2004 (4) TMI 75 - SC - Central Excise

Supreme Court Affirms Tribunal Decision on Rubber Latex Tariff Classification

The Supreme Court affirmed the Tribunal's decision that the rubber latex solution used by the Appellants should be classified under Tariff Item No. 40.05 ... Rubber Latex solution - Classification of goods - benefit of Notification No. 250/86 - whether the rubber latex solution used by the Appellants, to line those hose pipes, falls under Tariff Item No. 40.01 or 40.05 - Held that:- rubber solution is mixed with accelerators to the extent of 4% and activators to the extent of 2.5%. This by itself would show that the product cannot be classified under Tariff Item No. 40.01. The first test report shows that the product was a compounded latex solution. Thus by virtue of Chapter Note 5(a) the product could not be classified under Tariff Heading 40.01. The second test report shows that the product is a vulcanized rubber latex. If it is vulcanized then it cannot fall under Tariff Item No. 40.01. Thus all material on record indicates that the product cannot be classified under Tariff Item 40.01. As it does not fall under Tariff Item 40.01 the benefit of Notification No. 250/86 would not be available to the Appellants - Tribunal was wrong in either classifying the product under Tariff Item No. 40.05 and/or confirming the demand of duty payable under Tariff Item No. 40.05 - Decided against assessee. Issues: Classification of rubber latex solution under Tariff Item No. 40.01 or 40.05.Analysis:1. Facts and Background: The case involved a dispute over the classification of rubber latex solution used by the Appellant in manufacturing textile hose pipes. The Appellants initially classified the product under Tariff Item No. 40.05, claiming the benefit of a specific notification. However, the Department contended that the product should be classified under Tariff Item No. 40.01.2. Initial Classification and Testing: The Appellants filed a classification list on 1-4-1986 under Tariff Item No. 40.05. A sample was taken for chemical analysis, revealing the raw materials used in the rubber latex solution. The Appellants later filed a second classification list on 22-5-1986, still under Tariff Item 40.05, but sought the benefit of a notification exempting rubber latex under Tariff Item 40.01 from excise duty.3. Legal Proceedings: The Assistant Collector initially held that the product fell under Tariff Item No. 40.05, denying the benefit of the notification. The Appellants appealed to the Collector (Appeals), who classified the product under Tariff Item No. 40.01. Subsequently, the Department appealed to the Tribunal, which classified the product under Tariff Item No. 40.05.4. Legal Interpretation: The Appellants argued that the rubber solution contained accelerators and activators, making it unsuitable for classification under Tariff Item No. 40.01 as per Chapter Note 5(a. They contended that the presence of small amounts of antioxidants and preservatives, as per Chapter Note 5(b, should not alter the classification. The Tribunal upheld the classification under Tariff Item No. 40.05 based on the characteristics of the product.5. Decision and Rationale: The Supreme Court affirmed the Tribunal's decision, noting that the product's composition and characteristics aligned more closely with Tariff Item No. 40.05. The Court emphasized that the presence of accelerators and activators precluded classification under Tariff Item No. 40.01. Thus, the Appeals were dismissed, and no costs were awarded.In conclusion, the judgment resolved the classification dispute by determining that the rubber latex solution used by the Appellants fell under Tariff Item No. 40.05, based on the presence of accelerators and activators, thereby upholding the Tribunal's decision and dismissing the Appeals.