1985 (10) TMI 195 - AT - Income Tax

Summary

Issues Involved:
1. Levy of additional duty of customs (countervailing duty) on imported chemicals.
2. Classification of imported chemicals under Tariff Item 65 or Tariff Item 68 of the Central Excise Tariff.
3. Burden of proof regarding the predominant use of the chemicals.
4. Relevance of end-use in determining classification under Tariff Item 65.

Detailed Analysis:

1. Levy of Additional Duty of Customs (Countervailing Duty) on Imported Chemicals:
The appeals concern the imposition of countervailing duty on nine consignments imported by M/s. Union Carbide India Ltd., Bombay. The products involved were DSTDP, TBM-6P, DBPC, and SANTONOX R. The appellants argued that these products should be classified under Tariff Item 68, which covers "All other goods, not elsewhere specified," rather than Tariff Item 65, which pertains to "Rubber processing chemicals," including accelerators and anti-oxidants.

2. Classification of Imported Chemicals Under Tariff Item 65 or Tariff Item 68:
The appellants contended that the chemicals should not be classified under Tariff Item 65 unless the Department could prove their predominant use as rubber processing chemicals. They cited previous Tribunal decisions, which held that a chemical's classification under T.I. 65 requires evidence of predominant use in rubber processing. The Department failed to establish that the chemicals were predominantly used as rubber processing chemicals, relying instead on their potential use as anti-oxidants in rubber processing.

3. Burden of Proof Regarding the Predominant Use of the Chemicals:
The Tribunal reiterated that the Department bears the burden of proving that the goods fall under a specific tariff item. The Tribunal's previous decisions emphasized that if a chemical has multiple uses, it should not be classified based on one use unless it is the predominant or common use. The Department did not provide sufficient evidence to prove that the chemicals were predominantly used in rubber processing.

4. Relevance of End-Use in Determining Classification Under Tariff Item 65:
The Tribunal noted that while the end-use of goods generally does not determine their classification, it is relevant when the classification is related to the function of the goods, as in T.I. 65. The predominant use of the chemicals as anti-oxidants in rubber processing was not established by the Department. The appellants used the chemicals in polyethylene manufacturing, not rubber processing.

Case-Specific Findings:

Appeal Nos. 906/85 and 907/85 (DSTDP):
The literature indicated that DSTDP is a secondary anti-oxidant for polyolefins, with no mention of rubber processing. The Assistant Collector's reliance on the appellants' statements that the goods could also be used as rubber chemicals was insufficient. The Tribunal held that the goods were wrongly classified under T.I. 65 and should be under T.I. 68.

Appeal Nos. 908/85 and 909/85 (TBM-6P):
The literature showed various uses, including in polyethylene, PVC, and certain rubbers, but did not indicate predominant use in rubber processing. The Assistant Collector's decision was based on the mere possibility of use in rubber, which is contrary to the Tribunal's criteria. The Tribunal held that the goods should be classified under T.I. 68.

Appeal Nos. 910/85 and 911/85 (DBPC):
The literature indicated multiple uses, including in rubber and plastics, without showing predominant use in rubber processing. The Assistant Collector's reliance on the appellants' statements was misplaced. The Tribunal set aside the classification under T.I. 65, classifying the goods under T.I. 68.

Appeal Nos. 912/85, 913/85, and 914/85 (SANTONOX R):
The literature described SANTONOX R as an anti-oxidant for polyolefins. The Assistant Collector's reliance on the Bill of Entry description as "rubber antioxidants" was insufficient. The Tribunal noted a previous Appellate Collector's decision that the product was not used as a rubber anti-oxidant. The Tribunal held that the Department did not discharge its burden of proof and classified the goods under T.I. 68.

Conclusion:
The Tribunal allowed all nine appeals, directing that consequential relief be granted. The Department failed to prove that the chemicals were predominantly used as rubber processing chemicals, and thus, the goods should be classified under Tariff Item 68.