Amritlal Chemaux Ltd. vs Collector of Central Excise, Bombay-III>1996(09)LCX0159

1996(09)LCX0159

IN THE CEGAT, COURT NO. III, NEW DELHI

Shri G.R. Sharma, Member (T) and Ms. Archana Wadhwa, Member (J)

AMRITLAL CHEMAUX LTD.

Versus

COLLECTOR OF CENTRAL EXCISE, BOMBAY-III

Final Order No. 615/96-C, dated 25-9-1996 in Appeal No. E/2700/90-C

Advocated By : Shri Gopal Prasad, Advocate, for the Appellant.

Shri A.K. Agarwal, SDR, for the Respondents.

[Order per : G.R. Sharma, Member (T)]. - By the present appeal, the appellants have agitated the classification of the products.

2. The facts of the case are that two show cause notices were issued to the appellants. The first show cause notice was issued on 27-4-1989 and the second show cause notice was issued on 5-5-1989. In the first show cause notice, the appellants had declared two products in their C/List. The first product was Kem Kerrier TCI Conc. and the second product was Kem Kerrier D. Conc. In their C/List, they had claimed classification of the above two products under sub-heading 3402.10 stating sulphonated castor oil and claimed that these products were leviable to duty at nil rate. Samples were drawn from these products and sent to Dy. Chief Chemist. The classification was approved provisionally. The Dy. Chief Chemist opined that the two products stated above are dyes carrier. The Asstt. Collector accordingly issued show cause notice asking the appellants to explain as to why the products should not be classified under sub-heading 3809.00 and levied to duty at 15% [ad valorem].

3. The second show cause notice was issued on 5-5-1989. In this case, the product was described as `Azofast’ in the [Classification List] classifiable under sub-heading 3801.90 and leviable to duty at 15% [ad valorem] The A.C. provisionally approved the [Classification List], drew a sample and sent it to the Dy. Chief Chemist, Bombay. The Dy. Chief Chemist, in his test report, opined that the product is an aqueous solution of organic surface active agent. The Asstt. Collector, therefore, issued this show cause notice asking the appellants to explain as to why the product should not be classified under sub-heading 3402.90 and why it should not be levied to duty at a rate of 20% adv.

4. The appellants, in reply to the show cause notice, submitted that `Azofast’ is a product of the condensation of fatty oil with polyethylene glycol and its dilution and that after comparing the competing entries, the product is a finishing agent correctly classifiable under sub-heading No. 3801.90. On the question of classification of Kem Kerrier TCI Conc./D. Conc. the appellants submitted that for manufacture of the products, they took castor oil and that the same is sulphonated with sulphuric acid and then neutralised and diluted with organic solvent; that these two products are different on account of use of different solvents in the process of their manufacture. It was argued by the appellants before the lower authorities that T.I. 3402.10 reads : “Sulphonated castor oil, fish oil or sperm oil”. The appellants also requested that the Dy. Chief Chemist may be requested to indicate whether the test laid down in Note 3 to Chapter 34 was carried out. After careful consideration of the submissions made, the A.C., in his order-in-original held that Kem Kerrier TCI Conc./D. Conc. is classifiable under sub-heading No. 3809.00 with 15% Adv. rate of duty. For classification of Azofast, the ld. A.C. held that it was classifiable under sub-heading No. 3402.90 with 20% adv. rate of duty upto 28-2-1987 and at a rate of 25% ad valorem from 1-3-1987 onwards. The A.C. also directed the appellants to pay duty payable on these products. The A.C. also approved the C.L.

