2008 (3) TMI 123 - AT - Central Excise

Tribunal rules in favor of assessee on demineralized water duty demand, classifies it under SH 2851.11

The Tribunal ruled in favor of the assessee, setting aside the duty demand on demineralized water. The demineralized water, used within the factory for ... Lower authorities classified demineralized water (DM water) under SH 2851.19 after rejecting the assessee’s claim for classification under SH 2851.11 - it is not in dispute that DM water was used within the factory of production – only a part of the electricity generated by the process involving DM water was used outside the factory of production - Admittedly, it was used within the factory of its production so classifiable under SH 2851.11 attracting “nil” rate of duty Issues Involved:Classification of demineralized water under Central Excise Tariff Act - SH 2851.11 vs. SH 2851.19Detailed Analysis:The judgment pertains to appeals against demands of duty on demineralized water (DM water) for specific periods. The DM water was produced by purification in the assessee's factory, utilized in boilers for steam generation, which powered a turbine for electricity generation. A significant portion of this electricity was used internally for manufacturing final products, with the surplus supplied to the Tamilnadu Electricity Board grid. The lower authorities initially classified DM water under SH 2851.19 but rejected the assessee's claim for classification under SH 2851.11, leading to the duty demand. The relevant Tariff entry differentiated between distilled water used within the factory (SH 2851.11) and other uses (SH 2851.19).The counsel for the appellants argued that the DM water was indisputably used within the factory of production, a fact not contested by the Jt. CDR. However, the Jt. CDR contended that a portion of the electricity generated from the DM water process was consumed outside the factory, aligning with the lower authorities' stance. The Tribunal acknowledged that DM water fell under the category of 'Distilled or Conductivity Water and Water of Similar Purity' and the crucial issue was its correct classification under SH 2851.11 or SH 2851.19. Given that the DM water was indeed used within the factory of production, it should be classified solely under SH 2851.11, attracting a 'nil' rate of duty.Consequently, the Tribunal set aside the duty demand, allowing the appeals in favor of the assessee. The judgment was dictated and pronounced in open court, providing a clear resolution to the classification dispute regarding demineralized water under the Central Excise Tariff Act.