ORDER
K.S. Venkataramani, Member (T)
1. This appeal is directed against order-in-appeal No. 150/88 (M) passed by the Collector of Central Excise (Appeals) Madras by which he upheld the order of the Assistant Collector of Central Excise, Madras-Ill Division dated 16-12-1987 partially, confirming the classification of Liquid Paraffin I.P., Petroleum Jelly I.P. and Mineral Oil Medium under Tariff Heading 2710.99 2712.10 and 2710.99 of Central Excise Tariff Act, 1985 respectively, while setting aside the penalty imposed on the appellants herein by the Assistant Collector under Rule 173-Q of Central Excise Rules. The appellants herein manufacture, among other things, liquid paraffin I.P., Petroleum Jelly IP and consequent on the introduction of Central Excise Tariff Act, 1985, they filed the classification list for the products. The appellants claimed classification of the items under Chapter 29 with exemption under Notification 234/86, but the department contended that the items were classifiable under Chapter 27 and after issue of Show Cause Notice and considering their reply, classification of the items was decided under Chapter 27 i.e. liquid paraffin I.P. under sub-heading 2710.99 and petroleum jelly I.P. under heading 2712.10 respectively by an order of the Assistant Collector dated 26-5-1987 in which the Asstt. Collector also imposed a penalty on the appellants of Rs. 1 lakh. On an appeal against this order, the Collector (Appeals) remanded the case to the Asstt. Collector by his order dated 29-9-1987 with the direction that the Assistant Collector should obtain Chemical Examiner’s report and communicate it to the appellants and also to consider the evidence of drug licence produced by the appellants. The Collector (Appeals) also set aside the penalty. The Asstt. Collec-tor, accordingly, passed a fresh order dated 16-12-1987 in terms of the remand order, again confirming the classification after obtaining the Chemical Examiner’s report and once again, confirming the penalty on the appellants. The Chemical Examiner’s report dated 10-11-1987 stated that liquid paraffin IP and petroleum jelly IP are mixture of liquid hydrocarbons and mixture of semi-solid hydrocarbons and since they are devoid of the characteristics of the well-defined chemicals and they are not single chemical compounds, they cannot merit classification under Chapter 29. The Assistant Collector relied on this report and gave further reasoning while confirming the classification in his order. This order of the Assistant Collector was again challenged before Collector (Appeals) who confirmed the classification of the products ordered by the Asstt. Collector but set aside the penalty as being un-lawful.
2. Shri C. Natarajan, the learned counsel represented the appellants and at the out-set, he submitted that the appellants would now confine the present appeal only to the product liquid paraffin IP and will not be pressing the appeal in respect of other products. He submitted that before the Assistant Collector, in support of their claim for classification of the product liquid paraffin IP under sub-heading 2901.90, the appellants had relied upon Note l(a) to Chapter 27 which excluded separate chemically defined organic compounds even while including the same under Chapter 29 and the learned counsel submitted that nowhere the expression ‘separate chemically defined organic compounds’ was defined under the Central Excise Tariff Act, 1985 and that, hence, this should be understood in terms of expert opinion. The learned counsel pointed out that the adjudicating authority had understood the words separate chemically defined or-game compounds as a single compound and on that footing had adjudicated the case. The appellants had, in fact, specifically requested the Asstt. Collector to seek clarification from the Chemical Examiner to the question as to what constituted separate chemically defined organic compound, whether or not, containing impurities vide their letter dated 28-7-1987, 4-8-1987, 6-10-1987 as well as their written submissions dated 19-11-1987. The appellants had further, themselves, obtained the opinion on the controversy from experts which was furnished to that authority. These Experts were Prof. C.N. Pillai, Department of Chemistry, Indian Institute of Technology, Madras, Dr. P. Ratna-swamy, Deputy Director, National Chemical Laboratory, Pune, Dr. S. Sivasanker, As-sistant Director, National Chemical Laboratory, Pune, Dr. V. Srinivasan, Asstt. Prof, of Chemistry, Loyola College, Madras. They had also furnished Dr. Srinivasan’s individual answers to queries on the question regarding the scope of separate chemically defined organic compounds. The learned counsel regretted that the Asstt. Collector in her order did not make any observation on the validity or otherwise on the body of expert opinion submitted by the appellants. The Chemical Examiner also had not responded to the specific queries which the appellants wanted him to answer and his report does not give any categorical opinion that the product is not a separate chemically defined organic compound. On the other hand, according to the appellants, chemically defined organic compounds will have the following characteristics, namely, a unique chemical identity, a behaviour or performance potential or characteristic of a unique nature and susceptibility to being defined chemically in a unique way and it is their case that liquid paraffin IP has unique chemical identity as it is non-aromatic, paraffinic, acyclic hydrocarbon; it has total chemical inertness to human body and it is definable as paraffin. The learned counsel urged that nowhere the requirement of a single organic compound is available either under the Central Excise Tariff Act, 1985 or even in the Harmonised Commodity Description & Coding System. Therefore, if liquid paraffin IP is understood as a separate defined organic compound even by Expert opinion or contextually that should prevail rather than impose the authorities’ own assumption that only a single compound can have a separate chemical identity. The learned counsel also submitted that even according to the Explanatory Note to HSN, it is only other substances should not be deliberately added in order to take a product out of Chapter 29. The learned counsel further submitted that the observation of the Collector (Appeals) that the appellants had not brought in any reason for classifying the product under Chapter 29 is unfair and fails to consider the various Expert opinions brought on record by the appellants and he further submitted that the Collector (Appeals)’s order prefers to give weightage of Chemical Examiner’s Opinion where there are two opinions available and also assumes non-existent facts.
