Commr.Of Central Excise vs M/S Uni Products India Ltd. … on 1 May, 2020


Try out our Premium Member services: Virtual Legal Assistant, Query Alert Service and an ad-free experience. Free for one month and pay only if you like it.

Supreme Court of India

Commr.Of Central Excise vs M/S Uni Products India Ltd. … on 1 May, 2020

Author: Deepak Gupta

Bench: Deepak Gupta, Aniruddha Bose

                                                 REPORTABLE


            IN THE SUPREME COURT OF INDIA
             CIVIL APPELLATE JURISDICTION


           CIVIL APPEAL NOS. 302-303 OF 2009



COMMISSIONER OF CENTRAL EXCISE,
DELHI-III                                      ...APPELLANT

                            VERSUS


M/S. UNI PRODUCTS INDIA LTD.                   ...RESPONDENT




                          JUDGMENT

ANIRUDDHA BOSE, J.

These two appeals against the decision of the Customs

Excise & Service Tax Appellate Tribunal (CESTAT) rendered on

16th July, 2008 require adjudication on the question as to whether

1
“car matting” would come within Chapter 57 of the First

Schedule to the Central Excise Tariff Act, 1985 under the heading

“Carpets and Other Textile Floor Coverings” or they would be

classified under Chapter 87 thereof, which relates to “Vehicles

other than Railway or Tramway Rolling-Stock and Parts and

Accessories Thereof”. The appeals are against a common decision

and we shall also deal with both these appeals together in this

judgment. The respondent-assessee want their goods to be placed

under Chapter heading 5703.90. We shall refer to the specific

entries against this item later in the judgment. The respondent, at

the material point of time were engaged in the business of

manufacture of textile floor coverings and car matting. The

subject-goods have been referred to interchangeably by the

revenue also as car mattings and car carpets. The respondent, at

the material time, were clearing the goods declaring them to be

goods against Heading No.570390.90. Effective rate of excise

duty on goods under that entry was 8% and education cess at the

applicable rate for the subject period. We find this rate of duty,
2
inter-alia, from the order of the Commissioner dealing with the

first and the second show-cause notices. The rate of basic excise

duty would have been 16% apart from education cess if these

goods were classified against goods specified in heading

no.8708.99.00. Altogether three show-cause-notices were issued

against the respondent over clearance of goods under the said

heading. These notices required them to answer as to why they

should not be charged the differential rate of duty and interest. We

would like to point out here that in the show-cause notices, the

respective chapter sub-headings have been referred to as

8708.99.00 and 570390.90 and in the order of the Tribunal also,

the sub-headings have been referred to as such. But the authorities

themselves in certain places described the sub-headings in shorter

numerical forms, as 5703.90 and 8708.00. We find these minor

variations in the paper-book. But this variation of the sub-

headings represented in numerical form is not of any significance

so far as adjudication of these appeals are concerned. The

respondent were also to answer as to why penalty should not be
3
imposed upon them in terms of Section 38A of the Central Excise

Act, 1944 read with Rule 25 of the Rules made thereunder. The

first show-cause notice is dated 9th August, 2005 in regard to

clearance of goods made during the period between 9 th July, 2004

and 31st March, 2005. They had cleared altogether 8,65,777

pieces of those items in different sizes in that period. The second

show-cause notice was issued on 2 nd May, 2006 and related to

clearance of 12,02,482 pieces of the same goods for the period

between 1st April, 2005 and 31st January, 2006. The third show-

cause notice is of 7th March, 2007 and the clearance involved

20,15,412 pieces from 1st February, 2006 to 31st January, 2007.

For the period involved in the third show-cause notice, clearance

was made by the respondent under Chapter sub-heading

no.570500.19, which carried effective rate of duty @8%.

2. By the time the third show-cause notice was issued, the

adjudicating authority of first instance (Commissioner Central

Excise, Delhi III) had passed the order against the respondent on

29th September, 2006, upon considering their responses to the said
4
two show-cause notices. In this judgment, we shall mainly refer

to

this order, while examining the decision of the Tribunal. The

authorities’ stand has been that the subject-items ought to be

classified under sub-heading 8708.99.00. Against chapter

heading 8708, the goods described are “parts and accessories of

motor vehicles of headings 8701 to 8705”. The sub-headings

against tariff item nos.8701 to 8705 refer to five categories of

vehicles. These are (i) tractors (except those falling under 8709),

(ii) motor vehicles for the transport of ten or more persons,

including the driver, (iii) motor cars and other motor vehicles

principally designed for the transport of persons (other than those

of heading 8702) including station wagons and racing cars (iv)

