1998(04)LCX0080

IN THE CEGAT, EASTERN BENCH, CALCUTTA

Shri P.C. Jain, Member (T) and Smt. Archana Wadhwa, Member (J)

ICI (INDIA) LIMITED

Versus

COMMISSIONER OF CENTRAL EXCISE, CALCUTTA-II

Order No. A-448/Cal/98, dated 2-4-1998 in Appeal No. E/5031/93

Advocated By : Shri R. Swaminathan, Consultant, for the Appellant.

Shri R.K. Roy, JDR, for the Respondent.

[Order per : P.C. Jain, Member (T)]. - Question involved in the present matter is regarding the classification of Duco Putty whether under Tariff Heading 32.14 as Painters Fillings, as claimed by the assessee, or under Tariff sub-heading 3208.30 as assessed by the lower authority.

2. Second question is whether the demand of duty proposed by way of show cause notice dated 15-1-1991 for the period from 1-3-1986 to 31-5-1990, in the facts and circumstances of the case, is barred by time.

3. Dealing with the first question, the adjudicating authority has stated that the appellant firm herein has gone by the application of Putty. While it is conceded by the said authority that this is one of the factors to be considered, the composition of the material cannot be ignored which, according to it, is obviously such as to distinguish it from Putty. The essential characteristic of paints, finds the adjudicating authority, is that it is a free-flowing liquid and consists of a smooth, uniform suspension of fine particles or pigment in a liquid medium. The adjudicating authority finds that this is fully satisfied in the present case as is apparent from the Chemical Examiner’s Test Report which is in the following terms :

“The sample is in the form of grey soft paste and is composed essentially of pigment, extender, synthetic resin of cellulose nitrate type and volatile organic solvents. As such the sample is not of brushable consistency but on dilution of organic solvent it gives tack free opaque adherent coating.”

4. The adjudicating authority has given emphasis on the later part of the Test Report which says that on dilution of organic solvent the product gives tack free opaque adherent coating and hence it has been treated as falling under Tariff Heading 3208.30 relating to paints, varnishes of some particular types.

5. On the other hand, the appellants’ contention is that the goods fall under Tariff Heading 32.14 described, inter alia, as `Painters Fillings’. He submits that the lower authority has erred in relying on the later portion of the Chemical Examiner’s Report which simply states that on dilution of the pro- duct i.e. Duco Putty, which is in the form of grey soft paste, it becomes paint like, i.e. it gives tack free type opaque adherent coating. He submits that the as- sessment of the goods has to be done according to the condition in which they are removed from the factory or are used internally for captive consumption in the manufacture of another product. Therefore, the assessment of Putty on the basis of its dilution in an organic solvent is not called for. In view of this, the finding of the adjudicating authority, submits the learned Consultant, is faulty.

6. On the other hand, learned JDR Shri R.K. Roy reiterates the findings of the adjudicating authority. He has also attempted to explain to us the Chapter Note of Chapter 32 which we find is totally irrelevant because that speaks of solution of paints and varnishes falling under Tariff Heading 32.08. As rightly pointed out by the learned Consultant for the appellant firm, the product is to be assessed in the form in which it is removed from the factory or it is consumed in the manufacture of another product in the factory itself. Since the product is in the form of grey soft paste, we have to assess it as it is and not on its dilution. Keeping in view that in mind, the lower authority’s finding has gone wrong. Accordingly, we set aside the finding of the adjudicating authority holding that Putty falls under Tariff Heading 3208.30. The goods are correctly assessed under Tariff Heading 32.14 as Painters Fillings, as contended by the appellants herein.

7. The next question is regarding the demand being barred by limitation. Learned Consultant for the appellants has taken us through the various documents right from the declaration of the product in the classification list dated 5-3-1986; a sample drawn for the purpose of testing the Putty in 1986; three show cause notices issued for the product for the period from 1-12-1986 to 30-4-1989, for demanding duty on the same, which were ultimately dropped by the Assistant Commissioner. All these materials, submits the learned Advocate, show that the Department was fully aware about the nature and composition of Putty, being cleared under Tariff Heading 32.14 and yet the Revenue has framed a charge of suppression of facts or wilful mis-statement of facts or contravention of the Rules with intent to evade payment of duty, against the appellants herein. He submits that such charge is not supported by any overwhelming evidences as stated above.

8. Opposing the contentions, learned JDR, Shri Roy on the other hand, reiterates the finding of the adjudicating authority on this question, which reads as follows :

“It is thus clear that the composition of `duco putty’ and ‘putty’ as such is quite different and the assessee had mis-declared the composition before the AC concerned inasmuch as the complete composition of the material was not disclosed. In the face of this suppression, it is felt that there is enough justification for invoking Section 11A proviso.”

9. This finding of adjudicating authority is totally against the facts. There is difference between Duco Putty and Putty as we have already held above. The adjudicating authority has relied upon the dilution of Putty being paints. But as found above, dilution of Putty cannot be considered to be Putty and therefore, the finding of mis-declaration attributed to the appellants is not sustainable. Hence, we set aside the demand of duty as barred by time as well. In view of the above finding, there is no question of imposition of any penalty. Therefore, the penalty imposed is also set aside.

10. In short, the appeal is allowed with consequential reliefs to the appellants herein.

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Equivalent 1998 (104) ELT 347 (Tribunal)

Equivalent 1998 (026) RLT 0770