In-factory use controls classification of demineralized water; residuary tariff entry cannot apply where manufacturing use is established.

Demineralized water, being water of similar purity to distilled or conductivity water, was held classifiable under the tariff entry for water used within the factory of production because the decisive condition was in-factory use in the manufacturing process. The fact that part of the electricity generated was used outside the factory did not shift the classification to the residuary entry for other water. On that basis, the note states that the nil-duty classification applied and the duty demand based on the residuary entry was unsustainable.

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Issues: Whether demineralized water, prepared in the factory and used in the generation of electricity, was correctly classifiable under sub-heading 2851.11 as water used within the factory of production, or under sub-heading 2851.19 as other water, and whether duty demand based on the latter classification was sustainable.

Analysis: Demineralized water fell within the common tariff description of distilled or conductivity water and water of similar purity. The determinative question was whether the qualifying entry for sub-heading 2851.11 was satisfied. The use of part of the electricity generated outside the factory did not alter the fact that the demineralized water itself was used within the factory of production in the manufacturing process. Once that condition was met, the residuary sub-heading 2851.19 could not apply.

Conclusion: The goods were classifiable under sub-heading 2851.11 and attracted nil rate of duty. The duty demand was unsustainable and was set aside in favour of the assessee.

Ratio Decidendi: Where distilled or similar purity water is used within the factory of production, it is classifiable under the specific tariff sub-heading for such in-factory use and not under the residuary sub-heading for other cases.

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