2018 (8) TMI 1672 - AT - Central Excise

Classification of goods - mosquito repellants coils - whether mosquito repellants coils manufactured by the respondent are liable to be classified under Chapter Heading 38081091 Repellants for insects such as flies and mosquitoes or not? - Held that - It is a well established principle of classification that the chapter and section titles are only for ease of reference and do not determine the classification of the products. After classifying the products under various chapters, this chapter covers miscellaneous chemical products. In fact, this chapter contains several items such as animal black including spent animal black (3802.90.20), Wood Tar Oils etc (3807), Gum, Wood or Sulphate Turpentine and other Terpenic oils (3805), Culture media for Development or Maintenance of Micro-organisms or of Plant, human or animal cells (3821), Bio-diesel and mixtures thereof (3826) none of which are synthetic chemical products. The contention of the First Appellate Authority that simply because coils contain essential oils they do not fall under chapter 3808 is incorrect and based on wrong appreciation of the facts and ignoring that the chapter titles do not determine classification - there is a separate heading tariff item 3808 to cover insecticides and fungicides etc., which includes not only those which kills insects but also those which repel them. In the Bombay Chemicals Pvt. Ltd., 1990 (3) TMI 179 - CEGAT, NEW DELHI mosquito repellant coils have been held to be insecticides and this decision has been upheld by the Hon ble Apex Court COLLECTOR VERSUS BOMBAY CHEMICALS (P) LTD. 1994 (2) TMI 319 - SUPREME COURT . The First Appellate Authority has erred in holding that the mosquito coils in question are not classifiable under 38081091 - appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of mosquito coils under Central Excise Tariff - Chapter 38081091, applicability of duty, interest, and penalty.

Detailed Analysis:

1. Classification of Mosquito Coils:
The appeal involved the classification of mosquito coils under Chapter Heading 38081091 of the Central Excise Tariff. The Adjudicating Authority had earlier held that the coils were liable for Central Excise duty under this classification. However, the First Appellate Authority set aside this order, stating that the coils did not fall under Chapter 3808. The Appellate Tribunal disagreed with this finding, emphasizing that the coils were to be classified as insecticides under Chapter Heading 38081091. They highlighted that the chapter titles are for reference and do not solely determine classification. The Tribunal referred to previous judgments, including the Bombay Chemicals case, where mosquito repellent coils were classified as insecticides, a decision upheld by the Apex Court. Thus, the Tribunal concluded that the coils in question fell under the specified chapter heading.

2. Applicability of Duty, Interest, and Penalty:
The Adjudicating Authority had imposed a Central Excise duty demand, education cess, interest under Section 11AB, and penalties on the respondent company and its Director. However, the First Appellate Authority set aside these penalties based on the classification issue. The Revenue appealed against this decision, arguing that the coils should be classified as "Miscellaneous Chemical Products" under Chapter 38 and be liable for duty payment post-exemption limit. The Departmental Representative cited relevant case laws to support this argument. The Tribunal, after examining both sides, upheld the duty demand and penalties, as they classified the coils as insecticides under Chapter 38081091. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the Revenue.

In conclusion, the Appellate Tribunal clarified the classification of mosquito coils under the Central Excise Tariff, emphasizing that the chapter titles do not solely determine classification. They upheld the duty demand and penalties imposed, considering the coils as insecticides falling under Chapter 38081091. The judgment highlighted the importance of correct classification for tax liabilities and set aside the previous order that had ruled otherwise.