TaxTMI 
TaxTMI 
2020 (5) TMI 63
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.....90. We shall refer to the specific entries against this item later in the judgment. The respondent, at the material point of time were engaged in the business of manufacture of textile floor coverings and car matting. The subject-goods have been referred to interchangeably by the revenue also as car mattings and car carpets. The respondent, at the material time, were clearing the goods declaring them to be goods against Heading No.570390.90. Effective rate of excise duty on goods under that entry was 8% and education cess at the applicable rate for the subject period. We find this rate of duty, inter-alia, from the order of the Commissioner dealing with the first and the second show-cause notices. The rate of basic excise duty would have been 16% apart from education cess if these goods were classified against goods specified in heading no.8708.99.00. Altogether three show-cause-notices were issued against the respondent over clearance of goods under the said heading. These notices required them to answer as to why they should not be charged the differential rate of duty and interest. We would like to point out here that in the show-cause notices, the respective chapter sub-headin....
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....agons and racing cars (iv) motor vehicles for transport of goods (v) special purpose motor vehicles, other than those principally designed for the transport of persons or goods. The description of goods in Chapter 87 of the Central Excise Tariff of India (2004-05) in the eight digit format list the tariff-items of chapter 8708 have been depicted in the following manner:- "Tariff Item (1) Description of Goods (2) Unit (3) Rate of duty (4) 8708 - Parts and accessories of the motor vehicles of headings 8701 to 8705 8708 10 - Bumpers and parts thereof: Kg 16% 8708 10 10 - For tractors Kg 16% 8708 10 90 - Other Kg 16% - Other parts and accessories of bodies (including cabs): Kg 16% 8708 21 00 - Safety seat belts u 16% 8708 29 00 -Other Kg 16% -Brakes and servo-brakes and parts thereof: 8708 31 00 - Mounted brake linings Kg 16% 8708 39 00 - Other Kg 16% 8708 40 00 - Gear boxes Kg 16% 8708 50 00 - Drive-axles with differential, whether or not provided with other transmission components Kg 16% ....
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.... and blending equipment's, from where it is transported to carding equipment's. After carding, the same is put for Needle punching. After needle punching, the fabric is then chemically treated in order to provide strength to the carpet fabric as per customer requirement. After chemical binding, the fabric is laminated as per customer requirement. The laminated fabric/impregnated fabric is then moulded as per the requirement and trimmed to be fixed in the vehicle. After trimming the Namda felt is fixed on the back of the carpet as per requirement. Thereafter, the child parts as well as grippers are fixed wherever required. The resultant product is the moulded car carpets which was classified under sub-heading 5703.90." (quoted from the order of the Commissioner) 5. The respondent's argument that the Chapter heading 5703.90 covered carpets and other textile floor coverings and they were manufacturing those items only was rejected by the Commissioner. This plea, however, was subsequently accepted by the Tribunal. 6. Reference has been made before us to "Harmonized Commodity Description and Coding System", Explanatory Notes issued by the World Customs Organisation (2002)....
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.... further provides:- "3. Refences in Chapters 86 to 88 to "parts" or "accessories" do not apply to parts or accessories which are not suitable for use solely or principally with the articles of those Chapters. A part or accessory which answers to a description in two or more of the headings of those Chapters is to be classified under that heading which corresponds to the principal use of that part or accessory." 8. There is reference to "PARTS AND ACCESSORIES" under the main heading "GENERAL", in Section XVII of the HSN Explanatory Notes, 2002. Under the sub-heading "(iii) PARTS AND ACESSORIES", a three-layer test has been postulated. It is on satisfying all of these conditions a particular item would come under that chapter head. The sub-head III reads:- "(III) PARTS AND ACCESSORIES It should be noted that Chapter 89 makes no provision for parts (other than hulls) or accessories of ships, boats or floating structures. Such parts and accessories, even if identifiable as being for ships, etc., are therefore classified in other Chapters in their respective headings. The other Chapters of this Section each provide for the classification of parts and access....
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....otes dealing with parts and accessories under chapter-head 87.08 includes floor mats (other than of textile materials or unhardened vulcanised rubber). 10. The Commissioner found that car mattings satisfied all the tests enumerated in the said explanatory notes of HSN to be treated as parts and accessories classifiable under Chapter 87.08. 11. One of the reasons for such finding was that the car mattings were suitable for use solely or principally with the vehicle and that were not excluded by provisions of Notes to Section XVII. Then he applied the "market test", and concluded that if anybody asked for car matting in the market, the consumer would get a product which could only be used in a car, with fixed length and width. In his order, the Commissioner found that what was excluded was textile carpets of Chapter 57 and not car mattings. 12. The Commissioner, thus, did not accept the assessee's stand and observed:- "(A) what is excluded are the Textile carpets of Chapter 57 and not car mattings. One can only safely infer of exclusion of car matting in the list, provided, if it is established that "car mattings" are nothing but ordinary textile carpets of Chapter ....