motor vehicles for transport of goods (v) special purpose motor

vehicles, other than those principally designed for the transport of

persons or goods. The description of goods in Chapter 87 of the

5
Central Excise Tariff of India (2004-05) in the eight digit format

list the tariff-items of chapter 8708 have been depicted in the

following manner:-


“Tariff Item             Description of Goods             Uni Rate
                                                          t   of
    (1)                                                       duty
                                  (2)                          (4)
                                                          (3)
8708           - Parts and accessories of the
                 motor vehicles of headings 8701
                 to 8705
8708 10        - Bumpers and parts thereof:               Kg   16%
8708 10 10     - For tractors                             Kg   16%
8708 10 90     - Other                                    Kg   16%
               - Other parts and accessories of           Kg   16%
                 bodies (including cabs):
8708 21 00     - Safety seat belts                        u    16%
8708 29 00     - Other                                    Kg   16%

– Brakes and servo-brakes and parts
thereof:

8708 31 00     - Mounted brake linings                    Kg   16%
8708 39 00     - Other                                    Kg   16%
8708 40 00     - Gear boxes                               Kg   16%
8708 50 00     - Drive-axles      with    differential,   Kg   16%

whether or not provided with other
transmission components
8708 60 00 – Non-driving axles and parts thereof Kg 16%
8708 70 00 – Road wheels and parts and Kg 16%
accessories thereof
8708 80 00 – Suspension shock-absorbers Kg 16%
Other parts and accessories :

8708 91 00     - Radiators                                Kg   16%
8708 92 00     - Silencers and exhaust pipes              Kg   16%

                                                                     6
8708 93 00 - Clutches and parts thereof        Kg             16%
8708 94 00 - Steering wheels, steering columns Kg             16%
             and steering boxes
8708 99 00 - Other                             Kg             16%
                                                              ”




3. As would be evident from the above-referred table, there are

total seventeen items under the said sub-heading of tariff-item

specified as parts and accessories (including those referred to as

“other”) and the item against which the excise authorities want

the car mattings to be treated is in the nature of a residuary item,

referred to in that table as “other”. On the other hand, the relevant

parts of Chapter 57 of Central Excise Tariff of India, 2004-2005

stipulates:-

“Notes:

1. For the purposes of this Chapter, the term
‘carpets and other textile floor coverings’
means floor coverings in which textile
materials serve as the exposed surface of the
article when in use and includes article having
the characteristics of textile floor coverings but
intended for use for other purposes.

7

  Headin   Sub-heading         Descriptio
g No.          |No.            n of goods
  (1)        (2)                   (3)
 57.01       xx                    xx

 57.02                        Carpets       and
                              other      textile
                              floor coverings
                              (other than those
                              of heading No.
                              57.01), knotted,
                              woven, tufted, or
                              flocked, whether
                              or not made up.

                              In or in relation to
                              the manufacture
                              of which any
                              process           is
                              ordinarily carried
                              on with the aid of
                              machines:

           5702.11            Of coconut fibres
                              (coir)
           5702.1
                              Of jute
             2
           5702.1
                         Othe Other
             9
           5702.9             Other
             0

 57.0                         Other    carpets
  3                           and other textile

                                                     8
                                        floor coverings,
                                        whether or not
                                        made up
                        5703.1          Of coconut fibres
                           0            (coir)
                        5703.20         Of jute
                        5703.90         Other”



4. Before the authority of first instance (Commissioner, Central

Excise, Delhi-III, Gurgaon), the respondent explained their

manufacturing process in course of hearing on the first two show-

cause notices. This is recorded in the order of the Commissioner

passed on 29th September, 2006. We reproduce below that part

from the said order:-

“…….Depending upon the variety of
Moulded Car Carpets, the fibre i.e.
polyester/polypropylene is fed in opening
and blending equipment’s, from where it is
transported to carding equipment’s. After
carding, the same is put for Needle
punching. After needle punching, the fabric
is then chemically treated in order to
provide strength to the carpet fabric as per
customer requirement. After chemical
binding, the fabric is laminated as per
customer requirement. The laminated

9
fabric/impregnated fabric is then moulded
as per the requirement and trimmed to be
fixed in the vehicle. After trimming the
Namda felt is fixed on the back of the
carpet as per requirement. Thereafter, the
child parts as well as grippers are fixed
wherever required. The resultant product is
the moulded car carpets which was
classified under sub-heading 5703.90.”
(quoted from the order
of the Commissioner)

5. The respondent’s argument that the Chapter heading 5703.90

covered carpets and other textile floor coverings and they were

manufacturing those items only was rejected by the

Commissioner. This plea, however, was subsequently accepted

by the Tribunal.

