2007 (5) TMI 246 - SC - Central Excise

Supreme Court ruling on classification dispute for 'dipped rubberised tyre cord fabric' emphasizes manufacturing process analysis.

The Supreme Court reviewed the classification dispute under the Central Excise Tariff Act, 1985, concerning the product 'dipped rubberised tyre cord ... Whether 'dipped rubberised tyre cord fabric manufactured and used captively by the assessee has been wrongly classified under Chapter Heading 59.05 (now CH 59.06) of CETA instead of Chapter Heading No. 59.02? Held that:- The matter needs to be reconsidered by the adjudication Commissioner after examining the process and the procedure followed by the assessee in the manufacture of the product which the assessee calls as Dipped rubberised tyre cord fabric. We make it clear that if the Department comes to the conclusion after examining the process that the product is a rubberised tyre cord fabric then the same shall be classifiable under Chapter Heading 59.05 as held by this Court in the case of MRF Ltd.[2005 (1) TMI 110 - SUPREME COURT OF INDIA]. However, if the product remains dipped tyre cord fabric then the Department has to give a finding both on marketability as well as on the manufacture of the product and decide the matter accordingly in the light of the judgment of this Court in MRF Ltd. Lastly the Department will consider also as to whether in the present case the assessee has made use of the fabric of high tenacity yarn and also proceed to decide the points raised expressly in the show cause notice keeping in mind the contention of the assessee that even after rubberisation, the fabric remains of high tenacity yarn of nylon and according to the assessee the effect of rubberisation has nothing to do with the high tenacity yarn and that once the product becomes a rubberised tyre cord fabric then it will fall under Heading 59.05 and not in 59.02. Appeal allowed. Issues:Classification of product under Chapter Heading 59.02 or 59.06 of the Central Excise Tariff Act, 1985.Analysis:The case involved civil appeals under Sec. 35L(b) of the Central Excise Act against show cause notices issued to an assessee engaged in manufacturing vehicle tyres and calendered fabric using dipped rubberised tyre cord fabric. The Department alleged misclassification under Chapter Heading 59.05 instead of 59.02. The dispute centered around whether the product was 'dipped rubberised tyre cord fabric' falling under Chapter Heading 59.06 as claimed by the assessee, or 'tyre cord fabric of high tenacity yarn' under Chapter Heading 59.02 as contended by the Department.The Supreme Court referenced Chapter Heading 59.02 and 59.06 of the 1985 tariff to delineate the description of goods under each heading. The Court emphasized the need for a thorough examination of the manufacturing process to determine the correct classification. The judgment highlighted the relevance of prior Tribunal decisions in distinguishing between rubberised and dipped tyre cord fabric based on rubber content and fabric composition. The Court directed the adjudication Commissioner to reevaluate the matter considering the process followed by the assessee and the distinction between the two types of fabric as per relevant case law.The Court refrained from expressing any opinion on the merits of the case and allowed the appeals with no order as to costs. It underscored the importance of a comprehensive assessment by the Department on marketability, manufacturing process, and the use of high tenacity yarn in the product. Both parties were granted the opportunity to present arguments on the merits, ensuring a fair examination of all aspects of the classification issue. The judgment aimed at facilitating a thorough reconsideration of the matter in light of the legal principles and precedents governing the classification of the product under the Central Excise Tariff Act, 1985.