1984 (5) TMI 237 - AT - Central Excise

Issues Involved:

1. Classification of oil and spirit soluble colours under Central Excise Tariff.
2. Time-barred nature of the show cause notice.
3. Applicability of Rule 173-Q(d) of the Central Excise Rules, 1944.
4. Distinction between synthetic organic dyestuff and pigment dyestuff.
5. Classification of the product as synthetic organic dyestuff or pigment dyestuff.
6. Possible uses of the product.
7. Necessity of the product's capability to dye fabrics for classification under Entry 14-D.

Issue-wise Detailed Analysis:

1. Classification of Oil and Spirit Soluble Colours under Central Excise Tariff:

The core issue was whether Devarsons' oil and spirit soluble colours should be classified under item 14-D ("Synthetic organic dyestuffs (including pigment dyestuffs) and synthetic organic derivatives used in any dyeing process") or item 14-1 (1)(5) ("Pigments, colours, paints and enamels, not otherwise specified") of the Central Excise Tariff Schedule (CET). Initially, the Assistant Collector classified the product under item 14-1 (1)(5), which was exempt from duty under Notification No. 23/55. However, the Department later sought to classify the product under item 14-D, leading to a dispute over the correct classification.

2. Time-barred Nature of the Show Cause Notice:

The Appellate Collector held that the show cause notice dated 26-12-1970 was within the prescribed time-limit of one year and was not time-barred with respect to the clearances for the period 4-9-1970 to 4-10-1970. This decision was upheld, and it was concluded that the notice was issued within the permissible period.

3. Applicability of Rule 173-Q(d) of the Central Excise Rules, 1944:

The Appellate Collector determined that Rule 173-Q(d) had no application to the facts of the case. This rule pertains to confiscation and penalty provisions for contraventions of the Central Excise Rules, which were deemed irrelevant to the present dispute.

4. Distinction between Synthetic Organic Dyestuff and Pigment Dyestuff:

The Tribunal examined various technical authorities and definitions to determine the distinction between synthetic organic dyestuff and pigment dyestuff. It was concluded that synthetic organic dyestuffs are substances soluble in water or other solvents and used to dye or color materials. Pigment dyestuffs, on the other hand, are inert, stable, and insoluble in water, used for their coloring properties by mechanical dispersion in a medium.

5. Classification of the Product as Synthetic Organic Dyestuff or Pigment Dyestuff:

Based on the technical definitions and evidence presented, the Tribunal concluded that Devarsons' products, being soluble in organic solvents and used for coloring various products, are synthetic organic dyestuffs. They are not pigment dyestuffs or colors other than dyestuff or pigment. The Tribunal relied on the Customs Cooperation Council Nomenclature (CCCN) Explanatory Notes and other technical literature to support this classification.

6. Possible Uses of the Product:

The Tribunal found that Devarsons' products were used for coloring soaps, hair oils, petroleum products, plastics, waxes, and producing colored smoke for defense purposes. There was no evidence of their use in dyeing textiles. The National Chemical Laboratory's certificate supported this conclusion, stating that solvent dyes are used for coloring non-textile products.

7. Necessity of the Product's Capability to Dye Fabrics for Classification under Entry 14-D:

The Tribunal held that it is not necessary for a product to be capable of dyeing fabrics to fall within the purview of item 14-D. Synthetic organic dyestuffs used for coloring non-textile products also fall under this entry. The Tribunal rejected the argument that the phrase "used in any dyeing process" qualifies all the three commodity groupings in item 14-D, concluding that it qualifies only "synthetic organic derivatives."

Conclusion:

The Tribunal concluded that Devarsons' oil and spirit soluble colors are correctly classifiable under item 14-D of the Central Excise Tariff Schedule as synthetic organic dyestuffs. The appeal was rejected, and the classification under item 14-D was upheld. The Tribunal emphasized that dyes and dyestuffs are interchangeable terms and that the products in question are synthetic organic substances used for coloring various non-textile products.

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