2009 (9) TMI 7 - SC - Central Excise

Carpets classified by predominant textile weight; jute-dominant rugs treated as jute carpets despite polypropylene surface fiber under Chapter 57

The Commissioner of Central Excise, Bhubaneswar-I Versus M/s. Champdany Industries Limited

SC held that carpets woven from jute, cotton and polypropylene must be classified by the textile material that predominates by weight; because jute ... Classification of carpets - Rules for the Interpretation of the Schedule - manufacturers of carpets by interlacing yarns of three different types, namely, jute, cotton and polypropylene - Predominance of jute or fabric - common parlance test - Held that:- Since the goods admittedly fall under Chapter 57 and consist of more than two or more textile materials, it has to be classified on the basis of that textile material which predominates by weight over any other single textile material. As in the goods in question jute admittedly predominates by weight over each other single textile material, the said Carpet could only be classified as jute carpets and nothing else - the mere fact that the surface of the carpet is polypropylene fiber, it does not cease to become jute carpet - the most specific description shall be preferred to the heading providing a more general description – Decision of the Tribunal upheld. Issues Involved:1. Classification of carpets manufactured by the respondent-company.2. Interpretation and application of Chapter Note 1 of Chapter 57 of the Central Excise Tariff Act, 1985.3. Predominance test versus surface or essentiality test for classification.4. Application of common parlance test.5. Relevance of Rule 3 of the General Rules for the Interpretation of the Schedule to the Act.6. Consideration of residuary headings for classification.7. Relevance of exemption notifications and previous case law.Detailed Analysis:1. Classification of Carpets:The primary issue revolves around whether the carpets manufactured by the respondent-company, which contain jute, cotton, and polypropylene, should be classified as jute carpets. The respondent-company claimed that jute predominates by weight over the other materials, which was supported by expert reports and departmental examinations.2. Interpretation and Application of Chapter Note 1 of Chapter 57:The Revenue argued that since the surface of the carpets is entirely polypropylene, they should be classified under polypropylene carpets as per Chapter Note 1 of Chapter 57. However, the court clarified that Chapter Note 1 merely defines carpets for the purposes of Chapter 57 and does not determine their classification.3. Predominance Test versus Surface or Essentiality Test:The court emphasized the predominance test, which states that the textile material that predominates by weight should determine the classification. It was undisputed that jute content in the carpets was more than 50%. The court rejected the Revenue's argument based on the surface or essentiality test, stating that the predominance of jute by weight makes the carpets jute carpets, irrespective of the surface material.4. Application of Common Parlance Test:The Revenue suggested using the common parlance test, arguing that to a common man, the carpets would appear to be polypropylene carpets. The court dismissed this argument, stating that since the terms are defined in the Act, the common parlance test does not apply.5. Relevance of Rule 3 of the General Rules for the Interpretation of the Schedule to the Act:The Revenue argued for the application of Rule 3, which includes provisions for classifying goods with mixed materials. The court held that Rule 3(a) applies, which prefers the most specific description. Since jute predominates, the carpets should be classified as jute carpets. Clauses (b) and (c) of Rule 3 were deemed inapplicable as the goods could be classified under clause (a).6. Consideration of Residuary Headings for Classification:The Revenue attempted to classify the carpets under the residuary sub-heading 5702.90. The court, referencing previous judgments, reiterated that residuary headings should only be used when goods cannot be classified under specific headings. Since the carpets could be classified as jute carpets, the residuary heading was not applicable.7. Relevance of Exemption Notifications and Previous Case Law:The court noted various exemption notifications that provided total exemption for jute carpets, reinforcing their classification. The court also referenced previous judgments, including HPL Chemicals Ltd., Dunlop India Ltd., and Bharat Forge and Press Industries, which supported the principle that specific headings should be preferred over residuary headings.Conclusion:The court upheld the classification of the carpets as jute carpets based on the predominance test. The Revenue's arguments based on surface material, essentiality test, common parlance test, and Rule 3 were rejected. The appeals filed by the Revenue were dismissed, affirming the decisions of the Commissioner (Appeals) and the Tribunal. The court found no reason to overturn the concurrent findings of fact and law, which were neither perverse nor unsupported by evidence.