2015 (9) TMI 880 - SC - Central Excise

Classification of the product manufactured - Calcined China Clay - Classification under Chapter sub-heading 3824.90 or under Chapter Heading 25.05 - Held that - After mentioning the products, there is again an exclusion clause which excludes the products that have been roasted, calcined or obtained by mixing. Calcination was excluded there as well. However, when this Head Note is contrasted with Head Note 2 which was introduced in the year 1990, we find significant addition of words in the beginning of the said Note which are except where the context otherwise requires . Therefore, the exclusion of calcination would not apply in respect of those products where the context otherwise includes calcination. Chapter Heading 25.05 which has already been reproduced above mentions under Entry 2505.10 Kaolin and other kaolinic clays, whether or not calcined . It is not in dispute that the china clay otherwise is known as Kaolin as well and the process of Kaolin is same as that of china clay. Here the Kaolin is included under Entry 2505.10, i.e., under Chapter Heading 25.05, even when it is calcined. Therefore, it follows from the above that the context here requires such a product to remain included under Chapter 25.05 even when it is calcined. - merely because the product of assessee, i.e., China Clay is calcined, it would not put it out of Chapter Heading 25.05. - order of the CESTAT without any blemish and are of the opinion that there is no merit in the instant appeal - Decided against Revenue.

Summary

Issues:
Classification of the product "Calcined China Clay" under Chapter sub-heading 3824.90 or Chapter Heading 25.05.

Analysis:
The case involves a dispute regarding the appropriate classification of the product "Calcined China Clay" manufactured by the respondent-assessee. The Revenue contends that the product should be classified under Chapter sub-heading 3824.90, while the assessee argues for classification under Chapter Heading 25.05. The show cause notice alleged that the China Clay manufactured by the assessee underwent processes like calcination, making it distinct from regular China Clay. The Revenue relied on Chapter Note 2 to argue that calcined products are excluded from Chapter Heading 25.05 and should be classified under Chapter Heading 38.24. The assessee challenged this classification, leading to an appeal before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), which ruled in favor of the assessee.

The Revenue appealed against the CESTAT's decision, arguing that calcined clay cannot be included in Chapter Heading 25.05 as per Chapter Note 2. However, the Supreme Court rejected this argument and delved into the historical context of Chapter 25. It highlighted the changes in the provision from 1986 to 1990, specifically noting the addition of "except where the context otherwise requires" in the 1990 version. The Court emphasized that the context of the product being calcined did not exclude it from Chapter Heading 25.05, especially considering that Kaolin, also known as China clay, falls under this category even when calcined. The Court also referred to HSN Notes to support its interpretation of the classification.

In conclusion, the Supreme Court upheld the CESTAT's decision, stating that the product "Calcined China Clay" should be classified under Chapter Heading 25.05. The Court found no merit in the Revenue's appeal and dismissed it accordingly. Another related appeal, Civil Appeal No. 1768 of 2007, was also dismissed in line with the decision in Civil Appeal No. 3945 of 2006.