1998 (2) TMI 224 - AT - Central Excise

Issues Involved:
1. Classification of 'Lanolin Anhydrous Commercial' and 'Lanolin Anhydrous I.P.'
2. Eligibility for exemption under Notifications No. 175/86-C.E., 234/86-C.E., and 31/88-C.E.
3. Interpretation of relevant tariff headings and sub-headings.
4. Applicability of the Drugs & Cosmetics Act, 1940.
5. Use of technical and pharmaceutical standards and certificates.
6. Relevance of Harmonized Commodity Description and Coding System (CCCN) and HSN notes.
7. Application of Rule 3(c) of the Rules for Interpretation of Tariff Schedule.

Detailed Analysis:

1. Classification of 'Lanolin Anhydrous Commercial' and 'Lanolin Anhydrous I.P.':
The appellants classified 'Lanolin Commercial' under 3801.90, but the A.C. approved it under sub-heading 2913.00, granting slabwise exemption under Notification No. 175/86-C.E. The Department contended that both products should be classified under sub-heading 1507.00. The Tribunal observed that 'Lanolin' and 'Degras' are technically and commercially different commodities. 'Lanolin' is derived from 'Degras' and has different characteristics and qualities. The Tribunal noted that 'Lanolin' of I.P. grade is used in pharmaceutical preparations, which distinguishes it from other grades used for industrial or cosmetic purposes. Thus, the classification under sub-heading 1507.00 as 'Degras' or 'Wool grease residues' was incorrect.

2. Eligibility for Exemption under Notifications No. 175/86-C.E., 234/86-C.E., and 31/88-C.E.:
The appellant argued that 'Lanolin Anhydrous I.P.' is a bulk drug eligible for total/partial exemption under Notification No. 234/86-C.E. and/or Notification No. 31/88-C.E. The Tribunal noted that the product conforms to the Indian Pharmacopoeia, 1985, and is considered a pharmaceutical aid. Certificates from the Drugs Controller of India and other authorities supported this claim. The Tribunal emphasized that the product's classification as a pharmaceutical aid eligible for exemption under the specified notifications was supported by substantial evidence.

3. Interpretation of Relevant Tariff Headings and Sub-headings:
The Tribunal examined the relevant tariff headings and sub-headings. It noted that Chapter 15 of the Central Excise Tariff covers "Animal or vegetable fats and oils and their cleavage products; prepared edible fats; animal or vegetable waxes." However, 'Lanolin' is not merely a residue but a purified product obtained from 'Degras.' The Tribunal found that the proper classification should be under Chapter 29 or Chapter 30, which cover organic chemicals and pharmaceutical products, respectively.

4. Applicability of the Drugs & Cosmetics Act, 1940:
The Tribunal considered the applicability of the Drugs & Cosmetics Act, 1940. It noted that 'Lanolin Anhydrous I.P.' is recognized as a bulk drug under the Act and is used in pharmaceutical preparations. The Tribunal emphasized that the product's classification should consider its use as a pharmaceutical aid and its compliance with pharmacopoeial standards.

5. Use of Technical and Pharmaceutical Standards and Certificates:
The Tribunal relied on various technical and pharmaceutical standards and certificates to determine the proper classification. It referred to the Indian Pharmacopoeia, certificates from the Drugs Controller of India, and opinions from pharmaceutical experts. These documents confirmed that 'Lanolin Anhydrous I.P.' is used in pharmaceutical preparations and meets the required standards.

6. Relevance of Harmonized Commodity Description and Coding System (CCCN) and HSN Notes:
The Tribunal noted that the HSN notes have persuasive value but are not binding for Central Excise purposes. It observed that the HSN classification under Heading 15.05 does not necessarily apply to the Central Excise Tariff. The Tribunal emphasized that the Central Excise Tariff distinguishes between pharmacopoeial products and others, and the classification should reflect this distinction.

7. Application of Rule 3(c) of the Rules for Interpretation of Tariff Schedule:
The appellants argued that even if sub-heading 1507.00 applied, Rule 3(c) of the Rules for Interpretation of Tariff Schedule should classify the product under sub-heading 2913.00 or 2942.00, as these headings occur last in numerical order. The Tribunal agreed that interpretative rules have statutory force and must be considered when determining the appropriate classification.

Conclusion:
The Tribunal set aside the order of the Collector and remanded the appeals to the Assistant Collector for de novo consideration. The Assistant Collector was instructed to re-determine the appropriate heading and sub-heading and pass a speaking order considering the Tribunal's observations and the law. The Tribunal emphasized that the product should be classified based on its use as a pharmaceutical aid and its compliance with pharmacopoeial standards.

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