1996 (12) TMI 146 - AT - Central Excise

Appellate Tribunal reclassifies Tyre Cord Warpsheets as Fabrics, aligning with legal precedents and technical definitions.

The Appellate Tribunal overturned the classification of Tyre cord warpsheets as Rubber products under Tariff Item 16A(2) and ruled in favor of classifying ... Classification of goods - tyre cord warpsheets - fabrics (wide meaning) - impregnation/coating/lamination and predominance of base fabric - manufacture by transformation - classification under Tariff Heading 22Classification of goods - tyre cord warpsheets - fabrics (wide meaning) - impregnation/coating/lamination and predominance of base fabric - Tyre cord warpsheets dipped in resorcinol solution are classifiable as fabrics under Tariff Heading 22 rather than as rubber products under Item 16A(2). - HELD THAT: - The Tribunal applied the authoritative exposition in Delhi Cloth & General Mills, which treats 'fabric' in a broad sense encompassing textile manufactures irrespective of material or method of construction, and recognised tyre cord warp fabrics as textile fabrics. The court accepted that textile reference works and ISI specifications treat tyre cord warp sheets as woven fabrics and that Item 22 covers a wide range of fabrics including those impregnated or coated. The Tribunal rejected the Revenue's contention that the dipping process or material predominance would reclassify the product as a rubber article, observing that the predominance test in Tariff Item 22 applies only with reference to the pre-existing base fabric as clarified by the proviso and explanation in the tariff (as explained in Fenoplast). Earlier decisions holding that the dipping/processing may amount to manufacture were considered, but the determinative principle was that the ultimate product remains a fabric within Item 22. Applying these principles to the material before it, the Tribunal concluded that the goods fall under Tariff Heading 22 and not under Item 16A(2). [Paras 5, 6, 8, 9]Goods are classifiable under Tariff Heading 22 of the erstwhile Central Excise Tariff; the impugned order is set aside and the Revenue Appeal is allowed.Final Conclusion: The Tribunal held that the tyre cord warpsheets treated by dipping in resorcinol solution are textile fabrics within the wide meaning of Item 22 and accordingly are classifiable under Tariff Heading 22; the impugned Collector (Appeals) order was set aside and the Revenue Appeal allowed. Issues:Classification of Tyre cord warpsheets under Central Excise Tariff - Whether under Tariff Item 16A(2) as Rubber products or under Item 22.1(B) as Fabrics.Analysis:1. The Appellate Tribunal CEGAT, New Delhi heard an appeal against the Order-in-Appeal No. 242/87-C, dated 31-8-1987 of the Collector of Central Excise, Madras regarding the classification of Tyre cord warpsheets.2. The Collector of Central Excise (Appeals) classified the Tyre cord warpsheets dipped in Resorcinol Solution under Tariff Item 16A(2) as Rubber products, while the Revenue argued that they should be classified under Item 22.1(B) as Fabrics based on the decision of the Hon'ble Apex Court in previous cases.3. The Revenue contended that the Tyre cord warpsheets, even after processing, should be considered as fabrics based on legal precedents, including the decision in the case of Delhi Cloth & General Mills Co. Ltd. v. State of Rajasthan & Others. They argued that the fabric is a processed fabric and should be liable for duty under Tariff Heading 22.4. On behalf of the Respondents, it was argued that the Tyre cord warp sheets are not fabrics but a combination of Nylon and Rayon cords held together by cotton threads, merely dipped in resorcinol solution. They relied on judgments like M.R.F. Ltd. v. U.O.I. & Otrs. and G.O.I. v. Madura Coats to support their stance that the goods are not fabrics and do not undergo a significant transformation.5. The Hon'ble Apex Court's decision in the case of Delhi Cloth and General Mills Co. Ltd. v. State of Rajasthan & Others was cited, where it was held that Tyre cord warp fabrics are indeed fabrics based on technical definitions and specifications of textiles, supporting the classification under Item 22 of the Central Excise Tariff Act.6. It was argued that the Apex Court's decision in D.C.M. Ltd. v. State of Rajasthan & Others regarding the classification of fabrics for additional duty of Excise under the Additional Duties of Excise (Goods of Special Importance) Act, 1957, also supported the classification of the goods under Item 22.7. The Madras High Court in a separate case relied on the Apex Court's judgment to classify Tyre Cord fabric as fabrics, further supporting the classification under Item 22 of the Central Excise Tariff Act.8. Emphasis was placed on the manufacturing process and the level of transformation undergone by the Tyre cord warpsheets. Legal precedents like M.R.F. Ltd. v. C.C.E. and Empire Industries v. U.O.I. were cited to establish that the process of dipping the sheets in resorcinol solution constitutes manufacturing, leading to a new product's creation.9. The Tribunal ultimately held that the Tyre cord warpsheets are classifiable under Tariff Heading 22 of the Central Excise Tariff, overturning the previous classification under Tariff Item 16A(2) as Rubber products, and allowing the Revenue's appeal.This comprehensive analysis of the legal judgment outlines the arguments presented by both parties, references to relevant legal precedents, and the final decision of the Appellate Tribunal regarding the classification of Tyre cord warpsheets under the Central Excise Tariff.