2. study of plastics
TRANSCRIPT
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Evasion of Excise Duties in IndiaStudy of Plastics
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PREPARED BY
Narain Sinha
REVISED BY
A. Bagchi
Banwari Lai Sud
RESEARCH ASSIS TANCE BY
K. P. Thariathu
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Preface
The N ational Ins titute o f Public F inance and Policy is an
autonom ous, non-prof it organisat ion whose m ajor funct ions
are to carry out research, do consultancy work and under take
training, in the are a o f pub lic finance and policy.
The present study on the Evasion o f Excise D uty on Plas
tics is the second pa rt o f a larger study on the evasion o fexcise relating to a selected number of commodities, entrus
ted to the Institute by the Ce ntral Board o f Excise and Cus
toms, G ove rnm ent o f India. The first p art relating to Evasion
o f Excise Duty on Co pper was com pleted and subm itted to
the G ov ernm en t in 1982.
The present s tudy was carried ou t by D r N arain Sinha
w ho also prepa red the initial dra ft. T he study as well as the
draft report have been revised by Dr A. Bagchi and MrB. L. Sud.
R J Chelliah
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Contents
Page No.
Preface 103
1. Revenue Significance
and Structure o f Indian Plas tics Industry ] 052. Structure o f Exc ise Duty on P last ics 132
3. Evasion 146
4. Conclusions and Recomm endations 177
Ap pendix I: Description o f Central Excise
Tariff Item 15A from the
Levy o f D uty to date 186
Append ix II: Rates o f Excise Duty under15A 191
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1
Revenue Significance and
Structure of Plastics Industry
Revenue Significance of Plastics
P l a s t i c s were bro ug ht und er excise duty for the first tim e in
1961 with the incorporation of item 15A in the CentralExcise T ariff Schedule. A t first, the coverage of the item was
som ew hat lim ited a nd was applicab le to ce rtain specified
plastic m ateria ls and products , namely : (i) m ould ing pow ders,
granu les an d flakes; and (ii) polye thylene films, lay flat tubings
and PVC sheets. The duty was leviable at the rate of 20 per
cent ad valorem. The description o f the tariff head was ex
panded later and th e ra te o f duty was rais ed from tim e to time.
C urrently, the tariff head is broken up un der fou r sub-headsand extends no t only to plastics m aterials and articles made
o f such m aterial but also to polyu rethane foam s and articles
m anufactured therefrom . Cellophane and polyester films which
were for some tim e taxed separately are now included und er
pla stic s fo r purposes o f excise duty . The basic tariff rates are
50 per cen t ad valorem on resins and articles com ing und er
the first tw o sub-head s o f tariff item 15A and 75 per cent
ad valorem on po lyurethan e foam and articles there of taxableunder sub-items 15 A (3)an d 15A(4), respectively. The effective
rates of basic du ty vary from 10 per cent ad valorem to 75
per cent ad valorem. In addition, there is a special excise duty
at the rate of 5 per cent of the effective basic rate.
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The revenue from plastics at first was no t very significant
and fetched barely Rs ljnrore in 1961-62 forming less than 0.3
per cent o t th e to ta l C entra l excise revenue. W ith th e grow thof the plastics industry in the cou ntry and increasing use of
pla stic p roducts fo r a varie ty o f purposes, th e revenue from
pla stic s has in creased and for th e year 1982-83, stood a t Rs
1_42 cro re, ou t o f a to ta l C en tral excise revenue o f Rs 8302
crore, fo rm ing abo ut 1.7 per cent of the excise revenue. A ccor
ding to the budget estimates for the year 1983-84, the revenue
from plastics is expected to be aro un d Rs 169 crore ou t o f a
total C entral excise reven ue o f Rs 10,050 cror e (vide Table1.1). A lthough the co ntribu tion of plastics to excise revenue
has usu ally no t exceeded 2 per cent except in one or two
years, plastics com e w ithin the first 13 articles in term s o f
revenue, in the list o f com m odities included in the C entral
Excise T ariff Schedule.
A lthoug h there has been a fairly rapid grow th o f revenue
from plastics, in fact, the grow th has been faster than tha t of
C entral excise revenue as a whole, there is a feeling tha t evasion is w idesprea d in plastics pa rtly because o f the com plex
rate structu re and partly due to the struc ture of the industry
with a large num ber o f units m anufacturing plastics m ater ial
and pro du cts all over the coun try. It was, therefore, desired
by th e CBEC th a t some a ttem p t may be m ade to in vestigate
the ex tent o f evasion o f excise duty on plastics and suggest
ways o f m inimising the revenue loss. T he present re po rt is
the outcom e of the study unde rtaken by the N IPFP at theinstance of the CBEC.
Before proc eeding to cons ider the possible scope of evasion
and assessing the qu antative dimen sions o f the possible
revenue loss, it is necessary to examine briefly the na ture of
the pro du ct coming und er the description o f Plastics and
the structure of the industry.
Plastics IndustryPlastics are acknow ledgedly the w onder pro duc t o f the
tw en tieth cen tury. In the course of a few decades plastics
have com e to occupy a very im po rtan t place in m an s life and
com pete w ith tra ditio na l item s like steel, cem ent, alum inium
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T A B L E 1 . 1
Revenue Significance of Plastics (Tariff Item ISA)
(1961-62 to 1983-84)
Y e a r
R e v e n u e f r o m e x c i s e d u t ie s
( R s L a k h )
P l a s t i c s in c lu d in g A ll c o m -
c e l l o p h a n e a n d m o d it ie s
p o ly e s t e r f i l m s
C o lu m n ( 2 )
a s p e r c e n
t a g e o f
c o lu m n ( 3 )
( 1 ) ( 2 ) ( 3 ) ( 4 )
19 6 1- 6 2 1 4 2 4 8 9 3 1 0 .2 9
1 9 6 2 - 6 3 19 6 5 9 8 8 3 0 .3 3
19 6 3 - 6 4 3 0 7 7 2 9 5 8 0 .4 2
1 9 6 4 -6 5 6 2 1 8 0 1 5 1 0 .7 7
19 6 5 - 6 6 6 5 9 8 9 79 2 0 .7 3
19 6 6 -6 7 7 2 1 1 0 3 3 7 7 0 .7 0
19 6 7 - 6 8 1 1 7 2 1 1 4 8 2 5 1 . 0 2
19 6 8 -6 9 1 3 4 7 1 3 2 0 6 7 1 . 0 2
19 6 9 -7 0 2 0 0 1 1 5 2 4 3 1 1 . 3 1
1 9 7 0 -7 1 2 5 8 1 1 7 5 8 5 5 1 . 4 7
1 9 7 1- 7 2 3 0 2 2 2 0 6 1 1 0 1 . 4 7
1 9 7 2 - 7 3 3 5 8 9 2 3 2 4 2 5 1 . 5 4
1 9 7 3 - 7 4 4 1 0 8 2 6 0 2 1 3 1 . 5 8
1 9 7 4 -7 5 7 9 1 1 3 2 3 0 5 3 2 .4 5
1 9 7 5 - 7 6 7 7 5 7 3 8 4 4 7 8 2 .0 2
1 9 7 6 - 7 7 6 8 3 0 4 2 2 1 4 5 1 . 6 2
1 9 7 7 - 7 8 6 8 1 5 4 4 4 7 5 1 1 . 5 3
1 9 7 8 -7 9 9 4 6 4 5 3 4 1 9 5 1 . 7 7
1 9 7 9 - 8 0 1 1 3 0 9 6 0 11 0 9 1 . 8 8
1 9 8 0 - 8 1 1 2 7 7 3 6 5 0 0 0 2 1 . 9 7
1 9 8 1 - 8 2 1 4 3 4 6 7 4 2 0 7 4 1 . 9 3
1 9 8 2 - 8 3 ( R E ) 1 4 2 1 5 * 8 3 0 1 9 0 1 . 7 1
1 9 8 3 - 8 4 ( B E ) 1 6 8 0 0 1 0 0 5 0 4 2 1 . 6 7
N o te : P r o v is i o n a l
Sources : 1 . F o r c o l u m n ( 2 ) D i r e c t o r a t e o f S t a t i s t i c s a n d I n t e l l ig e n c e ,
Statistical Year Book, C e n tr a l E x c i s e , r e le v a n t is s u e s .
2 . F o r c o l u m n ( 3 ) , Explanatory Memorandum on the
Budget o f the Central Government.
and wood as a basic input of a wide range of industr ia l pro
ducts. In fact, plastics have proved to be m ore versatile tha n
m ost o f the t radi t ional inputs of indu stria l products because
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o f their pro pe rty o f l ight weight, dimen sional stabili ty and
easy processabili ty to form any desired shape, and the low
energy requirem ent fo r co nversion into different produ cts.A no ther advantage of plastics is th at processing can be per
formed in small un its, providing op po rtunities for self-em-
ploym en t and indu stria lisa tio n a t low cap ital cost.
As o f 1979 there were 523 factories m anu facturing plastic
material and products registered with the Central Excise
au tho rities. In 1981-82 the nu m be r was 477. O f these 115 or
nearly o ne-four th came under the jur isdict ion o f Bombay
Collectorates, accou nting for abo ut two -fif ths o f total revenue(Table 1.2).
Re venu e collected per factory du ring the years 1978-79
an d 1981-82 is given in colum ns 10 an d 11 o f T ab le 1.2. T he
collection p er facto ry seems to be high at centres where
p lastic m aterials (as distinguished from p lastic p roducts) are
manufactured.
Structure of the Plastics Industry
Broadly, the plastics ind ustry m ay be grouped und er three
broad sectors:
i . plastics raw material manufacturers;
i i . plastics processors; and
iii . plastics users, i.e. , m anu facturers o f articles of plastics.
M anu facturers o f plastics raw m aterials use several chemicals.
These raw mater ials are used to manufacture var ious types of
p lastic m aterials, finished and sem if in ished. The sem i-finished
articles are those from which the finished articles and com
ponen ts for ind ustry and everyday use are p roduced . P ro
cessors o f semi-finished plastics m aterials com prise m oulders,
laminators, fabricators, and others. These people manufacture
largely articles such as sheets, films, etc., w hich are used in
the m anu facture o f various kinds o f f inal produ cts.