6. Reference has been made before us to “Harmonized

Commodity Description and Coding System”, Explanatory

Notes issued by the World Customs Organisation (2002). These

Notes, termed HSN Explanatory Notes have been referred to by

the learned Counsel for both the parties. Strong persuasive value

of these Explanatory Notes has been recognised by this Court in

10
the cases of CCE vs. Wood Craft Products Ltd. [(1995) 3 SCC

454], Collector of Central Excise vs. Bakelite Hylam [1997

(91) E.L.T. 13 (S.C.)], Collector of Customs vs. Business

Forms Ltd. [(2005) 7 SCC 143] and Holostick India Ltd. vs.

Commissioner of Central Excise [(2015) 7 SCC 401]. General

Rules for the Interpretation of the Harmonized System lay down

the Principles of Interpretation for classification of Goods in the

Nomenclature. Rule 3(a) thereof provides:-

“Rule 3(a) The heading which provides the
most specific description shall be preferred to
headings providing a more general
description. However, when two or more
headings each refer to part only of the
materials or substances contained in mixed or
composite goods or to part only of the items
in a set put up for retail sale, those headings
are to be regarded as equally specific in
relation to those goods, even if one of them
gives a more complete or precise description
of the goods.”

Clause 3 (a) of the General Rules For the Interpretation of First

Schedule to the Central Tariff Act, 1985 in cases where

possibilities arise of a single item being classified under more than

11
one head corresponds to the said Rule 3(a) of the Explanatory

Notes.

The Explanatory Note IV (b) to this Rule i.e. 3 (a), of the

Rules for Interpretation of the HSN Explanatory Notes

specifies:-

“(iv) It is not practicable to lay down hard
and fast rules by which to determine whether
one heading more specifically describes the
goods than another, but in general it may be
said that:-

(a) xx xx xx

(b) If the goods answer to a
description which more clearly
identifies them, that
description is more specific
than one where identification
is less complete.

Examples of the latter category of
goods are:

(1) Tufted textile carpets,
identifiable for use in motor
cars, which are to be classified
not as accessories of motor cars
in heading 87.08 but in heading
57.03, where they are more
specifically described as
carpets.

12

(2) ………”

7. Section Note 2 of Section XVII of Central Excise Tariff

excludes eleven sets of items from being treated as parts and

accessories. Section Note 3 further provides:-

“3. Refences in Chapters 86 to 88 to
“parts” or “accessories” do not apply to
parts or accessories which are not suitable
for use solely or principally with the
articles of those Chapters. A part or
accessory which answers to a description in
two or more of the headings of those
Chapters is to be classified under that
heading which corresponds to the principal
use of that part or accessory.”

8. There is reference to “PARTS AND ACCESSORIES” under

the main heading “GENERAL”, in Section XVII of the HSN

Explanatory Notes, 2002. Under the sub-heading “(iii) PARTS

AND ACESSORIES”, a three-layer test has been postulated. It is

on satisfying all of these conditions a particular item would come

under that chapter head. The sub-head III reads:-

“(III) PARTS AND ACCESSORIES
13
It should be noted that Chapter 89 makes
no provision for parts (other than hulls) or
accessories of ships, boats or floating
structures. Such parts and accessories,
even if identifiable as being for ships, etc.,
are therefore classified in other Chapters in
their respective headings. The other
Chapters of this Section each provide for
the classification of parts and accessories
of the vehicles, aircraft or equipment
concerned.

It should, however, be noted that these
headings apply only to those parts or
accessories which comply with all three of
the following conditions:

(a) They must not be excluded by the
terms of Note 2 to this Section (see
paragraph (A) below).

and (b) They must be suitable for use
solely or principally with the articles of
Chapters 86 to 88 (see paragraph (B)
below).

and (c) They must not be more
specifically included elsewhere in the
Nomenclature (see paragraph (C)
below).”

9. Paragraph (B) and relevant extract from Paragraph (C) to the

same document stipulates: –

14
“(B) Criterion of sole or principle use.

(1) Parts and accessories classifiable
both in Section XVII and in
another Section.

