1998 (8) TMI 156 - AT - Central Excise

Summary

Issues: Classification of products under CET sub-heading, Duty liability on diluted products, Application of precedents

Classification of products under CET sub-heading:
The case involved the classification of three products - Polywhite NSR, Cidalene White RN, and Ultrawhite CD - purchased by the appellants after diluting duty paid Ultrawhite RNI with water. The Assistant Collector initially classified the products under CET sub-heading 3204.30, while the Collector (Appeals) classified them differently, considering them as new products. The main issue was whether the diluted products were distinct from the original raw material for classification purposes.

Duty liability on diluted products:
The Collector (Appeals) contended that the appellants had manufactured new products, leading to duty liability. However, the appellants argued that the diluted products were not new and relied on previous tribunal decisions that dilution alone does not create a new excisable commodity. The question was whether dilution amounted to manufacture and attracted duty liability.

Application of precedents:
The tribunal referred to various precedents, including cases involving dilution of food colors and synthetic organic dyes, to determine the outcome of the present case. The tribunal highlighted that in previous cases, dilution did not result in the emergence of a new product attracting duty liability. The issue was whether the principles established in these precedents applied to the current situation of diluting Ultrawhite RNI.

In the detailed analysis, the tribunal noted that the Collector (Appeals) did not dispute the appellants' claim that the products were excellent fluorescent whitening agents for polyester fiber. However, the Collector (Appeals) based the classification on the products' different names and bath ratios, concluding that they were distinct from the original raw material. The tribunal found no evidence to support this distinction, emphasizing that the characteristics and use of the products were not proven to differ from the original material. Relying on past tribunal decisions, the tribunal held that mere dilution did not result in a new excisable commodity, aligning with the principles established in previous cases.

The tribunal referenced cases like CCE v. Mallya Fine Chem and Jyoti Laboratories v. CCE to support its decision. These cases highlighted that the addition of substances like salt or water to duty-paid materials did not amount to manufacture of a new product attracting duty liability. The tribunal also cited the case of Jayu Products v. CCE, where dilution of Ultramarine Blue with China Clay was not considered manufacturing. Applying the principles from these cases, the tribunal concluded that the dilution of Ultrawhite RNI by the appellants did not constitute manufacture, and therefore, no duty liability arose on the diluted products. As a result, the tribunal set aside the Collector (Appeals) decision and allowed the appeal by the assessees.