Classification of micro cellular rubber sheets turns on statutory testing and intended use for exemption under excise notification.

Classification of micro cellular rubber sheets under the Central Excise Tariff had to be determined on the statutory test prescribed by Chapter Note 4(a) to Chapter 40, and a sample drawn from the finished product with fillers and additives was not a valid basis for that test; the goods were therefore classifiable under heading 4008.11 and not 3921.19. The exemption under Notification No. 18/95-CE was also available because the phrase "used in the manufacture of" refers to intended or ordinary use, and the notification did not require proof of actual end use by buyers. On that basis, the classification-based demand and denial of exemption were not sustained.

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Issues: (i) Whether micro cellular rubber sheets were correctly classified on the basis of a test report obtained from a sample drawn from the finished product, and whether the goods were classifiable under heading 4008.11 instead of 3921.19. (ii) Whether the goods were eligible for exemption under Notification No. 18/95-CE dated 16.03.1995 without proof of actual end use by the buyers.

Issue (i): Whether micro cellular rubber sheets were correctly classified on the basis of a test report obtained from a sample drawn from the finished product, and whether the goods were classifiable under heading 4008.11 instead of 3921.19.

Analysis: Classification depended upon the test required under Chapter Note 4(a) of Chapter 40 of the Central Excise Tariff Act, 1985, and the sample sent for testing had been drawn from the finished product containing fillers and other additives not permissible for that test. The factual matrix was found to be on all fours with the earlier decision on micro cellular rubber sheets, where it had been held that the proper sample for testing must be in accordance with the statutory note. As the classification in the impugned order rested on an improper sample and an impermissible test basis, the earlier classification under heading 3921.19 could not stand.

Conclusion: The goods were held classifiable under heading 4008.11 and not under heading 3921.19; the Revenue's classification was not sustained.

Issue (ii): Whether the goods were eligible for exemption under Notification No. 18/95-CE dated 16.03.1995 without proof of actual end use by the buyers.

Analysis: The exemption covered goods of the specified heading when used in the manufacture of soles, heels, or soles and heels combined for footwear. The expression "used in the manufacture of" was treated as referring to the intended or ordinary use of the goods, not proof of actual end use in every clearance. The record did not show that the department had proved actual use for other purposes, and there was no statutory requirement to produce an end-use certificate. In these circumstances, the benefit of the notification could not be denied merely because actual end use was not established.

Conclusion: The assessee was held entitled to the benefit of Notification No. 18/95-CE dated 16.03.1995.

Final Conclusion: The duty demand and penalties based on the impugned classification and denial of exemption were set aside, and the assessee succeeded on both substantive issues.

Ratio Decidendi: Where classification under the tariff depends on statutory testing, the sample must conform to the prescribed test requirements, and an exemption using the phrase "used in the manufacture of" is satisfied by the ordinary or intended use of the goods unless the statute expressly requires proof of actual end use.

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