1993(11)LCX0056
BEFORE THE CEGAT, SPECIAL BENCH ‘C’, NEW DELHI
S/Shri G.P. Agarwal, Member (J) and P.K. Kapoor, Member (T)
LUXOR PEN COMPANY
Versus
COLLECTOR OF CUSTOMS, CALCUTTA
Final Order No. 385/93-C, dated 30-11-1993, passed in Appeal No. C/1601/92-C
CASE CITED
Lotus Inks v. Collector — 1984(06)LCX0028 Eq 1984 (018) ELT 0387 (Tribunal) ..... [Para 3]
Advocated By : Shri L.P. Asthana, Advocate, for the Appellants.
Shri S. Bhansali, SDR, for the Respondents.
[Order per : P.K. Kapoor, Member (T)]. - This is an appeal against the order passed by the Collector of Customs (Appeals), Calcutta. Briefly stated the facts of the case are that the appellants imported 12 metric tonnes of LDPE powder valued at Rs. 2,54,943. The goods were allowed to be warehoused and 75% of the imported material was permitted to be ex-bonded after assessing the goods provisionally pending test. Out of 12 samples sent for test by the Central Revenues (Control) Laboratory, New Delhi, 10 samples were coloured irregular chips composed of synthetic resin, wax, organic colouring matter and inorganic filler. Out of the remaining 2 samples, one was found to be composed of synthetic resin, wax, inorganic pigment (Ti-02) and inorganic filler and was described as a preparation based on Titanium Dioxide (pigment), and the second one was found to be a preparation based on other colouring matter. On 20-9-1991, the Assistant Collector issued a show cause notice to the appellants alleging that the imported goods were preparations based on organic/ inorganic/other colouring matter. The show cause notice referred to Note 3 to Chapter 32 and alleged that the crayons for which the goods had been imported were colouring preparations. The appellants were asked to show cause as to why the goods already ex-bonded and also the goods lying in the warehouse should not be assessed under Heading 3204.17 as a preparation based on colouring matter (pigment) and under Tariff Heading 3206.10 as a preparation based on Titanium Dioxide and why the appellants should not pay duty amounting to Rs. 4,86,371.85 instead of Rs. 2,08,882/- already paid.
The appellants claimed that the goods were correctly classifiable under Heading 39.01. They contended that the goods were not based on colouring matter and they were not used as ingredients in the manufacture of colouring preparations. They also submitted that crayons could not be regarded as colouring preparations. They pointed out that the Harmonised System permitted an addition of colouring matter to moulding powders of plastics. However, by his order dated 13-1-1992 the Assistant Collector held that the goods based on organic colouring matter were classifiable under Heading 3204.17 and the goods based on Titanium Dioxide were classifiable under Heading 3206.10. He demanded duty amounting to Rs. 2,77,489.85 and also ordered the assessment of the goods lying in the warehouse on the same basis. Against the order passed by the Assistant Collector, the appellants filed an appeal before the Collector (Appeals). However, by the impugned order dated 15-5-1992 the Collector (Appeals) confirmed the order passed by the Assistant Collector.
2. On behalf of the appellants, Shri L.P. Asthana, the learned Advocate, appeared before us. He stated that the Collector (Appeals) had erred in holding that the imported goods were preparations based on synthetic colouring matter on the basis of the certificate of the Chief Chemist that the preparation was based on colouring matter and the principal character of the material was derived from the colouring property. He contended that Note 3 to Chapter 32 on which the Collector (Appeals) had relied was not relevant and the goods were not classifiable under any heading of Chapter 32. He submitted that the Collector (Appeals) had failed to appreciate that the imported material was meant to be used for the purpose of moulding and as a colouring preparation. He contended that the goods could not be deemed a colouring preparation since they do not find use in colouring plastics or rubber. He stated that the predominant constituent being plastic or polyethylene and other ingredients having been only physically mixed and not as a result of any chemical reaction, the goods could not be deemed as a preparation. He reiterated his stand that Note 3 to Chapter 32 was not applicable since the final product, namely, crayon was an article and not a colouring preparation. On these grounds he submitted that goods were correctly classifiable under Chapter 39 and not under Headings 3404.17 and 3206.10.
