Posted On by &filed under Customs, Excise and Gold Tribunal - Delhi, Tribunal.

Customs, Excise and Gold Tribunal – Delhi
Cce, Ahmedebad vs M/S Dyestuff And Intermediates, … on 1 November, 2000
Equivalent citations: 2001 (77) ECC 57


P.G. Chacko:

1. The dispute involved in this appeal of the Revenue is the classification of “copper complex” manufactured by the respondents. While the assessee claims classification of the product under Tariff Sub-heading (TSH) 2922.00, THE Department claims it under TSH 3204.29. The Assistant Collector classified the product under TSH 3204.29. The Collector (Appeals) classified it under TSH 2922.00.

2. There was a drawal of sample of the product for chemical test in 1988 and the report of the Chemical Examiner was as under:

“The sample is in the form of bluish coloured liquid. It is composed of an aqueous ammoniacal solution of copper complex, an oxygen function amino compound.”

On the basis of the above report, the assessee filed classification list No.4/88-89 effective from 01.01.89 claiming classification of the product under TSH No.2814.00. The Department issued a show-cause notice(SCN) directing the assessee to show cause why the product should not be classified under 3204.29. The party contested the proposal for classification under TSH 3204.29, by contending that the goods in question was an inorganic chemical and hence not classifiable as synthetic organic dyestuff or preparation based thereon under TSH 3204.29, and that the product as identified in the test report was covered by the specific description under TSH 2814.00 and hence classifiable under that sub-heading. The jurisdictional Assistant Collector, in adjudication of the dispute, held that the sample was not classifiable under TSH 2814.00 in view of HSN explanatory notes as the product was bluish in appearance. For meriting classification under TSH 2814.00, the product should be yellowish or colourless. The Assistant Collector,further, found, on the basis of the test report as well as the assessee’s averments contained in their letter dated 27.02.89 (to the effect that the copper complex was not used directly but in admixture with other chemicals for dyeing textile fabrics), that the product was a ingredient in the manufacture of colouring preparations and hence, by virtue of Chapter Note 2 to Chapter 32 of the Central Excise Tariff Schedule, it was appropriately classifiable as ‘synthetic organic dyes and preparations based thereon, under TSH 3204.29. Aggrieved by this decision of hte AC, the assessee preferred appeal to the Collector (Appeals). Before the lower appellate authority, the party switched over from TSH 2814.00 to TSH 2922.00 in their claim classification of the product. In support of this new claim, they also furnished technical information including opinion of Dr. N.R.Ayyangar, Head of the Organic Chemistry-II Division, National Chemical Laboratory, Pune. After considering the Chemical Examiner’s test report and the opinion of Dr. Ayyangar, the Collector (Appeals) recorded a finding that the copper complex was not an organic copper compound nor a preparation based on colouring matter. He held that, as reported by the Chemical Examiner, the product was an Oxygen function amino compound and hence correctly classifiable under TSH 2922.00. The lower appellate authority further observed that TSH 2922.00 was a specific entry covering the impugned product. He, therefore, set aside the AC’s order and allowed the assessee’s appeal accepting their claim for classification of the product under TSH 2922.00. Hence the Revenue’s appeal before the Tribunal.

3. Carefully examined the records and heard both sides.

4. Ld. SDR, Dr D.K.Verma submitted that the impugned product was held to be synthetic organic derivative used in the dyeing process and hence classifiable under Tariff Item No.14D of the old Central Excise Tariff, by Government of India (as revisional authority) in the case of Navin Industries, Bhavnagar (1981 E.L.T..958 (G.O.I.). Since the erstwhile Tariff item was covered under Chapter 32 of the new Central Excise Tariff Schedule, the impugned product, which was admittedly used exclusively in the dyeing process, was appropriately classifiable under TSH 3204.29. Ld. SDR further submitted that the decision of the Collector (Appeals) classifying the product under TSH No.2922.00 on the basis of hte test report of the Chemical Examiner was not correct inasmuch as synthetic organic colouring matters had stood excluded from Chapter 29 by virtue Chapter Note No.2 of that chapter. Ld. DR also relied on Chapter Note No.1 of Chapter 32 which specifically excluded separate chemically defined compounds falling within Heading No.3204,from the coverage of chemically defined compounds kept outside Chapter 32 by that Chapter Note. He, therefore, argued that the copper complex was appropriately classifiable under TSH No.3204.29. Ld. SDR also relied on the Tribunal’s Final Order No. 154-163/2000-c dated 02.03.2000 in appeal No. E/1042/91-c etc. (Kasat Chemicals Pvt. Ltd & Others Vs CCE, Pune) in support of his submission that the matter required to be remanded for remanded for fresh decision.

5. There was no representation for the respondents. However, their written submission were on record. According t o those submissions, the decision of Government of India in the case of Navin Industries (supra), relied on by the Revenue, no longer held the field inasmuch as the said decision was set aside by the Gujarat High Court as per judgement dated 11.06.91. The written submissions of hte respondents were also accompanied by a copy of the judgement of the High Court. In their submissions, the respondents contended that their product, copper complex was not an organic chemical but an inorganic chemical and the same was not classifiable under Chapter 29 and not under Chapter 32. The respondents relied on the test report of the Chemical Examiner and also on the opinion of Dr.Ayyangar.

