Customs, Excise and Gold Tribunal - Bangalore
Commissioner Of C. Ex. vs Unicorn Organics Limited on 3 February, 2005
Equivalent citations: 2005(186)ELT78(TRI-BANG)
ORDER S.L. Peeran, Member (J)
1. This is a Revenue appeal against OIO No. 75/97, dated 28-10-97. The assessees are manufacturer of Sorbitol. The same had been classified under Chapter Heading 29.05 as medicament. However, a show cause notice dated 16-10-96 was issued to reclassify the Sorbitol under Chapter Heading 3823.00. The Commissioner, after detailed examination, has found that there is no material placed by the Revenue for reclassifying the item and the item is rightly classifiable under Chapter Heading 2905.90. The findings recorded by him are extracted below here : para 4 to 11.
"4. I have carefully gone through the records of the case, the reply dated 28-2-1997 submitted by Unicorn, the Written brief dated 12-9-97 submitted by Shri V.J. Sankaram, learned Advocate, and the oral submissions made during the course of personal hearing.
5. The main issues for consideration are whether :
(a) the impugned goods are classifiable under chapter sub-heading No. 2905.90 which is the claim of Unicorn or sub-heading No. 3823 which is the case of the department; and
(b) the show cause notice is within the time limit and whether proviso to Sub-section (1) of Section 11A ibid is invocable.
6. In the first instance, I propose to the take up the classification issue. Unicorn have strongly argued that in the matters of classification, the items are to be classified on the basis of technical nomenclature, rather than on the basis of trade parlance. Unicorn have also submitted that a proper test should be conducted and results communicated to the assessee which gives an opportunity to the assessees to rebut the test report which might be against the classification sought for by him. Unicorn argued that the authorities had taken note of manufacturing process and that the impugned goods are bulk drugs. The recognition of the impugned goods as bulk drug by the Drug Control Administration is very important, they submitted. Further, they argued that Classification List filed by them with effect from 10-3-1989 was approved by the Assistant Collector and in fact the classification of impugned goods under sub-heading No. 2942.00 was suggested by the learned authorities. Unicorn submitted that the purity of Sorbitol manufactured by them was more than 90% of the dry matter and can be called as only D-Glucitol falling under 29.05. Unicorn referred to the opinion of Eicon India Ltd. (on the sample) which shows that on dry matter basis the Sorbitol (D-Glucitol) is 90.71%.
7. The conclusion reached by the department that the impugned goods do not merit classification under Chapter 29 is based, inter alia, on the following :
(a) the product manufactured by Unicorn is Sorbitol solution. But to seek classification under Chapter 29 D-Glucitol is to be manufactured in micro crystalline powder form and from Glucose or invert sugar.
(b) Sorbitol solution is a chemical preparation obtained from starch but not a Chemical product obtained by various chemical ingredients.
(c) Mannitol and the Isomeric Polyhydric alcohols are not permissible impurities and are deliberately left in the final product to change the end use of the product and also to meet the requirement of IP.
(d) Sorbitol solution manufactured by Unicorn cannot be regarded as separately chemically defined compound since it has not attained its molecular level.
8. Department has relied upon the HSN Notes. So, in this context certain extracts from HSN Notes under Chapter Heading 38.23 are reproduced below:
"Aqueous solutions of Chemical products of Chapter 28 or 29 remain classified with those chapters, but solutions of these products in solvents other than water are apart from few exceptions, excluded therefrom and accordingly, fall to be treated as preparations under this heading".
"Sorbitol other than that of Heading 29.05. This category covers, in particular, Sorbitol (D-Glucitol) syrups containing other polyols and in which the D-Glucitol content normally ranges from 60% to 80% of the dry matter. Products of this kind are obtained by the hydrogenation of glucose syrups having a high disacchoride and polysacchoride content, without any separation process having taken place. They have the characteristics of being difficult to crystallize and are used in vide variety of industries (e.g. food, cosmetics, Pharmaceuticals, plastics, textiles)".
