1993 (1) TMI 165 - AT - Customs

Summary

Issues:
Classification of Lactose BP/USP under Customs Tariff Act, 1985 - Applicability of exemption Notification No. 31/88-C.E. - Claim for refund of 10% CVD paid more - Chapter Heading 1702.19 vs. Chapter Heading 2940 - Interpretation of Chapter Notes - Benefit of exemption under Notification No. 31/88-C.E.

Analysis:

1. The appellants filed refund applications for claiming refund of 10% CVD paid more on Lactose BP/USP imported and cleared under various Bills of Entry. The Department collected 15% CVD instead of 5% CVD claimed by the appellants under exemption Notification No. 31/88-C.E., dated 1-3-1988. The dispute revolves around the classification of Lactose under Chapter Heading 1702.19 and the appellants' claim that it should be classified under Chapter Heading 2940 as 'Other Organic Chemicals' to avail the exemption. The appellants argue that Lactose is a Bulk Drug certified by the Drug Controller of India, falling under Chapter Heading 28 or 29, not under Chapter Heading 1702.19. They contend that Lactose contains less than 5% sugar, making it unsuitable for manufacturing tablets and capsules, thus warranting classification under Chapter Heading 2940. The lower authorities rejected the claim based on the specific coverage of Lactose under Chapter Heading 1702.19.

2. The Collector (Appeals) upheld the lower authorities' decision, stating that Lactose falls under Chapter Heading 17.02 for levy of additional customs duty, irrespective of its medicinal quality or certification as a bulk drug. The Collector emphasized that the exemption under Notification No. 31/88-C.E. applies only to goods falling under Chapter 28, 29, or 30, excluding bulk drugs under other headings. The Collector rejected the appeal as inadmissible, reinforcing the classification under Chapter Heading 17.02.

3. During the hearing, the appellants' counsel presented various arguments and references to support their claim. They cited a certificate from the Drug Controller, highlighting the eligibility of Lactose for exemption under a specific notification. Referring to pharmaceutical chemistry textbooks and legal precedents, the counsel argued that Lactose is an organic compound falling under Chapter Heading 29, not Chapter Heading 17.02. They drew parallels with cases involving chemically defined compounds and drug intermediates to strengthen their classification claim under Chapter Heading 2942 as 'Other Organic Compounds.'

4. The department's representative countered the appellants' arguments, asserting that Lactose, despite being a chemically defined organic compound, should be classified under Chapter Heading 1702.10, as specified in the chapter notes. The representative emphasized the exclusion of Lactose from Chapter Heading 2940.00 and the specific inclusion under Chapter Heading 17.02, aligning with the lower authorities' classification decision. The department argued that the appellants' acceptance of the classification for customs purposes precludes seeking a different classification for CVD payment.

5. The Tribunal analyzed the submissions and material on record, focusing on the classification dispute between Chapter Heading 17.02 and Chapter Heading 29 for Lactose. Referring to the interpretative rules, the Tribunal highlighted the specificity of Chapter Heading 17.02 in including Lactose and the exclusion from Chapter Heading 29. The Tribunal emphasized that the specific entry in Chapter 17.02 and the notification's requirement for classification under Chapter 28, 29, or 30 supported the lower authorities' classification decision. The Tribunal dismissed the appeals, deeming the lower authorities' classification and denial of exemption benefits as correct, distinguishing previous rulings under the old tariff system.

In conclusion, the Tribunal upheld the classification of Lactose under Chapter Heading 17.02, denying the appellants' claim for classification under Chapter Heading 29 and exemption benefits under Notification No. 31/88-C.E. The decision rested on the specificity of chapter notes, the notification's requirements, and the exclusion of Lactose from Chapter Heading 29, aligning with the lower authorities' classification decision.