than the  

manufacturer  of  identical  product  in  India,  however,  no  

concrete evidence to that effect has been led by the Revenue.  

The Tribunal has given a finding that the literature produced  

by  the  Respondents  is  of  the  Korean  manufacturer  and  is  

given  in  English language  as  well  as  Korean language  and  

there is no reason to doubt the veracity of the said literature.  

Inasmuch, as the manufacturers themselves have shown the  

use of Butyl Acrylate as adhesive as well as textile binders, we  

see no reasons to take a different view.

20.Under the DEEC scheme, the word ‘adhesives’ has not been  

defined.  Under  exemption  notification,  the  word  ‘materials’  

has been defined as under: -

“(a)  raw  materials,  components,  intermediates,   consumables,  computer  software  and  parts  required  for manufacture of export products”

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Therefore 'materials' permissible, are not only raw materials but  

are also intermediates for such raw materials, which are required  

for  manufacture  of  export  products  specified  in  the  licences,  

which in this  cases are  'Leather  Industry'  products.  The term  

used as 'material’  required for manufacture of export products  

would encompass such entities also which are not only directly  

used or usable as such in the manufacturing processes but also  

which could be used with same processing.

21.From the Encyclopaedia of Chemical Technology 4th Edition  

published by John Wiley and Sons,  it  is found for Acrylate  

Esters as in the present case it prescribes :-

"Emulsion  Polymerization:  Emulsion  polymerization  is  the  most  important  industrial   method  for  the  preparation  of  acrylic  polymers.  The  principal  markets  for  aqueous  dispersion  polymers  made  by  emulsion  polymerization  of   acrylic  esters  are  the  print,  paper,  adhesives,   textile, floor polish, and leather industries, where   they are used principally as coatings or binders.  Copolymers  of  either  ethyl  acrylate  or  butyl   acrylate  with  methyl  methacrylate  are  most  common. (Vol. 1, page 328)”

From  this  authoritative  Book,  it  is  apparent  and  can  be  

concluded,  that  BAM,  which  is  an  Acrylate  Ester,  can  be  

polymerised  by using water  to  prepare  the  'aqueous  emulsion  

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dispersion' which is used in the 'Leather Industry' as a 'Coating  

or Binder' to be an Adhesive. The aqueous preparation of this  

emulsion  would  not  require  any  elaborate  use  of  technology.  

There is no reason why BAM which on aqueous dispersion, even  

if classified under 2916.12, can be used as a binder in 'Leather  

Industry' as per this authoritative Encyclopedia on Technology,  

should  be  denied  the  benefit  of  considering  the  same  as  

adhesives.

22. The appellant has placed reliance on the judgment passed by  

the CEGAT, Mumbai in the matter of  Pioneer Embroideries  

Ltd v. commissioner of Customs, Mumbai 2004 (178) E.L.T  

933 (tri.). We have gone through the said judgment, however,  

the same is not applicable to the present case both on facts  

and law.

23.When  it  is  found  that  the  licences  produced  entitle  the  

Respondent to clear the ex-bond goods free of duty, there are  

no reasons for them to have mis-declared the values since the  

goods are duty free. There appears no incentive to do so. There  

is no allegation that the licences produced will not cover the  

quantity of values, even after the alleged loading of values as  

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declared.  Therefore,  this  court  upholds  the  decision  of  the  

Tribunal.

24.It  is  also  observed  that  the  demand  is  hit  by  the  bar  of  

limitation inasmuch as the appellant had cleared the goods in  

question after declaring the same in the bills of entries and  

giving correct classification of the same. Availing of benefit of a  

notification,  which  the  Revenue  subsequently  formed  an  

opinion was not available, cannot lead to the charge of mis-

declaration or mis-statement, etc. and even if an importer has  

wrongly  claimed  his  benefit  of  the  exemption,  it  is  for  the  

department to find out the correct legal position and to allow  

or disallow the same. In the instant case the appellant had  

declared the goods as Butyl  Acrylate  Monomer with correct  

classification of the same and the word 'adhesive' was added  

in the ex-bond bill as per the appellant’s understanding that  

BAM is  an adhesive.  In these  circumstances  it  was for  the  

Revenue to check whether BAM was covered by the expression  

adhesive or not and if even after drawing of samples they have  

allowed  the  clearances  to  be  effective  as  an  adhesives  

appellant  cannot  be  held  responsible  for  the  same  and  

subsequently,  if  the  Revenue  has  changed  their  opinion  as  

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regards  the  adhesive  character  of  BAM,  extended  period  

cannot be invoked against them. As such we are of the view  

that the demand of duty in respect of 14 consignments is also  

barred by limitation.

25.Therefore, the present appeals are dismissed but without any  

orders as to costs.

                          ............................................J

                                                [Dr. Mukundakam Sharma ]

  ............................................J                              [ Anil R. Dave ]

New Delhi, July 4, 2011.

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