3. Shri Narasimha Murthy, the learned DR appearing for the department contended that Chapter Note l(a) to Chapter 27 clearly lays down that that Chapter does not cover separate chemically defined organic compounds other than pure methane and propane whereas Chapter Note l(a) of Chapter 29 says that “Except where the context otherwise requires, the headings of the Chapter apply only to separate chemically defined organic compounds, whether or not containing impurities”. In the scheme of classification under the Central Excise Tariff Act, Chapter Notes have a vital role to play and the importance of these Chapter Notes has been highlighted by the Tribunal’s decision reported in 1986 (23) ELT 283 in the case of Saurashtra Chemicals v. Collector of Customs. The learned DR further stated that in the absence of any definition in the Central Excise Tariff Act as regards single chemically defined organic compound, it will be reasonable to have recourse to the Explanatory Notes to the HSN which is largely followed by the Tariff and the learned DR relied upon the case law reported in 1987 (28) ELT 132 that such a support from the Explanatory Notes of HSN will be valid. These Notes serve as a valuable guide in classification. He, thereafter, referred to the HSN Ex-planatory Note to Chapter 29 which defines separate chemically defined compounds as a single chemical compound which does not contain other substances deliberately added during or after its manufacture (including purification). A Note says that such a separate chemically defined compound might contain impurities and the Note also clarifies what would be the nature of impurities considered for the purposes of the Chapter. The Chemical Examiner’s report in the present case has clearly indicated that liquid paraffin IP does not have the characteristic of well defined chemical and it is not a single chemical compound. The learned DR submitted that being a mixture of hydrocarbons and without any known chemical structure of its own, the lower authorities were right in holding that liquid paraffin IP is not a separate chemically defined organic compound and, therefore, fell outside the scope of Chapter 29 and was rightly classifiable under Chapter 27. As regards the Expert opinion submitted by the appellants, the learned DR pointed out that some of these opinions are identically worded and they do not categorically say the words ‘a separate chemically defined organic compound and the opinion given by them is also not in the context of the Chapter Notes which is really of relevance for classification. On the other hand, the Asstt. Collector had followed the Chemical Examiner’s opinion given in the context of the Central Excise Tariff Act which is, therefore, preferable.
4. We have carefully considered the submissions made by the learned counsel and the learned DR. The dispute in the classification in the present case centres around the interpretation of the term of a separate chemically defined organic compound. We find that this Tribunal had occasion to deal with an identical issue in the case of Collector of Customs, Bombay v. The Atul Products Ltd. and The Atic Industries Ltd. reported in 1985 (20) ELT 147. In that case, the classification of Naphthalene was involved. The product was assessed under Heading 29.01/45(1) of the Customs Tariff. In the appeal, the Appellate Collector of Customs ruled that it should be assessed under Heading 27.07 and not under Chapter 29. The Tribunal made certain observations on the criteria for classification between the two Chapters 27 and 29 with reference to the Chapter Note requirement for classification of the product being a separate chemically defined organic compound. Some of the observations of the Tribunal are worth recalling. In para 8, the Tribunal observed that “This matter has been complicated by the fact that there is no definition in the Customs Tariff of a separate chemically defined compound. The CCCN defines a separate chemically defined compound as a single chemical compound of known structure, which does not contain other substances deliberately added during or after its manufacture (including purification). The definition goes on to explain that a separate chemically defined compound falling under Chapter 29 may contain impurities. Hence, Chapter Note l(a) of Chapter 29 of both the Indian Tariff and the CCCN speak as covering separate chemically defined organic compounds, whether or not containing impurities”.
“The only guide that we have from the Indian Tariff is that Chapter 29 applies only to separate chemically defined organic compounds, whether or not containing impurities. Chapter 27 covers mineral fuels, mineral oils and products of their distillation, bituminous substances; mineral waxes. It cannot cover separate chemically defined organic compound to the kind we are dealing now. It needs to be noted very carefully that Chapter 29 can cover a chemically defined organic compound even if it contains impurities. In scientific technology, an impurity has been defined as an undesirable foreign material in a pure substance”.
