2005 (5) TMI 70 - SC - Central Excise

Supreme Court clarifies tyre scrap classification: weight & metal content key.

The Supreme Court held that scrap arising from the manufacturing process of tyres should be classified under Tariff Item No. 7204.90, not 4004, ... Whether the scrap of rubberised bead wire obtained at the process of manufacture of the rubberized bead wire and the bead wire rings which are removed from defective tyres are to be classified under Tariff Item No. 4004 or 7204.90? Held that:- The product to start with is admittedly a stainless steel wire. In fact at the initial stage when it is cut and waste arises that waste is sold as scrap of stainless steel wire. Thereafter all that happens is that the stainless steel wire gets coated with rubber. Merely because it is coated with rubber does not mean that it loses its characteristic of stainless steel wire. The main item remains a stainless steel wire. When in the process of coating, some waste arises and that waste is sold, that waste would fall under Tariff Item No. 7204.90 by virtue of the fact that it is the waste predominantly of metal. Also this waste arises whilst mechanically working on metal and rubberising it. Thus, Note 6 of Section XV would make this a waste and scrap of metal. Chapter Note 6 to Chapter 40 would have no application at all. Chapter Note 6 to Chapter 40 specifically provides that the waste and scrap must be rubber waste or scrap. The Tribunal has missed the crucial words 'rubber waste ...... and scrap'. Waste arising from the process of rubberising a stainless steel wire is not a rubber waste or rubber scrap. Thus the decision of the Tribunal cannot be upheld. The Collector (Appeals) had applied the correct principles and had correctly classified the product. Issues: Classification of scrap arising from the manufacturing process of tyres under Tariff Item No. 4004 or 7204.90.Analysis:1. Facts Overview: The case involves a dispute regarding the classification of scrap arising from the manufacturing process of tyres by a company that produces rubberised bead wire and tyres. The company sells scrap generated during the manufacturing process.2. Legal Proceedings: Two show cause notices were issued to the company, which were initially dropped by the Assistant Collector but later challenged by the Commissioner of Central Excise. The Commissioner directed an appeal, leading to a series of appeals culminating in the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT).3. Classification Dispute: The central issue revolved around whether the scrap of rubberised bead wire and bead wire rings from defective tyres should be classified under Tariff Item No. 4004 or 7204.90.4. Appellate Decisions: The Collector (Appeals) analyzed the composition of the products and classified them under 72.07, emphasizing the predominance of metal in weight and essential characteristics. However, CEGAT classified the products under Tariff Item No. 4004 without considering the composition, solely relying on specific chapter notes.5. Supreme Court's Decision: The Supreme Court held that CEGAT misdirected itself by not considering the composition of the products. The Court emphasized that the main product was stainless steel wire, even after the rubber coating. The waste arising predominantly from metal during the manufacturing process should be classified under Tariff Item No. 7204.90, not as rubber waste under Chapter Note 6 to Chapter 40.6. Conclusion: The Supreme Court set aside CEGAT's judgment and restored the Collector (Appeals) decision, emphasizing the correct classification principles applied by the Collector. The Appeals were disposed of with no order as to costs.This detailed analysis highlights the legal dispute, the arguments presented, the different classifications proposed, and the final decision by the Supreme Court, providing a comprehensive overview of the case.