2005 (1) TMI 111 - SC - Central Excise

Whether the intermediate product manufactured by Camlin Limited is marketable? If it is marketable then whether the product is to be classified under Chapter Heading 32.04 or 96.09? Held that - Unable to accept the submission of learned Senior Counsel Mr. Dave on behalf of Camlin Ltd. that what Luxor had imported was only LDPE Powder whereas Camlin s product contained not just plastic resins but also wax colouring material fillers etc. and therefore it was a different product. What had been imported by Luxor Pen Co. was clearly not just synthetic resin but a compound which was identical to that being manufactured by Camlin Ltd. As one of the major manufacturers of crayon in this country was importing this material, the Department had clearly established the marketability of this material. It is settled law that for a good to be marketable it is not necessary that there must be actual instances of sale by the assessee. Marketability is essentially a question of fact to be decided on facts of each case and once it is shown that a product has actually been bought, marketability gets established. Having considered the rival submissions we are unable to accept the submission that this compound is to be classified under tariff Item No. 96.09. Chapter 96 deals with manufactured articles. The HSN Explanatory Note also shows that this chapter, and in particular tariff heading 96.09, deal with finished products. Further, there is a big distinction between an intermediate product and an unfinished or incomplete product. Admittedly, the product is an intermediate product. It is not a product in an unfinished stage. Therefore, interpretative Rule 2(a) will have no application. This product being a compound falls under Chapter 32 and it being an ingredient in the manufacture of colouring preparation by virtue of Chapter 32 Note 2 it gets covered by Tariff Item No. 32.04.

Summary

Issues:
1. Marketability of the intermediate product manufactured by Camlin Limited.
2. Classification of the product under Chapter Heading 32.04 or 96.09.

Analysis:

Issue 1: Marketability
The main issue in the appeals was whether the intermediate product manufactured by Camlin Limited was marketable. The Department presented evidence indicating that a competitor, Luxor Pen Co., was importing a product similar to Camlin's intermediate product, termed as "LDPE Powder." The Department argued that Luxor's imported product was identical to Camlin's, establishing marketability. Despite Camlin's contention that their product was different due to additional components like wax and colorants, chemical analysis revealed the products were indeed identical. The Court emphasized that marketability is determined by factual evidence, not necessarily actual sales by the assessee. As Luxor was importing the material, marketability was established.

Issue 2: Classification
The second issue revolved around the classification of the product. The Department argued for classification under Chapter Heading 32.04, citing that the compound was used in crayon manufacturing, falling under the category of synthetic organic colorants. Conversely, Camlin contended that the product should be classified under Heading 96.09, asserting that the compound had all the characteristics of a crayon. They relied on interpretive Rule 2(a, which includes incomplete goods having the essential character of the finished product. However, the Court held that the compound was an intermediate product, not unfinished, and thus did not meet the criteria for classification under Chapter 96. The product was deemed to fall under Chapter 32 as an ingredient in coloring preparations, specifically under Tariff Item No. 32.04.

In conclusion, the appeals were disposed of with the clarification that some were dismissed while others were allowed. The Court did not address the issue of Modvat credit entitlement for Camlin, leaving it for the company to pursue through a separate application.