2010 (7) TMI 328 - AT - Customs

Classification of product Bentonite - product imported is treated with acid - appellants had contested this decision on the ground that the decision was rendered in the context of domestic manufacture and not in the context of importation of the goods - Tribunal took a view that natural clay washed with acid is covered under CETH 3802 Held that - Bentonite when treated with acid is to be classified under CETH 3802 Appeal is rejected

Summary

Issues Involved:
1. Classification of imported Bentonite under CTH-2508.10 or CTH 3802.90.
2. Interpretation of Chapter Notes and Circulars.
3. Relevance of ITC (HS) Classification.
4. Impact of Supreme Court decisions on classification.

Detailed Analysis:

1. Classification of Imported Bentonite:
The primary issue is whether the Bentonite imported by the appellant on 8-11-2002 should be classified under CTH-2508.10 or CTH 3802.90. The appellants argued that the product is processed Bentonite and should be classified under CTH-2508.10, which covers Bentonite. They cited Chapter Note 1 of Chapter 25, which includes products that are in the crude state or have undergone certain physical processes without altering their structure. However, the department contended that the product should be classified under CTH 3802.90 as "activated natural mineral products" due to the acid treatment it underwent.

2. Interpretation of Chapter Notes and Circulars:
The Tribunal examined the relevant headings and Chapter Note 1 of Chapter 25, which specifies that the headings cover only products in the crude state or those that have undergone physical processes without changing their structure. The Tribunal noted that the imported goods were processed Bentonite, specifically Calcium Bentonite (acid activated). The Board's Circular No. 32/2002-Cus., dated 10-6-2002, was also considered, which discussed the classification of Bentonite and its derivatives. The circular clarified that Bentonite activated with acid or alkali undergoes a structural change and should be classified under heading 3802.

3. Relevance of ITC (HS) Classification:
The appellants argued that the ITC (HS) classification should be considered, citing the Supreme Court's decision in M/s. Dunlop India Limited and MRF Limited v. UOI, which emphasized that ITC (HS) should complement the tariff. However, the Tribunal held that once tariff headings and chapter notes are clear, there is no need to consider ITC (HS) classification for the purpose of levy of customs duty. The Tribunal found that the purpose of ITC (HS) classification is different and not meant for customs duty classification.

4. Impact of Supreme Court Decisions:
The appellants relied on several Supreme Court decisions to support their contention. They cited the decision in Dunlop India Limited and MRF Limited v. UOI, which stated that an article reasonably claimed under an enumerated item should not be consigned to a residuary clause. However, the Tribunal found that this observation did not help the appellants because Chapter 25 specifically excludes activated clay. The appellants also cited UOI v. Pesticides Mfg. & Formulators Association of India, arguing that ITC (HS) classification should be taken into account. The Tribunal, however, reiterated that clear tariff headings and chapter notes prevail over ITC (HS) classification. The decision in CCE Shilong v. Wood Craft Products Limited was also found irrelevant as the tariff entries were changed after 1-2-2003, and no retrospective effect was given to the amendment.

Conclusion:
The Tribunal concluded that the appellants failed to prove that the imported goods were not activated clay. The product, being acid-treated Bentonite, was rightly classified under CTH 3802.90. The appeal was rejected, and the classification under CTH 3802.90 was upheld.

(Pronounced in the Court on 29-7-2010)