Plastics raw m aterials may be classified into tw o grou ps:
(i) therm osets and ( ii ) thermoplast ics. Th erm oset t ing m ater i
als, when hea ted, undergo a chemical change a nd become ha rd
ened and furthe r heating produces no furthe r change. In this
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TABLE 1.2
Distribution of Factories and Revenue Collected Under T.I. ISA
N u m b e r o f fa c t o r i e s R e v e n u e p e r f a c t o r y
S I . C o ll e c t o r a t e E x c i s e r e v e n u e ( R s 0 0 0 ) a s o n ( R s 0 0 0 )
N o . 19 7 6 -7 7 19 7 7 -7 8 19 7 b -7 9 19 8 0 -8 1 19 8 1- 8 2 M a r c h M a r c h C o lu m n (5 ) C o lu m n 7
19 7 9 19 8 2 4- C o lu m n ( 8 ) -f- C o lu m n 9
( 1 ) ( 2 ) ( 3 ) ( 4 ) ( 5 ) ( 6 ) ( 7 ) ( 8 ) ( 9 ) ( 10 ) ( I D
1 . A l l a h a b a d 1 2 3 5 1 9 2 4 2 5 4 9 _
7 4 3 6 4
2 . B o m b a y
( 1 + I D 3 7 14 0 8 3 4 2 2 5 5 4 3 8 4 2 1 4 9 1 0 9 5 5 2 3 0 8 5 1 0 4 1 1 5 4 2 16 4 5 4 9
3 . W e s t B e n g a l
a n d C a lc u t ta 4 6 2 5 1 4 7 7 4 7 5 0 1 7 4 5 0 1 8 1 4 3 1 5 8 8 1 7 4 6 1 9 5 8 3
4 . D e lh i 4 1 6 4 4 5 5 8 8 4 4 1 3 12 8 8 3 0 0 11 3 4 2 7 2 4 8 1 1 1 2
5 . M a d r a s 2 9 0 6 9 3 1 4 0 5 3 7 9 5 9 5 0 0 6 1 6 2 3 0 7 2 3 2 4 16 5 0 2 5 9 6
6 . S h i l l o n g 8 6 1 9 8 6 5 3 9 2 9 2 7 5 9 9 4 6 2 8 1 9 2 3 4 8 9 2 0 1
7 . B a r o d a 4 4 4 0 7 4 7 7 0 0 16 6 8 5 9 4 0 5 2 2 3 4 8 5 9 7 5 9 5 7 2 17 5 6 6 7 5 0
8 . H y d e r a b a d 3 7 8 3 3 3 5 0 0 8 4 0 0 1 9 5 8 1 3 9 7 1 8 7 0 1 2 1 8 3 3 3 5 3 9 9 3
9 . M y s o r e 1 2 7 5 9 1 3 1 8 7 1 3 1 3 8 12 0 6 2 12 9 0 0 1 9 1 8 6 9 1 7 1 7
1 0 . P u n e 2 1 5 3 4 2 5 1 2 7 4 8 3 8 7 2 4 9 8 4 2 8 4 5 2 5 8 2 2 8 3 4 12 9 3
REVENUE
SIGNIFICANCE
AND
STRUCTURE
OF
PLASTICS
INDUSTRY
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( 1 ) ( 2 ) ( 3 ) ( 4 ) ( 5 ) ( 6 ) ( 7 ) ( 8 ) ( 9 ) ( 10 ) ( I D
1 1 . N a g p u r 7 7 2 2 8 7 2 9 7 9 7 2 1 0 1 3 3 8 9 9 1 2 7
12 . P a tn a 10 0 2 10 2 2 15 9 7 1 7 5 2 2 6 9 2 3 4 5 3 2 6 7 3
1 3 . J a ip u r 3 12 3 4 3 6 8 3 2 4 6 8 1 4 5 0 4 0 7 2 9 3 1 4 2 4 2 3 4 0 7 7 3 2 9
14 . C o c h in 2 7 6 8 3 1 1 6 3 8 3 9 4 1 1 6 6 1 5 0 1 6 1 0 2 4 0 6 1 5
1 5 . K a n p u r 4 5 7 1 6 9 1 3 6 9 9 6 2 5 3 8 2 4 0 9 1 3 5 5 3 8 4 8 2
16 . C h a n d ig a r h 1 7 2 3 9 1 7 9 4 5 1 4 7 5 2 1 8 1 7 4 3 2 7 3 6 4 9 1 7 7 2 1
17 . G o a 5 2 5 9 1 4 5 2 1 1 2 7 9 1 4 1 4 5 7 0
18 . G u n tu r 13 9 6 0 16 8 6 0 1 8 9 1 3 1 9 4 2 9 4 5 8 5 8 6 6 3 1 5 2 7 6 4 3
19 . A h m e d a b a d 5 4 5 7 5 8 1 7 7 7 2 0 1 2 3 9 4 1 3 1 9 8 1 0 1 1 7 7 2 12 0 0
2 0 . M a d u r a i 7 3 9 4 14 4 8 7 1 1
2 1 . B h u b a n e s h w a r 29 1 3 1 1 1 3
2 2 . I n d o r e 1 3 9 3 6 5 8 1 2 9 7 1 5 5 2 1 2 1 1 5 5 1 4 1
2 3 . M e e ru t 9 35 6 1 1 1 6 8 9 12 4 1
T o t a l/ A v e r a g e 6 6 1 7 8 7 6 6 2 2 9 5 9 16 9 8 3 1 2 3 4 9 2 1 1 3 8 0 3 4 6 5 2 3 4 7 7 1 1 7 5 5 7 2 9 3 1
Note: D o e s n o t in c lu d e fi g u re s fo r c e ll o p h a n e a n d p o ly e s t e r fil m s.
Source: D i r e c t o r a t e o f S t a t is tic s a n d In te ll ig e n c e , Statistical Year Bookt C e n t r a l B x c is e , r e le v a n t is su e s .
EV
ASION
OF
EXCISE
DUTIBS
IN
INDIA:STUDY
OF
PLASTICS
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sense the reaction is pe rm an en t. T herm op lastic m aterials, on
the othe r han d, soften when heated bu t become solid on
cooling and the phy sical change can be repe ated. Because o fthis prop erty, therm oplastics can be recycled.
Nevertheless, one advantage w hich th erm osets have over
therm op lastics is in their stability und er pressure an d high
tem peratures. Because of their stabil ity, the thermo sets ca n
no t be recycled. M ost o f their app lications therefore are in
the indu strial field. G enerally, the therm oset m aterials are
m anufac tured either in the small or the medium sector by
m ethods like cond ensation and polym erisation by the app li
cation o f hea t and pressure.
Plastics m aterials can be m anu factured in a variety o f
form s, such as solid or liquid resins, mou lding and extrusion
m aterials, coating and im preg nating resins, em ulsions, and
am ong oth ers, sheets, ro ds , tubes, films, foils, a nd profile
shapes. T he basis of each form is the synthetic resin or poly
m er, bu t according to the requ irem ent, some fillers, plasti-
cisers, stabilisers, pigm ents and othe r chemicals are also added
to yield the final plastics m aterials in a suitable con dition foruse in pro du cing finished plastics articles. M ostly, the con
cerns inv olved in m anu facture o f these m aterials are large
com panies hav ing expensive plan ts with a large capital
investment.
The follow ing are the m ost im po rtant plastics raw m ate
rials:
i. Th erm osett ing materials:
Phenol-formaldehydeAmino-plastics
Urea-formaldehyde
Melamine-formaldehyde
Alkyds
ii. T herm oplastics m aterials:
Polyethylene
Polyvinyl chloride
PolystyrenePolymethylmethacrylate
Cellulose acetate
Cellulose nitrate
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a . Therm osets . M ost of the therm osets are prod ucts of
either condensation or polycondensation or polyaddition.
The principal i tems in this group are phe nop lastics, amino-plast, a lkyds, poly ally 1 esters and o th e r u nsa tu ra ted polye
sters, epoxide resins and silicones. These resins are m ainly
used in the pre pa ration o f varnishes and paints. Some of
them are used as surface coatings or im preg nan ts, adhesives,
m oulding and casting resins. B ut a large p art o f the pro du c
tion is supplied to the fabricating or m ouldin g trade in the
form of m oulding pow ders. These are made by incorp orating
w ith the resin, w hile it is still in a fusible state , va riou s m ate rials, some of which assist the m oulding process and others
which are intend ed to give certain specific pro pe rties to the
m oulded articles. The principal use of m oulding pow ders is
in the prod uction o f electrical insulation pa rts. This rather
unspectacular use con stitutes by far the largest general ap p li
cation o f these m aterials.
The im portan t resins and m oulding pow ders coming under
the therm oset category are phen ol resins (m ouldingpow der), m ela m in e form aldehyde, urea form aldehyde, alk yd
resins and terpen e ph enolic resins. These resins are used in
the m anu facture o f laminated boa rds, rods and tubes by a
m odified m oulding techniqu e. Briefly, the techn ique consists
o f im pregnating sheets o f paper on cloth w ith the resin. The
stand ard technique is to stack a num ber o f treated sheets
together l ike a pack o f ca rds and subject the pack to heat
and pressure un til the resin is cured and the layers are bo nd
ed together. The layers o f pap er or cloth play the p art off il lers im parting g reat m echnical strength to the prod uct.
V arious m ethods of im pregnating are available.
b. T herm oplastics. U nlike the therm osets, the th e rm o
plastic s undergo no chem ic al change during th e m ould in g
pro cess. They mere ly soften and in some cases m elt when
heated and become rigid again on cooling. They do no t
req uire any fillers. H ow eve r, in som e cases a suitable plasti-
ciser is incorp orated. I t acts as a kind o f internal lubrican t
and imp roves the f low during m oulding. I t a lso adds tou gh
ness to the m aterial, d ecreasing the brittleness an d, if add ed
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in sufficient qua ntity, increases the flexibility particularly in
materials like polyvinylchloride.
Therm oplastics are generally the products o f polymerisation and copolym erisation. Polymerisation products are
obtained by the union o f several simple molecules o f the same
chemical constitution (know n as m onom ers) w ith m ultiple
carbon-carbon bonds. Similarly, copolym erisation products
are obtained from simple molecules o f different chem ical
constitution. M ost o f the thermoplastic resins can be process
ed by any o f the processing techniqu es such as extrusion,
calendering, injection mo ulding, thermoforming, and casting film. Extrusion is a major technique o f the plastics industry,
especially for the continuou s production o f pipes, sheetings
and films, wire covering for insulation, etc. This process can
be used also for making thick sheets. Calendering is con
venient for flexible PVC sheets, plain or embossed and can be
used for the purpose o f laminating a sheet to fabric or to
another plastic sheet (to make tiles).
Generally, the thermoplastic resins consist o f cellulose
derivatives, addition polymers and condensation polymers.
The m ost important cellulose derivatives are the esters like
cellulose-nitrate, cellulose-acetate etc., and the ethers like
ether-cellulose. The com mon characteristic o f these materials
is that they are all based on naturally recurring chain o f
monom ers. Raw materials for these are materials like w ood
pulp and light co tton linters. The cellulose derivatives
especially cellulose-nitrate can be extruded to form plain
sheets, whereas cellulose-acetate or triacetate is used to coat
films. Th ese films are mostly used for packaging.
Addition polymers are the most important class o f mate
rials am ong the thermoplastics. Polyethylene, wh ich constitutes
the principal member o f add ition polym er group, is made in
two principal qualities, viz., low -den sity and high-density.
In terms o f the rigidity characteristics and surface property,
high-density polyethylene (HDPE) is comparable with polys
tyrene (PS) wh ich is another form o f thermoplastics. Thelow-density polyethylene (LDP E) is principally used in the
form of film for bags and other packaging purposes. The
thickness o f such films ranges from 0.006mm to 0.12mm.
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An other mem ber of the group o f addi t ion polymers is polypro
pylene (PP) m ade by po lym eris atio n o f p ropyle ne. I t is co n
sidered stronger and m ore rigid than polyethylene. Thoughquite l ight , polypropylene is prone to oxidation unless appro
pria te sta bil is ers are added . The pp films are used in pack
aging an d fabrics. It also c an be m ade in thickness dow n
to 0.005mm.
