1998 (10) TMI 119 - AT - Central Excise

Summary

Issues: Classification of thinner under CET sub-heading 3814.00 or 3304.00, applicability of Nil rate of duty under Notification 230/86 as amended by Notification 89/87, evidence of usage of thinner, differentiation between thinner and nail polish remover, interpretation of Note 5 to Chapter 33, technical literature reference, classification based on usage.

Classification of Thinner:
The appellants manufactured various items under the trade mark "Gala of London," including thinner under CET sub-heading 3814.00. The Department contended that the thinner was a preparation for use in manicure and pedicure, classifiable under CET sub-heading 3304.00, attracting duty. A show cause notice was issued proposing recovery of duty and penalty. The Assistant Collector accepted the classification under CET sub-heading 3814.00, considering the thinner as an organic solvent, not for manicure or pedicure. However, the lower appellate authority reversed this decision, emphasizing the appellants' registration for manufacturing cosmetics and lack of evidence supporting the thinner's general-purpose use.

Interpretation of Note 5 to Chapter 33:
The appellate tribunal analyzed the product's characteristics, packaging, retail price, and label information. The product was sold in 60 ml packaging similar to nail polish remover, with a retail price indicating a cosmetic preparation. The label described it as a solvent for correcting thickened nail lacquer. The tribunal found the appellants' claim of differentiation between thinner and nail polish remover unsubstantiated. Even if distinct, the thinner was used for diluting nail polish, falling under Note 5 to Chapter 33, covering preparations for manicure or pedicure. The tribunal noted the absence of technical literature supporting alternative uses for the thinner, affirming its classification under CET sub-heading 3304.00.

Conclusion:
After considering the arguments and evidence presented, the tribunal upheld the classification of the thinner under CET sub-heading 3304.00. The decision was based on the product's usage for diluting nail lacquer, aligning with Note 5 to Chapter 33 and Note 2 to Chapter 33 regarding products suitable for cosmetic use. The tribunal rejected the appeal, affirming the lower appellate authority's decision and dismissing the appellants' claim of a different classification for the thinner.