2007 (1) TMI 351 - AT - Central Excise

Summary

Issues: Classification of charcoal dust under Heading 28.03 of the CETA Schedule

Analysis:

1. Issue of Classification - Charcoal Dust: The appellants were engaged in manufacturing activated carbon from coconut shell charcoal. The dispute arose regarding the classification of the by-product, "charcoal dust," under the CETA Schedule. The authorities classified the charcoal dust under Heading 28.03 and demanded duty, which the appellants contested.

2. Contentions of the Parties: The appellant's counsel argued that charcoal dust should not be classified under Heading 28.03 as it did not consist of 100% carbon, citing the HSN Notes. On the contrary, the SDR referred to the Chemical Examiner's Report, claiming the item as a form of carbon not elsewhere specified in the Tariff. The SDR highlighted that the appellant admitted the product was made of carbon.

3. Legal Interpretation and Analysis: The Tribunal analyzed Heading 28.03, which covers "Carbon (carbon blacks and other forms of carbon not elsewhere specified or included)." The HSN Notes exclude activated carbon and wood charcoal from this heading. The Tribunal emphasized that for an item to be classified under Heading 28.03, it must be composed wholly of carbon. The Chemical Examiner's report described the product as carbonaceous matter, not solely carbon. The absence of evidence proving the product's composition as entirely carbon led the Tribunal to reject its classification under Heading 28.03.

4. Historical Perspective: The judgment noted that during the disputed period, there was no specific entry for wood charcoal. It was only later, from 28-2-2005, that wood charcoal was included in the Tariff under Heading 44.02. This historical context was considered in the analysis of the classification issue.

5. Decision and Conclusion: Based on the above analysis, the Tribunal concluded that the demand for duty on the charcoal dust, classified under Heading 28.03, was not sustainable. Therefore, the impugned order demanding duty and penalty was set aside, and the appeal was allowed in favor of the appellants.

6. Final Verdict: The judgment, delivered by the Appellate Tribunal CESTAT, Chennai, clarified the classification issue of charcoal dust under the CETA Schedule, emphasizing the necessity for a product to be wholly composed of carbon to fall under Heading 28.03. The decision provided a detailed legal interpretation of the relevant provisions and historical context, ultimately ruling in favor of the appellants.