Polyvinylchloride (PVC) is m ainly processed in a highly
pla sticis ed form w ith varyin g degrees o f flex ibility by p ro
cesses like calendering, extrusion and mouding. Like polyethy
lene, two varieties of PVC are ava ilablerigid an d flexiblewith entirely different charac teristics. Ex trusion, calendering
and m oulding o f r igid PVC is possible only w ith add itions of
stabilisers. When copolymerised with vinyl-acetate, i t is suit
able for making records.
The derivatives o f acrylic acid are called acrylics. These
are cast as sheets . A no ther im po rtant mem ber o f this group
is styrenea water-white resin, ideal as an injection material.
Fi lms extruded from this m aterial can be vacuu m -formed tobe used in packagin g.
Last ly, the conde nsation polymers consist mainly o f eng
ineering plastics like nylon, a nd polycarbonates. The extruded
films o f nylon are used in packaging and can be easily lam i
nated with polyethylene. Po lycarbon ates can be inject ion-
m oulded, blow-m oulded and extruded. Polyamides are avail-
ble as film, la m inating resin s, adhesiv es and m ould ed
compounds.
In C ha rt 1, we presen t a flow-chart showing h o w some of
the principal plast ics polymers are derived from the basic
feedstocks.
Growth of Pla stics Raw M aterials in India
a. Production o f Plastics. A t prese nt (as o f A pril 1, 1982)
total instal led capacity o f plast ics raw m aterials in Ind ia is
ab ou t 2,97,590 m etric tonnes per ann um (M TA ). In this theshare o f thermosets is abo ut 6 .5 per cent . O ut o f the to tal
capacity of 19,340 MTA for the thermoset industry, hardly 42
per cen t is bein g used. C urren tl } ,th e the m oplastic s industry
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has a pro du ction capacity o f 2,78,250 M TA . Its share in the
total produ ction capacity o f plastics com es to ab ou t 94 per
cent. A sim ilar s i tuat ion prevails in actual pro duc tion o fpla stics raw m ate ria ls . In Table 1.3 we presen t th e p roduc
tion o f m ajor plastics raw m aterials in the country during
1970-71 to 1982-83. Th e share o f therm ose t resins in the tota l
p roduction o f p la stics w as ab o u t 6 per cent in 1970-71 which
declined to 4.4 pe r cent by 1978-79. It ha s fu rth er decreased
since then and in 1982-83 it wa s ju st 3.6 pe r cent. O n the
other hand , the imp ortance o f therm oplast ics has been on the
rise during this period. This is to be expected in view of the
fact th at therm oplastics can be recycled and find their use in
many ways.
An exam ination of grow th rates of product ion o f var ious
types of plastics raw materials reveals interesting trends.
Am ong the therm osets , melamine form aldehyde has grown
fast as com pared to othe r resins. But i ts share in total pr o
du ction being the least, i t has had a negligible im pac t on the
overall grow th o f therm oset resins. Similarly, a m ong the
thermoplast ics the growth of low-densi ty polyethylene
(LDP E) h as been the m ost impressive. It is follow ed by
HD PE a nd PS res ins .
b. Consumption o f plastics. D ata on actual consum pt ion
o f plast ics in Ind ia are no t available. If im ports of plastics
raw m aterial are adde d to their prod uction and exports are
substracted we arrive a t their tota l dom estic availabili ty.
This is term ed as total consum ption o f plastics by M inistry
o f Petroleum w hich is the m ain source of date on the Ind ian
petr o -chem ic al industry . In the absence o f reli able d a ta on
the inventory o f these raw m aterials held by m anu facturers
and users, the consumption figure estimated in this way may
be taken as th e ac tua l consum ptio n . These d a ta are se t o u t in
Table 1.4.
In the yea r 1970-71, the con sum ption of therm ose t resins
was 6.79 per cent o f the total consum ption o f plast ics. T he
share fell to 3.50 pe r c en t in 1978-79, in 1980-81 it fu rth erdeclined to 31.6 per cen t. Am ong the therm op lastics, the
consum ption o f PVC was 38.4 per cent o f the total plast ics
con sum ption in 1980-81. It was followe d by LD PE (32.9 per
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S o # r c e : I n d u s t r y s o u r c e s .
EVASION
OF
EXCISE
DUTIES
IN
INDIA.STUDY
OF
PLASTICS
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TABLE 1.3
Production of Plastics Raw Materials
(Tonnes)
Products 1 9 7 0 - 7 1 1 9 7 1 - 7 2 1 9 7 2 - 7 3 1 9 7 3 - 7 4 1 9 7 4 - 7 5 1 9 7 5 - 7 6
0 ) (2) (3) (4) (5) ( 6 ) (7)
A. Thermoset
M.F. moulding powder 7 8 1 4 5 1 6 0 1 6 8 1 0 9 1 2 0
P.F. moulding power 8 2 8 6 4 3 6 3 .4 0 4 4 3 4 .4 0 6 0 3 8 .2 0 3 6 8 1. 0 0 3 6 6 5
U.F. m oulding power 17 3 5 18 2 5 .6 0 18 6 1 .3 0 2 0 1 2 . 9 0 1 5 9 0 . 0 0 18 8 7
C.A.moulding power 10 8 4 1 2 8 4 . 3 0 1 5 3 6 . 6 0 16 0 3 .4 0 10 0 8 .6 0 1 1 3 3
Sub-Total (A) 6 18 3 7 6 18 7 9 9 2 9 8 2 2 6 3 8 9 6 8 0 5
B. Thermoplastic
LDPE 2 4 4 3 7 2 8 0 6 1 . 0 0 2 8 4 2 6 4 0 2 7 3 0 1. 4 0 2 6 9 4 8 .7 0 2 7 6 3 6
HDPE 2 1 1 5 3 2 1 9 3 3 .3 0 2 15 4 6 .3 0 2 3 0 6 5 . 3 0 2 4 0 5 8 . 8 0 2 0 0 18
PS 8 9 2 5 1 2 3 1 7 . 2 0 13 0 9 7 .7 0 1 4 3 7 6 . 6 0 8 0 2 4 .2 0 9 2 0 3
PVC resins 4 1 4 7 2 4 2 8 5 0 .6 0 4 8 8 3 6 . 0 0 4 8 0 0 5 . 6 0 4 6 7 4 6 . 1 0 4 3 8 18
P P
Sub-Total (B) 9 5 9 8 7 10 5 16 2 1 1 1 9 0 6 1 1 2 7 4 9 1 0 5 7 7 8 10 0 6 7 5
Grand TOTAL 10 2 17 0 1 1 2 7 8 0 1 1 9 8 9 8 1 2 2 5 7 1 1 1 2 1 6 7 10 7 4 8 0
RBVBNUB
SIGNIFICANCE
AND
STRUCTURE
OF
PLASTICS
INDUSTRY
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(Tonnes) o?
P ro d u c ts 1 9 7 6 - 7 7 1 9 7 7 - 7 8 1 9 7 8 - 7 9 1 9 7 9 - 8 0 19 8 0 -8 1 1 9 8 1 - 8 2 1 9 8 2 - 8 3 -
( 1 ) ( 8 ) ( 9 ) ( 10 ) (ID ( 1 2 ) ( 1 3 ) ( 14 )
A , Thermoset
M .F . m o u ld in g p o w e r 1 4 4 1 8 0 1 7 8 2 4 5 2 1 4 3 2 8 3 8 6
P -F . m o u ld in g p o w e r 4 0 7 8 .6 0 4 3 7 8 4 2 3 6 4 5 9 2 4 7 9 4 4 5 5 6 4 3 0 8
U . F . m o u l d i n g p o w e r 2 2 8 0 . 9 0 2 2 2 6 2 4 9 7 3 0 7 7 2 8 4 5 3 2 4 9 2 7 9 5
C . A . m o u l d i n g p o w e r 1 0 2 5 . 8 0 9 9 0 7 6 5 6 2 7 3 2 4 2 9 1 6 7 7
S u b -T o t a l ( A ) 7 5 3 0 7 7 7 4 7 6 7 6 8 5 4 1 8 1 7 7 8 4 2 4 8 1 6 6
B . Thermoplastic
L D P E 2 5 7 4 1 . 2 0 1 8 4 5 1 5 6 0 2 8 7 1 2 7 5 8 7 1 5 4 9 4 2 9 3 10 6 14 8
H O P E 2 5 1 7 7 . 3 0 2 5 5 8 5 2 8 0 7 3 2 5 3 8 0 2 4 2 9 3 3 1 7 3 2 3 2 7 0 2
P S 1 3 3 9 8 . 2 0 13 5 6 9 14 4 7 4 1 2 0 3 6 1 0 2 0 5 7 6 4 2 12 5 8 0
P V C re si n s 4 7 4 9 9 .7 0 5 9 0 2 3 6 2 6 4 3 4 9 8 9 1 5 2 0 5 0 3 7 0 3 7 4 16 4 8
P P 7 1 2 7 1 3 4 2 5 1 6 7 2 9 2 0 6 4 4 2 4 0 18
S u b - T o ta l (B ) 1 1 1 8 1 6 11 6 6 2 8 16 8 3 4 5 17 2 0 0 7 1 8 0 4 3 1 1 9 1 3 4 8 2 17 0 9 6
G r a n d T O T A L 1 1 9 3 4 6 12 4 4 0 2 17 6 0 2 1 18 0 5 4 8 18 8 6 0 8 19 9 7 7 2 2 2 5 2 6 2
Note'. * P r o v is io n a l
Source: M i n is tr y o f P e tr o le u m , Indian Petrolem and Petr ochemicals Stat is tics , E c o n o m ic s a n d S t a ti s t ic s D iv is io n ,G o v e r n m e n t o f In d ia , N e w D e lh i (v a r io u s is su e s ).
BVASION
OF
EXCISB
DUTIES
IN
INDIA:STUDY
OF
PLASTICS
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Estimated Consumption o f Plastic Raw M aterials
( T o n n e s )
P r o d u c t s 1 9 7 0 - 7 1 19 7 1- 7 2 1 9 7 2 - 7 3 1 9 7 3 - 7 4 19 7 4 -7 5 19 7 5 -7 6 1 9 7 6 - 7 7 1 9 7 7 - 7 8 1 9 7 8 - 7 9 19 7 9 -8 0 19 8 0 -8 1
( 1 ) ( 2 ) ( 3 ) ( 4 ) ( 5 ) ( 6 ) ( 7 ) ( 8 ) ( 9 ) ( 10 ) ( U ) ( 12 )
A. ThermosetsM .F . m o u ld in g
P o w d e r
P .F . m o u ld in g
7 8 1 4 8 1 6 0 16 8 7 6 1 2 0 1 4 4 1 8 0 1 7 8 2 4 5 2 1 4
p o w d e r
U . F . m o u ld in g
3 3 6 7 4 3 3 3 4 4 6 6 5 9 1 2 3 8 9 3 3 6 6 1 4 0 4 2 4 6 7 3 4 2 8 7 4 7 5 3 5 2 1 4
p o w d e r
C .A . m o u ld in g
16 6 3 18 2 3 1 8 9 3 2 0 0 5 1 6 8 5 19 3 9 2 2 8 3 2 2 6 1 2 5 0 6 3 0 7 1 2 8 7 0
p o w d e r 1 1 7 0 13 8 4 16 7 6 17 0 6 13 9 7 1 4 6 5 1 0 6 8 1 2 3 5 10 9 3 6 8 9 3 8 7
B.