Under Section Note 3, parts and
accessories which are not suitable
for use solely or principally with
the articles of Chapters 86 to 88
are excluded from those
Chapters.

The effect of Note 3 is therefore
that when a part or accessory can
fall in one or more other Sections
as well as in Section XVII, its
final classification is determined
but its principal use. Thus the
steering gear, braking systems,
road wheels, mudguards, etc.,
used on many of the mobile
machines falling in Chapter 84,
are virtually identical with those
used on the lorries of Chapter 87,
and since their principal use is
with lorries, such parts and
accessories are classified in this
Section.

(2) Parts and accessories classifiable
in two or more headings of the
Section.

Certain parts and accessories
are suitable for use on more than

15
one type of vehicle (motor cars,
aircraft, motorcycles, etc.);

examples of such goods include
brakes, steering systems, wheels,
axles, etc. Such parts and
accessories are to be classified in
the heading relating to the parts
and accessories of the vehicles
with which they are principally
used.

(C) Parts and accessories covered more
specifically elsewhere in the
Nomenclature –
Parts and accessories, even if
identifiable as for the articles of this
Section, are excluded if they are
covered more specifically by another
heading elsewhere in the
Nomenclature, e.g: –

xx xx
xx xx
xx xx

(7) Textile carpets (Chapter 57)

xx xx
xx xx”

16
Moreover, the Explanatory Notes dealing with parts and

accessories under chapter-head 87.08 includes floor mats (other

than of textile materials or unhardened vulcanised rubber).

10. The Commissioner found that car mattings satisfied all the

tests enumerated in the said explanatory notes of HSN to be

treated as parts and accessories classifiable under Chapter 87.08.

11. One of the reasons for such finding was that the car mattings

were suitable for use solely or principally with the vehicle and

that were not excluded by provisions of Notes to Section XVII.

Then he applied the “market test”, and concluded that if anybody

asked for car matting in the market, the consumer would get a

product which could only be used in a car, with fixed length and

width. In his order, the Commissioner found that what was

excluded was textile carpets of Chapter 57 and not car mattings.

12. The Commissioner, thus, did not accept the assessee’s stand

and observed:-

17
“(A) what is excluded are the Textile carpets
of Chapter 57 and not car mattings. One can
only safely infer of exclusion of car matting in
the list, provided, if it is established that “car
mattings” are nothing but ordinary textile
carpets of Chapter 57. But as has been already
discussed supra car mattings are commercially
known differently in the market than ordinary
textile carpets of Chapter 57. From the point of
view of its manufacturing process these are
entirely different from ordinary carpets. My
discussion and logic given in para 18.7.1
clearly indicates that, the “car mattings” are
different products. Board’s Circular
No.117/28/05-CX dt. 17.4.95 clearly states car
mattings different product all together.
The observations advanced in the judgments of
Hon’ble Tribunal in the cases of Sterling India
(2000(115) ELT-807-Trib., Jyoti Carpet
Industries (2001 (132) ELT-458-Trib-Delhi),
Swaraj Majda (1993 (68 ELT 258 Trib) clearly
indicates that “car mattings” are entirely
different than ordinary textile carpets of
Chapter 57 (All these judgments are discussed
in latter paras)

B-1 The HSN Clarificatory Notes on Chapter
57 (page 783 of HSN Clarificatory Notes
Volume-II) states the following category of
products are classifiable under Chapter 57:

“The above products are classified in
this chapter whether made-up (i.e.

made directly to size, hemmed, lined,
fringed, assembled etc.) in the form
18
of carpet squares, beside rugs, hearth
rugs, or in the form of carpets for
installation in rooms, corridors,
passages or stairs, in the lengths for
cutting and making up. They may
also be impregnated (i.e. with latex)
or packed with woven or non-woven
fabrics or with cellular rubber or
plastics.”

B-2 From the above notes it is clear that not
only the carpets in running length, but also
made ups (i.e. made directly to size, hemmed,
lined, fringed assembled etc.) in the form of
carpet squares, or in the form of carpet
installation in rooms, corridors, passages or
stairs are required to be classified under
Chapter 57.

B-3 From the above explanation, it is seen that,
carpets covered under Chapter 57 are simple
carpets in running length may be made up
directly to size, hemmed, lined, fringed,
assembled etc. in the form of carpet squares, or
in the form of carpet installation in rooms,
corridors, passages or stairs and not certainly
covers car mattings which undergo further
processing like moulding, chemical treatment
to provide strength to the carpet fabric as per
customer requirement, lamination as per
customers requirements, and trimming for
fixing in the vehicle with NamdA fixing on the
back. The car mattings although is of textile
carpet origin are not ordinary carpets as
19
explained in the Explanatory Notes of HSN for
Chapter 57 and certainly not covered under
Chapter 57.

