1987 (1) TMI 267 - AT - Central Excise

Summary

Issues Involved:
1. Classification of Electrolytic Manganese Dioxide under Customs Tariff Act, 1975.
2. Applicability of countervailing duty under Central Excise Tariff.

Detailed Analysis:

1. Classification of Electrolytic Manganese Dioxide under Customs Tariff Act, 1975:

The core issue was whether the imported electrolytic manganese dioxide for dry batteries should be classified under Heading 25.01/32(3) or Heading 28.01/58 of the Customs Tariff Act, 1975 (C.T.A.). The Assistant Collector of Customs initially classified the goods under Heading 28.01/58, which pertains to "Chemical elements, inorganic chemical compounds and other products as specified in Note 1 and 2 to Chapter 28 of the Customs Tariff." The respondents argued that the goods should be classified under Heading 25.01/32(3), which is specific for "Battery Grade Manganese Dioxide."

The Assistant Collector's decision was based on the fact that Chapter 25 of the C.T.A. applies only to goods in a crude state or those subjected to processes like washing, crushing, grinding, etc., as specified in Note 1 to Chapter 25. The imported electrolytic manganese dioxide underwent several processes, including electrolysis, which is not mentioned in Note 1 to Chapter 25. Therefore, it was classified under Heading 28.01/58 as a chemical compound.

The Collector of Customs (Appeals) overturned this decision, arguing that the specific mention of "Battery Grade Manganese Dioxide" under Heading 25.01/32(3) should prevail. The Collector emphasized that the heading does not specify that the manganese dioxide must be in a natural or crude form.

However, the Tribunal concluded that the classification must be consistent with the Chapter Notes and Section Notes of the Tariff Schedule and the Rules for Interpretation. Since the imported goods were manufactured through processes not specified in Chapter Note 1 to Chapter 25, they could not be classified under Heading 25.01/32(3). The Tribunal upheld the Assistant Collector's classification under Heading 28.01/58.

2. Applicability of Countervailing Duty under Central Excise Tariff:

The Assistant Collector also imposed countervailing duty under Item 68 of the Central Excise Tariff (C.E.T.), which applies to goods classified under Heading 28.01/58 of the C.T.A. The respondents contested this, seeking a refund of the differential duty.

The Tribunal noted that the imported electrolytic manganese dioxide was a manufactured product with high purity, resulting from processes including electrolysis. It was not a natural mineral substance and had various uses beyond dry batteries. Therefore, it fell under the scope of Heading 28.01/58(1) of the C.T.A., making it subject to countervailing duty under Item 68 of the C.E.T.

The Tribunal referenced previous decisions, including cases involving high-grade manganese dioxide and bone cement, to support the classification under Heading 28.01/58(1). These cases established that products subjected to processes beyond those specified in Chapter 25 Notes fall outside its scope.

Conclusion:

The Tribunal held that the Electrolytic Manganese Dioxide was correctly classifiable under Heading 28.01/58(1) of the C.T.A. with countervailing duty under Item 68 of the C.E.T. The orders-in-original by the Assistant Collector of Customs were upheld, and the appeals filed by the Revenue were allowed, setting aside the impugned orders of the Collector of Customs (Appeals).