1987 (8) TMI 322 - AT - Central Excise

Summary

Issues: Classification of insulated copper strips under Tariff Item 68

Issue 1: Classification of insulated copper strips under Tariff Item 68
The case involved the classification of insulated copper strips under Tariff Item 68. The appellants argued that despite insulation, the strips remained essentially copper strips and should be classified under Tariff Item 26A(2) of the Central Excise Tariff (CET). The department contended that the insulated strips constituted a new and distinct product, making them liable for classification under Tariff Item 68.

Analysis:
The appellants manufactured electric wires and cables using copper strips insulated with varnish, glass fiber, paper, cotton, and enamels. They sought classification under Tariff Item 26A(2) for copper strips covered with glass fiber. The department issued a show cause notice proposing classification under Tariff Item 68, asserting that the insulated copper strips had acquired a separate character as conductors. The Assistant Collector and the Appellate Collector upheld this classification, emphasizing the distinctive character of the insulated strips as conductors.
The appellants argued that a similar issue was considered by the Bombay High Court in a previous case, where it was held that the insulated copper strips should not be classified under Tariff Item 68. They contended that the nature of use should not be the criteria for classification under the CET.
The department argued that insulation was essential to make the copper strips suitable for use as conductors, equating the end product to the original copper strips. They relied on precedents and legal principles to support their position that the change in identity due to processing determines classification.
The Tribunal analyzed the contentions and referred to the Bombay High Court's judgment, emphasizing that for a manufacture to occur, the commodity must undergo changes leading to the creation of a new and distinct article. Applying this test, the Tribunal held that the insulation process did not change the character of the copper strips significantly enough to warrant classification under Tariff Item 68.
The Tribunal rejected the department's argument that the functional aspect should determine classification, emphasizing that the insulation did not transform the copper strips into a distinct commercial product. It concluded that the insulated copper strips should not attract duty under Tariff Item 68, allowing the appeal.

Conclusion:
The Tribunal ruled in favor of the appellants, holding that the insulated copper strips should not be classified under Tariff Item 68 but rather under Tariff Item 26A(2) of the CET. The decision was based on the principle that the insulation process did not alter the essential character of the copper strips significantly enough to create a new and distinct product.