Captive use of chlorotetracycline HCL not proved, so classification and duty liability could not change.

Chlorotetracycline HCL was found not to have been captively used in the manufacture of animal food supplement, so the product classification and duty liability could not be altered on that basis. The record showed separate manufacturing lines for the supplement and for chlorotetracycline HCL, and the assessee's letter did not admit actual use of the chemical in the supplement line; it referred only to a theoretical quantity in the final product. As the Revenue did not rebut the manufacturing process or identify any stage at which the chemical was actually added, the finding that there was no captive use was sustained, with the issue decided in favour of the assessee.

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Issues: Whether chlorotetracycline HCL was captively used in the manufacture of animal food supplement so as to affect the product classification and duty liability.

Analysis: The record showed that the manufacturing process for animal food supplement and for chlorotetracycline HCL were and that the ferments mash was used in two different production lines. The assessee's letter did not admit use of chlorotetracycline HCL in the animal food supplement; it only referred to the quantity of chlorotetracycline contained in the final product on a theoretical basis. The Revenue did not controvert the manufacturing process or identify any stage at which chlorotetracycline HCL was actually added in the animal food supplement line. On the evidence, the finding of the lower authorities that chlorotetracycline HCL was not used captively in the manufacture of animal food supplement was sustained.

Conclusion: The issue was answered against the Revenue and in favour of the assessee.

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