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1998 Supreme(SC) 35
SUPREME COURT OF INDIA
S.C.Agrawal : S.R.Babu
Collector Of Customs, Bombay
Versus
S.H.Kelker And Company
Case No. : 276 of 1991
Date of Decision : 1/13/98
A chemical dissolved in a solvent is excluded from Chapter 29 of the Customs Tariff if the solvent is necessary for the product's stability and suitability for a specific use, rather than being used solely for safety or transport.
Headnote:(A) Customs Tariff Act, 1975 - Chapter 29, Note 1(e) and Chapter 33, Heading 33.02 - Classification of imported chemical dissolved in solvent - Whether a product dissolved in a non-odoriferous solvent for stability and specific use in perfumery falls under organic chemicals or mixtures of odoriferous substances - If the solvent is necessary to make the product suitable for use and the product is intended for a specific use rather than general use, it cannot be classified under Chapter 29. (Paras 10, 11)
(B) Heading 33.02 - Scope - Envisages mixtures of odoriferous substances and mixtures with a basis of one or more odoriferous substances used as raw materials in industry - A chemical consisting of various isomers (odoriferous) dissolved in a non-odoriferous solvent, used as a perfume in industry, falls under this heading. (Para 10)
Facts of the case:
A consignment of a chemical was imported, which was a solution of an aromatic chemical in a non-odoriferous solvent. The pure form of the chemical was physically unstable, and dissolution in the solvent was necessary for stability and usability. The product was used as a perfume in the manufacture of soaps, cosmetics, and detergents. A dispute arose whether the product should be classified as an organic chemical under Chapter 29 or as a mixture of odoriferous substances under Heading 33.02 of the Tariff.
Findings of Court:
The product is a mixture with a basis of an odoriferous substance used as a raw material in industry. The solvent is not merely for safety or transport but is essential for making the product suitable for use and retaining that suitability. Since the product is intended for specific use in perfumery and not for any other purpose, it is excluded from Chapter 29 by Note 1(e).
Issues: Whether the imported product is classifiable as an organic chemical under Chapter 29 or as a mixture of odoriferous substances under Heading 33.02 of the Tariff.
Ratio Decidendi: A product dissolved in a solvent is classifiable under Chapter 29 only if the solvent is used solely for safety or transport and does not render the product particularly suitable for specific use. Where the solvent is necessary for the product's stability and suitability for a specific industrial use, it falls under Heading 33.02.
Result: Appeals allowed.
S.C.AGRAWAL, J.
(1) THESE appeals by the Revenue are directed against the judgments of the Customs, Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as "the Tribunal"). They raise a common question as to whether "Abbalide" imported by the respondents is classifiable as "an organic chemical" under Chapter 29 or a mixture of odoriferous substances falling under Heading 33.02 of Chapter 33 of the Tariff in the Schedule to the Customs Tariff Act, 1975 (hereinafter referred to as "the Tariff).
(2) THE facts, briefly stated, are as under: M/s S.H. Kelker & Co. Ltd., the respondent in CA No. 276 of 1991, had imported a consignment of "Abbalide" in the year 1986. It was assessed to customs duty after being classified as falling under Chapter 29 of the Tariff. After the samples were got tested by the Customs Authorities and after receiving the test report, it was found that the item was a mixture with a basis of odoriferous substance and a show-cause notice dated 2-3-1987 was issued requiring the respondent to show cause why it should not be treated as falling under Heading 33.02 of the Tariff. After considering the reply submitted by the respondent to the said show-cause notice, the Deputy Collector of Customs passed the order dated 6-3-1983 whereby it was held that the proper classification of the product would be under Heading 33.02 of the Tariff. The appeal filed by the respondent against the said order of the Deputy Collector was dismissed by the Collector of Customs (Appeals) by order dated 7-7-1988. The said orders were set aside by the Tribunal, on appeal, on the view that the goods were classifiable under Chapter 29. The Tribunal has remanded the matter to the Assistant Collector for examining the question of classification of the product under the heading and sub-heading of Chapter 29 after giving both sides due opportunity of representation.
(3) IN Civil Appeals Nos. 10082-83 of 1995, the respondent, Hindustan Lever Ltd., had imported a consignment of "Abbalide" which was assessed for duty under Heading 33.02 of the Tariff. Subsequently, a refund claim was made by the said respondent on the basis that the said consignment was classifiable under Chapter 29. The said claim of the respondent for refund was rejected by the Assistant Collector of Customs. The order of the Assistant Collector was affirmed in appeal by the Collector of Customs (Appeals). The Tribunal, following its judgment in the case of S.H. Kelker & Co. Ltd. (which is under challenge in CA No. 276 of 1991), set aside the orders passed by the Assistant Collector and the Collector (Appeals) and remanded the matter to the Assistant Collector for examining the question of classification of the product under the heading and sub-heading of Chapter 29 of the Tariff after giving both the sides due opportunity of representation.
(4) CHAPTER 29 of the Tariff relates to "organic chemicals" and is divided into various heads. The learned counsel for the respondents has submitted that the articles in question fall under the group "Aromatic polycarboxylic acids, their anhydrides, halides, peroxides, peroxyacids and their derivatives" under Heading 29.17. In the Notes at the beginning of Chapter 29, it is stated as follows:
"1. Except where the context otherwise requires, the headings of this chapter apply only to:
(A) Separate chemically defined organic compounds, whether or not containing impurities;
(B) Mixtures of two or more isomers of the same organic compound (whether or not containing impurities), except mixtures or acyclic hydrocarbon isomers (other than stereoisomers), whether or not saturated (Chapter 27);
(C) The products of Headings 29.36 to 29.39 or the sugar ethers and sugar esters and their salts, of Heading 29.40, or the products of Heading 29.41, whether or not chemically defined;
(D) The products mentioned in (a), (b) or (c) above dissolved in water;
(E) The products mentioned i
