2000(12)LCX0250
IN THE CEGAT, COURT NO. III, NEW DELHI
Ms. Jyoti Balasundaram, Member (J) and Shri G.R. Sharma, Member (T)
COMMISSIONER OF C. EX., CHANDIGARH
Final Order No. 526/2000-C, dated 7-12-2000 in Appeal No. E/2154/2000-C
Advocated By : Shri S.P. Rao, JDR, for the Appellant.
Shri R.C. Gupta, Advocate, for the Respondent.
[Order per : G.R. Sharma, Member (T)] . - In this impugned order ld. Commissioner (Appeals) held that the product in question shall be classifiable under Tariff Heading 25.01. Being aggrieved by this order Revenue has filed the captioned appeal.
2. The facts of the case in brief are that two show cause notices were issued to the respondents herein. The show cause notices were issued on account of the fact that the assessee in their classification lists declaration filed under Rule 173B of the Central Excise Rules, 1944 had been declaring the ‘denatured salt’ as one of the manufactured items and had claimed the classification thereof under chapter Heading 25.01.
3. On examination of the manufacturing process, it was noticed that the respondents have been purchasing raw materials namely Urea, Caustic Soda, Chlorine Gas etc. Caustic Soda and Chlorine gas are first reacted in a closed tank and the product so formed is transferred to another tank in which urea is already placed. Mixture in this tank is heated up to the temperature of 1000C. Heating is done with steam. The chemical reaction starts in this tank and on completion of the reaction Hydrazine in liquid form with other chemical product is manufactured. This is taken to a storage tank. From this storage tank limited quantity of the product is taken into an evaporater tank where Hydrazine evaporates. It passes through a condensor and is collected. The remaining product in the evaporater tank is taken into centrifuge. From the contents, Hydrazine which are still present in the product are taken out and likewise pass through the evaporater and in turn through the condensor to collect Hydrazine. The Residue product which remains in the centrifuge is taken out from its bottom. This is in the form of crystalline powder. These are the goods which are to be classified. The Deputy Commissioner classified this product under chapter Heading 38.24 (then 38.23) and confirmed the demand of Rs. 12,21,863/-. The respondents herein filed an appeal against this order. Ld. Commissioner (Appeals) held that the item was classifiable under chapter Heading 25.01 and hence the appeal is before us by Revenue.
4. Arguing the case for Revenue Shri S.P. Rao, ld. JDR submits that Ld. Commissioner (Appeals) has said that the product left after chemical processing is a product of the chemical or allied industries; that the Residue of such industries falls within chapter Heading 38.23 (now 38.24). Ld. JDR submitted that the case in dispute is whether Residue is product of chemical industries is arising in manufacturing Hydrazine; that it was a mixture of Sodium Chloride and other Salts formed during chemical reaction in the plant in a natural way without applying any process for denaturalisation of the salt ; that this Residue also contains some quantities of Urea and Caustic Soda, which were initially put in the chemical reaction. He submitted, therefore, these goods were a mixture of chemical compound and were nothing but a Residue of chemical and allied industries.
5. The ld. JDR submitted that page 184 of H.S.N. entries covered only salt which has been denatured by any process, Residuary Sodium Chloride in particular that left after chemical processing (e.g. electrolysis) or obtained as a bye-product of the treatment of certain ores; that in chemical processing like electrolysis, Residual Sodium Chloride in particular which is left over is from brine solution which is nothing but fully saturated solution of common salt i.e. Sodium Chloride with Water that in electrolysis, salt is initially present in the electrolyte from where the Residue is obtained. Ld. JDR submitted that in the present case this product is formed by chemical reaction; that Sodium Chloride is not added at any stage of the process of manufacturing of Hydrazine; that the goods are obtained as a Residue product of chemical reaction which takes place between Urea, Caustic Soda and Chlorine ; that the reaction is wholly a chemical reaction and Residue is obtained from the bottom of the centrifuge; that this is a process of separation of manufactured Hydrazine. Ld. JDR further submitted that the respondents herein manufactured Hydrazine; that Hydrazine was covered by chemical industries; that the product was within Section VI covering products of chemical or allied industries.
6. Ld. DR also submitted that words used at page 545 of H.S.N. are Residual Sodium Chloride and not salt ; that the Residual product formed in the process in this case was a mixture of Sodium Chloride, Sodium Carbonate water etc.; that this mixture cannot be termed as Residual Sodium Chloride. Ld. DR submitted that contention of the respondents herein that by applying the principle of the pre-dominance, the classification of the product as Sodium Chloride is not correct; that chapter 25 covers only mineral products ; that note 2 to chapter 25 provides except where this context otherwise requires Heading 25.01, 25.03 25.05 covers only products which have been washed powdered or concentrated. Further the reasoning that the question of understanding a product by applying the principle of pre-dominance does not arise in this case as the product is clearly identifiable. The ld. DR also submitted that respondents herein have claimed classification of this product under chapter Heading 25.01 that chapter 25 covers only mineral products that note 1 to chapter 25 provides that this chapter covers in general, mineral products only; only mineral products which are in crude state or the products which have been crushed, ground, screened, concentrated are covered. The ld. DR therefore, submitted that Heading 38.23 of H.S.N. covers Residual products of chemical or allied industries not elsewhere specified or included. He submits that in view of the above submissions the product in dispute is classifiable under the then chapter Heading 28.23.