S u b - T o t a l (A )
Thermoplastics
6 2 7 8 7 6 8 5 8 1 9 8 9 7 9 1 7 0 5 1 7 1 8 5 7 5 3 7 8 3 4 9 8 0 6 4 8 7 5 8 8 6 8 5
L D P E 2 2 9 8 8 2 8 5 2 5 3 0 0 13 3 3 2 0 2 2 7 6 2 1 3 5 0 1 2 3 4 2 3 0 5 3 7 3 8 8 3 7 7 0 7 3 6 3 3 9 0 5 4 4
H D P E 1 3 5 9 0 2 1 5 7 5 2 4 2 7 5 2 9 0 2 9 2 7 19 9 2 1 4 7 9 3 3 3 6 7 4 8 5 7 4 5 4 2 5 1 6 2 7 0 6 5 9 6 2 4
P S 8 1 8 9 1 2 4 4 3 1 3 5 1 0 1 4 8 4 0 8 18 1 9 6 1 0 1 3 6 3 9 1 4 1 0 2 1 5 5 3 1 1 2 4 5 7 10 5 5 2
P V C r e s in s 4 1 4 5 2 4 2 5 4 0 4 9 5 8 6 4 8 9 7 3 4 7 4 5 3 4 4 2 2 3 4 7 7 9 6 6 7 2 2 7 6 8 7 3 6 8 1 9 5 3 1 0 5 7 6 8
S u b - T o t a l ( B ) 8 6 2 1 9 1 0 5 0 8 3 1 1 7 3 8 4 1 2 6 0 4 4 1 1 0 4 5 4 1 1 0 3 2 4 12 9 0 3 2 1 8 3 6 4 1 2 2 2 2 8 8 2 3 0 7 4 9 2 6 6 4 8 8
G r a n d T O T A L
( A + B )
9 24 9 7 1 1 2 7 6 8 1 2 5 5 8 2 1 3 5 8 3 5 1 1 7 5 0 5 1 1 7 5 0 9 1 3 6 5 6 9 1 9 1 9 9 0 2 3 0 3 5 2 2 3 9 5 0 7 2 7 5 1 7 3
Source: M i n is tr y o f P e tr o le u m , Indian Petroleum and Pe troche micals Stat is tics , E c o n o m i c s a n d S t a t is t ic s D i v is io n , G o v e rn m e n t o f I n d ia , N e w D e lh i ( v a r io u s is su e s) .
REVENUE
SIGNIFICANCE
A
ND
STRUCTURE
OF
PLASTICS
INDUSTRY
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cent) and H D PE (21.7 per cent). The share o f these three
resins in the tota l was as high as 93.0 per cent. The above
figures, how ever, do n ot include the consum ption o f pp.c. End-use applications. The m ajor end-use o f thermo sets
is in pow er generation and dis tribution, electronics and tele
com m un ications, fertiliser and chemical indu stries, defence,
etc. These applications acco unt for almo st 60 per cent o f
their consumption.
G enerally, therm op lastic resins have a sp ectrum end-use.
Some of their prod uc ts are f inal, wh ereas others are inter
m ediate i tems which need furth er processing in ord er tom ake them u sable. D epend ing upo n the desired physical and
chemical prop ert ies in the f inal prod uct , more than one type
o f thermo plast ic m aterial can be used in the m anufacture of
final pro du cts In othe r w ords, wide su bstitutability exists
am ong the use o f therm oplast ic resins . The second factor
th a t may influence the pa ttern is the process ado pted in the
m anufactur ing of the prod uct . Some o f the therm oplas tc
resins are suitable for a pa rticula r type o f process such asinjection moulding, extrusion, blow moulding etc.
A broa d end-use pa ttern of m ajor therm oplast ic m aterials
fo r the years 1970 to 1981 is given in Table 1 .5. F r o n this
table i t w ould be seen tha t in the case o f LD PE 70 per cent
o f the raw m aterial goes for the prod uction o f films which are
m ainly used in pack aging, and aro un d 10 per cent for the
p rodu c tio n o f household goods The sheets and film s made
from this m aterial are easily vacuum -formed to mak e blisterpackages
HDPE is a fine low-friction material often used for drawer
slides. O ther attrac tive electrical pro pe rties o f this raw
m aterial m akes this polym er suitable for cable insulation . Its
m arkets include injection m oulding prod ucts l ike hou sehold
articles; blow moulding goods such as consumer and industry
packaging item s; and extrusion p roduc ts , such as films and
sheets, m onofilamen t cane strapping , pipes and cables etc.Film s and sheets accou nt for hardly 4 per cent o f the total
p roduction o f H D P E while the use o f H D PE in blo w
m oulding and o ther extrusion prod uction (such as cane s trap
pin g, pipes and cables and w oven sacks) is increasing.
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End-Use of Thermoplastics by Broad Categories
(Per Cent)
Polymer Applications 19 7 0 19 7 1 1 9 7 2 1 9 7 3 1 9 7 4 1 9 7 5 1 9 7 6 19 7 7 19 7 8 1 9 7 9 1 9 8 0 1 9 8 1
( 1 ) ( 2 ) ( 3 ) ( 4 ) ( 5 ) ( 6 ) ( ' ) ( 8 ) ( 9 ) ( 10 ) ( I D ( 1 2 ) ( 1 3 ) ( 14 )
LD PE i. F ilm & Coating 7 4 .3 7 3 . 8 7 4 . 3 6 4 .6 7 5 . 9 7 6 . 7 7 2 . 3 7 6 . 9 6 9 . 7 8 5 .2 8 5 .6 7 4 .3
i i . Moulding 6 .8 7 .0 6 .4 6 .8 6 . 3 6 . 3 6 . 4 1 3 . 8 1 2 . 5 7 . 8 8 . 3 1 2 .0
iii. Wires and Pipes 7 . 9 7 . 9 8 .0 8 . 3 8 . 2 7 . 5 6 .9 7 . 2 7 4 2 . 8 1 . 7 2 . 0
iv . Miscellaneous 1 1 . 0 1 1 . 3 1 1 . 3 1 0 .3 9 .6 9 .5 1 4 . 4 2 . 1 1 0 , 4 4 . 2 4 . 4 1 1 . 7
TOTAL 10 0 .0 1 0 0 . 0 1 0 0 . 0 10 0 .0 10 0 .0 1 0 0 . 0 1 0 0 . 0 1 0 0 0 10 0 .0 10 0 .0 10 0 .0 10 0 .0
PVC i. Wires and
Cables 2 7 .5 3 0 .3 3 0 .5 2 8 .6 2 5 .5 2 8 .8 2 6 . 5 2 4 . 2 2 0 .3 3 2 .6 2 6 .1 1 8 .9
ii. Pipes, fitting
conduits 6 . 1 7 . 7 1 3 .5 1 6 .0 2 5 .1 1 7 . 1 2 0 .0 2 1 . 8 2 4 . 2 2 5 . 4 3 1 .0 4 3 .0
iii. Leather cloth
and sheets/film 1 7 . 5 1 8 . 0 2 0 .4 2 0 .1 1 8 . 9 2 4 . 0 2 4 .7 2 8 .3 2 6 . 4 2 2 . 3 2 7 .8 2 1 .8
iv. Footwear 2 2 . 3 1 9 . 2 1 7 . 4 1 7 . 1 1 1 . 1 1 1 . 6 8 .8 1 0 .0 7 . 3 9 . 2 4 . 2 6 . 1
v. Compounders 1 8 . 3 1 4 . 4 1 0 . 7 1 0 .6 1 0 .4 7 .9 7 .8 7 . 2 1 0 .1 2 . 3 0 . 2 0 . 3vi. Miscellaneous 8 .9 1 0 . 4 7 . 5 7 . 4 9 . 1 9 .6 1 . 2 8 . 5 1 1 . 7 8 .2 1 0 . 7 9 .9
TOTAL 1 0 0 . 0 1 0 0 . 0 10 0 .0 10 0 .0 10 0 .0 10 0 .0 10 0 .0 10 0 .0 1 0 0 0 10 0 .0 1 0 0 .0 10 0 .0
BEVBNUB
SIONIFICANCB
AND
STRUCTURE
OF
PLASTICS
INDUSTRY
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( 1 ) ( 2 ) ( 3 ) ( 4 ) ( 5 ) ( 6 ) ( 7 ) ( 8 ) (9) ( 10 ) 0 0 ( 12 ) ( 13 ) ( 14 )
L D P E i . In je c ti o n
m o u l d i n g 6 3 .7 5 2 . 5 4 0 . 3 3 2 .4 3 1 .6 3 1 .& 3 4 .0 3 3 . 6 3 5 . 9 2 6 .6 1 9 . 8 2 9 .7
ii . B lo w m o u ld in g 17 .9 1 9 . 0 2 5 . 3 2 7 . 2 2 6 .6 1 8 . 6 2 1 .8 2 5 . 7 2 7 . 4 2 9 . 6 3 1 . 3 2 5 .4
i i i . E x t r u s i o n 1 8 . 4 2 8 .5 3 4 .4 4 0 . 5 4 1 . 8 4 9 . 8 4 4 .2 4 0 .7 3 6 . 7 4 3 . 8 4 8 .9 4 4 .9
(a ) F il m a n d
s h e e t s 5 .0 5 . 4 2 .9 3 . 3 2 .8 4 . 1 3 . 1 3 . 7 2 . 5 3 . 0 3 . 0 3 . 5
( b ) O t h e r s 1 3 . 4 2 3 . 1 3 1 . 5 3 7 .2 39 .0 4 5 . 7 4 1 . 1 3 7 .0 3 4 .2 4 0 . 8 4 5 . 0 4 1 .4
T O T A L 1 0 0 . 0 1 0 0 . 0 1 0 0 . 0 1 0 0 . 0 1 0 0 . 0 1 0 0 . 0 1 0 0 . 0 10 0 .4 1 0 0 . 0 1 0 0 . 0 10 0 .0 10 0 .0
Source: M i n is t r y o f P e tr o le u m , Indian Pe tro leum and Pe tro ch em icals St a ti st ic s, E c o n o m i c a n d S t a t is t ic s D iv is io n ,
G o v e r n m e n t o f In d i a , N e w D e lh i ( v a r io u s is su e s) .
