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CASE NO.: Appeal (civil)  3354 of 2001

PETITIONER: M/s Quinn India Ltd.

RESPONDENT: Commissioner of Central Excise,Hyderabad

DATE OF JUDGMENT: 11/05/2006

BENCH: Ashok Bhan & Lokeshwar Singh Panta

JUDGMENT: J U D G M E N T

Lokeshwar Singh Panta, J.

       M/s. Quinn India Limited \026 the appellant-assessee has  filed the present Statutory appeal under Section 35L of the  Central Excise Act, 1944 (for short "the Act") against the Final  Order No. 1860/2000 dated 22.12.2000 recorded by the  Customs, Excise, Gold (Control) Appellate Tribunal, South  Zone Bench, Chennai (hereinafter referred to as "the Tribunal")  in Civil Appeal Nos. E/1299/94-C and E/CO/366/94-C.  By  the impugned order, the Tribunal has allowed the appeal filed  by the Commissioner of Central Excise, Hyderabad  (hereinafter referred to as "the Revenue") and set aside the  order  - Appeal No. 2/94(H)(D) CE dated 28.2.1994 of the  Collector of Central Excise (Appeals).         The assessee was engaged in the manufacture of  Penetrator -4893 falling under tariff item No. 68 of the old  tariff since 1980 to 1986.  The assessee was paying the excise  duty on the product till the new tariff was introduced.  After  the new tariff, the product was being cleared under sub- heading No. 3801.19 as finishing agents, Dye Carriers to  accelerate the dying or fixing of dyestuff and other products  and preparations of kind used in textile, paper, leather or like  newspapers not elsewhere specified or included.  On 6.5.1986,  the assessee filed a new classification list under the Chapter \026  sub-heading No. 3402.90 and claimed that the earlier  classification was under a wrong impression.  The  classification list dated 6.5.1986 was approved by the  Assistant Collector on the basis of the note given by the  Chemical Examiner in his Report dated 6.10.1981 which came  to the knowledge of the assessee in the year 1986.  Therefore,  the assessee changed the classification to the appropriate  tariff item.           A Show Cause Notice (SCN) dated 4.6.1991 was issued  by the Revenue directing the assessee to pay a sum of   Rs.  1,24,094.45p. as central excise duty for the period May, 1986  to September, 1990 invoking larger period under Section 11A  of the Act.  During pendency of the proceedings, the Revenue  drew another sample of the product of the assessee and sent it  to the Central Revenue Control Laboratory (CRCL) at Delhi to  the Chief Chemist for his opinion.  The Chief Chemist vide his  Report dated 2.4.1992 opined that the samples had surface  active properties.  The assessee filed its reply to the show  cause notice, inter alia, contending   that prior to 28.2.1986  they were classifying their product Penetrator 4893 under  tariff item No. 68 and with the introduction of new tariff it was

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classified under heading 3801.19.  On 5.5.1986, the assessee  filed a fresh classification list based on the Report of the  Chemical Analyst classifying the product under item No.  3402.90.  They explained the process of manufacture of the  product clarifying that the product is a wetting agent.   Further, it was contended that the product was only an  auxiliary aid for improving the penetration process of dye  solvent.  The  Adjudicating Authority vide order dated  4.6.1991 relying upon the opinion of the Chemical Examiner’s  Test Report came to the conclusion that the classification of  Penetrator manufactured by the assessee  would fall under  heading 3402.90.  The show cause notice was, accordingly,  discharged and the proceedings initiated in OR No. 74/91  Adjn. were dropped.         Being aggrieved by the order of the Adjudicating  Authority, the respondent-Revenue filed an appeal before the  Collector (Appeals), who vide his order dated 28.2.1994  rejected the said appeal relying upon the documentary  evidence produced by the assessee in its defence.  The  Revenue then filed an appeal before the Tribunal challenging  the correctness and validity of the order of the Collector  (Appeals).  The Tribunal, however, allowed the appeal of the  Revenue and set aside the original order in appeal as also the  Order-in-Original holding that the goods manufactured by the  assessee were not commercially and popularly known as  service active agents and they were different products,  commercially having different names, character and use than  the service active agents from which the goods were produced.   It was observed that the service active agents were one of its  raw materials and the finished penetrator could not be  considered for excise purpose as service active agents.         In the present appeal, it is contended by Mr. Tushar Rao,  the learned counsel for the assessee that the Tribunal has  ignored the Reports of the Chemical Examiner dated  6.10.1981 and that of the Chief Chemist, CRCL dated  2.4.1992  without assigning any cogent reason in the  absence  of any rebuttal evidence overriding the said Reports.  He next  contended that the Tribunal has not appreciated the well- settled law that the burden is laid upon the Revenue to prove  by convincing evidence that the product falls under a  particular classification.  The Tribunal has also ignored  Chapter Note 3 to the Chapter Heading 34 where under the  products of the assessee would fall and wrongly relied upon  the dictionary meaning of the product which had no relevance  to the goods of the assessee.  He also contended that the  Tribunal has ignored the fact that the assessee had also filed  the classification list of the other like industries which were  considered by the Collector in his Original Order as also by the  Collector (Appeals).         On the other hand, the learned senior counsel for the  Revenue sought to support the order of the Tribunal to  contend that the classification of excisable goods under  different excise items involved a question of highly technical  nature requiring scrutiny of the chemical characteristics of the  goods, therefore, the order of the Tribunal cannot be lightly  interfered with unless the findings are perverse or otherwise  erroneous in law or based on no evidence.  In support of this  submission, reliance is placed on the decision of this Court in  Reliance Silicon (I) Pvt. Ltd. v.  Collector, Central Excise, Chennai  [(1977) 1 SCC 215].           We have gone through the ratio of the said decision.  In  our opinion, this judgment can be of little assistance to the  Revenue.  As noticed in the earlier part of the judgment, the  assessee has classified the goods in question, under tariff item  No. 68 of the old tariff from 1980 to 1986 attracting 15 per

