2008 (6) TMI 21 - AT - Central Excise

Appellant receive Zircon Sand & process the same to make Zirconium Washed Dried Frit (ZDF) - According to assessee, it is classifiable under CH 26.15 as Zirconium ore/concentrates , while according to the Revenue, it is classifiable under CH 28.25 as other metal oxides, hydroxides and peroxides - even if ZDF, which is nothing but crude Zirconium Hydroxide cake is treated as Zirconium concentrate, it will still be classifiable under Chapter 28- Revenue s appeal is allowed

Summary

Issues: Classification of Zirconium product under the Central Excise Tariff Act.

In this judgment, the issue at hand was the correct classification of a product called "Zirconium Washed & Dried Frit (ZDF)" under the Central Excise Tariff Act. The manufacturing unit received Zircon Sand and processed it to create ZDF, which was then cleared to a buyer for further extraction of Zirconium. The dispute arose between the respondents and the Revenue regarding whether ZDF should be classified under Heading 26.15 as "Zirconium ore/concentrates" or under heading 28.25 as "other metal oxides, hydroxides and peroxides."

The Revenue argued that ZDF should be classified under heading 28.25 as it covers processed goods like ZDF, which contains Zirconium Oxide and impurities. They emphasized that the specificity of the chapter heading should be considered, and ZDF falls more appropriately under heading 28.25. They also pointed out that there is no requirement for purity in chapter notes for chapter 28 and accused the respondents of changing their classification stance for exemption purposes.

On the other hand, the respondents contended that ZDF should be classified under Heading 26.15 as "Zircon Ore Concentrate" as it involved a process of concentrating Zircon Ore by removing impurities. They highlighted that ZDF is used for Zirconium extraction and argued that the purity of Zirconium Oxide in ZDF was below the threshold for classification under 28.25.

The Tribunal carefully analyzed the submissions from both sides and considered the process involved in converting Zircon Sand into ZDF. They noted that the chemical composition and structure of Zirconium Silicate in Zircon Sand changed during the manufacturing process, leading to the formation of Zirconium Hydroxide in ZDF. Based on the HSN explanatory notes, the Tribunal concluded that the resultant product, ZDF, should be classified under heading 28.25 as it constituted a separate chemically defined compound, even with impurities.

The Tribunal referred to various HSN explanatory notes to support their decision, emphasizing that the changes in chemical composition and crystallographic structure during processing excluded ZDF from classification under Chapter 26 and placed it under Chapter 28. They also highlighted the distinction between natural and artificial Zirconium Oxide, further justifying the classification of ZDF under heading 28.25.

Ultimately, the Tribunal ruled in favor of the Revenue, setting aside the previous classification of ZDF under Heading 26.15 and allowing the Revenue's appeal. The judgment was pronounced on 24-6-2008 by the Appellate Tribunal CESTAT NEW DELHI.