1989 (9) TMI 120 - HC - Central Excise

HDPE strips held plastic, not synthetic textile; classified under 39.20, 39.23 instead of Heading 54.06 for excise

HC held that HDPE strips/tapes used for manufacturing HDPE woven sacks are goods of plastic, not synthetic textile material. Relying on technical ... Classification of goods by substance and commercial identity (plastic article v. textile) - Interpretation of Section XI and its Notes - width criterion vis-a -vis material character - Binding effect of tribunal and Supreme Court decisions on departmental classification - Trade/ordinary meaning and common parlance in tariff classification - Writ jurisdiction under Articles 226/227 where alternative statutory remedy existsClassification of goods by substance and commercial identity (plastic article v. textile) - Interpretation of Section XI and its Notes - width criterion vis-a -vis material character - Binding effect of tribunal and Supreme Court decisions on departmental classification - Trade/ordinary meaning and common parlance in tariff classification - HDPE strips/tapes and HDPE woven sacks are classifiable as articles of plastic under Chapter 39 and not as textile articles under Chapter 54/46/63. - HELD THAT: - The Court examined manufacturing process, statutory scheme and precedents and held that classification must rest on the true nature and commercial identity of the product, not solely on an intermediate characteristic such as width. Although Section XI and Note 1(c) refer to strips of apparent width not exceeding 5 mm being treated within Chapter 54, the Court read the tariff as a whole and concluded that entry 54.06 applies only to strips when they are of synthetic textile material. In the absence of any finding that the HDPE strips are synthetic textile material, and in view of (a) the manufacturing process from HDPE granules into plastic strips/tapes, (b) authoritative determinations and registrations (including DGTD registration and Textile Commissioner correspondence) treating the industry as plastic/HDPE woven sacks, and (c) earlier decisions of the Central Excise Gold Appellate Tribunal affirmed by the Supreme Court and accepted by the Department that HDPE woven sacks are articles of plastic, the HDPE strips fall under Heading 39.20 (sub-heading 3920.32) and the finished HDPE sacks under Heading 39.23 (sub-heading 3923.90). The Assistant Collector and the Collector (Appeals) erred by treating width as the sole criterion and by failing to consider the material character and the binding precedents. [Paras 20, 21]HDPE strips/tapes classifiable under Head. 39.20, sub-heading 3920.32; HDPE woven sacks classifiable under Head. 39.23, sub-heading 3923.90; impugned orders quashed and respondents directed to classify accordingly.Writ jurisdiction under Articles 226/227 where alternative statutory remedy exists - Binding effect of tribunal and Supreme Court decisions on departmental classification - High Court may exercise writ jurisdiction despite availability of appellate remedy where the adjudicating authority has ignored binding tribunal/Supreme Court decisions and the order levies duty on incorrect interpretation of tariff entries. - HELD THAT: - The Court applied the principle that the existence of an alternative statutory remedy does not preclude exercise of constitutional writ jurisdiction where the order is manifestly illegal, based on incorrect interpretation of tariff entries and where authorities have ignored binding decisions of the departmental appellate tribunal and the Supreme Court. The Court found that the Assistant Collector and the Collector (Appeals) had perfunctorily disregarded settled precedents and failed to distinguish them on law or facts; accordingly the High Court properly entertained the petition under Articles 226/227 and decided the merits. [Paras 11]Writ petition maintainable; availability of alternative remedy was no bar to exercise of jurisdiction in the facts of this case.Final Conclusion: The writ petitions are allowed: HDPE strips/tapes held to be articles of plastic under Head. 39.20 (sub-heading 3920.32) and HDPE woven sacks under Head. 39.23 (sub-heading 3923.90); impugned orders of the Assistant Collector and Collector (Appeals) quashed and respondents directed to classify the goods accordingly. No order as to costs. Issues Involved:1. Classification of HDPE woven sacks under the Central Excise Tariff Act, 1985.2. Availability of alternative remedy and jurisdiction of the High Court to entertain the writ petition.3. Applicability of previous judgments and circulars in the context of the new Tariff Act, 1985.Summary:1. Classification of HDPE woven sacks under the Central Excise Tariff Act, 1985:The petitioners, limited companies manufacturing HDPE woven sacks, contended that their products should be classified under Chapter 39 of the Central Excise Tariff Act, 1985, as articles of plastic. The Assistant Collector, Central Excise, classified the HDPE strips under sub-heading 5406.11 and Polypropylene under sub-heading 5406.90, with fabrics thereof under heading 5408.00, thus requiring duty payment under Chapter 63.01 at 12% ad valorem. The petitioners argued that HDPE tapes fall under Heading 39.20, HDPE fabrics under Heading 39.26, and HDPE sacks under Heading 39.23 sub-heading 3923.90. They cited differences between HDPE and textile materials, supported by various reports and expert opinions, and argued that in common parlance, HDPE woven sacks are known as plastic sacks. The court held that HDPE strips or tapes fall under Heading 39.20, sub-heading 3920.32, and HDPE sacks under Heading 39.23, sub-heading 3923.90, thus quashing the orders of the Assistant Collector and Collector (CE) Appeals.2. Availability of alternative remedy and jurisdiction of the High Court to entertain the writ petition:The respondents argued that the petitioners should have exhausted alternative remedies available under the Central Excise Law, specifically by appealing to the Central Excise Gold Appellate Tribunal. The petitioners countered that the impugned order was manifestly illegal and based on an incorrect interpretation of the tariff entry, making it challengeable directly before the High Court. The court, referencing the Supreme Court judgment in A.V. Venkateswaran, held that the availability of an alternative remedy does not bar the High Court from exercising its jurisdiction under Art. 226/227 of the Constitution, especially when the order is manifestly illegal.3. Applicability of previous judgments and circulars in the context of the new Tariff Act, 1985:The petitioners cited previous judgments of the Central Excise Gold Appellate Tribunal, which classified HDPE woven sacks as articles of plastic, a finding upheld by the Supreme Court. They argued that these judgments should be binding despite the introduction of the new Tariff Act, 1985. The respondents contended that the new Tariff Act, based on the harmonized system of nomenclature, necessitated a different classification. The court found that the judgments and circulars issued under the old tariff were still relevant and that the HDPE woven sacks should be classified as articles of plastic under the new tariff as well.Conclusion:The court allowed the petition, quashing the orders of the Assistant Collector and Collector (CE) Appeals, and directed the respondents to classify the HDPE woven sacks under Chapter 39 of the Central Excise Tariff Act, 1985. No other points pertaining to other issues were raised during the course of the arguments. There was no order as to costs.