3. On behalf of the respondents, Shri S. Bhansali, the learned SDK contended that the imported goods were meant for use as a raw material for the manufacture of crayons which are nothing but ‘colouring preparations’ since they impart colour to paper. He stated that according to the Concise Oxford Dictionary and Oxford Advanced Dictionary, “preparation” implies “specially prepared”. He contended that ‘Crayon’ being an item which is specially prepared for imparting colour to paper it has to be deemed as a preparation. In this regard he referred to the Tribunal’s decision in the case of Lotus Inks, Madras v. Collector of Customs, Madras reported in 1984 (018) ELT 387 wherein while examining the distinction between “Dyeing” and “Colouring”, the Tribunal had observed that “colouring” can be by coating, staining, covering, the purposes being protection, beautifying, giving a surface property not present in the coloured material, writing etc.
4. In his rejoinder, the learned Counsel submitted that the case law cited by the learned SDR was not relevant to the point at issue. He stated that the imported material was essentially a moulding powder which on moulding takes the shape of ‘Crayons’. He contended that under these circumstances the material in question could not be deemed as a ‘colouring preparation’ or ‘master batch’ since such preparations are not used for moulding purposes.
5. We have examined the records of the case and considered the submissions made on behalf of both sides. It is seen that the main point that arises for consideration in this case whether the imported raw material for the manufacture of crayons, which on test were found to be composed of - (1) Synthetic resin, wax, organic colouring matter and inorganic filler - (2) Synthetic resin, wax, inorganic pigment (Ti-02) were classifiable under Heading 3204.17 and 3206.10 respectively as held by the lower authorities or under Heading 3901.10 of the Customs Tariff as claimed by the appellants.
6. It is seen that on test of 12 samples, it was reported by the Chief Chemist that 10 samples were coloured irregular chips composed of synthetic resin, wax, organic colouring matter and inorganic filler. Out of the remaining samples, one was found to be consisting of synthetic resin, wax, inorganic pigment (Titanium Dioxide) and the second was described as a preparation based on other colouring matter.
The predominant constituent of the goods was polyethylene since its percentage ranged between 32.7 to 50.4. The colouring matter content was found to be between 11 to 18% and the rest was accounted for by wax and inorganic filler. On the grounds that the goods are polyethylene based moulding powder meant for the manufacture of ‘Crayons’, the appellants have contended that they would be classifiable under Heading 3901.10. They have also contended that Note 3 of Chapter 32 on which reliance was placed by the Collector (Appeals) is not relevant since the goods cannot be regarded as colouring preparation.
7. It is well settled that even though the Customs Tariff is not fully aligned to the Harmonised System (HSN), the notes to HSN have persuasive value in the matter of classification of goods under the Customs Tariff. Hence, in order to examine the appellants’ claim that the goods in question would be appropriately classifiable under Heading 3901.10, we refer to the following extracts from the Notes to Chapter 39 under the heading GENERAL
“Combinations of plastic and materials other than textiles.
This Chapter also covers the following products, whether they have been obtained by a single operation or by a-number of successive operations provided that they retain the essential character of articles of plastics :
(a) - - - - -
(b) - - - - -
(c) - - - - -
(d) - - - - -
In addition to the exclusions mentioned in Note 2, the Chapter excludes
(a) Concentrated dispersions of colouring matter in plastics having the character of products of Chapter 32; see, for example, the Explanatory Notes to Heading 32.04 [paragraph (1)(C) regarding concentrated dispersions of colouring matter in plastics, and paragraph (II)(2) concerning organic luminophores e.g. rhodamine B in plastics]. Heading 32.05 (seventh paragraph concerning concentrated dispersions of colour lakes in plastics) and Heading 3206 (Part A) sixth paragraph, sub-paragraph (1) concerning concentrated dispersions of other colouring matter in plastics).