“It is useful to see what the CCCN says about a separate chemically defined compound. It defines it as a single chemical compound of known structure, which does not contain other substances deliberately added during or after its manufacture (including purification). The Nomenclature also clarifies that the separate chemically defined compound falling within Chapter 29 may contain impurities. The term impurities is clarified as applying exclusively to single chemical compound substances whose association with the single chemical compound results solely and directly from the manufacturing process (including purification). The substances (impurities) may result from any of the factors involved in the process and are principally the following :-
(a) Unconverted starting materials,
(b) Impurities present in the starting materials,
(c) Reagents used in the manufacturing process (including purification) and
(d) By-products.
A substance that is deliberately left in the product to render it particularly suitable for a particular type of use or to improve its suitability for a specific use is not regarded as a permissible impurity for the purpose of the Chapter. As an example, a product of methyl acetate with methanol deliberately left in it to improve its solvent properties is not a substance containing permissible impurities.”
5. The Tribunal then examined and found that Naphthalene is a chemically defined product with the formula C10Hs and stated that Naphthalene is recognizable and known by its chemical structure C10Hs. The Tribunal also found that besides recognized chemical structure and authorities on the subject, reliance could be placed on the CCCN also because “CCCN itself is an authority that is reliable and widely respected and “we cannot forget that the Indian Customs Tariff introduced in 1976 is clearly patterned on this work and its classification and headings follow the international Nomenclature”. The Tribunal further made an observation that the tariff recognized that even a chemically defined compound means a chemical substance with a definite and recognized chemical structure and can contain impurities and further observed that hence, the assessment only requires that a product should be chemically recognizable as a given chemical substance. Ultimately, deciding the classification of Naphthalene in this case under Chapter 29, the Tribunal concluded that naphthalene is a separate chemically defined organic compound, a single chemical substance with a known and recognized structure in Chemistry.
6. The ratio of the above decision, in our view, is very much applicable to the present dispute before us and we may, therefore, proceed to deal with the present issue in that light. The question then will be whether the product liquid paraffin IP has a definite chemical structure or formula. From the records, it is seen that liquid paraffin is a petroleum product. It is a basically fraction of the original product containing mixtures of few compounds. The process of purification is aimed at removing the contaminates such as aromatics. This process is not designed to arrive at a pure compound. Paraffin is a collective term given to a petroleum product and has no single identity. It is actually a mixture of hydrocarbons containing compounds of carbon chains of varying lengths. It contains a variety of carbon structures ranging from C-10 to C-40. Even, according to the appellants, liquid paraffin IP is a mixture of saturated non-aromatic, hydrocarbons, containing both acyclic and cyclic hydrocarbons. It has been seen from the criteria laid down in the Tribunal’s order above that to be a separate chemically defined organic compound, there should be a known structure and when admittedly the product liquid paraffin IP has a verying chemical structure, it cannot be considered as a separate chemically defined compound in terms of the Explanatory Notes in the CCCN or HSN which are identical. The appellants have also not put-fouth, at any stage, what is the chemical structural formula for liquid paraffin IP. On the other hand, from the records, it would appear that liquid paraffin IP is made up of a varying chemical structure. In this context, even the Expert’s opinion relied upon by the appellants had not indicated what would be the chemical structure for liquid paraffin IP or its molecular formula. In any case, it is no longer necessary to turn to the various Experts’ opinions obtained by the appellants as to what constitutes a separate chemically defined organic compound as occurring in Chapter Notes to Chapters 27 and 29 of Central Excise Tariff Act, 1985, since we find that there is a decision of the Tribunal touching on the same aspect, and it may, therefore, be reasonable for us now to decide the issue by applying the ratio of the Tribunal’s decision. The appellants have made much of the fact that Chemical Examiner had not answered some of their queries. If this was their grievance, the appellants should have insisted on cross examining that authority during the adjudication proceedings before the lower authorities, which they have failed to do, although they had such an opportunity during the personal hearings they had before the adjudicating and Appellate authorities, at which time that could have insisted upon being permitted to cross examine the Chemical Examiner. The Chemical Examiner has opined that liquid paraffin IP is a mixture of liquid hydrocarbons and is not a single chemical compound which is in line with the criteria laid down in the Tribunal’s decision (supra). We have seen, by applying the criteria of the Tribunal’s order in the Atul Products Ltd. case, that liquid paraffin IP is a mixture of hydrocarbons which has a varying chemical structure, and could, therefore, not be considered as a separate chemically defined organic compound or as a single chemical substance with a known and recognized structure in chemistry. Therefore, liquid paraffin IP cannot be brought within the ambit of Chapter 29 because Chapter Note l(a) thereof says that the headings of the Chapter apply only to a separate chemically defined organic compound whether or not containing impurities. The classification of the product under Heading 2710.99 decided by the lower authorities, therefore, needs no modification and is accordingly, confirmed.
7. In the circumstances, we see no reason to interfere with the order passed by the Collector (Appeals). The appeal is, accordingly, rejected.