1984 (2) TMI 347 - AT - Central Excise

Issues Involved:
1. Classification of 'Katrang AF 150' under the correct Central Excise Tariff Item.
2. Eligibility for exemption under Notification No. 101/66-C.E.
3. Reassessment of the product under Item 15A after 1-3-1982.
4. Validity of the Assistant Collector's order and reasoning.

Issue-wise Detailed Analysis:

1. Classification of 'Katrang AF 150' under the correct Central Excise Tariff Item:
The product 'Katrang AF 150' manufactured by M/s. Hico Products Limited was initially classified under Tariff Item No. 68 by the Superintendent of Central Excise, Khopoli, in January 1977. However, upon further chemical testing, the Chief Chemist, New Delhi, classified it under Item No. 15AA, leading to a dispute. The Assistant Collector upheld this classification, asserting that 'Katrang AF 150' was an organic surface-active preparation. The Tribunal found that the product was used as an anti-foaming agent in pharmaceuticals, and its classification should be under Item 15AA, not Item 68, as it was not merely a silicone resin but a surface-active preparation.

2. Eligibility for exemption under Notification No. 101/66-C.E.:
M/s. Hico initially claimed exemption under Sl. No. 3 of Notification No. 101/66-C.E., which was denied because 'Katrang AF 150' contained more than 5% emulsifying agent. Subsequently, they claimed exemption under Sl. No. 4, which covers "emulsifiers, wetting out agents, softeners, and other like preparations intended for use in any industrial process." The Assistant Collector rejected this claim, but the Tribunal disagreed, stating that 'Katrang AF 150' as an anti-foaming agent should be considered similar to emulsifiers and wetting agents, thus eligible for exemption under Sl. No. 4 from 3-1-1981.

3. Reassessment of the product under Item 15A after 1-3-1982:
The Central Excise reassessed 'Katrang AF 150' under Item 15A starting from 1-3-1982, following a reform in the item description. The Tribunal noted that the change was based on the presence of silicones in the product, listed under explanation II of the recast item. However, the Tribunal concluded that 'Katrang AF 150' should still be assessed under Item 15AA even after 1-3-1982, as it was a preparation containing silicones used as an anti-foaming agent, not a silicone resin itself.

4. Validity of the Assistant Collector's order and reasoning:
The Tribunal criticized the Assistant Collector for not providing a reasoned and detailed finding and for relying heavily on the Chief Chemist's report. The Tribunal found the Assistant Collector's reasoning flawed, particularly his statement that 'Katrang AF 150' could not be covered under both Sl. No. 3 and Sl. No. 4 of the notification. The Tribunal emphasized that the product's classification should be based on its actual use and properties, leading to the conclusion that it was eligible for exemption under Sl. No. 4 of Notification No. 101/66-C.E. from 3-1-1981.

Conclusion:
The Tribunal set aside the order of the Collector of Central Excise (Appeals) dated 11-3-1983 and directed that 'Katrang AF 150' be assessed under Item 15AA with the exemption under Sl. No. 4 of Notification No. 101/66-C.E. from 3-1-1981. Refunds for any excess amounts collected were to be processed within three months.

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