(b) Preparations of polymers of Heading 39.01 to 39.13 specially formulated for use as glues or adhesives and products of Headings 39.01 to 39.13 put up for retail sale as glues or adhesives, not exceeding a net weight of 1 kg. (Heading 35.06).
(c) Plates and articles thereof (other than the goods of Heading 39.198 or 39.19) printed with motifs, characters or pictorial representations, which are not merely incidental to the primary use of the goods (Chapter 49).”
It is seen that in terms of the exclusion clause (a) concentrated dispersions of colouring matter in plastics having the character of products of Chapter 32 are excluded from the scope of Chapter 39.
In order to examine whether the disputed goods have the character of the products of Chapter 32, we refer to Note 3 to Chapter 32 and also the relevant extracts of the Notes under Heading 32.04 and 32.06 of the HSN.
“CHAPTER 32
TANNING OR DYEING EXTRACTS; TANNINS AND THEIR DERIVATIVES; DYES, PIGMENTS AND OTHER COLOURING MATTER; PAINTS AND VARNISHES; PUTTY AND OTHER MASTICS; INKS
Chapter Notes.
1. … …
2. … …
3. Headings Nos. 32.03, 32.04, 32.05 and 32.06 apply also to preparations based on colouring matters (including, in the case of Heading No. 32.06, colouring pigments of Heading No. 25.30 or Chapter 28, metal flakes and metal powders) of a kind used for colouring any material or used as ingredients in the manufacture of colouring preparations. The headings do not apply, however, to pigments dispersed in non aqueous media, in liquid or paste form, of a kind used in the manufacture of paints, including enamels (Heading Nos. 32.12) or to other preparations of Heading Nos. 32.07, 32.08, 32.09, 32.10, 32.12, 32.13, or 32.15
… … … … …
32.04 SYNTHETIC ORGANIC COLOURING MATTER. WHETHER OR NOT CHEMICALLY DEFINED; PREPARATIONS BASED ON SYNTHETIC ORGANIC COLOURING MATTER AS SPECIFIED IN NOTE 3 TO THIS CHAPTER; SYNTHETIC ORGANIC PRODUCTS OF A KIND USED AS FLUORESCENT BRIGHTENING AGENTS OR AS LUMINOPHORES, WHETHER OR NOT CHEMICALLY DEFINED (+)
Synthetic organic colouring matter and preparations based thereon as specified in Note 3 to this Chapter :
3204.11 Disperse dyes and preparations based thereon
3204.90 Other
(I) SYNTHETIC ORGANIC COLOURING MATTER. WHETHER OR NOT CHEMICALLY DEFINED;
PREPARATIONS BASED ON SYNTHETIC ORGANIC COLOURING MATTER AS SPECIFIED IN NOTE 3 TO THIS CHAPTER
Synthetic organic colouring matter is generally obtained from oils or other products of the distillation of coal tar.
This heading applies, inter alia, to:
(A) ————
(B) ————
(C) Concentrated dispersions of synthetic organic colouring matter in plastics, natural rubber, synthetic rubbers, plasticisers or other media. These dispersions are usually in the form of small plates or lumps and are used as raw materials for colouring rubber, plastics, etc. in the mass.
(D) ————
(E) Other preparations based on synthetic organic colouring matter of a kind used for colouring any material or used as ingredients in the manufacture of colouring preparations. However, the preparations referred to in the last sentence of Note 3 to this Chapter are excluded.
32.06 OTHER COLOURING MATTER : PREPARATIONS AS SPECIFIED IN NOTE 3 TO THIS CHAPTER, OTHER THAN THOSE OF HEADING NO. 32.03, 32.04 OR 32.05; INORGANIC PRODUCTS OF A KIND USED AS LUMINOPHORES. WHETHER OR NOT CHEMICALLY DEFINED.
3206.10 Pigments and preparations based on titanium dioxide.
3206.20 Pigments and preparations based on chromium compounds.
3206.30 ........
3206.41 ........
3206.42 ........
3206.43 ........
3206.49 ........