EVASION
OF
EXCISE
DUTIES
IN
INDIA
!STUDY
O
FPLASTICS
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PVC, one o f the relatively low -cost materials, is a single
volum e plastic m aterial w hich is in general use. It has ach i
eved the m arke t leadership because o f i ts goo d physicalp roperties, com pounding versa tility fo r a w id e variety o f
app lication s, low cost and processing ease. Its prod ucts are
usually made by extrusion, injection moulding, rotational
m oulding, com pression and blow m oulding, calendering
and foam ing procedures . Principal m arkets for r igid PVC
include p ipes, con du its, pipe fittings, wire and cable insula
tion . Flexible PV C sheets are used fo r ra in coats, bottles,
film sheetings, gard en base, curtains, no velties an d w ire insu lation. PVC is also a useful blo w -m ould ing m aterial as its
bo ttle s com bine a h igh level o f clarity approach ing th a t o f
glass w ith break resistance as good as tha t o f polyethylene.
Sheetings and films have an increasin g share in the con s
um ption o f PVC . A similar trend is observed for wire and
cable insulation, and pipe fittings and conduits.
Other types of thermoplastic material l ike polycarbonates,
poly buty le ne, cellulo se acetate etc ., are n o t used for them anufactcre o f extrusion or ca lendering p rod uc ts such as
tubes, films etc.
Studies carried o ut in the p ast show th at the cost of
therm op lastic resins co nsti tutes a significant p rop ortion o f
m aterial costs in m ost o f their end-use ap plications1. In
p a rticu la r , in poly thene bags m ade o f H D P E resin s consti
tute 95 pe r cent. Similarly, the no velty items wh ich are
m anufactured from PVC sheets , the prop ort ion is abo ut 65p er cent. G iv en th a t the pric e o f n a p h th a accoun ts fo r a
high prop ort ion o f the tota l m ateria l costs in the nap htha-
based the rm o plastic m ateria ls, the in crease in th e pric e o f
na p hth a in recent years has affected end -prod uct prices
significantly.
Profile of the Industry
The In dian plastics ind ustry may be conveniently con sidered as consis ting of raw m ateria l ma nufacturers and
1 Tata Econom ic Consultancy Services, The Small Scale Plastic
Industry in Greater Bombay, 1972 .
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p lastics processers.
a. Raw m ate ria l manufa ctu rin g In dia n th erm oset indus
try. In the organised sector therm oset resins are m anufac t
ured by Indian Plastics Ltd (IPL), Bakelite Hylams (BH), and
the Industr ia l Plastics Co rpora t ion Pv t . Ltd (TIPCO ). In
ad dition, there are three units, viz., Nuchem Plastics, Ciba
and Allied R esin and Chem ical m anufactur ing urea form
aldehyde resin and m oulding pow der. B oth urea and mela-
mine are white crystalline substances showing some chemical
resemblance. Each reacts w ith formalde hyde to form a
resin hav ing m any po ints in com m on w ith phen olic resins,and these can be m ade into m oulding pow ders by similar
m ethods. The users o f these resins are generally located in
the sm all and tiny sec tors.2 Res ins such as phenolic, alkyd
and maleic resins are therm op lastic in na ture, bu t once
conver ted into m oulding pow der they become therm osets.
Phenol formaldehyde, belonging to phe nop last group,
is derived f rom the conden sat ion phe nol or any num ber of
i ts homologues with aldehyde, par t icular ly formaldehyde.
F or the phenols, the m ajor supplier is R ashtr iya Chemical
and Fe rtil isers while form aldehyde is supplied by H erdill ia
Ph armaceu ticals . The na ture o f the f inal prod uct var ies
according to the conditions under which the reaction is
conducted. In o ther w ords, by changing the tem perature,
t ime an d pressure (or vacuum ), m any grades o f phenolic
resins can be ob tained such th at each g rade will have a
special application. F or instance, TIPC O alone m anufacturedabo ut 77 different grades of P FM P wh ose ex-factory prices
ranged from Rs 5.00 to Rs 48.80 per kilogram in the year
1981
Therm oset resins whether phenolic , maleic or urea cannot
be used as such. They have to be converted in to m ould ing
pow der. T here are m any sm all un its w hich m anufac ture
phenol form aldehyde resins fo r the pu rpose o f captive
consumption while making laminated sheets.PF resins are mainly used for making decorative laminates
1 It is pertinent to point out th at about 200 small-scale units are
operating currently on thermosets.
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and industrial laminates. The decorative laminates are
glossy , mat and w ood tex, wh ile the industrial laminates are
used extensively in the electrical, electronic and engineeringindustries.
b. In dia n th ermopla stic in dustr y. Fou r im por tan t types
o f produ cts are manufactured in India . They are:
i. Po lyethylenes, bo th high an d low densities,
ii. Polystyrene,
iii. Polyvinyl derivatives, and
iv. Polyacrylic and polymethacrylic derivatives.
i. Polyethylene. Among the polyethylenes, the two
popular types are the H D PE and LD PE. In Ind ia , only
Poleolefin India Limited (PIL) in the corporate sector
manufactures HDPE, with ethylene supplied by its sister
un i t N O CIL . I ts produ ct ion star ted in 1968. The at t ract ive
electrical prope rties o f H D PE m akes it desirable as a cable
insulator. I ts m ain large m arkets include users of pipe, pipe
fittings, pac kag ing films, surgical im plem ents, w ire coa tings
and cable insulation, disposable p roduc ts, beverage cases,
bo ttles and closures. Poleole fin m anufac tured 32,702 tonnes
of H D PE in the yea r 1982-83.
LDPE is one of the major polymerised plastics. I ts produc
tion in India star ted when Alkali and Chem ical C orporat ion
o f Ind ia Lim ited (A C C I) was established in 1955 w ith its
2,500 M TA pla nt based on alcoho l ethylene. Th e secondm anu facturing facility was provided by U nion Ca rbide India
Limited (UC IL) w ith com missioning o f a 3 ,000-MTA plant
in 1961. Th is p lan t is base d on pe tro-e thy len e. By 1979-80,
the prod uctio n capacity o f A CC I increased to 12,000 M TA
w hereas tha t of UC IL to 28,000 M TA. To tal produ ct ion of
LD PE o f these two units was a round 28,000 M T indicat ing
abo ut 70 per cent o f the capaci ty ut il isat ion. One m ore
naph tha-based plan t in the public sector has been comm is
sioned in 1978-79 w ith installed c apa city o f 80,000 M TA .
The total produ ct ion o f LD PE during 1982-83 was o f the
order of 1,06,148 MT, IPCL contributing 74.1 per cent,
UCIL 17.1 per cent and ACCI 8.8 per cent, respectively.
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Am ong the m ajor app lications o f LD PE, films and c oa t
ings are the m ost im po rtan t ones. LD PE films can be used
for a wider variety of pack aging and for m anu facturing bags.A no ther fast developing use o f these films is in the m an ufa c
tur e o f can al linings in agricu lture.
ii. Polystyrene. I t is prepared from ethylene and benzene.
Ethylene is made from na tura l gas or petroleum w here as
benzene is often ob ta ined as a by-product from coke-ovens.
Polystyrene (PS) is a polymerised pro du ct being m anu factured
in India by Polychem and H indu stan Polym ers with a total
cap acity o f 17,500 M TA (as o f 1975-76). T he cap acity
increased to 23,500 M TA in 1979-80. These un its use bo th
petro -ethy lene as w ell as alcohol-ethylene, bu t the b reak-ups
are no t available. In othe r wo rds, no ne o f these un its m ain
tain any accoun t as to how much is produced f rom which
type o f ethylene. The perform ance of Polychem and H indus
tan Polymers over this period has been character ised by
co ntrasting trends . W hile in the form er, capa city utilisation
declined from 74.69 per cent to 40.57 p er ce nt, in the latter
it increased from 22.49 per cent to 74 per cent during 1975-76
to 1979-80. This was partly due to the fact tha t wh ile P oly
chem expa nded its installed capac ity from 10,000 M TA in
1975-76 to 16,000 M TA in 1979-80, its pr od u ctio n actua lly
declined from 7,469 M T to 6,492 M T d uring this period.
In 1982-83, Polychem produ ced 5,839 M T o f poly styrene as
against 6,741 MT manufactured by Hindustan Polymers .
iii. Polyvinyl derivatives. I t is perha ps one o f the lowe st
cost m aterials wh ich has achieved a k ind o f m arket leadership
in the plastics in du stry because o f its phy sical prop erties,
com poun ding versati li ty for a wide variety of applications
and processing ease. Its com pou nds range from soft, f lexible
films to rigid, high -strength pro du cets. Plasticisers, lubricants,
fillers and stabilisers are used to produce this kind of versati
li ty. Apart f rom this , i t is possible to make a compound withthe r ight balance of prop ert ies for almo st any application.
I ts pro du cts a re usually m ade by extrusion, injection m ould
ing, blow m oulding and calendering. The principa l prod uc ts of
rigid PVC includ e pipes, con duits, w eather, stripping, etc. ,
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w here as flexible PV C is used for rain co ats , baby pa nts, films,
sheeting, curtains, novelties and many other such items.
To begin with, five units, viz., National Organic ChemicalIndustry Limited (NO CIL), Ch em plast, Calico, Sri Ram and
Plastics Re sins a nd Chem ical (PR C )3 were in the pro du ction
line o f PVC. T otal installed capacity w ith these five co m pa
nies wa s 90,200 M TA as on 31.3.1976. Du e to a massive
expansion programm e at Sri Ram Chemicals, the total capa
city grew to 1,03,400 M TA by 31.3.1980. The installed ca pa
city o f some o f the o the r units is also fairly high. Fo r
instance, Calico is one such un it, but m ost of its prod uctionis for captive consum ption.
Besides petro-eth ylene , alcoho l-ethylene and acetylene
are also used in the m anu facture o f PVC. C urrently, Sri Ram
and Calico use calcium carbide as the basic raw m aterial,
wh ereas Ch em plast is alcohol-based and NO CIL is naph tha-
based.
Tw o grades o f resins are m anufac tured in the coun try.
These are suspension grade and emulsion grade. The suspension grade consti tutes abo ut 93 per cent o f the total availa
bili ty o f PVC resins, w hile only tw o units, viz., Chemplast
and Calico have the facility to produ ce em ulsion grade. The
tota l pro du ction o f PVC du ring 1982-83 was 41465 tonnes,
C hem plast co ntribu ting 19,183 tonn es, No cil 18,493 tonn es,
Sri Ram 2,604 ton nes an d Calico 1,185 tonnes, respectively.
The polyvinyl ace tate resins are used as an adhesive for
all sorts o f m aterials, including pa pe r, m etal, m ica, glass,plastic sheets, w ood and porcela in . T his polym er is m anufac
tured b o th in the small-scale sector as well as by m edium or
large manufacturers . Among the big units are Calico Chemi
cals and Plast ics Divis ion, H oech st , Pa rekh Dyechem , Hico,
Indofi l, C olour Chem , Su rfactant and Chem ical, P.C. Chan de,
BASF and Q uinn India. Besides, there are a num ber of small
m anufacturers o f this polymer.
iv. Polypropylene (pp). Th e p p resins are polymerisedpropylene gas generated a t relatively low tem peratu res and
* Subsequently, Plast ics Resins and Chemical closed down in 1978 due
to uneconomic working conditions.
