1993 (11) TMI 119 - AT - Customs

Summary

Issues Involved:
1. Classification of imported goods under the appropriate Customs Tariff Heading.
2. Applicability of Note 3 to Chapter 32 of the Harmonised System of Nomenclature (HSN).
3. Determination of duty liability based on the classification of goods.

Issue-wise Detailed Analysis:

1. Classification of Imported Goods:
The primary issue was whether the imported raw material for the manufacture of crayons, composed of synthetic resin, wax, organic colouring matter, and inorganic filler, should be classified under Heading 3204.17 and 3206.10 as held by the lower authorities or under Heading 3901.10 as claimed by the appellants. The Assistant Collector had classified the goods based on organic colouring matter under Heading 3204.17 and those based on Titanium Dioxide under Heading 3206.10, demanding a higher duty amount. The appellants contended that the goods were correctly classifiable under Heading 39.01, arguing that the goods were not based on colouring matter and were not used as ingredients in the manufacture of colouring preparations. They emphasized that the predominant constituent was polyethylene and not colouring matter.

2. Applicability of Note 3 to Chapter 32 of HSN:
The appellants argued that Note 3 to Chapter 32 was not relevant and that the goods could not be deemed as colouring preparations since they do not find use in colouring plastics or rubber. They contended that the final product, namely crayon, was an article and not a colouring preparation. On the other hand, the respondents maintained that the imported goods were meant for use as raw material for the manufacture of crayons, which are colouring preparations since they impart color to paper. The Tribunal examined the Notes to Chapter 39 and Chapter 32 of the HSN and found that concentrated dispersions of colouring matter in plastics having the character of products of Chapter 32 are excluded from the scope of Chapter 39. The Tribunal referred to Note 3 to Chapter 32, which applies to preparations based on colouring matters used for colouring any material or as ingredients in the manufacture of colouring preparations.

3. Determination of Duty Liability:
The Tribunal observed that the imported goods were in the form of coloured irregular chips composed of synthetic resin, wax, fillers, and organic and inorganic colouring matters. The major constituents were polyethylene (32.7 to 50%) and colouring matter (11 to 18%). The Tribunal concluded that the imported goods were preparations produced by mixing polyethylene with other materials, thus falling under the scope of Chapter 32 as preparations used for colouring any material or as ingredients in the manufacture of colouring preparations. Consequently, the goods based on synthetic organic colouring matter were classifiable under Heading 3204.17, and those based on Titanium Dioxide were classifiable under Heading 3206.10, as held by the Collector (Appeals). The Tribunal confirmed the order appealed against and rejected the appeal, thereby upholding the duty liability determined by the lower authorities.

Conclusion:
The Tribunal confirmed the classification of the imported goods under Headings 3204.17 and 3206.10, as determined by the lower authorities, based on the interpretation of Note 3 to Chapter 32 of the HSN and the nature of the goods as preparations used for colouring materials. The appeal was rejected, and the order of the Collector (Appeals) was upheld, affirming the higher duty liability.