When car mattings are not by definition
covered under Chapter 57 (as explained above
taking reference of the clarificatory notes of
HSN) those are not excluded from para-C of
HSN General Explanatory Notes on Section
XVII referring to parts and accessories Part-III
para (c) (Sl.No.7) (page 1412 of HSN
Explanatory Notes Vol.4).

Thus “car mattings” satisfies the test 2-C.

18.7. From the above discussion it is clear that “car
matting” satisfies all the tests enumerated in the
explanatory notes of HSN for Chapter XVII, to be
treated as a part and accessory classifiable under
chapter 87.08 of motor vehicles of Chapter 87.05-
87.07.”

13. The other order of Commissioner in connection with the

third show-cause notice was passed on 5 th January, 2007. The

reasoning and conclusion of this order was in the same line with

the order passed on 29th September, 2006. Thus, in both the orders

the Commissioner sustained the directions for payment rejecting

20
the reply of the assessee and the orders charged on the respondent

duty differential and interest and also imposed penalty.

14. The two appeals of the respondent before the Tribunal were

decided in their favour by a composite decision. This decision is

assailed before us by the revenue authorities in these two appeals.

The Tribunal observed and held:-

“5.3 We find that chapter 57 covers not only
carpets but also other floor coverings. What
has to be considered is that between the terms
‘carpets and other floor coverings’ the terms
‘parts and accessories’ which can be
considered more specific. Even if the claim of
the Department that at no stage the carpets
come into existence is accepted, it cannot be
denied that the article can be considered as
other floor coverings meant for other
application. We also find that in the
interpretative notes for rule 3(a) in HSN,
where by way of an example, it has been
clarified that “textile carpet identifiable for
use in motor cars to be classified not as
accessories of motor cars in heading 8708 but
in heading 5703 where they are more
specifically described as carpets”. Though, in
common parlance the impugned product may
not be considered as carpets, in view of the
wordings of the chapter, the section notes,
chapter notes and the explanatory notes
extracted above we are of the considered
opinion that the impugned goods is correctly
21
classifiable under chapter heading 570390.90
as claimed by the assessee.”

6. The orders of commissioner are set aside
and the appeals are allowed with
consequential relief.”

15. Chapter Notes to Chapter 57 of the HSN Explanatory Notes,

relating to carpets and Other Textile Floor Coverings are relevant

for effective adjudication of these two appeals. The said Chapter

Notes read:-

“Chapter Notes.

1.- For the purposes of this Chapter,
the term “carpets and other textile floor
coverings” means floor coverings in
which textile materials serve as the
exposed surface of the article when in
use and includes articles having the
characteristics of textile floor coverings
but intended for use for other purposes.

2. This Chapter does not cover
floor covering underlays.

GENERAL

This Chapter covers carpets and other
textile floor coverings in which textile
materials serve as the exposed surface of
the article when in use. It includes articles
having the characteristics of textile floor

22
coverings (e.g., thickness, stiffness and
strength) but intended for use for other
purposes (for example, as wall hangings or
table covers or for other furnishing
purposes).

The above products are classified in this
Chapter whether made up (i.e., made
directly to size, hemmed, lined, fringed,
assembled, etc.), in the form of carpet
squares, bedside rugs, hearth rugs, or in the
form of carpeting for installation in rooms,
corridors, passages or stairs, in the length
for cutting and making up.

They may also be impregnated (e.g.,
with latex) or backed with woven or
nonwoven fabrics or with cellular rubber or
plastics.”

16. The said instrument, i.e. HSN Explanatory Notes deal with

four entries against tariff item no.5703 in following terms:-

“57.03 – CARPETS AND OTHER
TEXTILE FLOOR COVERINGS,
TUFTED, WHETHER OR NOT MADE
UP.

          5703.10    -     Of wool or fine animal hair
          5703.20    -     Of nylon or other
                           polyamides
          5703.30 -        Of other man-made textile
                           materials
          5703.90 -        Of other textile materials
                                                                23

This heading covers tufted carpets and
other tufted textile floor coverings produced
on tufting machines which, by means of a
system of needles and hooks, insert textile
yarn into a pre-existing backing (usually a
woven fabric or a nonwoven) thus producing
loops, or, if the needles and hooks are
combined with a cutting device, tufts. The
yarns forming the pile are then normally
fixed by a coating of rubber or plastics.
Usually before the coating is allowed to dry it
is either covered by a secondary backing of
loosely woven textile material, e.g., jute, or
by foamed rubber.

