1991 (9) TMI 74 - HC - Central Excise

High Court rules in favor of manufacturers in tariff dispute, orders refund of excise duty

The High Court ruled in favor of the petitioners, the manufacturers of fibre glass reinforced plastic food trolleys for aircraft, in a dispute over the ... Furniture, meaning of - Steel furniture Issues: Classification of manufactured trolleys under Central Excise Tariff - Correctness of conclusion by Central Government - Limitation on order under Section 36(2) of the Central Excises and Salt Act, 1944.Analysis:1. The petitioners, manufacturers of various fibre glass reinforced plastic articles, including food trolleys for aircraft, faced a dispute regarding the classification of these trolleys under the Central Excise Tariff. The Department contended that the trolleys should be classified as 'steel furniture' under Tariff Item 40 instead of the original classification under Tariff Item 68.2. The petitioners challenged the Department's classification through appeal to the Appellate Collector of Central Excise. The appellate authority quashed the show cause notices and upheld the original classification under Tariff Item 68. However, a subsequent review order classified the trolleys as 'steel furniture' under Tariff Item 40, leading to the petitioners approaching the High Court through a Writ Petition.3. The main contentions before the High Court were whether the Central Government's conclusion on the classification was correct and whether the order under Section 36(2) of the Act was within the stipulated time limit. The Court decided to focus on the correctness of the classification as furniture rather than addressing the issue of limitation.4. The High Court analyzed the nature and purpose of the manufactured trolleys, emphasizing their specialized use in aircraft for storing and serving food to passengers. It was noted that these trolleys were not meant for household use and were specifically designed for the unique requirements of an aircraft galley, which included compact size, capacity for multiple trays, and secure storage when not in use.5. The Court referenced previous judgments to support its view that articles designed for specific purposes, such as medical equipment trolleys or industrial transport trolleys, cannot be classified as furniture, regardless of the materials used. The judgment highlighted that the term 'furniture' was not defined under the Act, and the intended use and design of the articles were crucial in determining their classification.6. The High Court criticized the reasoning in the review order, stating that the focus should have been on whether the trolleys qualified as furniture before considering them as 'steel furniture'. The Court concluded that the trolleys did not meet the criteria for being classified as furniture, thereby rejecting the Department's classification under Tariff Item 40.7. The Court allowed the Writ Petition, quashed the review order, confirmed the original classification under Tariff Item 68, and directed the refund of excise duty paid under protest by the petitioners. The Court dismissed the Department's argument of unjust enrichment, stating that refund was justified as the payment was made under protest and the classification issue was initiated by the Department.