6. We have carefully considered the rival submissions. We note that respondents’ claim for classifying their product under TSH No.2922.00 was not before the adjudicating authority. Such a claim was raised for the first time before the lower appellate authority. As regards the decision of the lower appellate authority. As regards the decision of the lower appellate authority, we note that the same was rendered after considering the Chemical Examiner’s test report and the opinion of Dr.Ayyangar. The test report was to the effect that the sample was composed of aqueous ammoniacal solution of copper complex, an oxygen-function amino compound. Chapter 29 of the Central Excise Tariff Schedule, comprises organic chemicals. According to Chapter Note 1 in that chapter , the heading s of the Chapter apply only to separate chemically defined organic compounds, whether or not containing impurities. TSH No.2922.00 is the entry covering oxygen-function amino compounds. In view of this position , for classifying the copper complex under TSH 2922.00 as an oxygen-function amino-compound, it requires to be established at the outset that the product merits recognition basically as an organic chemical. We have also examined TSH 3204.29 which reads: “Synthetic organic dyes and preparations based thereon”. Obviously, for a product to fall under this Sub-heading, it has primarily to be an organic chemical or a preparation based thereon. In any case, the respondents’ submission that their product is an inorganic chemical can by no stretch of imagination support their claim for classifying it under TSH 2922.00.

7. Dr. Ayyangar, in his opinion, stated that the product cold not be considered as a synthetic organic derivative since more than 85% of the constituents of the product were inorganic in nature. He reported that the product was a co-ordination complex, in which the function of the only organic constituent viz. nitrilo triacetic acid (NTA) was only to keep copper in a stable form at the temperature at which the complex was applied along with Phthalogen Blue dyestuff to cotton fabrics in the dyeing process. The Copper was combined with NTA to form a complex through oxygen and nitrogen atoms and was not directly bonded to any carbon atom. According to Dr. Ayyangar, co-ordination complexes of this type could not be considered as synthetic organic derivatives, but could be considered as inorganic products. Dr. Ayyangar categorically stated his opinion that the copper complex was not an organic copper compound. The lower appellate authority also recorded a finding to the same effect. Notwithstanding such finding, the Collector (Appeals) reckoned the product as an organic chemical of Chapter 29 and held that since TSH 2922.00 was a specific entry for oxygen-function amino compounds and the impugned product was reported t do be an oxygen-function amino compound in the Chemical Examiner’s test report, the product was appropriately classifiable under TSH 2922.00.

8. We have carefully examined the reliance placed by ld. SDR on the Government of India’s decision in Navin Industries. That decision was set aside by the Gujarat High Court as submitted by the respondents. The judgement of the High Court,however, does not disclose any final decision on the classification of copper complex. The High Court was remanding the issue to the adjudicating authority for fresh decision. We have also come across a copy of the Chief Chemist’s letter No. D.O.C. 38-Ex. O./85 dated 13.2.1987 marked as Annexure-E in the file, wherein he opined thus: “It is appropriate to consider the copper complex of nitrilo triacetic acid as a complex organic compound derived from nitrilo triacetic acid which is a carboxylic acid. Its classification will be governed by the Note 5 under Chapter.” Whether this opinion was available to the lower appellate authority is not clear from the records. Though it appears that the opinion was given on samples of copper complex drawn f rom various manufacturers under the Ahmedabad C. Ex. Collectorate, it is not clear as to whether such samples included that of the respondents also. We further note that, in the case of Kasat Chemicals (supra), this Tribunal was seized of a classification dispute on similar product and in that case, the Tribunal remanded the matter to the adjudicating authority for re-consideration after examining technical literature on the product. The Tribunal’s order in that case has, by the way, revealed to us one significant thing i.e.,Dr. Ayyangar N.C.L. had deposed before the Tribunal in some earlier case of Kasat Chemicals in 1989 that the product was synthetic organic derivative. It, thus apears that the opinion given by Dr. Ayyangar on the respondents’ product in 1990 is glaringly at variance with his oral evidence on Kasat Chemicals’ product. If the two products are to be taken as chemically identical, then, Dr. Ayyangar’s opinion given in 1990 on the respondents’ product cannot be accepted as credible.

9. In view of what we have noted above, the issue of classification of the respondents’ product requires fresh consideration in the light of technical literature and fresh evidence of experts. This has desirably to be done at the adjudicatory level since the Assistant Collector has never had occasion to consider the party’s claim for classifying the product under TSH 2922.00. Therefore, we set aside the orders of the lower authorities and allow the present a appeal by way of remand, directing the Assistant Commissioner to adjudicate afresh the question whether the impugned product is classifiable under TSH 3204.29 or under TSH 2922.00 in relation to the period of dispute. In such adjudication, the Assistant Commissioner shall duly consider the Chief Chemist’s and other expert’s opinions already on record and any further chemical literature/opinion of experts which he (the A.C.) may like to call for or the assessees may like to bring on record in support of their case. Since we have noted that the exact chemical formula and structure of the impugned product are not forthcoming from the records, we make it clear that the assessees shall provide the same to the adjudicating authority. The adjudicating authority shall also provide opportunity for examination of any expert, if required. A speaking order shall be passed on the classification issue after giving a reasonable opportunity of personal hearing to the assessees.

(Operative part of this order has already been pronounced in open Court.)

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