5. Shri Gopal Prasad, the ld. Counsel appearing for the appellants submitted that the ld. Collector (Appeals) has relied upon the opinion of the Dy. Chief Chemist in respect of classification of the products and that the function of the Dy. Chief Chemist is to analyse the product and leave the matter of classification to the proper officer. Thus, he contended that the Dy. Chief Chemist exceeded the limit: that the chemical test report of the Victoria Jubilee Technical Institute, Bombay on Kem Kerrier TCI Conc.; D.Conc. on tests conducted in accordance with Note 3 of Chapter 34 and found that these two products answered the requirement of Note 3 of this Chapter for classification of the goods under Heading No. 34.02. He submitted that test on the samples of the above products was also conducted by the Department of Chemical Technology, University of Bombay and it was opined that these two products answered the test laid down in Note 3 of Chapter 34. The ld. counsel submitted that the Dy. Chief Chemist had not conducted the test in terms of Note 3 of Chapter 34 to determine whether the products were classifiable under Heading 34.02 or not. The ld. Counsel submitted that these two products are organic surface active agent in terms of the explanation contained in Chapter Note 3 of Chapter 34.

6. Assailing the opinion of the Dy. Chief Chemist that the products described as Kem Kerrier TCI Conc./D. Conc. become dye carrier only when they are emulsified. The ld. Counsel submitted that emulsification takes place at the user’s end and that it was settled principles of law that the classification has to be adopted for a product in the shape it leaves the factory. In support of this contention, he cited and relied upon the Trade Notice No. 150/89 dated 28-4-1989 of Hyderabad Collectorate. In support of the contention that the products manufactured by them become dye carrier only when they are emulsified, the ld. Counsel cited and relied upon the page 79 of the book titled as “Technology of Textile Processing” by Shri V.A. Shenai. The ld. Counsel also contended that the A.C. has also ordered for recovery of duty whereas there was no show cause notice with reference to recovery of duty. It was also contended that the goods were not provisionally assessed. Summing up his arguments, the ld. Counsel submitted that the products may be classified correctly as claimed by the appellants and the impugned order may be set aside and the appeal may be allowed.

7. Shri A. K. Agarwal, the ld. SDR appearing for the respondents submitted that in sofar as the classification of Kem Kerrier TCI Conc./D. Conc. is concerned, the Dy. Chief Chemist opined that they were dye carriers : that this opinion of the Dy. Chief Chemist was not contested by the appellants for retest within prescribed period. Regarding the test conducted by the Victoria Jubilee Technical Institute, Bombay and the Deptt. of Chemical Technology, University of Bombay, the ld. SDR submitted that the samples were not taken with the authority of the Central Excise officers and, therefore, the test report cannot be treated as the reports on the samples of the goods in dispute. The ld. SDR submitted that there is a process prescribed for retest of sample which was not followed by the appellants. On the question of the contention that the products become dye carriers only when they are emulsified, the ld. SDR submitted that the literature of these products prepared by the appellants clearly states that these two products are dye carriers. The ld. SDR submitted that when the literature of the appellants themselves is supported by the chemical test report, there is nothing more left for determining the identity of the goods. He submitted that the lower authorities have rightly classified these two products under sub-heading No. 3809.00. He submitted that once these products are classifiable under sub-heading No. 3809.00, the question of conducting the test in terms of Note 3 of Chapter 34 does not arise. The ld. SDR therefore, submitted that the lower authorities have rightly classified the goods. On the question of demand of duty, the ld. SDR submitted that the show cause notice specifically says that the products described as Kem Kerrier TCI Conc./D. Conc. attracts duty at a rate of 15% adv. and that the show cause notice in respect of Azofast also says that the product shall be classifiable under Chapter Heading 3402 attracting duty at 20% adv. that in pursuance of this show cause notice, the order-in-original confirms that the duty on Kem Kerrier TCI Conc./D.Conc. shall be 15% adv. and that duty on Azofast shall be 20% adv. upto 28-2-1987 and 25% adv. from 1-3-1987. The ld. SDR submitted that in view of this allegation of the show cause notice and its confirmation in the order-in-original, it is very clear that there is a demand of duty consequent upon the approval of the C/List. The ld. SDR reiterated the findings of the lower authorities and submitted that in view of the above submissions the appeal may be rejected.

