Imp No.:- 35/2004
Exp No.:- 35/2004

PUBLIC NOTICE NO. 61/2004 Date-13/09/2004

Sub : Assessment and Clearance of ‘Denatured Ethyl Alcohol’ And procedure thereof under Customs Tariff – reg.

Attention of members of Trade and Industry and CHAs is invited to the difficulties faced by them of late in proper assessment of imported ‘Denatured Ethyl Alcohol’ due to lack of uniform and objective norms regarding the nature and quantity of the ‘Denaturants’ present in Ethyl Alcohol so as to qualify for assessment as ‘Denatured Ethyl Alcohol’. ‘Denatured Ethyl Alcohol’ is classified in the Customs Tariff under the CTH 2207. The Tariff Item 2207 20 00 describes these goods as ‘Ethyl Alcohol and other Spirits, denatured, of any strength.’ However, neither the Section Notes under Section IV of the Tariff nor the Chapter Notes under Chapter 22 gives any clear definition of the term ‘Denatured’ to specifically denote as to what are ‘denaturants’ and of which quality and of what specifications these should be present to make Ethyl Alcohol / Spirits ‘Denatured’.

2. A reference to the relevant Explanatory Notes to the HSN also does not clarify the issue completely. The relevant Explanatory Notes to CTH 2207 reads as under:

“Ethyl Alcohol and other spirits, denatured, are spirits mixed with substances to render them unfit for drinking but not to prevent their use for industrial purposes. The denaturants used vary indifferent countries according to national legislation. They include wood naphtha, methanol, acetone, pyridine, aromatic hydrocarbons (benzene etc.), colouring matter.” It is obvious that this definition is open-ended, “inclusive” and illustrative in nature.

3. It is also observed that Alcohol and Alcoholic preparations are ‘State Subjects’ in India and different State governments have passes different Regulations to safeguard the interest of Government Revenue or the policy of prohibition followed by them. These Regulations enable the respective State Governments to exercise control over intended uses of Denatured Ethyl Alcohol and to prevent its diversion for use as ‘Undenatured Ethyl Alcohol.’

4. There could be potential classification dispute on account of the high differential rates of duty between ‘Un-denatured’ and ‘Denatured Ethyl Alcohol’, (at present 150% +2%) (Education cess on duty) for Undenatured Ethyl Alcohol and 15%+16% (CVD) + 2% (Education cess on duty ) for Denatured Ethyl Alcohol). Therefore, it is desirable to lay down objective norms indicating the presence, nature and quantity of ‘Denaturants’ in Ethyl Alcohol not only for ensuring proper assessment of ‘Denatured Ethyl Alcohol’ but also to rule out the possibility of mis-declaration of ‘Un-denatured Ethyl Alcohol’ as ‘Denatured’.

5. The Indian Chemical Manufacturer’s Association vide their letter dtd. 5.8.2004 have also made a representation and have recommended for adoption of ISI’s specification for alcohol denaturants under IS: 41171973 as per Amendment No. 2 which prescribes tjat 1.5 gm of Denatonium Benzoate or Denatonium Saccharide (Denaturants) / 100 litres of alcohol is sufficient to denature ethyl alcohol.

6. The Indian Standard Specification for Alcohol Denaturants (IS:4117-1973), as amended, prescribes the essential requirements as well as the method for testing the denaturants in denatured alcohol. The IS:4117-1973, as amended, mentions the minimum quantity of 20 different types of Denaturants (CD1 & CD2 and SD1 to SD18) required for denaturing of ethyl alcohol depending upon the intended use of denatured alcohol (as per Appendix ‘A’) along with the desirable characteristics and method of test for these denaturants (as per Table 1). It intends to introduce a measure of uniformity in the enforcement of various Regulations under Excise Act of different States in regard to procurement and usage of ethyl in industry. (For the full extent and scope of IS 4117-1973, the Indian Standard Specification for Alcohol Denaturants, as amended, published by the Bureau of Indian Standards (Reaffirmed in 1996) may be referred to ).

7. Accordingly, it has been decided that for the purpose of uniformity of assessment and clearance of ‘Denatured Ethyl Alcohol’, the norms set out in the Indian Standard Specification Alcoholic Denaturants (IS 4117-1973) as amended, shall be followed.

8. The following procedure for testing of samples and clearance of goods shall be followed :

a) 3 (three) sets of samples from the import consignment will be drawn by the Boarding Officer and thereafter discharge of the goods for storage in Bonded tanks will be allowed. These samples will be forwarded to DYCC, New Custom House, Mumbai aor any Reputed Laboratory recognized by the State Government, as may be specified by the AC/DC of concerned Appraising Group, for testing the sample of ‘Denatured Ethyl Alcohol’ along with the Test Memo which will contain specific queries with reference to IS :4117-1973 regarding composition, purity, nature and presence of amount/quantity of denaturants in the Ethyl Alcohol vis-à-vis importers declaration. One set of the sample shall be retained by the Dock unit and preserved until finalization of assessment.

b) If the goods, as chemical test and analysis report are found to be in conformity with the norms/specifications laid down under IS 4117. The goods shall be assessed to duty and cleared from Customs.

c) However, if any importer imports ‘Un-Denatured Ethyl Alcohol’ but wants to clear it as ‘Denatured’ or he is not very sure about the nature and quantity of ‘denaturants’ present in the Denatured Ethyl Alcohol’ imported by him, he may submit a written request to Asstt./Dy. Commissioner i/e of the Appraising Group requesting for denaturation with denaturants as per IS 4117-1973, under Customs supervision as per the provisions of Section 24 of the Customs Act, 1962 read with ‘Denaturing of Spirit Rules, 1972’.

d) On a request made by the importer, any consignment declared as ‘Denatured Ethyl Alcohol’ may be released, pending Chemical Test Report, after making a provisional assessment against a suitable Bond and security/surety to the satisfaction of AC/DC Appraising Group. Similarly, on a request made by the Importer the goods after denaturation in terms of ‘Denaturing of Spirit Rules, 1972, may be released pending Chemical Test Report after provisional assessment against a suitable Bond, undertaking to pay the differential duty in case the goods on chemical test are not found to be denatured as per IS:4117-1973 specification even after denaturation. The importer will also undertake not to avail of the option of re-test as provided under Rule 6 of the Denaturing of Spirits Rules, 1972. The provisional assessment shall be finalized on receipt of the chemical Test Report.

9. In case the goods declared as ‘Denatured Ethyl Alcohol’ on import are not found as per declaration or found not to be ‘Denatured’ at all on chemical test as per IS:4117-1973 specification, it will amount to mis-declaration under the provisions of the Customs Act, 1962. The process of adjudication of offences involving confiscation, fine, penalty and demand of duty shall be initiated in such cases. However, the goods, when ordered for release may, on a written request by the importer, be subjected to denaturation as explained in para 8 [c] above.

10. Difficulties, if any, noticed in implementation of this Trade Notice may be brought to notice of undersigned for suitable redressal.

11. After the assessment and clearance from Customs, these goods shall be required to comply with relevant State Regulations under respective Excise Act, as applicable.

Sd/-
(AHMED HUSSAIN)
COMMISSIONER OF CUSTOMS (IMPORT)

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