9. Thus HSN notes clearly indicate that solutions of Chapter 28 or 29 with solvents other than water except few exceptions are excluded from those chapters. It is evident from the notes that Sorbitol can be in the form of solution. Therefore, the contention of the department that Sorbitol has to be in micro crystalline powder form is not tenable. The explanatory notes in HSN also mention that products of Sorbitol other than Heading 29.05 have high disacchoride and polysacchoride content, without any separation process having taken place. But in the case of impugned goods the content of disaccharides is 0.2% and polysaccharides is nil. It is also worthwhile to note that 'separation process' is taking place during the process of manufacture of impugned goods. Glucotone and other ions, organic impurities are removed by separation process (i.e.. evaporation). Applying this analogy also the impugned goods do not appear to be the goods mentioned under Chapter 38, as per HSN explanatory notes.
10. As regards the allegation that Sorbitol solution is a Chemical preparation obtained from starch, I do not find any relevance of the same for Classification of the goods. If anything is relevant it is only hydrogenation of glucose syrups. If glucose syrup is obtained from starch, it cannot be said that glucose syrup is not hydrogenated. In other words, how glucose syrup is obtained is not relevant. The requirement is that the glucose syrup should be hydrogenated to produce Sorbitol which is being done in Unicorn.
11. It is also alleged that Isometric Polyhydric alcohols are not permissible impurities as per IP. If so, it is not understood as to how Drug Control Authorities have certified the impugned goods as bulk drugs meeting the standards of IP. Chapter notes do not categorise the impurities as pure and impure. Manittol and other polyhydric alcohols are impurities present in Sorbitol solution and according to chapter notes presence of impurities in the organic compounds will not exclude classification under Chapter 29."
2. The Revenue is reiterating their grounds taken up in the show cause notice that the item cannot be considered as 'Bulk drug' in terms of purity, form and process of manufacture and are not entitled to the benefit of Notification No. 31/88-C.E., dated 1-3-1988 and also the Notification No. 8/95, dated 8-2-1995 as the item does not fall under Chapter Heading 2905.90. In view of the presence of 2% of Mannitol and about 0.2% of Polyhydric alcohols and about 29% of water, the presence of Sorbitol is only 69% and, therefore, the product cannot be defined as separate chemically defined organic compound. The Revenue has not drawn any samples nor they have obtained any test results. There is no expert opinion or any evidence in the matter for reclassifying the goods from the one which is accepted all along in the classification lists filed by the assessee treating the item to be 'Bulk drug' in terms of the evidence earlier produced and granting the benefit of exemption of the said Notifications. The appellants had also produced Chemical Examiner's report, which had shown the details and had accepted Sorbitol as classifiable as a separate chemically defined organic compound under Chapter 29.
3. We have heard both sides in the matter and find that the order passed by the Commissioner is legal and proper and the Revenue has not produced any evidence to rebut the same. It is further seen that the Tribunal, in the case of CCE, Hyderabad-I v. Starchem Industries Ltd. by Final Order No. 1832/99, dated 23-7-1999 [2000 (117) E.L.T. 488 (Tribunal)] had in an identical matter pertaining to the same goods and on the same allegation had remanded the case for de novo consideration with a direction that adequate enquiry/tests should be got conducted through technically qualified persons/laboratories/ agency to examine the factual accuracy of the contention of the respondents in stating that despite the presence of these impurities, the item is Sorbitol and required to be classified as separate chemically defined organic compound and a 'Bulk drug' under Chapter 29. We find that the original authority, after due examination, in terms of the Tribunal's ruling has passed OIO No. 39/2002, dated 25-9-2002 accepting the test results obtained by the department and has conclusively held that despite the Sorbitol Solution (IP grade 70%) containing di and poly saccharide contents, it continues to remain Sorbitol for classification under Chapter 29. The Revenue has accepted this order passed in the case of M/s. Starchem Industries Ltd. situated in the same Commissionerate. We have seen the Tribunal's order of remand in Final Order No. 1832/99, dated 23-7-1999 and the order passed in OIO No. 39/2002, dated 25-9-2002 and find the facts to be identical and there is no difference in the same. There is no need to remand this matter. In view of the Revenue not having produced any evidence and as in similar matters, the Revenue has accepted the findings of the OIO, we hold that the order passed by the Commissioner is correct and proper. We find that the ratio of the judgment rendered in the case of Parental Drugs (India) Ltd. v. CCE, Indore - 2004 (171) E.L.T. 259 (Tri. - Mumbai) is also applicable to the facts of the case. So also, the findings recorded by the Tribunal in the case of Bharat Textile Processings v. CC, Tuticorin - 2004 (171) E.L.T. 86 (Tri. - Chennai). There is no merit in this revenue appeal and the same is rejected.