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2012 (2) TMI 12

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..... goods are undeniably products of chemical industry. Consequently, their classification will have to be under the residuary entry of chapter 38 of the tariff i.e. Heading 3824 90 90 – Decided in favor of assessee. - AAR/ Cus / 01 /2012 - - - Dated:- 27-1-2012 - Mr. Justice P.K.Balasubramanyan, Mr. Y.G.Parande, JJ. Present for the applicant : Sh. Ravikumar Yanamandra, CA Present for the Commissioner : Sh. S.N.Singh, Commissioner, (AR) Sh. K.K. Jaiswal, Addl. Commissioner (AR) Ruling (By Y.G. Parande) This is an application filed by M/s Arteco Coolants India Pvt. Ltd., Suite No. 41, Vatika Business Centre, Level 5, Tech Park 1, Airport Road, Yerwada, Pune (the applicant) under S. 28H of the Customs Act, 1962. 2. The applicant is a wholly owned subsidiary of M/s Arteco NV, Belgium and proposes to undertake the manufacture of antifreeze coolants in India. For this purpose, they propose to import super concentrate, a constituent of the antifreeze coolants to be manufactured by them. Ruling has been sought on the classification of the super concentrate to be imported by them. 3. It has been stated in the application that Arteco NV, Belgium develops and manuf .....

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..... licant also furnished the product data sheets detailing the technical description of the super concentrates. Applicant further states that the super concentrate adds corrosion protection properties to the engine coolant and in order to achieve the intended result of antifreeze preparation, the super concentrate has to be blended with monoethylene glycol demineralized water that are locally procured. The blending results in increase in the concentration of MEG and dilution in the amount of super concentrate in the final product i.e. anti-freeze coolant. 7. As regards the classification the applicant feels that the super concentrate will fall classification under heading 3824 90 90 for the following reasons: 1. The super concentrate is a mixture of organic or inorganic chemical additives, the composition of which is not chemically defined. 2. It is not a product which is either occurring in nature or processed by the application of physical processes but is produced by a process of chemical transformation, resulting in a chemical compound used as corrosion inhibitor in the final product i.e. antifreeze coolant. The goods are not separately defined elements or chemical com .....

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..... trate does not have the essential characteristics of antifreeze coolant. According to rule 2(b), the classification of goods which contain more than one material or substance is to be done in accordance with rule 3. Hence, in accordance with rule 2, the goods in question cannot be classified under heading 3820. As regards rule 3, rule 3(a) provides that the heading which provides more specific description is to be preferred to the one providing a more general description. Even though anti freezing preparations is a more specific description, the subject goods cannot be used as anti freezing preparation by themselves and therefore cannot be classified under heading 38.20 by resorting to this rule. Rule 3 (b) stipulates that composite goods are to be classified as it they consisted of the component which gives them their essential character. In this case no single constituent chemical can be said to give the super concentrate its essential character. Hence, resort will have to be had to rule 3(c) according to which the goods are to be classified under the heading which occurs last in the numerical order. 10. Consequently the appropriate classification according to the applicants .....

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..... ycol in proper ratios and that they by themselves did not meet the critical requirements of engine coolant. 10. The case was heard for arguments on the admissibility on August, 26th 2011. On behalf the department, objections were raised on admissibility on the ground that the description of the product given in the application was too generic to enable a ruling on the correct classification. It was argued that the actual composition of the goods would be the determining factor for classification and, in its absence the applicant could not seek an advance ruling. Noting that the question as to whether the facts are adequate to render satisfactory ruling would necessarily have to be gone into when considering the application for the purpose of ruling, the Authority admitted the application reserving for the department the right to raise its contention at the final hearing. 11. The case was next heard on September 30th, 2011 when the applicant reiterated his submissions and furnished additional material including detailed chemical composition of the goods proposed to be imported, including the chemical names and exact proportions by weight of the different constituents in the supe .....

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..... not qualify for description as an anti freeze preparation of heading 3820, nor could it be said to be possessing the essential characteristics of antifreeze preparations warranting classification under that heading by application of rule 3(b) of the General Rules for Interpretation. 12. The applicant reiterated the request not to disclose the exact composition of the product in the Authority s ruling, since it was proprietary information and disclosure could injure their interest. 13. The Authorized Representative arguing for the department on the other hand contested the submissions of the applicant. He argued that the goods would be appropriately covered by heading 3820 00 00 for the following reasons: 1. Two out of three products under consideration namely, CSC-GEN and CSC-QFB have MEG/Glycerol as their principal constituent. He submitted technical literature relating to Ethylene Glycol and Glycerol downloaded from the internet. That MEG and Glycerol are themselves antifreeze agents could not be disputed by the applicant and this is borne out by the technical literature on record. 2. He emphasized that heading 3820 00 00 referred to antifreeze preparations (emphasi .....

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..... rd that in the absence of relevant details, this statement could not be relied upon. 8. As regards the third product namely, CIP-FG, according to the Authorized Representative, this too could not be covered by heading 38.24 as the coverage of HSN notes relating heading 38.24 did not seem to be even remotely connected with the said product. In response to the queries from the bench, he submitted that the product did not contain any ethylene glycol and did not seem to have any antifreeze properties and therefore its classification would have to be decided on merits. 14. We have considered the submissions. 15. The principal submission of the applicant is that the super concentrates cannot be used directly as antifreeze coolants and hence cannot be classified under heading 38.20. It is also submitted that the minimum concentration of MEG in the antifreeze coolant has to be 90% as mentioned in the technical opinion of the department s chemical examiner Grade I. They are using the imported goods for manufacture of antifreeze coolants by adding locally procured MEG and demineralized water in the required proportions and it is this final product that will be classified under head .....

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..... account of its non-toxicity. Technical literature also shows that the concentration of MEG (and glycerol) in the final antifreeze coolant depends upon the requirements of particular engines or applications. 18. The following facts are undisputed: 1. In two of the products under consideration, MEG/Glycerol is a major constituent, along with other additives such as corrosion inhibitors. 2. MEG/Glycerol acts as a heat transfer agent and on account of its low freezing point provides antifreeze properties to the coolant. 3. The other ingredients provide corrosion resistance, which is an equally important feature of formulated antifreeze coolants. 4. The imported product cannot itself be used as anti-freeze coolant since the concentration of the anticorrosion agents or corrosion inhibitors is too high and requires to be adjusted to suitable levels for use as antifreeze coolant. Further, addition of MEG is also necessary to reach the desired concentration. 19. As far as the Rules for Interpretation are concerned, the AR has argued that the case is covered by rule 2(a) as the imported goods, namely CSC-GEN and CSC-QFB have the essential character of anti-freeze coolan .....

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..... reads ANTI-FREEZING PREPARATIONS AND PREPARED DE-ICING FLUIDS . The case turns upon the meaning of the word preparations . The word preparations has not been defined either in the tariff under this heading or in the relevant HSN notes. We have therefore to resort to the dictionary meaning of this word. Chambers 21st Century Dictionary defines preparation to mean, 1 the process of preparing or being prepared. 2 something done by way of preparing or getting ready ..4 a medicine, cosmetic or other such prepared substance. Miriam Webster Dictionary defines preparation to mean ..4 Something that is prepared; specifically : a medicinal substance that is made ready for use. Concise Oxford English Dictionary defines preparation to mean 1 the action or process of preparing or being prepared, 2 a specially made up substance, esp. a medicine or food. Webster s Third New International Dictionary defines preparation to mean 1 the action or process of making something ready for use or service 5 something that is prepared: something that is made, equipped or compounded for a specific purpose. 24. From the above it would appear that the word preparations refers to something that is m .....

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