Products of this heading are distinguished
from the tufted textile fabrics of heading
58.02 by, for example, their stiffness,
thickness and strength, which render them
suitable for use as floor coverings.”

17. Learned counsel for the revenue has argued, referring to

three earlier orders of the Customs Excise and Gold (Control)

Appellate Tribunal (CEGAT-the predecessor of CESTAT) and has

also relied on a circular issued by the excise authorities dated 17 th

April, 1995. The said circular (bearing no.117/28/95-CX)

specifies:-

24

“Car Mattings made from non-woven
materials in roll form – Dutiability of
Circular No.117/28/95-CX, dated 17-4-1995
[From F.No.57/1/94-CX.1]
Government of India
Ministry of Finance (Department of Revenue)
New Delhi

Subject: Dutiability of Car Mattings made
from non-woven materials in roll form –
Regarding

I am directed to refer to Board’s
<<15391$Circular No.5/Floor-

Coverings/87>> (F. No.57/1/87-CX.1), dated
23-6-1987 wherein it was clarified that duty
liability would not be attracted on car
mattings made from duty paid non-woven
material in roll form. It has been brought to
the notice of the Board that this position may
not hold good after extension of Modvat to
these items.

2. The matter has been re-examined by
the Board. The Board is of the view that there
are two clear stages i.e. non-woven material
emerging as excisable and dutiable goods in
roll form and finally car mattings emerging as
different final products. Duty has to be
charged at both stages as the processes of
conversion of non-woven material in roll form
into car mattings involves the processes of
cutting, stitching, sizing etc., and both
products are known differently in the market.

3. It is, therefore, clarified that
appropriate Central Excise Duty is payable on
floor coverings in the form of non-woven
25
material in rolls when cleared from the
factory, as well as, on the car mattings
subsequently manufactured out of duty paid
floor coverings in the form of non-woven
material in rolls.

                 4.    The          Board’s        earlier
             <<15391$Circular                  No.5/Floor

Coverings/87>> (F. No.57/1/87-CX.1) dated
23-6-1987 may be treated as withdrawn and
assessments may be finalized in terms of the
revised instructions.”

This circular deals with a situation in which non-woven

materials in roll form which were excisable goods, emerged as a

different product when the former is transformed as car matting

upon application of certain process. For this reason, it was

stipulated, that duty would be leviable at two stages. But in these

two appeals, we are to determine as to whether car mattings came

within the aforesaid tariff under Chapter 57. These appeals do not

raise the question as to whether car mattings themselves would be

subjected to excise duty or not. The question here is under which

tariff-head the duty should be paid. The aforesaid circular does

not assist the revenue in the subject appeals.

26

18. In the three Tribunal decisions cited on behalf of revenue

authorities, such car mattings were treated as parts and

accessories of motor cars. The first case cited is that of Collector

of Central Excise, Bombay-II vs. Sterling India [(2000) 115

ELT 807]. This was a decision of CEGAT, New Delhi. Before the

Tribunal in this case, the assessee went unrepresented. The goods

involved were canvas canopy, floor mattings and seat covers. The

Tribunal upheld the Collector’s order that the said articles were

not classifiable as floor coverings under sub-heading No.5702.90

of the Tariff and those were to be classified under Heading No.

8708.00. The order of the Tribunal does not contain any analysis

or reasoning and reads: –

“3. We have gone through the facts on
record. We find that both the Asstt.
Collector of Central Excise, Bombay, who
had adjudicated the matter and the
Collector of Central Excise (Appeals),
Bombay, had held that the goods in dispute
were not the carpets and floor mattings but
were accessories of motor vehicles. The
goods in dispute are canvas canopy, floor
matting and seat covers for motor vehicles.

27

Floor matting was made from jute coated
with PVC. Other items also were not used
as floor coverings. The Collector of Central
Excise (Appeals) has also referred to the
HSN Explanatory Notes and the relevant
Chapter Notes to arrive at his conclusion
that the type of the goods involved in these
proceedings were not to be classifiable as
floor coverings.”

