2006 (11) TMI 381 - AT - Central Excise

Tribunal Upholds Milk Cans' Classification as Utensils under Heading 73.23, Rejecting Revenue Appeal

COMMISSIONER OF C. EX., VADODARA Versus KRISHNA INDUSTRIES

COMMISSIONER OF C. EX., VADODARA Versus KRISHNA INDUSTRIES - 2007 (208) E.L.T. 191 (Tri. - Ahmd.) ISSUES PRESENTED AND CONSIDERED 1. Whether the milk cans in question are classifiable under Tariff Heading 73.23 ('Table, kitchen or other household articles') or under Heading 73.10 ('Tanks, casks, drums, cans... of a capacity not exceeding 300 L'). 2. Whether the capacity of the cans is a determinative criterion for classification between Heading 73.10 and Heading 73.23. 3. Whether items described as 'domestic milk cans' under the HSN Note fall within the exemption available under the relevant Notification when classified under Heading 73.23. ISSUE-WISE DETAILED ANALYSIS Issue 1: Classification - Heading 73.23 vs 73.10 Legal framework: The relevant rival tariff descriptions are Heading 7310.00 (containers of iron or steel, capacity not exceeding 300 L) and Heading 73.23 (table, kitchen or other household articles of iron or steel). The HSN Note to 73.23 expressly lists 'domestic milk cans' and states that 'household articles' include goods for use in hotels, restaurants, boarding-houses, hospitals, canteens, barracks, etc. Precedent treatment: The Tribunal has previously observed in Laxmi Narayan Metal Industries v. CCE that vessels used elsewhere than in household can still fall within the category of utensils (cited as Tribunal view in record). Interpretation and reasoning: The Court reads the HSN Notes and heading texts to distinguish the two headings: Heading 73.23 is specific in including milk cans and household/table/kitchen articles (broadly including institutional uses), whereas Heading 73.10 describes larger and smaller containers used principally as sales packings or for storage/transport of chemicals, fuels and packaged goods. The specific mention of 'domestic milk cans' under 73.23, coupled with the absence of milk cans from the examples in 73.10, indicates legislative intent to treat milk cans as articles falling within 73.23. The Court reasons that the purpose and typical use (repeated handling and service of milk) align with 73.23 rather than the packaging/storage focus of 73.10. Ratio vs. Obiter: Ratio - classification of milk cans as goods covered by Heading 73.23 based on specific textual inclusion in HSN Notes and the functional distinction between service/utensil use and packaging/storage use set out in Heading 73.10. Conclusion: The Court affirms that the milk cans are classifiable under Heading 73.23 and not under Heading 73.10. Issue 2: Role of Capacity in Classification Legal framework: Heading 73.10 expressly refers to containers 'of a capacity not exceeding 300 L' and sub-headings therein make further capacity distinctions (e.g., capacity of 50 L or more and less than 50 L). HSN Note to 73.23 includes items used in hotels, restaurants, etc., without capacity limitation and specifically mentions 'domestic milk cans.' Precedent treatment: The adjudicating authority applied capacity as the principal criterion, treating 5 and 10 litre cans as domestic and larger cans as industrial; this approach was contested and rejected on appeal. Interpretation and reasoning: The Court finds that capacity alone cannot be the determinative criterion for classification between 73.10 and 73.23. The presence of explicit capacity sub-headings within 73.10 demonstrates that where capacity is meant to operate as a classification criterion, the tariff scheme makes that explicit; absent such explicitness in 73.23 (and given the specific textual inclusion of milk cans), capacity cannot supplant the function/use-oriented test. Moreover, the HSN Note's inclusion of institutional uses (hotels, hospitals, canteens, barracks) demonstrates that articles of large capacity used in such contexts are still within 73.23. Therefore, classifying by mere litre-capacity (as in the adjudication order) is inconsistent with the textual scheme and HSN Notes. Ratio vs. Obiter: Ratio - capacity is not the decisive test for distinguishing between Heading 73.10 and Heading 73.23; function/use and specific mention in the HSN Note control classification. Conclusion: Capacity is not the criterion for classification in this context; the adjudication decision relying on capacity is unsustainable. Issue 3: Entitlement to Exemption when Classified under Heading 73.23 Legal framework: The respondent claimed benefit of exemption Notification applicable to goods classifiable under Heading 73.23 (as per the record). Classification into 73.23 is a prerequisite for claiming the exemption. Precedent treatment: The Commissioner (Appeals) accepted classification under 73.23 and extended the exemption; the appellate challenge raised by Revenue was directed only to classification and consequent exemption. Interpretation and reasoning: Given the Court's conclusion that the milk cans properly fall within Heading 73.23, and taking into account the HSN Note's express inclusion of 'domestic milk cans' and institutional uses, the cans meet the textual and functional criteria for Heading 73.23. No contrary textual or policy provision was shown to bar the exemption once classification under 73.23 is established. The fact that for Sales Tax purposes the items were treated as household articles further supports the functional classification, though the Court grounds its conclusion on the tariff texts and HSN Notes. Ratio vs. Obiter: Ratio - once classified under Heading 73.23, the milk cans are eligible for the exemption claimed; the Court's allowance of the exemption flows directly from the classification ratio. Conclusion: The exemption applicable to Heading 73.23 is properly extended to the milk cans; the appeal challenging that order is without merit and is rejected. Cross-References and Consolidated Conclusion The issues are interlinked: classification (Issue 1) is governed by textual inclusion and functional use rather than capacity (Issue 2), and classification under Heading 73.23 carries entitlement to the claimed exemption (Issue 3). The Court upholds the Commissioner (Appeals) in all respects, rejects the capacity-based approach of the adjudicating authority, follows the HSN Notes interpretation, and applies the Tribunal precedent that utensils used outside strict household settings can still fall within the utensil/household category.