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pressures. This resin is ligh t in w eight, tran slu cen t in its
na tura l state, and can be readily colou red. I t surpasses poly-
ethylenes in m any fields because of i ts higher therm al o pe rating range . I t has good surface hard ness and fair abrasion
resistance. Produ cts are m ade from pp by all o f the conven
tional processes for thermop lastics. Th e pro du ct ion o f pp
reSins s tarted in the cou ntry in 1978 w hen the IPC L was
comm issioned. The annu al prod uct ion capacity of th is plant
is 30,000 M TA an d its pr od uc tion in 1982-83 was o f the
order o f 24.018 M T.
b. Plastics semi-finished goods. Plastic m aterials hav e awide range of applications due to their com m on cha racter is
tic o f plasticity, tha t is, the capa bili ty o f being form ed under
external influence into shapes w hich are retained even after
the external influences are rem oved . Th e shaping processes
used include m oulding, casting, extruding, etc. Some of these
ap plications lie in the f inished pro du cts while o thers are
semi-finished in na ture. T hou gh the semi-finished prod ucts
sometimes possess the ch aracteristics o f f inished articles readyfo r use, they a re classified, as a ge neral rule, as sem i-finished ,
irrespective of whether or not they are surface-worked.
Sem i-finished pro du cts include plastic boa rds, sheets,
shee ting, films an d lay flat tubing s. Pla stic b oa rds , generally
m ade o f the rm os et resins, especially phenolic resins, are used
for indu str ia l purposes. These boa rds are r igid in nature.
Besides plastic boards made of phenolic resins and rigid PVC,
other similar m ater ials w ithin the therm oset group are alsoused in m an ufac turing these boa rds. Sheets and sheeting are
thinn er than the plast ic boards, bu t th icker than the films.
Th e dividing line be tw een sh eets an d films is ra th er th in.4
The sheets can be laminated ones. Two or more sheets joined
togeth er form a boa rd. Similarly, tw o or m ore films m ake a
lam inated film. A lay flat tub ing , on the oth er ha nd , is a
seamless flexible tub e m ade by the extrusion proce ss. If it is
cu t vertically it beco m es a film. A film can also be m an ufac
4 The term film is used for sheeting having nominal thickness notgreater than 0.010 inch ASTM D 88376, p. 369 (=0.02 56 cm =
25mm).
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tured by the calendering process. The adv antage with an
extrud ed film lies in th at its m axim um w idth can be m ore
tha n w ha t is possible for a calend ered film. Bu t a calenderedfilm is sup erior because o f i ts uniform thickness. G enerally,
extrusion m oulding is used to mak e such con tinuou s shapes.
This process is also used in mak ing articles of variou s profile
shapes. Extrusion coating is employed to add a thin layer of
p lastics on a substance such as texti le o r paper. Som etim es,
thick-s hee t extrusion is also possible. All these articles, w hethe r
semi-finished or unfinished, are used in varied app lications
such as lining in refrig era tion , pack aging, b ags, rainc oats, etc.In the organised sector, only five firms are registered with
D G TD for m anu facturing PVC rigid and flexible sheets and
films by the calendering process. T hese are Bho r, C aprih ans,
Cal ico, A m artara and Indian Co rk Limited. In a ll , they have
nine plants , Bhor an d C aprihans having m ore plants . Because
o f the very high cap ital costs involved in a calendering plan t,
these units are all o f m edium size. Ho w ever, for extruded
films there are a num ber o f small units. These u nits generallyfirst m ake lay flat tubings and then cu t them vertically to get
a film. The m aterials used in the lay flat tubings are PVC,
LD PE and pp. The m ain use o f these films, sheeting and lay
fla t tubings is in packaging garm ents and othe r s im ilar pr o
ducts. The type o f resin to be based depends on the t ran sp a
rency and clarity required in the film.
Sheets m ade of HIPS and PVC are used as a l iner in
refrigerators and oth er similar prod ucts. LD PE films areused fo r canal l ining an d f or storage p urposes. Polyester
films, if m etall ised, are used fo r zari yarn and packaging,
w hereas unm etall ised films are used for m anu facture of
m agnetic tapes used in tape recorders and floppy discs used
in com puters. Acrylic sheets are m ainly used as a stationery
item . Cellulose ac eta te films are used in X -ray films. Seve ral
concerns are engaged in the produ ction o f these films.
Sheets and films m ade o f plasticised PVC by a calenderingprocess can be sewn, heat-sealed, or ele ctr ic ally-seale d. I t is
used for app arel , protective clothing and the l ike. Th icker
sheets are coloured and embossed fo r w om ens h andbag s,
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luggage, seat covers, a nd uph ols tery . Th in PVC film is used
for packaging, especially o f m eat and fruits. A nothe r im por
tant use is as a laminate for printed papers.Flo oring tiles, largely made of PVC, are m anu factured by
lam ination and decorated either by printin g or by rolling in
co lou r chips; the co m m on est tile is vinylasbe stos, pressed
into sheets on calender and then emb ossed and cut into
tiles.
Rigid PVC sheets have high dim ensional stabili ty and in
the corrugated form are used for building construction,
pa rtitio n s , rain gu tte rs , dow nsp ou ts, industria l tan k linin gs,vacuum-formed signs and lighting panels.
Styren e film is widely used for sem irigid food con taine rs
especially used for packaging.
A crylonitrile butad iene styrene or ABS possesses a wide
range o f properties, n otably scuff resistance, plus high im pact
strength at lower tem pera ture, m aking it suitable for high-
qu ality luggage, refrig erato r linings, and food and detergen t
containers be cause o f i ts chem ical resistance.
N ylo n films are ideal fo r food packaging because o f
strength, impermeabili ty to oils and greases, and high melting
po in t. As such films are ste am sterilis able , th ey find m any
uses in hospitals. They are frequ ently lam inated. Acrylic
sheets have h igh resistance to ultraviolet l ight and external
exposure. Their prime use is in surfacing laminates.
T o con clude, articles like plastic bo ards, sheets, sheeting
and films are m ade o f a variety o f plastic raw m aterials.
Such articles are m ainly used for packaging purp oses . I t has
been estim ated th a t consum er packagin g curren tly absorbs
approx im ately 60,000 M T o f plastic raw m aterials a year.
This accounts for roughly 34 per cent o f the tota l consum p
tion o f therm oplast ics in the country.
c. Polyurethane fo a m and articles thereof. Polyurethane
is used either as flexible o r rigid foam or as elastom ers.
Internat ional ly , polyurethane is a large volume pro du ct with
several soph isticated applications. I t is well-know n as a cold
insu lan t w hich can co ntribute substantially to energy saving.
In India , the m ajor use is in the produc t ion of m ats, ma ttres
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ses, pillows, cushions, etc. The pro du ction of rigid foam in
India is yet in i ts infancy. U -foam and A llwyn are the pion
eers in the industry. Po lyurethane elastom er produ cts arealso manufactured by U-foam (Hyderabad) , but the quant i ty
produced is n o t sig nif ic ant.
The main raw m aterials for the pro du ction of f lexible
foam are polyol and TD I, both o f which happe n to be imp or
ted produ cts. F or produc tion o f one tonn e of f lexible foam,
on an average 1.0871 tonn e o f raw m aterials are requ ired,
poly ol con tribu ting roughly 0.6728 to nne, respectively . For
rigid foam , T D I is replaced by M D I. F or produ cing onetonne o f r igid foam , 1.0859 tonnes o f raw m aterials com pris
ing polyol 0.4748 ton ne, M D I 0.5979 and o thers 0.0132
tonne are required. F or polyurethane elas tom er produc ts ,
poly ol, N D I and catalysts a re used.
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2
Structure of Excise Duty on
Plastics
Introduction
T h i s chapter gives a brie f acco unt o f the structure o f excise
duty on artificial or synthetic resins and plastic materials and
other specified materials.
The tariff i tem un der w hich plastics are bro ug ht un der
excise duty at present is m uch wider in scope than w hen the
item was first inco rpo rated in the Cen tal Excise T ariff Sche
dule. Excise du ty on plastics cam e to be levied in 1961 with
the introd uction o f i tem 15A in the Tariff Schedule w ith the
t it le and description o f PLASTICS, AL L SORT S, namely,
(i) moulding powders, granules and flakes (thermosett ing
and therm oplastics); (ii) polyethy lene films, lay flat tubings
and PVC sheets (th at is to say, polyvinyl chloride sheets) .
The tariff head in q uestion un derw ent many changes since i ts
incorp oration and eventually came to be divided into four
sub-items. In 1982, wh en the item was last rew orde d, sub-
item (1) was aligned w ith item 39.01/06 o f the Ind ian C us
tom s Tariff Schedule to fac ilitate classifications o f indigenou s
as well as im po rted plastics for pu rpose s o f levying excise
duty and addit ional duty of customs. This al ignment furtherexpanded the scope of the i tem. Cellophane which had
earlier come und er a separate head was om itted and merged
in tariff item 15A. L ikewise, po lyes ter films w hich ha d been
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inco rpo rated in the excise tariff schedule as a sep arate
item 15BB in 1981 Bu dget becam e p ar t o f item 15A. An
acco unt of the evolution o f the tariff i tem 15 A and the dutystructure is given in A ppendices I and II . The paragrap hs
belo w con ta in a b rie f descrip tion o f the com ponents and
coverage o f the tariff i tem 15A as i t stands now and some o f
the an om alies no ticed in definition o f the respec tive sub-
items.
Sdb-items of Tariff Item 15A
As o f Septem ber, 1983, Tariff I tem 15A contains fo ur sub-
items, namely:
(1) Resins and materials;
(2) Articles o f m aterials;
(3) Po lyurethane foam ; and;
(4) A rticles o f po lyuretha ne foam.
