1997 (1) TMI 182 - AT - Central Excise

Summary

Issues:
1. Eligibility of the appellant's product for the benefit of notification 114/73.
2. Classification of the appellant's product under chapter 32.
3. Presence of glue as a binding agent in the product.
4. Interpretation of the exemption notification by the tribunal.
5. Consideration of the Chemical Examiner's report.
6. Relevance of Calcutta II Trade Notice No. 154 of 90.

Analysis:
The main issue in this case revolves around the eligibility of the appellant's product for the benefit of notification 114/73, specifically concerning the classification of the product under chapter 32. The appellant's product, a dry distemper, is claimed to fall under chapter 32 and be classifiable under heading 32.10, which is not disputed. The department seeks to deny the benefit by arguing that distempers are not covered by the description in the notification. The appellant contends that distempers are in the nature of pigments based on the Chemical Examiner's report and HSN Explanatory notes, which describe distempers as color pigments with binders. The appellant's product ingredients include glue as a binding agent, constituting less than 4% by weight, as per their declaration.

The tribunal analyzed the notification and held that the appellant's product, being a dry distemper, qualifies as a material in the nature of pigments or dry colors falling under chapter 32. The tribunal emphasized that the notification exempts mixtures in the nature of pigments or dry colors without specifying particular sub-headings. It was noted that the notification only refers to the chapter, not the headings or sub-headings, allowing for a broader interpretation to include products in the nature of pigments or colors. The tribunal also considered the proviso in the exemption, which permits the presence of binding agents within a certain limit, in this case, less than 4% by weight, as confirmed by the Chemical Examiner's report.

Regarding the Calcutta II Trade Notice No. 154 of 90, which suggested that the exemption did not apply to dry distemper, the tribunal found that the notice did not consider the proviso in the exemption regarding the percentage of binding agents. The tribunal concluded that the department failed to prove that the conditions of the notification were not met, while the appellant demonstrated compliance. Consequently, the tribunal accepted the appeal, dismissing the Cross Objection, which reiterated the department's viewpoint without substantial evidence to counter the appellant's claims.