P.K. Kapoor, Member (T)

1. This is an appeal against the order passed by the Collector of Customs (Appeals), Calcutta. Briefly stated the facts of the case are that the appellants imported 12 metric tonnes of LDPE powder valued at Rs. 2,54,943. The goods were allowed to be warehoused and 75% of the imported material was permitted to be ex-bonded after assessing the goods provisionally pending test. Out of 12 samples sent for test by the Central Revenues (Control) Laboratory, New Delhi, 10 samples were coloured irregular chips composed of synthetic resin, wax, organic colouring matter and inorganic filler. Out of the remaining 2 samples, one was found to be composed of synthetic resin, wax, inorganic pigment (Ti-02) and inorganic filler and was described as a preparation based on Titanium Dioxide (pigment), and the second one was found to be a preparation based on other colouring matter. On 20-9-1991, the Assistant Collector issued a show cause notice to the appellants alleging that the imported goods were preparations based on organic/inorganic/other colouring matter. The show cause notice referred to Note 3 to Chapter 32 and alleged that the crayons for which the goods had been imported were colouring preparations. The appellants were asked to show cause as to why the goods already ex-bonded and also the goods lying in the warehouse should not be assessed under Heading 3204.17 as a preparation based on colouring matter (pigment) and under Tariff Heading 3206.10 as a preparation based on Titanium Dioxide and why the appellants should not pay duty amounting to Rs. 4,86,371.85 instead of Rs. 2,08,882/- already paid.

The appellants claimed that the goods were correctly classifiable under Heading 39.01. They contended that the goods were not based on colouring matter and they were not used as ingredients in the manufacture of colouring preparations. They also submitted that crayons could not be regarded as colouring preparations. They pointed out that the Harmonised System permitted an addition of colouring matter to moulding powders of plastics. However, by his order dated 13-1-1992 the Assistant Collector held that the goods based on organic colouring matter were classifiable under Heading 3204.17 and the goods based on Titanium Dioxide were classifiable under Heading 3206.10. He demanded duty amounting to Rs. 2,77,489.85 and also ordered the assessment of the goods lying in the warehouse on the same basis. Against the order passed by the Assistant Collector, the appellants filed an appeal before the Collector (Appeals). However, by the impugned order dated 15-5-1992 the Collector (Appeals) confirmed the order passed by the Assistant Collector.

2. On behalf of the appellants, Shri L.P. Asthana, the learned Advocate, appeared before us. He stated that the Collector (Appeals) had erred in holding that the imported goods were preparations based on synthetic colouring matter on the basis of the certificate of the Chief Chemist that the preparation was based on colouring matter and the principal character of the material was derived from the colouring property. He contended that Note 3 to Chapter 32 on which the Collector (Appeals) had relied was not relevant and the goods were not classifiable under any heading of Chapter 32. He submitted that the Collector (Appeals) had failed to appreciate that the imported material was meant to be used for the purpose of moulding and as a colouring preparation. He contended that the goods could not be deemed a colouring preparation since they do not find use in colouring plastics or rubber. He stated that the predominant constituent being plastic or polyethylene and other ingredients having been only physically mixed and not as a result of any chemical reaction, the goods could not be deemed as a preparation. He reiterated his stand that Note 3 to Chapter 32 was not applicable since the final product, namely, crayon was an article and not a colouring preparation. On these grounds he submitted t