2013 (12) TMI 1290 - AT - Central Excise

Classification of chemical preparations - Revenue was of the view that the chemical preparations made during the processing of the films are classifiable as chemical preparations for photographic uses under CETH 3707 of the Central Excise Tariff Held that - The Tribunal while remained the matter back had clearly directed the adjudicating authority to apply his mind independently on the submissions made by the appellant as regards the marketability of the products and give a detailed and speaking order on the issue - Revenue has not led any iota of evidence which shows that the various chemical preparations made by the appellant while processing of the cinematographic films are marketable or are marketed Following CCE Vs. Famous Cine Laboratory 1992 (2) TMI 241 - CEGAT, NEW DELHI - Prasad Film Laboratories, Famous Cine Laboratories and Navrang Cine Center (P) Ltd. (cited the chemical preparations used in the processing of cinematographic films are not goods known to the market and hence are not exigible to duty. The expert s opinion also clearly shows that the preparations are mixed prior to their usage and such mixed chemical preparations are prone to oxidation and other chemical reactions which could make them less effective and such chemicals are not marketed - The department has not tested any of the samples to ascertain the shelf life/other parameters relevant for examining the issue of marketability of the products - Merely because certain chemicals are marketed cannot lead to the conclusion that the chemical preparations made in situ by the appellant are also marketable and no effort whatsoever has been made by the Revenue to establish the marketability and Revenue has failed miserably in this regard - various chemical preparations produced by them in situ and captively consumed are not marketable goods falling under CETH 3707 of the Central Excise Tariff. Classification of Silver residue arises out of manufacture - Revenue was of the view that the processing of the film, silver residues which are also obtained are classifiable under Chapter 26 of the Central Excise Tariff Held that - The duty demand on silver residue which is arising during the processing of the film, as per Chapter Note to Chapter 26, silver waste arising in the processing of the cinematographic films stands excluded from Chapter 26 and are properly classifiable under Chapter 71 and during the material period, the silver residue was exempt from excise duty Thus, the excise duty demand in respect of silver residue also does not sustain - Once the duty demands fail, all consequential demands towards interest and penalties also fail Decided in favour of Assessee.

Summary

Issues Involved:
1. Marketability of Chemical Preparations for processing Cine Films (CPCF) made in situ and captively consumed.
2. Classification of Hypo Solution Waste (Silver Residue) under the Central Excise Tariff.

Detailed Analysis:

1. Marketability of Chemical Preparations for Processing Cine Films (CPCF):
The primary issue was whether the chemical preparations made in situ and used captively by the appellant for processing cinematographic films were marketable. The Revenue had classified these preparations under CETH 3707 of the Central Excise Tariff and demanded excise duty. The Tribunal had earlier remanded the matter to the adjudicating authority to independently assess the marketability of these products, but the authority failed to comply, merely reiterating previous findings.

The appellant argued that these preparations, including prebath, developer, bleach, stop bath, fixer bath, and stabilizer, were not marketable as they were mixed in situ, captively consumed, and had no shelf life. Historical decisions, such as those in the cases of Prasad Film Laboratories, Famous Cine Laboratory, and Navrang Cine Centre (P) Ltd., supported this view, confirming that such preparations were not marketable goods. Additionally, a letter from Kodak India Ltd. clarified that these chemicals were mixed just before use due to their susceptibility to oxidation and other reactions, further supporting their non-marketability.

The Tribunal found that the Revenue did not provide any evidence to counter these claims or prove the marketability of the chemical preparations. The Tribunal concluded that the preparations made by the appellant were not marketable goods under CETH 3707, thus setting aside the duty demands.

2. Classification of Hypo Solution Waste (Silver Residue):
The second issue was whether the silver residue, a by-product of the film processing, was correctly classified under Chapter 26 of the Central Excise Tariff. The appellant contended that, according to the HSN explanatory note, waste of precious metal should be classified under Chapter 71, which exempts silver from duty. The Revenue conceded that the silver residue should indeed be classified under Chapter 71 and not Chapter 26.

The Tribunal agreed with the appellant, noting that during the relevant period, silver residue was exempt from excise duty under Chapter 71. Consequently, the excise duty demand on the silver residue was also set aside.

Conclusion:
The Tribunal set aside the impugned orders, concluding that the chemical preparations used in situ by the appellant were not marketable and thus not subject to excise duty under CETH 3707. Similarly, the silver residue was correctly classifiable under Chapter 71 and exempt from duty. All consequential demands for interest and penalties were also dismissed. The appeals were allowed with consequential relief in accordance with the law.