3206.50 Inorganic products of a kind used as luminophores
(A) OTHER COLOURING MATTER; PREPARATIONS AS SPECIFIED IN NOTE 3 TO THIS CHAPTER OTHER THAN THOSE OF HEADING NO. 32.03, 32.04 OR 32.05
This heading covers inorganic colouring matter or colouring matter of mineral origin.
The heading excludes, however :
(a) ——- -
(b) ———
(c) ——- -
The colouring matter of this heading includes:
(1) Pigments based on titanium dioxide, such as titanium whites consisting either of mixtures of titanium dioxide with calcium or barium sulphate or other materials or of surface treated titanium dioxide. The name titanium white sometimes refers to titanium dioxide which is unmixed and has not been surface-treated; this product is classified in Heading 28.23.
(2) .........
………
(12) ……..
Inorganic pigments with added organic colouring matter are also classified in this heading.
These products are primary materials used principally for the manufacture of the colours or pigments for the ceramic industries (see Note on Heading 32.07), the colours, paints, enamels and lacquers of Headings 32.08 to 32.10 and 32.12, artists’, students’ or amusement colours of Heading 32.13 and printing inks (classified in Heading 32.15)
This heading further includes preparations based on the colouring matters referred to above, and also the colouring pigments of heading 25.30 or of Chapter 28 and metallic flakes and powders, of a kind used for colouring any material or used as ingredients in the manufacture of colouring preparations in the form of;
(I) Concentrated dispersions in plastics, natural rubber, synthetic rubbers, plasticisers or other media. These dispersions are used as raw materials for colouring plastics, rubber, etc. in the mass.
(or) (II) Mixtures with relatively large quantities of surface-active products or with organic binders. These are used for colouring in the mass plastics, etc., or as ingredients in preparations for printing textiles. They are normally in the form of pastes.
… … … … …”
8. It is seen that the goods assessed under Heading 32.04.17 on test by the Chief Chemist were found to be in the form of coloured irregular chips composed of synthetic resin, wax, fillers and organic and inorganic colouring matters. As seen from the impugned order the major constituents were polyethylene (synthetic resin) 32.7 to 50% and colouring matter 11 to 18%. According to the Oxford Advanced Dictionary by A.S. Hornby, the expression “preparation” means : “kind of medicine, food, etc. specially prepared”. The imported goods which have evidently been produced by mixing of polyethylene with other materials viz. organic and inorganic colouring matters, wax and fillers are undeniably ‘preparations’ which are excluded from the scope of Chapter 39 in terms of the ‘General’ notes under Heading 3901.10 of the HSN read with Note 3 of Chapter 32 of HSN in terms of which preparations used for colouring any material or used as ingredients in the manufacture of colouring preparations fall under Headings 32.03 to 32.06. Further, the Notes (C) and (E) under Heading 32.04 also provide that the heading covers preparations based on synthetic organic colouring matter of a kind used for colouring any material or used as an ingredient in the manufacture of colouring preparations. The imported material based on synthetic organic colouring matter was admittedly meant to be used in the manufacture of ‘Crayon’ which is a preparation for imparting colour to paper. For these reasons, in our view, in terms of Note (C) to Heading 32.04 the material composed mainly of polyethylene and colouring matter other than that based on Titanium Dioxide was classifiable under Heading 3204.17 as held by the Collector (Appeals).
9. It is seen that on test a part of the imported goods was found to consist of synthetic resin, wax, inorganic pigment (titanium dioxide) and fillers. Evidently these goods are a preparation based on titanium dioxide. The imported titanium dioxide based preparation is admittedly meant for use as an ingredient in the manufacture of Crayons which are also colouring preparations used for imparting colour to paper. Hence, in terms of Note 3 to Chapter 32 of the HSN they would be appropriately classifiable under Heading 32.06. Therefore, we do not find any infirmity in the Collector’s order holding the imported titanium dioxide based colouring preparation as classifiable under Heading 3206.10.
10. In view of the above discussion, we confirm the order appealed against and reject the appeal.
Equivalent 1994 (70) ELT 294 (Tribunal)