2006 (8) TMI 347 - AT - Central Excise

Summary

Issues Involved:
1. Classification of imported items under the Customs Tariff Act.
2. Interpretation of HSN Explanatory Notes for Chapter 20 and Chapter 21.
3. Determination of whether added vitamins disqualify products from classification under Chapter 20.
4. Examination of whether compounding processes affect classification under Chapter 21.

Detailed Analysis:

1. Classification of Imported Items:
The respondents imported several items and classified them under heading 2106.90. They contended that the items should be classified under Chapter 20 of the Customs Tariff Act. The Commissioner (Appeals) initially rejected their claim, but the Tribunal allowed the appeal by way of remand. Upon re-adjudication, the Dy. Commissioner of Customs classified the items under heading 2106.90. The respondents appealed again, and the Commissioner (Appeals) accepted their contention for three items but upheld the classification under 2106.90 for two items. The Revenue appealed against this decision.

2. Interpretation of HSN Explanatory Notes for Chapter 20 and Chapter 21:
The Tribunal referred to the HSN Explanatory Notes under Chapter 21.06, which state that products containing added vitamins and marketed as maintaining general health should be classified under heading 21.06. The Tribunal observed that there was no material to conclude that the vitamins in the products were added, which would disqualify them from classification under heading 20.09. The Commissioner (Appeals) followed this interpretation for three products, classifying them under Chapter 20.

3. Determination of Whether Added Vitamins Disqualify Products from Classification Under Chapter 20:
The Revenue argued that the products contained added vitamins, specifically Tocopherol (Vitamin E) and Ascorbic Acid (Vitamin C), which were marketed as maintaining general health. The respondents contended that these vitamins were natural constituents of the Aloe vegetable extract. However, upon confrontation, they admitted that these ingredients were added during the compounding process. The Revenue submitted that the addition of vitamins and other ingredients beyond natural levels disqualifies the products from classification under Chapter 20.

4. Examination of Whether Compounding Processes Affect Classification Under Chapter 21:
The Revenue highlighted that the products were complex preparations involving compounding with various substances, as indicated in the HSN Explanatory Notes for Chapter 21.06. The Tribunal had previously noted that there was no evidence of compounding with tartaric acid or other substances. However, new evidence suggested that compounding was undertaken, and the products were complex preparations. The Tribunal remanded the matter to the Original Authority to determine whether the added vitamins were within permissible limits and whether the compounding process rendered the products classifiable under heading 21.06.

Conclusion:
The Tribunal remanded the matter back to the Original Authority to reassess the classification of the products by examining the HSN Explanatory Notes for Chapter 20 and Chapter 21. The Original Authority was directed to determine whether the added vitamins were within permissible limits and whether the compounding process affected the classification. Both parties were allowed to present fresh evidence to support their claims. The appeal was allowed by way of remand.