2000 (1) TMI 80 - AT - Central Excise

Issues Involved:
1. Classification of cellulose powder (relipulp powder) under Central Excise Tariff Act, 1985.
2. Applicability of Board's Circular No. 6/90-CX 3, dated 19-2-1990.
3. Relevance of the Tribunal's decision in Maruthi Chemicals.
4. Measurement of particle size in terms of microns.
5. Deduction of interest on receivables from the assessable value for duty quantification.

Detailed Analysis:

1. Classification of Cellulose Powder:
The main issue is the classification of cellulose powder, specifically relipulp powder, under the Central Excise Tariff Act, 1985. The Revenue classified the product under heading 3912.90, while the assessee preferred heading 47.01. The learned DR argued that the product should be classified under Heading 3912.90 due to the manufacturing process involving washing with diluted acid and drying, which differs from the process for cotton linters. The DR also referenced Note 6(b) of Chapter 39 and the HSN notes, which classify cellulose in primary form under Chapter 39.

The learned senior counsel for the assessee contended that the product is made from cotton rags treated with Sodium Hydroxide, washed, dried, and pulverized into powder form. He emphasized that the HSN notes for Chapter 47 recognize cellulose pulp in powder form and that Chapter 39 would only apply if the product does not fall under any other chapter. Since the product fits Chapter 47 due to its raw materials and form, Chapter 39 is excluded.

2. Applicability of Board's Circular No. 6/90-CX 3:
The DR relied on Board's Circular No. 6/90-CX 3, which pertains to products obtained by mixing raw materials with Hydrochloric acid. The learned senior counsel argued that the manufacturing process in this case involves caustic soda, not acidic medium, making the circular inapplicable. The Tribunal agreed, noting that the product is obtained in an alkaline medium, not acidic, thus excluding the circular's applicability.

3. Relevance of the Tribunal's Decision in Maruthi Chemicals:
The DR cited the Tribunal's decision in Maruthi Chemicals, which classified a similar product under Chapter 39. The learned senior counsel distinguished this case, noting that the Tribunal did not consider Chapter 47, the chemical analysis, or the HSN notes for Chapter 39, making the decision inapplicable. The Tribunal concurred, finding significant differences in the facts and legal considerations.

4. Measurement of Particle Size in Terms of Microns:
In Appeal Nos. E/5366-5400/95, the learned senior advocate argued that the Commissioner (Appeals) erroneously applied a particle size test in microns, which is not specified in the HSN notes for Chapter 47. The Tribunal agreed, noting that the HSN only recognizes the product in powder form without specifying particle size, thus rejecting the Commissioner's reliance on the Sieve Test.

5. Deduction of Interest on Receivables:
In Revenue Appeal No. E/480/95A, the issue was the deduction of interest on receivables from the assessable value. The learned advocate cited the Supreme Court's decision in G.O.I. v. M.R.F. Ltd., which held that interest on receivables should be deducted. The Tribunal found the issue settled by this judgment and upheld the Commissioner (Appeals)' decision, rejecting the Revenue's appeal.

Conclusion:
The Tribunal concluded that the cellulose powder (relipulp powder) should be classified under Heading 47.01 of the Central Excise Tariff Act, 1985, due to the raw materials used, the manufacturing process in an alkaline medium, and the product's powder form recognized by the HSN notes. The Board's Circular No. 6/90-CX 3 and the Tribunal's decision in Maruthi Chemicals were found inapplicable. The particle size test in microns was also deemed irrelevant. The deduction of interest on receivables from the assessable value was upheld based on the Supreme Court's ruling. Consequently, the Revenue's appeals were rejected, and the assessee's appeals were allowed with consequential relief.

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