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....ing on the back. The car mattings although is of textile carpet origin are not ordinary carpets as explained in the Explanatory Notes of HSN for Chapter 57 and certainly not covered under Chapter 57. When car mattings are not by definition covered under Chapter 57 (as explained above taking reference of the clarificatory notes of HSN) those are not excluded from para-C of HSN General Explanatory Notes on Section XVII referring to parts and accessories Part-III para (c) (Sl.No.7) (page 1412 of HSN Explanatory Notes Vol.4). Thus "car mattings" satisfies the test 2-C. 18.7. From the above discussion it is clear that "car matting" satisfies all the tests enumerated in the explanatory notes of HSN for Chapter XVII, to be treated as a part and accessory classifiable under chapter 87.08 of motor vehicles of Chapter 87.05- 87.07." 13. The other order of Commissioner in connection with the third show-cause notice was passed on 5th January, 2007. The reasoning and conclusion of this order was in the same line with the order passed on 29th September, 2006. Thus, in both the orders the Commissioner sustained the directions for payment rejecting the reply of the as....
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....teristics of textile floor coverings (e.g., thickness, stiffness and strength) but intended for use for other purposes (for example, as wall hangings or table covers or for other furnishing purposes). The above products are classified in this Chapter whether made up (i.e., made directly to size, hemmed, lined, fringed, assembled, etc.), in the form of carpet squares, bedside rugs, hearth rugs, or in the form of carpeting for installation in rooms, corridors, passages or stairs, in the length for cutting and making up. They may also be impregnated (e.g., with latex) or backed with woven or nonwoven fabrics or with cellular rubber or plastics." 16. The said instrument, i.e. HSN Explanatory Notes deal with four entries against tariff item no.5703 in following terms:- "57.03 - CARPETS AND OTHER TEXTILE FLOOR COVERINGS, TUFTED, WHETHER OR NOT MADE UP. 5703.10-Of wool or fine animal hair 5703.20-Of nylon or other polyamides 5703.30-Of other man-made textile materials 5703.90-Of other textile materials This heading covers tufted carpets and other tufted textile floor coverings produced on tufting machines which, by....
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....ls when cleared from the factory, as well as, on the car mattings subsequently manufactured out of duty paid floor coverings in the form of non-woven material in rolls. 4. The Board's earlier 15391$Circular No.5/Floor Coverings/87 (F. No.57/1/87-CX.1) dated 23-6-1987 may be treated as withdrawn and assessments may be finalized in terms of the revised instructions." This circular deals with a situation in which non-woven materials in roll form which were excisable goods, emerged as a different product when the former is transformed as car matting upon application of certain process. For this reason, it was stipulated, that duty would be leviable at two stages. But in these two appeals, we are to determine as to whether car mattings came within the aforesaid tariff under Chapter 57. These appeals do not raise the question as to whether car mattings themselves would be subjected to excise duty or not. The question here is under which tariff-head the duty should be paid. The aforesaid circular does not assist the revenue in the subject appeals. 18. In the three Tribunal decisions cited on behalf of revenue authorities, such car mattings were treated as parts and accessor....
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....curing raw-materials from different manufacturers and out of such materials, they had been producing car mattings and other mattings as well, such as bath mats, telephone mats, floor foot mats etc. with the aid of power operated machines. The process of manufacture involved cutting as per standards, overlocking and stitching etc. Following the case of Sterling India (supra), it was held that floor mats of cars could be classifiable under head No.8708. But again, like in the case of Sterling India (supra), the Tribunal has not given any reasoning for such classification in this decision. The Tribunal in these appeals, following the case of Sterling India (supra) found that the subject-goods were classifiable under Chapter 8708. All these three cases have been decided by the Tribunal, which obviously has no precedent value for us. We however, discussed these cases only for the purpose of ascertaining as to whether the revenue authorities had been treating car mats as a subject head under sub-heading 8708, on proper analysis of competing claim of the assessees to include them in sub-heading 5703. We do not find so from these decisions of the Tribunal. 20. There are authorities i....
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....ecessary that the goods in question should be generally available in the market. Even if the goods are available from only one source or from a specified market, it makes no difference so long as they are available for purchasers. Now, in the appeals before us, the fact that in Kerala these poles are manufactured by independent contractors who sell them to Kerala State Electricity Board itself shows that such poles do have a market. Even if there is only one purchaser of these articles, it must still be said that there is a market for these articles. The marketability of articles does not depend upon the number of purchasers nor is the market confined to the territorial limits of this country. The appellant's own case before the excise authorities and the CEGAT was that these poles are manufactured by independent contractors from whom it purchased them. This plea itself - though not pressed before us - is adequate to demolish the case of the appellant. In our opinion, therefore, the conclusion arrived at by the Tribunal is unobjectionable." 22. Emphasis on technical meaning has been highlighted in the case of Commissioner of Central Excise vs. Wockhardt Life Sciences Limited....
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....ive value is very strong, as observed in the judgments of this Court to which we have already referred. Moreover, the Commissioner himself has referred to the Explanatory Notes in the order-in- original while dealing with the respondent's stand. Thus, we see no reason as to why we should make a departure from the general trend of taking assistance of these Explanatory Notes to resolve entry related dispute. Now, on referring to these Explanatory Notes, we find that one category of carpets [Textile carpets (Chapter 57)] has been excluded specifically from parts and accessories. In our opinion, the subject-item does not satisfy the third condition specified in Section XVII of the Explanatory Notes in relation to "III-Parts and Accessories". A plain reading of clause (C) thereof, which we have quoted above, excludes "textile carpets" (Chapter 57). 26. The main argument of the appellant is that because the car mats are made specifically for cars and are used also in cars, they should be identified as parts and accessories. But if we go by that logic, textile carpets could not have been excluded from Parts and Accessories. We have referred to such exclusion in the preceding paragraph....