1998 (9) TMI 322 - AT - Central Excise

Summary

Issues: Classification of product under Chapter sub-heading 3210.90 or 3208.90, determination of weight of solvent and solution under Note 3 of Chapter Note 32, arbitrary calculation of percentage of synthetic solvent.

Classification of product under Chapter sub-heading 3210.90 or 3208.90:
The case involved a dispute regarding the correct classification of polyurethane paints manufactured by the respondents under Chapter sub-heading 3210.90 or 3208.90. The Revenue argued that the product should be classified under sub-heading 3208.90, which covers paints based on synthetic polymers. The Collector (Appeals) had approved the classification under sub-heading 3210.90. The Revenue contended that polyurethane paints, being based on synthetic polymer, should be classified under sub-heading 3208.90, which is more specific and should prevail over the general heading. It was emphasized that the weight of the solvent exceeded 50% of the weight of the solution, supporting the classification under sub-heading 3208.90.

Determination of weight of solvent and solution under Note 3 of Chapter Note 32:
The discussion also revolved around Note 3 of Chapter Note 32, which provides an inclusive definition amplifying the scope of heading 32.08. The Department argued that the product contained 60% to 70% synthetic solvent, exceeding the threshold of 50% weight of solvent to solution ratio as per Note 3. However, the appellants raised concerns about the arbitrary calculation of the percentage of synthetic solvent without a proper basis. The respondents contended that the hardener was applied after mixing with a thinner, which they argued took the product out of the definition in Note 3. The Tribunal examined the evidence and submissions to determine the validity of the weight ratio and its impact on the classification.

Arbitrary calculation of percentage of synthetic solvent:
A crucial aspect of the judgment focused on the arbitrary determination of the percentage of synthetic solvent in the polyurethane paints. The appellants highlighted that the quantum of solvent, ranging from 60% to 70%, was questioned due to insufficient clarity on the strength of the synthetic solvent compared to other components. The Tribunal agreed with the Collector (Appeals) that the calculation of the percentage of synthetic solvent lacked a proper basis, supporting the respondents' argument. Consequently, the appeal was rejected, affirming the Collector (Appeals)'s decision and disposing of the cross objections accordingly.

In conclusion, the judgment addressed the classification dispute, the application of Note 3 for determining the weight ratio of solvent to solution, and the issue of arbitrary calculation of the percentage of synthetic solvent. The decision upheld the Collector (Appeals)'s order based on the lack of a sound basis for determining the synthetic solvent percentage, ultimately rejecting the appeal and settling the classification matter under the relevant sub-heading.