2005 (2) TMI 114 - SC - Central Excise

Final ruling affirms classification of children's play items; play pool under Tariff Heading 39.22; no extended limitation

OK. PLAY (INDIA) LTD. Versus COMMISSIONER OF C. EX., DELHI-III, GURGAON

The SC affirmed the Tribunal, holding that several articles (activity desks/chairs, fun fliers, play table, play pool, rockers, slides, swings) are not ... Classification of Play Table, Tables, Activity Desks and Chairs - Whether the assessee was right in classifying the following articles under Chapter Heading 95.03 and clearing the same without payment of duty. The said articles are Activity Desks and Chairs, Fun Fliers, Play Table, Play Pool, Rockers, Slides and Swings? Held that:- The mere fact that an article is meant for exclusive use of children would not place it in the category of toys. The word 'toys' is not defined. However, Tariff Heading 95.03 describes 'toys' as reduced-size models and similar recreational. This tariff heading is identical to HSN Heading 95.03 which also refers to 'toys' as reduced-size models. Both the headings describe 'toys' as representing animals or non-human objects. They refer to toy musical instruments, apparatus, appliances etc. Heading 95.03 is a residuary item. It covers Doll houses and furniture. Under the explanatory notes to HSN Heading 95.03, reference is made to toys like sewing machines, musical instruments etc. distinguishable by their size and limited capacity from real sewing machine, musical instrument etc. Similarly, under the explanatory Note (B) to HSN Heading 95.03, reduced-size model includes models of aircraft, trains etc. which are reproductions of Articles. It is important to note that Section XX of the Central Excise Tariff Act, 1985 (hereinafter referred to for the sake of brevity as 'the 1985 Act') covers Chapters Nos. 94, 95 and 96 under the caption 'Miscellaneous Manufactured Articles'. Chapter 94 deals with Furniture. Chapter Note 1(k) excludes toy furniture or toy lamps from Chapter 94. Chapter Note 2 refers to the articles of furniture, falling in Chapter 94, subject to the condition that they are for placing on the floor or ground. Tariff Heading 94.01 refers to Seats. Further, the HSN Heading 94.03, which is similar to Tariff Heading 94.03, refers to any movable article which can be placed on the floor and mainly used in dwelling house, schools, cafes etc. as furniture. It covers desks, chairs etc. Basically, toys, as indicated by HSN Heading, are miniature reproduction of the articles used by the adults, like, furniture, musical instruments etc. However, we are not inclined to remit the matter as the item stands fully covered by the explanatory notes to HSN Heading 39.22. Moreover, at the stage of show-cause, full opportunity was given to the assessee to disprove that it was not falling under Heading 39.22. On the facts and circumstances of this case and without going into the question as to what course the department should follow when the Tribunal classifies the item in a different category, we hold that the Adjudicating Authority was right in classifying 'Play Pool' under Tariff Heading 39.22. Nothing prevented the department from calling upon the assessee over the years to produce their catalogues. The classification lists were duly approved by the department from time to time. All the facts were known to the department, whose officers had visited the factory of the assessee on at least 12 occasions. In the circumstances, we do not find any infirmity in the reasoning given by the Tribunal in coming to the conclusion that there was no wilful suppression on the part of the assessee enabling the department to invoke the extended period of limitation under the proviso to Section 11A(1) of the 1944 Act. However, we may clarify that the show cause notices dated 24-6-1997, 27-5-1998, 15-10-1998, 31-3-1998 and 30-9-1999 are in time as held by the Tribunal. Subject to what is stated hereinabove regarding classification of 'Play Pool' under Tariff Heading 39.22, we do not find any infirmity in the impugned judgement of the Tribunal. Hence, the Civil Appeals filed by the assessee and the cross-appeals filed by the department are dismissed. However, in the facts and circumstances of this case, there will be no order as to costs. Issues Involved:1. Classification of Play Table, Activity Desks, and Chairs.2. Classification of Swings, Slides, Fun Fliers, and Rockers.3. Classification of Play Pool.4. Application of the extended period of limitation under Section 11A(1) of the Central Excise Act, 1944.Detailed Analysis:1. Classification of Play Table, Activity Desks, and Chairs:The primary issue was whether these articles should be classified under Tariff Heading 95.03 as 'toys' or under Tariff Headings 94.01 and 94.03 as 'furniture.' The assessee argued that these items were designed for the amusement of small children and were sold in toy shops, thus classifiable as toys under Heading 95.03. The department contended that these items were smaller versions of adult furniture and should be classified under Headings 94.01 and 94.03.The court agreed with the department, stating that the mere fact that an article is meant for the exclusive use of children does not place it in the category of toys. The court noted that toys are generally reduced-size models of articles used by adults, and the items in question were more akin to furniture. The court referred to various definitions and explanatory notes to conclude that play tables, activity desks, and chairs constitute 'furniture' under Tariff Headings 94.01 and 94.03.2. Classification of Swings, Slides, Fun Fliers, and Rockers:The issue was whether these items were 'toys' under Tariff Heading 95.03 or equipment for general physical exercise under Tariff Heading 95.06. The assessee claimed these items were toys, while the department argued they were equipment for physical exercise.The court held that these items are toys under Tariff Heading 95.03. It noted that the purpose of reduced-size models of slides, swings, etc., is amusement and not physical exercise. The court referred to explanatory notes which exclude toys from Heading 95.06 and include swings and slides used in playgrounds under Heading 95.03.3. Classification of Play Pool:The Adjudicating Authority classified 'Play Pool' as 'Baths' under Tariff Heading 39.22, while the assessee claimed it was a toy under Tariff Heading 95.03. The Tribunal classified it under Heading 39.22, which the department did not appeal.The court upheld the classification of 'Play Pool' under Heading 39.22. It noted that the Play Pool has specifications similar to baby baths and camping toilets, as clarified in the explanatory notes to HSN Heading 39.22. The court found no ambiguity in this classification and did not remit the matter back to the Tribunal.4. Application of the Extended Period of Limitation:The department issued a show cause notice on 4-11-1997, claiming duty for the period from 1992-93 to 28-2-1997, alleging mis-declaration by the assessee. The Tribunal concluded that the assessee had filed its classification list with an exact description of the goods, and the department had approved it without further enquiry. Therefore, the department was not entitled to invoke the extended period of limitation.The court agreed with the Tribunal, stating that the department had ample opportunity to examine the classification over the years and had visited the assessee's factory multiple times. The court found no wilful suppression by the assessee and upheld the Tribunal's decision to drop the proceedings pursuant to the show cause notice dated 4-11-1997. However, it clarified that other show cause notices issued within the limitation period were valid.Conclusion:The court dismissed the civil appeals filed by the assessee and the cross-appeals filed by the department, upholding the Tribunal's judgment with the clarification regarding the classification of 'Play Pool' under Tariff Heading 39.22. There was no order as to costs.