O f the four , (1) is by far the m ost im po rtant f rom the tax
angle, a ccou nting for 81.85 per cent o f revenue in the year1981-82. Sub-item (2) co ntribu ted 13.45 per cen t an d sub-
i tems (3) and (4) taken together accounted for the rem aining
4.70 per cen t (Table 2.1).
a. Resins and materials. Resins and mater ials which are
taxed un der tariff hea d 15 A (1) fetching the bulk o f the
revenue from plastics include mainly the follow ing categories
of plast ic m ater ials/products:
i . Co ndensat ion, polycondensat ion and polyaddit ion
products;
ii . Polym erisat ion a nd co -polymerisation products;
iii. Ch em ical derivatives o f cellulose;
iv. Regenerated cellulose;
v. Vulcanised fibre;
vi . Hardened proteins;
vii . N atu ral resins modified by fusion (rungum );
viii. E ster gum s;
ix. C hlorinated rubber, rub be r hydrochloride, oxidised
rubber, cyclised rubber;
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T A B L E 2 . 1
Revenue from Ba sic Duty under 15A Sub-itemwise
( R s . 0 0 0 )
S u b - i t e m s 1 9 7 0 - 7 1 1 9 7 1 - 7 2 1 9 7 2 - 7 3 1 9 7 3 - 7 4 1 9 7 4 - 7 5 19 7 5 -7 6
(1) (2) (3) (4) (5) (6) (7)
1 5 A ( 1 ) 1 3 2 5 0 9 1 9 5 6 0 9 2 7 2 6 3 3 3 1 0 1 6 8 4 4 8 3 7 2 4 1 9 3 0 3
( 7 1.5 8 ) ( 7 8 .1 5 ) ( 8 0 .0 9 ) ( 7 9 .2 9 ) ( 7 7 . 5 9 ) ( 7 7 . 7 6 )
1 5 A (2 ) 5 6 6 17 4 15 6 0 6 0 3 2 5 7 0 1 '7 1 1 8 7 1 2 1 0 5 0 7 2
(2 8 .4 2 ) ( 1 7 . 5 0 ) ( 1 7 . 7 2 ) ( 17 .9 3 ) ( 2 0 . 5 4 ) ( 19 .4 9 )
1 5 A ( 3 ) 8 9 6 5 5 5 9 9 6 2 5 6 5 9 0 1 8 2 6 7
( 3 .7 7 ) ( J . 6 4 ) ( 1 . 6 0 ) (1 . 0 2) ( 1 . 5 3 )
15 A (4 ) 13 9 2 18 7 7 4 5 9 7 4 9 14 6 5 8 0
( 0 . 5 9 ) ( 0 , 5 5 ) ( 1 . 1 8 ) ( 0 .8 5 ) (1 . 2 2)
T o ta l 1 8 5 1 2 6 2 3 7 5 2 6 3 4 0 4 3 4 3 9 1 1 7 8 5 7 7 8 9 9 5 3 9 2 2 2
(1 0 0. 0 0) (1 0 0. 0 0) (1 0 0. 0 0 ) 1 0 0 . 0 0) 1 0 0 . 0 0) ( 1 0 0. 0 0)
M i s c e lla n e o u s d u t y 1 7 17 4 6 1 8 7 9 2 9 0 6 3 8 1 7 15 0 7
T o ta l b a s ic d u ty 2 0 3 3 0 0 2 3 8 14 4 3 4 1 2 2 6 3 9 2 0 1 4 4 8 17 16 5 4 0 7 2 9
EVASION
OF
IXCISB
DUTIES
IN
INDIA:STUDY
OF
PLASTICS
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x. Alginic acid, its salts an d e sters; and
xi. Linoxyn.
Th e sub-item, how ev er, does no t includ e artificial waxes
and starches.
Ex planation III to the Ta riff i tem makes it clear tha t sub-
item (1) is to be take n to ap ply to m aterials in the follow ing
forms only;
(a) liquid or pa sty (including ertiulsions, dispersion s and
solutions);
(b) blocks, lumps, pow ders ( including m oulding pow ders),granules, flakes and similar bulk forms; and
(c) waste and scrap.
P art (a) o f the ex plan ation is in line w ith note 3(a) of
cha pter 39 o f the Indian Custom s Tariff . As indicated later ,
the explanat ion is no t adequ ate to clear doub ts ab ou t the
na ture o f certain plastic m aterials l ike aqueou s solution . In
the absence o f the term solution s in (a), aqu eous solutions
o f resin have been declared as not artif icial or syn thetic resinin liquid form in a judge m ent by the D elhi High C ourt
(Indian Plastics and Chem ical Pv t., Lim ited versus U nion o f
India, decided in 1980).
The basic tariff ra te fo r 15A( 1) is 50 pe r cen t ad valorem.
However , through notif icat ions issued under the Central
Excise rules, the effective ra tes hav e been redu ced for all
i tems. F or im po rtant i tem s o f thermo plast ics, the rates
broadly range from 27 per cen t to 35 pe r cent, fo r p o lypropylene, it is 27 per cent, fo r LD PE , 30 per cent and for PVC
and H D PE , the ra te is 35 per cent. F or therm ose tting plastics,
the rate is 15 per cent ad valorem bo th for resins and m ould
ing po w de rs. The 15 pe r cent is also app licable to certain
resins ( including moulding powders) l ike polyester resins,
ABC resins, polystyrene resins, nylon resins, and epoxy
resins. F o r certain new items like vulcanised fibre, dex tran
and chlorinated rubb er, the rate o f duty is 10 per cent advalorem. Alkyd resins and maleic resin including fum eric resin
whether modified or not are wholly exempted from duty, but
their m oulding powders or com pounds in any form are
dutiable. F o r phen olic resins and terpene pheno lic resins, the
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duty is 20 per cent ad valorem.
Alkyd, m aleic (including fum eric) ph enolic and terpen e
phenolic resin s have been so defined as to exclu de ble nds
w ith oth er artificial or syn thetic resin*. F or residu ary items
no t separately m entioned in the exem ption notifications, the
rate o f duty is 40 per cen t ad valorem. Differential rates pres
cr ibed ear l ier for naphtha-based and other than naphtha-
based pla stics have been done aw ay w ith and uniform rates
rates are now applicable except in the c as eo fH D P E , for
which the rate is 35 per cent ad valorem if naph tha-based. By
inference, the rate for other than naph tha-based H D PE may
be taken to be 40 per cent, b u t since IPC L is the only m anu
facturer of this i tem , and it is naph tha-based , the distinction
is of academic interest only.
PVC com poun d and polyester polym er chips are wholly
exempted from duty, but cellulose acetate m oulding granules
are dutiable at 10 per cent ad valorem. Plastic materials
reprocessed f rom or prod uced out o f scrap or w aste of plast ic
m aterials and articles o f plastics are exempted from duty.Th ere are a few con ditional exem ptions related to end-use,
e.g., cellulose acetate if used in the m an ufac ture o f acetate
yarn; polyam ide chips for m anufac ture o f nylon yarn; resins
for particle boards, etc. , are exempt from duty.
This sub-item is also covered by the general exem ption
scheme for small m an ufac turers. U nde r this scheme, which
has been discussed at some length elsewh ere, clearances upto
Rs 5 lakh are exem pt from duty and clearances in excess ofRs 5 lakh upto Rs 25 lakh enjoy a concessional rate of 75 per
cent of the no rm al duty payable.
Excise duty relief scheme for encouraging higher pro du c
tion is also applicable to this sub-item . U nd er this scheme,
the qu antum o f relief is as under:
(a) W here effective basic U pto 110 per 30 pe r cent o f the
excise du ty is no t cen o f base cle- du ty paid on ex-
m ore tha n 20 per cent arances cess clearances
ad valorem
In excess o f 110 40 per cen t o f the
per cent o f base duty paid on cle-
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clearances
(b) Where effective basic
excise duty exceeds 20
per cent ad valorem
Upto 110 per
cent of base
clearances
In excess of 110
per cent o f base
clearances
arances in excess
of 110 per cent of
base cle arances
15 per cent of
du ty paid on ex
cess clearances
20 per cent o f the
duty paid on cle
ara nc es in excess
o f 110 per cent
o f base clear
ances
A close loo k at tariff sub-item 15A( 1), show s tha t this item
has certain features w hich could facil i tate evasion. Fo r ins
tance, : .!kyd and maleic resins (including fumeric resins) have
been defin ed in notifica tion N o . 157/81 CE dated 29.8 .1981
so as to exclude blends o f m ixtures o f such resins w ith other
artificial o r syn thetic resins. W hile these resins are duty-free,
the duty on their blends, being residuary items, is 40 per cent
ad valorem. Such wide difference in tax incidence pro m pts
m anufacturers especially those using these blends/m ixtures to
declare their pro du cts as resins. This hap pen s mo re especi
ally in factories w hich use these blends for captive co nsu m p
tion.
A similar tendency is no ticeable in the case o f pro duc ers
o f pheno lic resins and terpene phen olic resins where also the
definition excludes blends. In the case o f ph eno lic resins, theproble m is fu rth e r accen tuated by th e p resc rip tion o f low er
du ty a t 15 pe r cent ad valorem in the case of phenol formalde
hyde resin including m oulding pow der (un der notification
N o .241/82 C E d a ted 1.11.1982) as against 20 per c e n t a l
valorem for phen olic resin (u nd er no tification N o. 157/81 CE
dated 29.8.1981). Ph eno l form aldehy de resin is a type of
phenolic resin, in fac t, is it s p rinc ipal variety and yet, while
the latter has been defined in the notification, no formal definition has been given for the form er. This leads to con fusion
and is a source of l i tigation. Several m anu facturers are pa y
ing duty on phen olic resin u nder pro test and i t will no t be
surprising i f some m anufacturers c lear the prod uct a t lower
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rates even thou gh as per definition, the duty payable would
be hig her.
The prescription of lower duty on certa in mouldingpow ders w ith n ap h th a as the base w ith ou t sim ultaneously
changing the rates for resins, accentuated the tendency to
evade by m isclassifying the prod ucts. Fo rtunately, the
tendency has been neutralised by recently revised notifications
(N o s.190/82 and 241/82) levying the same duty both on
m oulding po w ders and resins and also by doing away with
the dis tinction between naphtha-based and other than
naphtha-based products .b. Su b item 15 A(2) or articles o f ma terials described in sub-
item (I). T ariff item 15A (2) bring s un de r the charge o f excise
duty articles of m aterials described in sub-item (I ) . N ot all
such articles are, ho w ever, excisable. The sub-item specifies
the articles on w hich du ty is leviable. These are: board s,
sheeting, sheets and films w hether lacquered or m etallised or
lam inated or not; an d lay flat tubing s no t containing any
textile m aterial. These articles, becom e excisable if made o fany o f the m aterials specified un de r 15A (1). T hu s one could
say th at n o t all bo ard s, sheeting, sheets etc., are excisable
und er 15A(2); only those which are m ade of m aterials speci
fied un de r 15A (1), th a t is to say, articles w hich co nfo rm to
the des cription o f bo ard s, sheeting, sheets, films, etc., and are
m ade o f m aterials described in sub-item (1) are liable to excise
du ty. Th is desc ription is decidedly be tter th an the earlier
form ulation o f the sub-item w hereby art icles made of plastics,all sorts (including tubes, rods, sheets, etc,) were covered and
du ty w as confined to b oard s, sheets, sheeting, films, etc.,
throu gh exemp tion notification. The earl ier description led
to some lit igation (refer to G uja rat H igh C ou rt ruling in the
case o f Jalal Plastics Ind us tries given in D ecemb er, 1980).
Presum ably, the prese nt desc ription seeks to clear the dou bt
wh ich led to such litigation . The Custom s T ariff Schedule also
uses the w ords articles of m aterials un der item 39.07.
From the revenue po int o f view, the scope o f sub-item
15A (2) has been furth er circum scribed by tw o exem ption
no tifications o f 1982 (N os. 149/82 CE and 150/82 CE ). Th e
second notification exem pted art icles m ade o f non-plastic
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m aterial dutiable un de r sub-item 15A (1), provided duty has
been paid on such m ateria l. T h rough notification N o. 149/82,
articles made o f plastics, all sorts other than the following
have been exem pted from duty provided they are produc ed
ou t of du ty-p aid artificial resins or plastic m aterials or cellu
lose esters and ethers in any form or such articles are produc
ed out o f scrap o f plastics:
i. films or sheet o f regen erated cellulose and polyester
films, wh ether lacquered or lam inated or m etallised
or not:
ii. rigid plastic bo ard s, sheeting, sheets an d film
whether lacquered or laminated or metallised or not;
and
iii. flexible poly viny l ch lorid e she eting, shee ts, films
whether lacquered or laminated or metal l ised or not
and lay flat tubings no t con taining any textile m at
erial. As tarif f item 15 A excep t films o r sh ee t o f
rege nerated cellulose is co vered by the Ru le 56A,
even in the case o f the abo ve th ree item s excep t films
or sheets o f regenerated cellulose, duty is set off by
the proform a credi t , o f the duty paid on raw m ater i
als falling un der this tariff item. Prov isions have
also been made for rel ief o f duty on:
(a) cellophane, pap er or co tton fabrics used in the
m anufac ture of r ig id a r ticles of o ther than
PVC; and
(b) cellophane, pap er, co tton fabrics, adhesives,
coated coppe r foils or plain co pp er foils used in
the m anufacture o f r igid PVC ar ticles.