7. Shri R.C. Gupta, ld. Counsel appearing for the respondents submits that Residuary Sodium Chloride left after chemical processing or obtained as a bye-product of only certain ores as mentioned at page 184 of H.S.N. is out of the crystalisation process. He submits that this entry can be devided into 2 parts ;
(i) Residuary Sodium Chloride, in particular and left after chemical processing.
(ii) Residuary sodium chloride obtained as a bye-product of the treatment of certain ores, ld. Counsel submits that in the present case Residuary Sodium Chloride is being obtained in particular left after chemical processing: that the entry does not have word only : that the word only is neither mentioned in CETA 1985 nor in H.S.N. and is a deliberate attempt to mislead the Tribunal. Ld. Counsel submits that when page 184 of H.S.N. is read with chapter notes 1 & 2 of chapter 25 it clearly establishes the wider scope of CETA 1985. Ld. Counsel submitted that chapter note 2 of Section V under chapter 25 of the CETA read with H.S.N. notes at page 184 clears beyond any pale of doubt that salt other than of mineral origin is also covered under chapter Heading No. 25.01. He submits that reaction in the instant case is wholly chemical reaction, and the Residue is obtained from bottom of centrifuge; that this is a process of separation of crystallised material from other material formed during separation of manufactured Hydrazine through crystallisation and is specifically excluded by chapter note 2 to chapter 25 of CETA 1985. Ld. Counsel submitted that the maxim that the context otherwise requires read with chapter note 1 & 2 of H.S.N. as well as chapter note 2 appended to chapter 25 of the CETA 1985 do not limit that salt is to be obtained from mineral, ores, or Sea water only. Ld. Counsel also submitted that titles of Sections and the chapters are provided for ease of reference only and have no legal importance. Ld. Counsel also submitted that in the instant case Rules of classification are applicable as a conflict between various headings arises in the present case, Ld. Counsel therefore, prayed that the appeal may be rejected and the product may be classified under chapter Heading 25.01 after upholding the impugned order.
8. On careful consideration of the rival submissions in the instant case we note that respondents herein has claimed the classifications of the product under chapter Heading 25.01 whereas department proposes classification under chapter Heading 38.23. We also note that the final product in the instant case is Hydrazine. We also note that the product in dispute is obtained as Residue. The only dispute is whether this Residue is Residue of chemical or allied industries as proposed by department or is Residue left after chemical processing or obtained as bye-product of treatment of certain ores. Hydrazine is a chemical product classifiable under chapter 38. The Residue in the instant case does not arise as a bye-product of treatment of ores. We have also perused chapter heading in dispute. We note that for classification of a product under chapter 25 the product must be mineral product, salt, sulphur, clay, stone lime and cement. In the instant case, the Residue is none of the above mentioned product. On a study of the process of manufacture we find that certain chemicals are reacted, none of these chemicals are classifiable under chapter 25, thus the Residue in question cannot be a product obtained after chemical processing e.g. (electrolysis). None is a bye-product of a treatment of certain ores. The product is obtained after crystallisation. The product is obtained as a bye-product or Residue while manufacturing Hydrazine. Hydrazine is admitedly a chemical. Thus the Residue in the instant case is nothing but a residue of chemical and allied industries. We note that there is specific heading for Residue of chemical and allied industries under the present chapter Heading 38.24. Since there is specific heading, we need not go to decide the issue by resorting to be Rules for interpretation of tariff. These Rules are attracted only when the heading is not specific or the product is a composite one. The question therefore, of any material being pre-dominantly present in the Residue does not arise in the present case. We have also perused notes on pages 184 and 545 of H.S.N. as also the notes under chapter 25 and chapter 38 of schedule of the CETA 1985. We find that the product is a Residual product of the chemical and allied industry and the product is not elsewhere specified or included. The product is not salt, table salt denatured salt and pure sodium chloride. We have carefully perused chapter Note 2 of chapter 25 and find that the product in dispute is not obtained after washing is not crushed, ground, powdered, sifted screened or concentrated. We hold that the product is a Residual product of chemical industry.
9. Having regard to the above discussion we hold that the product is classifiable under chapter Heading 38.23 (now 38.24) of CETA 1985. The appeal of Revenue is therefore, allowed in the above terms.
Equivalent 2001 (127) ELT 0069 (Tri. - Del.)