1998 (8) TMI 237 - AT - Central Excise

Issues Involved:
1. Classification of boards made for insulation purposes.
2. Applicability of Chapter Note 2 of Chapter 44.
3. Interpretation of Rules for classification under CET Act, 1985.
4. Relevance of Harmonised Commodity Description and Coding System (HSN Notes).

Detailed Analysis:

1. Classification of Boards Made for Insulation Purposes:
The primary issue revolves around the classification of boards made for insulation purposes. The Collector (Appeals) held that these boards, although cleared in the form of boards, are insulators and should be classified under sub-heading 8546.00 as electrical insulators of any material. Conversely, the Assistant Collector classified them under Heading 44.09 as articles of densified wood. The Assistant Collector argued that the goods are not in the shape for direct use as insulators and thus do not qualify for classification under T.H. 85.46.

2. Applicability of Chapter Note 2 of Chapter 44:
The Revenue's appeal contends that the Collector's order did not observe natural justice and failed to consider the counter-submission of the Assistant Collector. The Revenue emphasized that the classification should be determined according to the terms of the heading and any relative section or chapter notes. Specifically, Note 2 of Chapter 44 defines densified wood and suggests that even if the wood is used as an insulator, it should not be excluded from Chapter 44. The process of manufacture results in densified wood, which is classifiable under 4409.00 of the CET Act, 1985, regardless of its end application as an insulator.

3. Interpretation of Rules for Classification under CET Act, 1985:
The Collector (Appeals) relied on Rule 3(a) of the Interpretative Rules, which states that the heading providing the most specific description should be preferred. The argument was that Heading 85.46, which covers electrical insulators of any material, should be preferred over Heading 44.09. However, the Assistant Collector and the Revenue argued that Heading 44.09 is more specific as it explicitly covers densified wood and its articles, including those used as insulators.

4. Relevance of Harmonised Commodity Description and Coding System (HSN Notes):
The Revenue's appeal also referenced the Harmonised Commodity Description and Coding System, which classifies densified wood under Heading 44.13, corresponding to Heading 44.09 of the CET Act, 1985. The HSN Notes indicate that densified wood used in manufacturing various items, including insulators, should be classified under Heading 44.13. This supports the argument that the goods in question should be classified under Heading 44.09.

Judgment:
Upon careful consideration, it was concluded that the item in question, which has acquired resistance to electrical agencies, satisfies the definition of densified wood under Note 2 of Chapter 44. The classification should be based on chapter notes and HSN notes, not the end use. The item, being densified wood, falls under Chapter Heading 44.09, which is more specific compared to the general Heading 85.46 for electrical insulators of any material. The Tribunal upheld the classification under Heading 44.09, aligning with the precedent set in the case of C.C.E. v. Western India Plywood Ltd., where densified wood used for electrical insulation was classified under 44.09. Thus, the appeal of Revenue was accepted, and the impugned order was set aside.

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