Acrylic sheets an d acrylic plastic bangle tubes are also
exempt f rom duty i f produ ced out o f duty-paid art if ic ial
resins and plastic m aterials, an d/o r scraps o f plastics, an d or
m ethyl m ethacrylate m ono m er. Like-wise, m etallised cellop
hane is exempt from duty i f m ade from duty-paid plain
celloph ane film.
There are some end-use exemptions also. For instance:
i. flexible PVC sheeting, sheets and films no t co ntain ing
any textile m aterial are exem pt from du ty if used
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w ithin the fac tory of prod uct ion in the m anufacture
of coated textile fabrics, etc., falling under Tariff Item
N os. 19,22 and 22B. P rio r to 1.3 .1983, concessio n wasalso available even when these sheeting, etc., were
used outside the factory o f their prod uction;
ii. cellulose triac eta te, an d cellulose triac eta te film are
exempt from duty i f intended for use in the m anu
facture o f cine-films, X -ray films or p ho tog rap h films.
G oods com ing under this sub-item do no t come within
the purview o f the general exem ption available to small-scale
industries. H ow ever, PV C films o f thickness below 0.25mm .and lay fiat tubings, prod uc ed by ex trusion process by an
industrial unit with init ial investment in plant and machinery
no t exceeding Rs 20 lakh are exempt from duty. Prior to
M arc h 1, 1981, the critica l limit fo r inv estm en t was Rs 10
lakh.
As m ent ioned earlier, an im po rtant fea ture o f the s tructure
o f duties for pro du cts com ing und er sub-item 15A (2) is that
such pro du cts are distinguished on the basis o f rigidity/flexibi-lity. In exem ption no tification (N o. 149/82 CE dated
22.4.1982) crite ria for rigid ity a nd flexibility hav e been laid
dow n as follows:
i. The expression flexible in relation to an article made
o f plastics, m eans art icles wh ich have a m odulus of
elasticity either in flexture o r in tension o f no t over
700 kilogram per squ are cen timetre a t 23 degrees
centigrade and 50 pe r cent relative hum idity w hentested in accordance w ith the m ethod o f test for stiff
ness o f plastics (ASTM D esignation D-747-63), for
flextural pro perties o f plastics (ASTM D esignation
D-790-63), for tensile properties of plastics (ASTM
D esignation D-638-64TJ, or for tensile pro perties of
thin plastic sheeting (AST M D esignation D-882-64T);
and
ii. The expression rigid in relation to an art icle mad eo f plastics, m eans all articles oth er tha n flexible as
defined in (i) abo ve.
The above criteria for rigidity haVe been in op eration for
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du ty purposes since Janu ary, 1977. How ever, when applied
to polyethene films, the criteria have resulted in some anoma
lies and led to abuse. Test results from the N ational TestH ouse, C alcutta, revealed th a t plastic films w hich are very
thin in dimen sion and ap pe ar to be no t at all rigid in its
ord inary sense are actually rigid for duty pu rpose as their
m od ulus o f elasticity far exceeds 750 kilogram s per sq.cm.
and therefore shou ld be treated as dutiable. But in practice
these were passed as flexible and so no t liable to du ty. Theresult was tha t there was sub stan tial leakage o f excise du ty
as many m anu facturers al l over India did no t pay any duty on
such plastic films. Th e confu sion was com po un ded by the
fact tha t in the field o f plastic technolog y these films w ere no t
really treate d as rigid films, bu t ca tego rised as semi-rigid. It
is understood that whenever declarations were obtained from
the assessees, the assessees showed them as flexible because of
their ap pa ren t thinness. Th e defence o f the assessees w as
tha t they did not have any m achinery to ascertain the
modulus or elastici ty by ASTM. Thus, excise duty amounting
to crores o f rupee s is believed to have been evaded by plastic
sheet m anu facturers thro ug h misclassification of rigid sheets
as flexible. The problem has now pra ctically been go t over
w ith the issue o f notification N o .231/82 CE o f O ctober, 1982.
This notification exemp ts films or sheets up to an d including
thickness o f 0.25mm . other than those m anu factured from
PVC from du ty leviable thereo n pro vided such films and
sheets are produced out o f du ty-p aid (excise or countervailing
custom s du ty as the case may be) artificial resins o r plasticm aterials or cellulose esters and ethers.
Thus the curre nt po sit ion regarding duty l iabili ty o f ar t i
cles under sub-item 15A (2) is as follows:
i. Rigid plastic bo ard s, sheeting, sheets an d films
w hether o f PVC or othe r than PV C are liable to duty.
H owever, films and sheets m ade o f plastic m aterial
othe r than PVC is exem pt, provided the thicknessdoes no t exceed 0.25mm . and the non-PV C ingredient
is m anu factured from du ty-pa id art ificial resins o r
p la stic m aterials o r cellulose esters and e th ers;
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ii. Rigid plastic bo ard s, sheeting, sheets and films o f PVC
are dutiable;
iii. Flexible PV C shee ting, sheets a nd films are du tiable .H ow eve r, PVC films, w he ther rigid or flexible, o f thick
ness below 0.25m m . an d lay flat tubings m ade by
small m anu factu rers have been specifically exem pted;
iv. Films or sheet o f reg ene rated cellulose (cellophane)
are dutiable; a nd
v. Poly ester films are du tiable.
Th e basic tariff- du ty on sub -item s 15A (2) is 50 per cent
ad valorem, but throug h exem ption notificat ions, the rates
have been reduced to 30 per cent ad valorem on (i), (ii), (iii)
and (v) above and to 20 per cent ad valorem on (iv).
In the l ight of the preceding discussion on the structure
o f sub-item 15A (2), tw o sug gestions are offered below for
reform in order to avoid confusion.
a. Notification N o. 39/73. I n item (iii) o f this notification,
polyv inyl ch loride lay flat tub ing s m ay be repla ced by
polyviny chloride lay flat tubings no t co ntainin g any textile
m ate rial. The latte r description will be in co nso naa ce w ith
the description o f tariff sub-item 15 A (2) and avoid confusion.
b. Criteria for rigidity/flexibility. Since films o r sheets o f
other than polyvinyl chloride w ith maximum thickness o f
0.25mm . have been exem pted from duty, i t does no t seem to
be necessary to dis tinguish betw een rig id and flexible film s o f
other than PVC for duty purpo se. Bo th could be m ade du ti
able. In th a t case, there w ill be ha rdly any need for AST M
for this purpose.
Polyurethane Foam and Articles made of Polyurethane Foam:
Sub-item 15A(3) and ISA (4).
Basic tariff rates for these two sub-items are 75 per cent
ad valorem. The effective rates are also the sam e except in the
case of r igid polyurethan e foam s for which the effective rateis 15 pe r cent. The con cessional ra te for rigid poly ure than e is
applicable with effect from 9.6.1982. The sam e rate is ap pli
cable to r ig id polyurethane foam i f such foam is not removed
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from the factory but is consumed o r ut il ised as such or after
subject ion to any process or processes in the m anufac ture of
any oth er goods o f polyu rethane foam . The fol low ing art iclesm ade of polyu rethane foam are excisable:
(a) Sheets and sheeting,
(b) Mattresses and the like,
(c) Q uilts an d the like,
(d) Pillows,
(e) Cushions,
(f) Mats,
in any shape or size. O ther art icles m ade o f p olyure thane
foam are exempt f rom duty i f produced out of duty-paid
(excise or add itional du ty under sect ion 3 of Indian Cu stom
Tari ff Act) polyurethane foam . Articles o f polyu rethane foam
are also exempt f rom duty i f m anufactured from wastes or
scrap of po lyurethane from, or f rom waste and scrap o f
art icles of polyurethane foam.
Special Excise Duty
Besides basic du ty, tar iff item 15A is subjected to special
excise du ty. The latter is levied as a fraction o f the forme r.
W hile the ta riff ra te o f special duty is 10 per c ent o f the basic
duty, the effective rate is 5 per cen t o f the basic duty. Fo r
some tim e beginning with 1st M arch , 1974, this item was
subjected to aux iliary duty as well, bu t it w as m erged with
basic duty w ith effect from 16th M arch, 1977.
C ri tical Appraisal of the T ax S tructure
The preceding pa ragra ph s give an idea o f the cu rren t excise
tax structure o f this i tem . The evolution o f the duty structure
relating to plastics since incep tion is surveyed in A ppend ices
I and II . Tw o notab le po ints which emerge from this survey
are:
i. the tax is levied bo th at the raw m ateria l stage and
also at the article stage;
ii. the tax structure does no t ap pe ar to have been viewed
in total i ty at one t ime.
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T aking the second po int first, we find tha t the existing du ty
structure is the outcom e o f at tem pts made over the years to
tackle problems as and w hen they have arisen w ithout going
fully into the ir overall im plications. This has resu lted in
freq ue nt changes and instabili ty o f the tariff structure. Rates
have occasionally been changed. I t is not clear whether their
effect on oth er similar items was take n fully into acc oun t.
This has resulted in imbalances, encouraging misclassification,
evasion an d litigation. In the 1982 Bud get the tariff hea d was
aligned w ith the customs tariff and the form and description
of the tariff was changed and yet the notif ications issued sti llread as if the old tariff was in vogue.
Co m ing to the f irst point, i t is sometimes argued th at i t
m ight be pre ferab le to levy the duty at one stage only, per-
ferably at the raw m aterial stage. The underlying assum ption
is th a t such a step w ould ease assessm ent, reduce disputes
and make for smoother and easier collection.
Th ough adm inistratively attractive, shifting the point of
levy to the raw m aterial stage only w ithout granting full set
off at the prod uc t stage w hich is possible only und er a system
of value-added tax, is no t desirable. The present system of
levying duty bo th at the raw m aterial and the prod uct stage
thus has its m erits. In any case, w ith changed desc ription o f
the tariff, difficulties of levying duty at the pro du ct stage have
been considerab ly reduced .
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3
Evasion
Introduction
A s in the case o f several oth er com m odities, a signiricant
p ro p o rtio n o f th e duty due on pla stic s is believed to be
evaded throug h some means or the other . The comm on
m etho ds o f excise du ty evasion especially w here the duty
is ad valorem, are the following: U nderreporting ;
M is classif ic ation; and
U nderv aluatio n .
U nderrepor t ing of prod uc t ion is one of the common
m etho ds o f evading taxes, be it incom e tax or excise du ty.
Since it is possible to correlate pr od uc tion w ith inp uts, even
though roughly, un derrepo rt i