Customs, Excise and Gold Tribunal - Delhi
Soni Chemicals vs Collector Of Central Excise on 28 November, 1990
Equivalent citations: 1991(31)ECC451, 1993ECR149(TRI.-DELHI), 1991(54)ELT298(TRI-DEL)
ORDER D.C. Mandal, Member (T)
1. The issue for decision in this case is whether correcting fluid and diluter packed in separate bottles and then cleared as one set in a common container should be classified under Tariff Heading 3823.00 in respect of correcting fluid and 38.14 in respect of the diluter for the purpose of Central Excise duty and whether value of correcting fluid only should form the basis of assessable value of the correcting fluid and not the total value of the correcting fluid and thinner.
2. The facts of the case in brief are as follows :-
(a) The appellants manufacture correcting fluid falling under Tariff Heading 3823.00. They also purchase diluter in bulk falling under Tariff Heading 3814.00. They repack diluter into small glass bottles and seal them. They clear correcting fluid and diluter separately. In respect of correcting fluid they pay Central Excise duty which is at 15% ad valorem. They do not pay duty on diluter packed in small glass bottles as they avail of the benefit of full exemption from Central Excise duty under Notification No. 230/86-C.E., dated 3-4-1986, as amended. They also clear sets of one bottle of correcting fluid and one bottle of diluter, both packed in a common container.
They filed a classification list in respect of this double pack, classifying the diluter under Tariff Heading 3814.00 and correcting fluid under Tariff Heading 3823.00 respectively. The value of the double pack was shown by them to be the total value of diluter and correcting fluid less the value of the correcting fluid, for the purpose of assessment to Central Excise duty. They did not include the value of the diluter on the ground that diluter was not manufactured by them. They manufactured correcting fluid on which only Central Excise duty was payable. The classification list was approved by the central excise officer. The Assistant Collector of Central Excise, Central Excise Division-I, Nagpur, issued a show cause notice on 4-8-1988 under Section 11A of the Central Excises and Salt Act, 1944, proposing recovery of Central Excise duty amounting to Rs. 1,04,894.22 for the period from January, 1988 to June, 1988. In his order-in-original No. 27/89 (Demand) dated 19-7-1989 (issued on 20-7-1989), the Assistant Collector, Central Excise Division-I, Nagpur, held that in the double pack of correcting fluid and diluter, correcting fluid provides the essential character to the goods and under Rule 3(b) of the Rules for interpretation of the Schedule to the Central Excise Tariff Act, 1985, the double pack of correcting fluid and diluter should both be assessed under Heading 3823.00 as a set of articles and the value for assessment should be the total value of the correcting fluid and diluter taken together in respect of one double pack and not the value of the correcting fluid only. He confirmed the demand for duty of Rs. 1,04,894.22 under Section 11A of the Central Excises and Salt Act, 1944. By the impugned order the Collector (Appeals) has upheld the order of the Assistant Collector. Hence this appeal before us.
3. During the hearing before us, the learned advocate for the appellants has argued that in terms of Note 2(d) to Chapter 38 of the Schedule to the Central Excise Tariff Act, 1985 (hereinafter referred to as New Tariff), Diluter was classifiable under Heading 38.14 and chargeable to Nil rate of duty under Notification No. 230/86-C.E., dated 3-4-1986. He has stated that there is no dispute in the classification and assessment of correcting fluid and diluter cleared separately. The Department has classified the set consisting of both correcting fluid and diluter under Heading 3823.00 following the Interpretative Rule 3(b) and Note 2 to Section VI of the New Tariff. He has also argued that the diluter or thinner cleared in the common pack with the correcting fluid is used as and when required for mixing with correcting fluid, otherwise the correcting fluid is used as such. Therefore, by mixing thinner with the correcting fluid as and when required no new product comes into existence as the product correcting fluid is already there. This being not a composite goods, Interpretative Rule 3(a) or 3(b) is not applicable in this case. In support of his arguments, the learned advocate relied on the Tribunal's decision reported in 1989 (44) ELT 548 (Tribunal) in the case of Collector ofCentral Excise v. Kalinga Paints & Chemical Industries and 1990 (47) ELT 427 (Tribunal) in the case of Polyfoam Industries v. Collector of Customs.
4. The learned Junior Departmental Representative for the Revenue has argued that the correcting fluid and thinner are packed together and sold. They arc set of goods and classifiable in terms of Interpretative Rule 3(b). The value for assessment of the double pack should be the value of the correcting fluid and thinner because the value of the goods in the form cleared is to be taken for assessment of excise duty. For his arguments he has relied on the Tribunal's decision reported in 1986 (26) ELT 936 (Collector of Central Excise, Tiiane v. India Dyestuff Industries Ltd., Bombay). He has argued that Note 2 to Section VI shall govern the classification in this case. The learned Departmental Representative has, however, confirmed that the thinner was not manufactured by the appellants. The same was purchased in bulk from outside and packed in small containers.