19. The next case is that of Collector of Central Excise vs.

Swaraj Mazda [(1993) 68 ELT 258]. This is also a decision of

CEGAT. This case relates to availability of Modvat credit on floor

mats for motor vehicles. In this case floor mats had been cleared

on payment of duty under sub-heading No.8708, which covered

parts and accessories of motor vehicles of heading 87.01 to 87.05.

Applicability of that entry was not in lis in that appeal. The

Tribunal found that floor mats could be an item entering into the

stream of completion of the manufactured product rendering it fit

for marketing. On that ground input credit under the Modvat

provisions was allowed. The third case, which was cited on

behalf of the revenue was that of Jyoti Carpet Industries vs.

28
Commissioner of Central Excise, Jaipur-I
[(2001) 132 ELT

458] decided by the CEGAT. This was a case where the

manufacturer classified textile floor covering of jute as product

under sub-heading 5703.20 in the relevant years. The assessee in

this case had been procuring raw-materials from different

manufacturers and out of such materials, they had been producing

car mattings and other mattings as well, such as bath mats,

telephone mats, floor foot mats etc. with the aid of power

operated machines. The process of manufacture involved cutting

as per standards, overlocking and stitching etc. Following the case

of Sterling India (supra), it was held that floor mats of cars could

be classifiable under head No.8708. But again, like in the case of

Sterling India (supra), the Tribunal has not given any reasoning

for such classification in this decision. The Tribunal in these

appeals, following the case of Sterling India (supra) found that

the subject-goods were classifiable under Chapter 8708.

All these three cases have been decided by the Tribunal,

which obviously has no precedent value for us. We however,
29
discussed these cases only for the purpose of ascertaining as to

whether the revenue authorities had been treating car mats as a

subject head under sub-heading 8708, on proper analysis of

competing claim of the assessees to include them in sub-heading

5703. We do not find so from these decisions of the Tribunal.

20. There are authorities in which it has been held that the

popular meaning among consumers would be a major factor for

interpretation of dispute relating to classification. This principle

has been laid down in the cases of Plasmac Machine

Manufacturing Co. Pvt. Ltd. vs. Collector of Central Excise,

Bombay [1991 Supp.(1) SCC 57] and Dabur India Ltd. vs.

Commissioner of Central Excise, Jamshedpur [(2005) 4 SCC

9]. In the case of Dabur India Ltd (supra), it has been held: –

“9. From the abovementioned authorities, it
is clear that in classifying a product the
scientific and technical meaning is not to
be resorted to. The product must be
classifiable according to the popular
meaning attached to it by those using the
product. As stated above, in this case the
appellants have shown that all the
ingredients in the product are those which
30
are mentioned in Ayurvedic textbooks. This
by itself may not be sufficient but the
appellants have shown that they have a
Drug Controller’s licence for the product
and they have also produced evidence by
way of prescriptions of Ayurvedic doctors,
who have prescribed these for treatment of
rickets. As against this, the Revenue has
not made any effort and not produced any
evidence that in common parlance the
product is not understood as a
medicament.”

21. In the case of A.P. State Electricity Board vs. Collector of

Central Excise, Hyderabad [(1994) 2 SCC 428], the

marketability test has been applied, which is, in a way, a corollary

to the “popular meaning” test. In this case it has been held: –

“10. It would be evident from the facts
and ratio of the above decisions that the
goods in each case were found to be not
marketable. Whether it is refined oil (non-

deodorised) concerned in Delhi Cloth
and General Mills or kiln gas in South
Bihar Sugar Mills or aluminium cans with
rough uneven surface in Union Carbide or
PVC films in Bhor Industries or
hydrolysate in Ambalal Sarabhai the
finding in each case on the basis of the
material before the Court was that the
articles in question were
31
not marketable and were not known to the
market as such. The ‘marketability’ is thus
essentially a question of fact to be decided
on the facts of each case. There can be no
generalisation. The fact that the goods are
not in fact marketed is of no relevance. So
long as the goods are marketable, they are
goods for the purposes of Section 3. It is
also not necessary that the goods in
question should be generally available in
the market. Even if the goods are
available from only one source or from a
specified market, it makes no difference
so long as they are available for
purchasers. Now, in the appeals before us,
the fact that in Kerala these poles are
manufactured by independent contractors
who sell them to Kerala State Electricity
Board itself shows that such poles do have
a market. Even if there is only one
purchaser of these articles, it must still be
said that there is a market for these
articles. The marketability of articles does
not depend upon the number of purchasers
nor is the market confined to the territorial
limits of this country. The appellant’s own
case before the excise authorities and the
CEGAT was that these poles are
manufactured by independent contractors
from whom it purchased them. This plea
itself — though not pressed before us —
is adequate to demolish the case of the
appellant. In our opinion, therefore, the
conclusion arrived at by the Tribunal is
unobjectionable.”
32

22. Emphasis on technical meaning has been highlighted in the

case of Commissioner of Central Excise vs. Wockhardt Life

Sciences Limited [(2012) 5 SCC 585] for resolving classification

related disputes of goods. In this case, it has been held that a

commodity cannot be classified in a residuary entry if there is a

specific entry, even if the specific entry requires the product to be

understood in a technical sense.

