AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (5) TMI 63
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.... 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-headings have been referred to as 8708.99.00 and ....
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.... 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% 8708 60 00 - Non-driving axles and parts thereof Kg 16% 8708 70 00 - Road wheels and parts and accessories thereof Kg 16% 8708 80 00 - Suspe....
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....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). These Notes, termed HSN Explanatory Notes have been referred to by the learned Counsel for both the parties. Strong persuasive value of these Explanatory Notes has been recognised by this Court in the cases of CCE vs. Wood Craft Products Ltd. [(1995) 3 SCC 454], Collector of Central Excise vs. Bakelite H....
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....orresponds 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 accessories of the vehicles, aircraft or equipment concerned. It should, however, be noted that these headings apply only to those parts or accessories which comply with all three of the following conditions: (a) They must not be excluded by the terms of Note 2 to this Section (see paragraph (A) below). and (b) They must be suitable for use solely or principally with the art....
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....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 57. But as has been already discussed supra car mattings are commercially known differently in the market than ordinary textile carpets of Chapter 57. From the point of view of its manufacturing process these are entirely different from ordinary carpets. My discussion and logic given in para 18.7.1 clearly indicates that, the "car mattings" are different products. Board's Circular No.117/28/05-CX dt. 17.4.95 clearly states car mattings different product all together. The observations advanced in the judgments of Hon'ble ....
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....he 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 assessee and the orders charged on the respondent duty differential and interest and also imposed penalty. 14. The two appeals of the respondent before the Tribunal were decided in their favour by a composite decision. This decision is assailed before us by the revenue authorities in these two appeals. The Tribunal observed and held:- "5.3 We find that chapter 57 covers not only carpets but also other floor coverings. What has to be considered is that between the terms 'carpets and other floor coverings' the terms 'parts and accessories' which can be considered more specific. Ev....
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....r 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 means of a system of needles and hooks, insert textile yarn into a pre-existing backing (usually a woven fabric or a nonwoven) thus producing loops, or, if the needles and hooks are combined with a cutting device, tufts. The yarns forming the pile are then normally fixed by a coating of rubber or plastics. Usually before the coating is allowed to dry it is either covered by a secondary backing of loosely woven textile material, e.g., jute, or by foamed rubber. Products of this heading are distinguished from the tufted textile fabrics of heading 58.02 by, for example, their stiffness, thickness and strength, which render them suitable for use as floor coverings." 17. Learned counsel fo....
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.... 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 accessories of motor cars. The first case cited is that of Collector of Central Excise, Bombay-II vs. Sterling India [(2000) 115 ELT 807]. This was a decision of CEGAT, New Delhi. Before the Tribunal in this case, the assessee went unrepresented. The goods involved were canvas canopy, floor mattings and seat covers. The Tribunal upheld the Collector's order that the said articles were not classifiable as floor coverings under sub-heading No.5702.90 of the Tariff and those were to be classified under Heading No. 8708.00. The order of the Tribunal does not contain any analysis or reasoning and reads: - "3. We have gone through the facts on record. We find that both the Asstt. Collector of Central Excise, Bombay, who had adjudicated the matter and the Collector of Central Excise (Appea....
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....viously 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 in which it has been held that the popular meaning among consumers would be a major factor for interpretation of dispute relating to classification. This principle has been laid down in the cases of Plasmac Machine Manufacturing Co. Pvt. Ltd. vs. Collector of Central Excise, Bombay [1991 Supp.(1) SCC 57] and Dabur India Ltd. vs. Commissioner of Central Excise, Jamshedpur [(2005) 4 SCC 9]. In the case of Dabur India Ltd (supra), it has been held: - "9. From the abovementioned authorities, it is clear that in classifying a product the scientific and technical meaning is not to be resorted to. The product must be classifiable according to the popular meaning attached to it by those using the product. As stated above, in this case the appellants have shown that all the ingredients in the product are....
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....ndent 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 [(2012) 5 SCC 585] for resolving classification related disputes of goods. In this case, it has been held that a commodity cannot be classified in a residuary entry if there is a specific entry, even if the specific entry requires the product to be understood in a technical sense. 23. "The common parlance test", "marketability test", "popular meaning test" are all tools for interpretation to arrive at a decision on proper classification of a tariff entry. These tests, however, would be required to be applied if a particular tariff entry is capable of being classified in more than one heads. So far as subject-dispute is concerned, we have already referred to Chapter note 1 of Chapter 57. This note stipulates that carpets and other floor coverings would mean floor coverings in which textile materials serve as the ....