Separate classification of correcting fluid and diluter applies where common packing is only for convenience, not a mixed product.
Correcting fluid and diluter packed in a common container were treated as distinct products, not a taxable set under Rule 3(b) read with Note 2 to Section VI, because the fluid was ready for use and the diluter did not create a new product; they were therefore to be classified separately under their respective tariff headings. On valuation, the assessable value had to reflect the product actually manufactured and cleared, so the correcting fluid alone was the relevant assessable value and the diluter could not be added merely because it shared the same pack. The combined classification and combined valuation approach was rejected.
Issues: (i) Whether correcting fluid and diluter packed together in a common container were classifiable as a set under Rule 3(b) of the Interpretative Rules read with Note 2 to Section VI of the Schedule to the Central Excise Tariff Act, 1985, or were to be classified separately under their respective tariff headings. (ii) Whether the assessable value of the correcting fluid cleared in the common pack was to be the value of the correcting fluid alone or the combined value of correcting fluid and diluter.
Issue (i): Whether correcting fluid and diluter packed together in a common container were classifiable as a set under Rule 3(b) of the Interpretative Rules read with Note 2 to Section VI of the Schedule to the Central Excise Tariff Act, 1985, or were to be classified separately under their respective tariff headings.
Analysis: Note 2 to Section VI applies only where goods are put up in sets of separate constituents intended to be mixed together to obtain a product of Section VI or VII. The correcting fluid was found to be a ready-to-use product which could be used as such, while the diluter was added only when required and did not bring into existence a new product. The two goods were distinct products falling under different tariff headings and, when cleared separately, were separately assessable. They were not mixtures or composite goods, and the common packing was only for convenience of users.
Conclusion: The goods were not classifiable as a set under Rule 3(b) read with Note 2 to Section VI, and were required to be classified separately under their respective headings.
Issue (ii): Whether the assessable value of the correcting fluid cleared in the common pack was to be the value of the correcting fluid alone or the combined value of correcting fluid and diluter.
Analysis: Once the goods were held to be separately classifiable and not a set, the assessable value had to follow the value of the product actually manufactured and cleared. Section 4 governed valuation on the basis of the price of the manufactured goods at the time of removal, and the price of the correcting fluid alone was the relevant value for assessment. The value of the diluter could not be added merely because it was packed in the same container.
Conclusion: The assessable value was to be the value of the correcting fluid alone and not the combined value of correcting fluid and diluter.
Final Conclusion: The demand based on combined classification and combined valuation could not stand, and the appeal succeeded with the impugned order set aside.
Ratio Decidendi: Goods packed together are not a taxable set unless they are intended to be mixed together to obtain a new product; where the constituents remain distinct and separately classifiable, valuation must be based on the individual product cleared.
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