By TIOL News Service

MUMBAI, DEC 18, 2017: THIS is a Revenue appeal.

The respondents are engaged in the manufacture of (i) Fibre Glass Pressure Vessels,CSHNo.7014.00 @ 18% adv and (ii) Components for industrial water treatment plants,CSHNo.8421.10 @ 13% adv.

The department contended that the product at (ii) above is excluded from classification under Ch. 84 as per Chapter Note 1(c) and is correctly classifiable under CSHNo.7014.00 @ 18% advalorem as ‘Articles of Glass fibres coated/covered with plastics'.

SCNs were issued and differential duty demands of Rs.6,48,292/- and Rs.40,33,775/- respectively were confirmed.

The Commissioner(A) set aside the orders and in Revenue appeal the CESTAT remanded the matter for denovo adjudication with direction that the issue needs to be determined after ascertaining the predominant nature of fibre plastic or other items.

Again, the original authority confirmed the demand but the Commissioner(A) like earlier set aside the order and, therefore, Revenue is in appeal before the CESTAT.

The AR while reiterating the stand taken by the department submitted that the predominant material used is the glass fibre and, therefore, the FRP glass fibre vessel should be classified under heading 7014 and not under Ch. 84.

The respondent assessee submitted that the classification of the goods should be primarily decided in accordance with essential characteristic of product. Inasmuch as the essential characteristic of glass fibre pressure vessel is that it is a component of water treatment plant and hence correctly classifiable under Chapter 8421 and not under Chapter 70.14.

The Bench inter alia observed –

+ we find that the respondent is admittedly manufacturing glass fibre vessel wherein the ingredients of glass fibre is predominant.

+ according to the predominate principle the products should be classified under chapter 70.14.

Distinguishing the reliance placed by the Commissioner(A) on the decision in Kemrock Industries, the CESTAT viewed -

"In the present case, the rival entry is 70.14 which is based on the predominant of the material used and 84.21 which is on the basis of end use. Accordingly, the case of Kemrock Industries (supra) is not directly applicable in the fact of the present case. We also observed that there is no dispute that the product in question in the present case is FRP glass fibre vessel wherein the predominant material is glass fibre. Therefore, it will be preferably classifiable under Chapter 70.14."

Relying on the Note 2 (a) to Section XVI of CETA and Chapter Note 1 (c) of Chapter 84, the Bench further observed -

"7. From the above Chapter Note also it is clear that since the product in question is classifiable under Chapter 70, even though it is a part used with the goods of Chapter 84. It will not cover under Chapter 84, if it is made out of glass. This chapter note 1 (c) absolutely clear that the product FRP glass fibre vessel correctly classifiable under Chapter 70.14 and will not cover under Chapter 84."

Noting that identical issue had been considered by the Tribunal in the case of Thermodors Pvt. Ltd. - 2016-TIOL-565-CESTAT-MUM, the Bench concluded thus -

"8. In view of the above decision, it is clear that the goods in question has to be classified according to the predominance of the material contained in the final product. In the fact of the present case, the FRP glass fibre vessel contained predominantly glass fibre. Therefore, it is correctly classifiable under Chapter Heading 70.14 and not under 84.21. All the judgements relied upon by the Ld. Counsel being on different facts from the fact of the present case, not applicable, hence, the same are distinguished.

9. It is also observed that the Tribunal while remanding the matter in the first round given a categorical finding that the classification has to be decided on the basis of predominance of the material used in the product. Therefore, it was not open for the Commissioner to go into any other aspects except the principles of predominance of material contained in the finished goods. For this reason also the impugned order is not sustainable."

The glass fibre vessels were held to be correctly classifiable under 70.14 and accordingly the impugned order was set aside and the Revenue's appeal was allowed.

(See 2017-TIOL-4437-CESTAT-MUM)