1990 (11) TMI 260 - AT - Central Excise

Summary

Issues: Classification of correcting fluid and diluter for Central Excise duty assessment.

In this case, the main issue was whether correcting fluid and diluter, packed in separate bottles but cleared as one set in a common container, should be classified under Tariff Heading 3823.00 for correcting fluid and 38.14 for diluter for Central Excise duty assessment. The value of the correcting fluid only or the total value of correcting fluid and thinner was also in question for assessable value determination.

The appellants manufactured correcting fluid falling under Tariff Heading 3823.00 and purchased diluter in bulk under Tariff Heading 3814.00. They repacked diluter into small glass bottles and cleared correcting fluid and diluter separately. The Assistant Collector of Central Excise issued a show cause notice proposing recovery of duty based on assessing the correcting fluid and diluter as a set under Heading 3823.00. The Collector (Appeals) upheld this decision, leading to the appeal before the Tribunal.

During the hearing, the appellants argued that the diluter should be classified under Heading 38.14 and charged Nil duty. They contended that the correcting fluid and diluter were not intended to be mixed together to create a new product. The Department, however, argued that the correcting fluid and diluter were a set of goods under Interpretative Rule 3(b) and should be assessed together.

The Tribunal considered the arguments and noted that the correcting fluid was used as is, with diluter added only when needed. A certificate confirmed this usage. The Tribunal found that the correcting fluid and diluter were not intended to be mixed to create a new product of Section VI or VII. Therefore, Note 2 to Section VI was deemed inapplicable to the case.

The Tribunal determined that Rule 3(b) of the Interpretative Rules did not apply as the correcting fluid and diluter were distinct products classified under specific headings when cleared separately. The Tribunal referenced previous decisions to support this interpretation.

Ultimately, the Tribunal held that the correcting fluid and diluter should be separately classified under their respective Tariff Headings. The assessable value for the correcting fluid should be based on its price at the time of removal, not the total value of the correcting fluid and diluter. The impugned order was set aside, and the appeal was allowed.