5. We have considered the arguments and the records placed before us. There is no dispute about the facts stated above. Note 2 of Section VI of the New Tariff reads as follows :-
"2. Goods put up in sets consisting of two or more separate constituents, some or all of which fall in this Section and are intended to be mixed together to obtain a product of Section VI or VII, are to be classified in the heading appropriate to that product, provided that the constituents are :
(a) having regard to the manner in which (hey are put up, clearly indentifiable as being intended to be used together without first being repacked;
(b) presented together; and (c) identifiable, whether by their nature or by the relative proportions in which they are presented, as being complementary one to another."
It has been argued before us by the learned Advocate that the correcting fluid is used as such. The thinner or diluter is mixed with the correcting fluid as and when required. They have also filed a certificate dated 24-2-1990 from Dr. G.D. Nageshwar, Director, Laxminarayan Institute of Technology, Nagpur University in which it is certified that the correcting fluid Eraz-Ex can be used without adding dilutcr to it as it has sufficient fluid consistency. The dilutcr may be added only when the correcting fluid thickens or solidifies. This certificate makes the purpose and use of the appellants' correcting fluid very clear. The goods put up in sets consisting of two or more separate constituents are to be assessed in terms of Note 2 to Section VI (Supra) when constituents arc intended to be mixed together to obtain a product of Section VI or VII. Chapter 38 under which correcting fluid and thinner are assessable, fall in Section VI of the Tariff. Thinners are specifically mentioned in the Tariff Heading 3814.00. Chapter Note 2(d) says that correcting fluid are included in Heading No. 38.23 and these are not to be classified in another heading of this Schedule. The contention of the appellants is that the correcting fluid is used as it is and diluter is mixed as and when required. This is confirmed by the certificate given by the Director of Laxminarayan Institute of Technology, Nagpur University (Supra). This fact has not been disputed by the learned Departmental Representative. Correcting fluid as manufactured by the appellants is a ready to use manufactured product. Addition of thinner to it as and when required does not result in a new product. In other words, both are not intended to be mixed together to obtain a new product of Section VI or Section VII. In the circumstances, Section Note 2 to Section VI is totally inapplicable to this case.
6. Rule 3(b) of the Interpretative Rules is applicable for classifying mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets, which cannot be classified by reference to sub-rule (a) of Rule 3 of the Interpretative Rules, sub-rule (a) of the said rule provides that for classification the heading which provides the most specific description shall be preferred to heading providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set, these headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. In the present case, correcting fluid and diluter are two distinct products and they are specifically covered by the Headings 3823.00 and 3814.00 respectively. When these are cleared separately, they are assessed separately under these headings. These two products though packed in a common container for clearing in some cases for the convenience of the users, these are not mixture nor are composite goods. Therefore, Interpretative Rule 3(b) is not applicable in this case.
7. The learned advocate has cited two decisions of this Tribunal in support of his arguments. In Kalinga Paints & Chemicals Industries (Supra), the respondents therein manufactured Aluminium medium in their factory. They paid duty on the same, before clearance. They procured aluminium paste from outside. The two products were packed separately and put in a common carton for marketing as aluminium paints. The operation of putting the two materials separately had been carried out outside the factory. The Tribunal held that this operation was not manufacture within the meaning of Section 2(f) of the Central Excises and Salt Act, 1944. The other decision relied on by the learned Advocate is the Tribunal's decision reported in 1990 (47) ELT 427 (Tribunal) in the case of Polyfoam Industries v. Collector of Customs. This relates to a consignment of Isocyanate and Polyol. It was held by the Tribunal that the two imported products were classifiable under the respective Tariff headings, namely 3909.50 and 2929.10.
8. In the light of the foregoing discussions, we are of the opinion that the products correcting fluid and diluter cannot be classified in this case as a set of articles under Interpretative Rule 3(b) read with Note 2 to Section VI of the Tariff. The goods should be separately classified under the respective Tariff Headings. The value for the purpose of assessment should be the value separately fixed for each of the products.
9. The learned Departmental Representative has relied on this Tribunal decision reported in 1986 (26) ELT 936 (Tribunal) in the case of Collector of Central Excise, Thane v. Indian Dyestuff Industries Ltd., Bombay. It was held by the Tribunal in that case that in terms of Section 4 of Central Excises and Salt Act, 1944 the assessable value is the price at which the manufactured goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal. This ratio of the decision does not affect our aforesaid findings. The price of correcting fluid only at the time of removal should be the basis of assessable value of the correcting fluid cleared in the common packet in this case. What we have held is that it is not a set of goods within the meaning of Interpretative Rule 3(b) and Note 2 to Section VI (Supra). This being the position, the separate value of correcting fluid should be the assessable value of the said product and not the total value of correcting fluid and thinner. In the light of the above findings, we set aside the impugned order and allow the appeal.