Coloured polystyrene compound classification under excise duty turns on in-factory processing and removal after colouring

Coloured polystyrene compound was treated as classifiable under Tariff Item 15-A(1)(ii), and colouring the uncoloured material in the same factory did not create a new commodity. Rule 9 of the Central Excise Rules was applied to deem excisable goods used within the factory as removed immediately before consumption or utilisation, so duty attached when the coloured compound was removed from the factory after processing. The contention that duty should be assessed at the uncoloured stage was rejected, and liability was linked to the coloured value, subject to limitation.

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Issues: Whether coloured polystyrene compound was classifiable under Tariff Item 15-A(1)(ii) and whether central excise duty was payable only at the coloured stage on removal from the factory, instead of at the uncoloured stage.

Analysis: The order followed the Tribunal's earlier decision in the same assessee's case and held that colouring of uncoloured polystyrene in the same factory did not result in a new commodity. In view of Rule 9 of the Central Excise Rules, excisable goods used within the factory after processing are deemed to have been removed immediately before such consumption or utilisation. As the goods were captively consumed for colouring and were liable to duty only when removed after that process, the claim that duty had to be assessed on the uncoloured stage was rejected.

Conclusion: The goods were held classifiable under Tariff Item 15-A(1)(ii), and excise duty was held payable at the time of removal of the coloured polystyrene compound on its coloured value, subject to limitation.

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