8. Heard the submissions of both sides. We find that there are two show cause notices. One show cause notice deals with classification of Azofast and applicability of the rate of duty and the other show cause notice deals with classification of Kem Kerrier TCI Conc./D.Conc. and the applicability of the rate of duty on these two products. We find that for classification of chemical products, normally, a sample is drawn and sent to the Chief/Dy. Chief Chemist. In the instant case, the C/List was approved provisionally and the sample was sent for test to the Dy. Chief Chemist. The Dy. Chief Chemist in respect of Kem Kerrier TCI Conc./D.Conc. opined that the product is dye carrier. We do not find any hint that this product was recommended for classifying under 3809.00. We find that this is an inference drawn by the adjudicating authority and therefore, the contention of the appellants that the Dy. Chief Chemist exceeded his limit is not tenable. We also observe that the appellants in the brochure issued on the subject claimed that the product is a dye carrier. Looking to the literature on the subject prepared by the appellants as also the opinion of the Dy. Chief Chemist, we have no hesitation in holding that the product is dye carrier and is classifiable under sub-heading 3809.00. A lot of emphasises was laid by the Counsel of the appellants that it was only an extract of the test report of the Dy. Chief Chemist which was communicated to them and they had no opportunity of seeing the full report of the Dy. Chief Chemist and thus they have been denied an opportunity of rebutting the report. The admitted position is that the extract of the Dy. Chief Chemist’s report was sent to the appellants. If they had any objection, they should have followed the procedure set out in the Rules which they did not do and, therefore, we are not prepared to accept the contention of the counsel that they were denied an opportunity of rebutting the findings of the Dy. Chief Chemist in the chemical test report.

9. Another point that was agitated by the ld. Counsel was that they should have conducted the test prescribed in Note 3 of Chapter 34 of the schedule to the Tariff Act. We find that since in the opinion of the Dy. Chief Chemist, the product was dye carrier and the literature prepared by the appellants also shows that the product was dye carrier and since dye carrier was classifiable under Chapter 38, there was no question of conducting any test whatsoever under Note 3 of Chapter 34.

10. On the question of no mention of demand in the show cause notice, we find that show cause notice alleged that duty shall be chargeable at appropriate rate and the rate was mentioned in the show cause notice. Therefore, the plea of the appellants that the demand was not raised or there was no mention of demand in the show cause notice is not tenable. Moreover, we find that C/List was approved provisionally, therefore, the demand is sustainable in law when the C/List was approved finally.

11. We find that the classification of Azofast as determined by the department was not agitated before us. In the brochure, they should have stated that the product Azofast is a finishing agent and may be classifiable under 3801.90. We find that the only point that was taken in reply to the show cause notice was that on comparison of the above two competing entries, the product described as Azofast is a finishing agent and was correctly classifiable under sub-heading 3801.90. No additional evidence was brought on record nor any additional grounds were adduced before us for classification of this product under Chapter Heading 3801.90. We find that the Dy. Chief Chemist, in his test report found the item to be organic surface active agent and, therefore, the Asstt. Collector correctly held that it is classifiable under Chapter 34. Heading No. 34.02 reads : “Organic surface active agents (other than soap) : surface active preparations, washing preparations etc.” 3402.10 reads : “Sulphonated castor oil, fish oil or sperm oil” and 3402.90 reads : “Other”. We find that 34.02 is a general heading and 3402.10 and 3402.90 are its two sub-headings. Admittedly the product was not found to be sulphonated castor oil, therefore, it can fall under sub-heading 3402.90. We also observe that the appellants relied upon Rule 3 of Interpretative Rules saying that a specific entry should be preferred over a general entry. We find that 34.02 is a specific entry for organic surface active agent and, therefore, Azofast which has been found on chemical test to be surface active agent falls was fit for classification under heading No. 3402.00 and further under sub-heading 3402.90 and we hold accordingly.

12. Having regard to the above discussion and finding, we uphold the impugned order and reject the appeal.

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Equivalent 1997 (89) ELT 108 (Tribunal)