2. study of plastics

8/12/2019 2. Study of Plastics

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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
http://0.0.0.0/http://0.0.0.0/http://0.0.0.0/http://0.0.0.0/http://0.0.0.0/http://0.0.0.0/


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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


17/100

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


18/100

(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


19/100

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


20/100

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.


21/100

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


22/100

( 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


23/100

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 .


24/100

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.


25/100

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.


26/100

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. ,


27/100

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.


28/100

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


31/100

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


35/100


36/100

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


37/100

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


39/100

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


40/100

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

2. study of plastics

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