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cent ad valorem duty being regularly paid by it.  With the  introduction of new tariff in 1986, the assessee started  clearing Penetrator 4893 under heading 3801.19, as finishing  agents, Dye Carriers to accelerate the dying or fixing of dye  stuff and other products and preparation of a kind used in  textile, paper, leather or like industries not elsewhere specified  or included.  The assessee on 5.5.1986 sent an intimation to  the Revenue regarding the new classification list filed by it  under the heading 3402.90 attracting nil rate of duty on the  basis of the Exemption Notification No. 101/66 dated 17.6.66  w.e.f. 1980 and amended by the Notification No. 78/76-CE  dated 10.2.1986.  The classification lists dated 6.5.1986 and  10.4.1987 submitted by the assessee were supported by the  Chemical Examiner’s Report dated 6.10.1981 opining that the  goods possessed surface active properties under Chapter  Heading No. 3402.90 attracting nil rate of duty on the basis of  the above-said notifications.  The classification lists were  approved by the Assistant Collector with effect from  28.2.1986. The Assistant Collector, Hyderabad \026 VIII Division  drew the sample of Penetrator 4893 manufactured by the  assessee and sent the sample to the Chief Examiner, CRCL,  New Delhi for his opinion.  In relation to the classification of  the goods, the Collector vide Order in Original No. 191/91  dated 26.12.1991, on the basis of the Report of the Chemical  Examiner and Chief Chemist and other material on record  came to the conclusion that the goods have rightly been  classified under tariff item 3402.90 and declined to invoke the  larger period under Section 11A stating that there has been no  suppression of material facts by the assessee in filing the  classification lists.  On careful consideration of the Order-in- Original of the Collector as well as the Order-in-Appeal  recorded by the Collector (Appeals),  it is clear that the Chief  Chemist,  CRCL vide his letter dated 2.4.1992 had given clear  and positive opinion that the Penetrator 4893 manufactured  by the assessee and forwarded to the Laboratory by Assistant  Collector, Hyderabad, vide letter dated 20.7.1991 was  "composed of organic solvent, non-volatile residue having  surface active properties and water".  From the said opinion of  the Chief Chemist, it cannot be disputed that the goods  manufactured by the assessee possessing surface-active  properties are classifiable under tariff item No. 3402.90.  The  Collector (Appeals) in his order observed that no evidence has  been led by the Revenue to show that Penetrator 4893  manufactured by the assessee acts as a finishing agent to be  classified under Chapter heading 38.09 and the contention of  the Revenue that the product is not wetting agent was not  found supported  by any evidence.  The Tribunal has  completely ignored the Report of the Chemical Examiner dated  6.10.1981 and the Final Opinion of the Chief Chemist dated  2.4.1992 coupled with the  classification issued by the  Department regarding use of wetting agents in the textile  industries falling under tariff item No. 3402.02.  Test Report of  the Chemical Examiner and Chief Chemist of the Revenue  unless demonstrated to be erroneous, cannot be lightly  brushed aside.  The Revenue has not made any attempt to  discredit or to rebut the genuineness and correctness of the  Reports of the Government, Chemical Examiner and Chief  Chemist.  Thus, the Reports are to be accepted along with  other documentary evidence in the form of classification  issued by the Department regarding use of wetting agents in  the textile industries to hold that the product Penetrator 4893  possessed surface active properties and, therefore, is covered  by Exemption Notification No. 101/66 dated 17.6.66 as  amended from time to time.         The assessee has adduced cogent and convincing

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evidence to show that the expression occurring in tariff item  No. 3402.90 of the Act should be understood in the sense in  which the persons who deal in such goods understand it  normally.  The Revenue has failed to adduce contrary evidence  in support of its claim that the classification of the penetrator  manufactured by the assessee is not covered under tariff item  No. 3402.90.  It is also settled law that the onus or burden to  show that the product falls within a particular tariff item is  always on the Revenue. [See: Commissioner of Central Excise,  Calcutta v. Sharma Chemical Works [(2003) 5 SCC 60] and  Commissioner of Central Excise, Nagpur v. Vicco Laboratories  [(2005) 4 SCC 17].           In our view, the impugned judgment of the Tribunal is  clearly erroneous and unsustainable.  In the circumstances,  we find merit in the contentions urged on behalf of the  appellant-assessee.  We are also of the view that the Tribunal  has erred in interfering with the Order-in-Appeal No.  2/94(H)(D) CE of the Collector (Appeals) dated 28.2.1994 and  Order-in-Original No. 191/91 of the Assistant Collector dated  26.12.1991         In the result, we allow this appeal and set aside the  impugned judgment of the Tribunal.   Parties shall bear their  own costs.