23. “The common parlance test”, “marketability test”, “popular

meaning test” are all tools for interpretation to arrive at a decision

on proper classification of a tariff entry. These tests, however,

would be required to be applied if a particular tariff entry is

capable of being classified in more than one heads. So far as

subject-dispute is concerned, we have already referred to Chapter

note 1 of Chapter 57. This note stipulates that carpets and other

floor coverings would mean floor coverings in which textile

materials serve as the exposed surface of the Article when in use.

33
This feature of the car mats has not really been rejected by the

revenue authorities as untrue in the order of the Commissioner,

before whom assertion to that effect was made by the respondent.

24. The core issue in these appeals is as to whether car mats

come under chapter-heading 57.03 or not. In the second appeal,

the numerical representation of the product, as claimed by the

assessee, was different but that difference is not of much

significance. Revenue’s case is that the goods are manufactured in

such a way that these can be used as accessories of cars. The

Tribunal found that though in common parlance the products

involved may not be considered as carpets, in view of the

wordings of the chapter, section notes, chapter notes and

explanatory notes, the goods were classifiable under chapter

heading 570390.90.

25. We do not find any error in such reasoning. Chapter 87 of the

Central Excise Tariff of India does not contain car mats as an

independent tariff entry. We have reproduced earlier the various

34
parts and accessories listed against tariff entry 8708. All of them

are mechanical components, and revenue want car mats to be

included under the residuary sub-head “other” in the same list.

The HSN Explanatory Notes dealing with interpretation of the

rules specifically exclude “tufted textile carpets, identifiable for

use in motor cars” from 87.08 and place them under heading

57.03. Revenue’s argument is that the Explanatory Notes have

persuasive value only. But the level or quality of such persuasive

value is very strong, as observed in the judgments of this Court to

which we have already referred. Moreover, the Commissioner

himself has referred to the Explanatory Notes in the order-in-

original while dealing with the respondent’s stand. Thus, we see

no reason as to why we should make a departure from the general

trend of taking assistance of these Explanatory Notes to resolve

entry related dispute. Now, on referring to these Explanatory

Notes, we find that one category of carpets [Textile carpets

(Chapter 57)] has been excluded specifically from parts and

accessories. In our opinion, the subject-item does not satisfy the
35
third condition specified in Section XVII of the Explanatory

Notes in relation to “III-Parts and Accessories”. A plain reading of

clause (C) thereof, which we have quoted above, excludes “textile

carpets” (Chapter 57).

26. The main argument of the appellant is that because the car

mats are made specifically for cars and are used also in cars, they

should be identified as parts and accessories. But if we go by that

logic, textile carpets could not have been excluded from Parts and

Accessories. We have referred to such exclusion in the preceding

paragraph. It has also been urged on behalf of the revenue that

these items are not commonly identified as carpets but are

different products. The Tribunal on detailed analysis on various

entries, Rules and Notes have found they fit the description of

goods under chapter heading 570390.90. We accept this finding of

the Tribunal. Once the subject goods are found to come within the

ambit of that sub-heading, for the sole reason that they are

exclusively made for cars and not for “home use” (in broad

terms), those goods cannot be transplanted to the residual entry
36
against the heading 8708. As we find the subject-goods come

under the chapter-heading 570390.90, and the other entry under

the same Chapter forming the subject of dispute in the second

order of the Commissioner, in our opinion, there is no necessity to

import the “common parlance” test or any other similar device of

construction for identifying the position of these goods against the

relevant tariff entries.

27. For these reasons, we dismiss the appeals. The impugned

decision of the Tribunal is sustained.

28. Any connected applications shall also stand disposed of.

There shall be no order as to costs.

..………………………….J.

(Deepak Gupta)

37
…………..……………….J.

(Aniruddha Bose)

New Delhi,
May 1, 2020.

38
39



Source link