Customs, Excise and Gold Tribunal - Delhi
Collector Of C. Ex. vs M.M. Rubber Co. Ltd. on 16 February, 1989
Equivalent citations: 1989(22)ECC245, 1989(41)ELT343(TRI-DEL)
ORDER D.C. Mandal, Member (T)
1. The question to be decided in this appeal is whether the respondents' rubber products bus seats, car seats, scooter seats and motor cycle seats are correctly classifiable under Item 16A(1) of C.E.T. as latex foam sponge or under Item 34-A as motor vehicle parts.
2. The facts of the case, in brief, as stated in the order-in-original No. C.No. V/16A/3/22/80, dated 28.2.81 passed by the Assistant Collector of Central Excise, Bangalore and also stated by the learned Advocate and the learned J.D.R. during the hearing before us, are that the respondents are manufacturers of latex foam sponge articles falling under Central Excise Tariff Item 16A(1). They manufacture rubber products, viz. pillows, cavity sheetings, sofa cushions, chair cushions, cinema seat cushions, scooter seats, motor cycle seats, bus seats, car seats etc. They were filing classification lists from time to time in respect of all the products manufactured by them under Item 16A(1) of the Central Excise Tariff and the same were approved by the proper officer of Central Excise. The Company filed two revised classification lists No. 5/80 and 6/80 both dated 9.4.1980 seeking classification of the scooter/motor cycle/car/bus seats as motor vehicle parts under Tariff Item 34-A for the period from 29-5-1971 to 10-5-1979 and under Item 68 of the Central Excise Tariff for the period from 11-5-1979. Prior to this, they classified these products under Tariff Item 16A(1) and paid Central Excise duty under that Tariff Item without raising any protest. As the scooter/motor cycles/bus/car seats are primarily rubber products classifiable under Tariff Item 16A, and the Tariff Item 68 is a residuary Item, which will attract only if the products are not classifiable under any other Tariff Item, the Company was informed by the Assistant Collector of Central Excise vide his letter C.No. V/16A/3/22/80 dated 29-7-1980 that the said goods were correctly classified under Tariff Item 16A in the earlier classification lists and the said goods could not be reclassified as contended by them. In their letter No. MR-CE/1170/80, dated 11-8-1980, the respondents requested for an appealable order after giving them an opportunity to present their case. A show cause notice was, therefore, issued by the Assistant Collector of Central Excise on 10-9-1980 asking them to show cause why the said products should not be classified under Tariff Item 16-A as done earlier and their request for reclassification as in the aforesaid two classification lists should not be rejected. After considering their reply to the Show Cause Notice and after giving them personal hearing the Assistant Collector of Central Excise held as follows :-
"9. There is no dispute to the effect that these seats are made out of Latex Foam Sponge in the shape of seats etc., in different sizes or thickness. Tariff Item 16-A clearly specifies Latex Foam Sponge and when this is manufactured it has to be in some shape or other. It is also not doubted that even though the articles have peculiar shapes and designs they are not capable of being used straight away as Motor Vehicle Parts in the form of seats, unless further finishing is done in the form of fixing covers etc. Hence, what has been manufactured is distinctly an article made out of Latex Foam Sponge.
ORDER In view of the above, I hold that the product in question should be classifiable under Tariff Item No. 16-A of the Central Excise Tariff."
Being aggrieved of the aforesaid order of the Assistant Collector, the respondents filed an appeal before the Appellate Collector of Central Excise, Madras. In his impugned order, the Appellate Collector followed his earlier orders wherein he held that such seat cushions were classifiable under Item 34-A of the Central Excise Tariff as motor vehicle parts and allowed the appeal of the respondents herein.
In exercise of the power conferred on the Central Government under Section 36(2) of the Central Excises and Salt Act, as it then existed, the Government of India examined the records of the case relating to the impugned order-in-appeal No. 291/81, dated 31-10-1981 passed by the Appellate Collector of Central Excise, Madras to decide whether the same was proper, legal and correct. It appeared to the Central Government that after manufacture the impugned goods emerged as "Latex foam sponge" in specific shape and were, therefore, prima facie covered under the specific entry 16A(1) of the Central Excise Tariff. It also appeared to the Central Government that in order to become identifiable motor vehicle parts the impugned goods had to be affixed to a metal plate and thereafter covered by leather or rexin. It, therefore, appeared to the Central Government that the Appellate Collector erred in classifying the impugned goods under Item 34-A of the Central Excise Tariff. The Central Government were, therefore, tentatively of the view that the impugned order-in-appeal was not proper, legal and correct and they proposed to set aside the same and restore the ordcr-in-original dated 28-2-1981 passed by the Assistant Collector, or pass orders as deemed fit after considering the submissions made by the respondents. Accordingly, a show cause notice was issued by the Central Government on 27-2-1982 asking the respondents to show cause against the proposed action. The proceedings initiated by the Central Government in that show cause notice stood transferred to this Tribunal for being disposed of as an appeal consequent on the setting up of the Tribunal with effect from 11-10-1982.
3. At the beginning of the hearing before us on 24-1-1989, the learned Departmental Representative Shri Chakraborty stated that the respondents herein had filed a Writ Petition in Delhi High Court against Order-in-Original No. C.No. V/16A/3/22/80, dated 28-2-1981 passed by the Assistant Collector of Central Excise, Bangalore in this case, before the Appellate Collector set aside the said order of the Assistant Collector by the impugned order dated 31-10-1981. After the order of the Assistant Collector was set aside by the Appellate Collector on 31-10-1981, the respondents did not withdraw the Writ Petition filed by them in Delhi High Court. But there is no Writ Petition in any High Court (including Delhi High Court) against the review proceedings initiated by the Central Government in the aforesaid show cause notice dated 27-2-1982. These facts were confirmed by the learned Advocate Shri Lukose. As there is no Writ Petition against these proceedings and hence no stay order also, we asked the learned Advocate and the learned Departmental Representative to argue the matter so that after hearing them, this appeal can be decided by us.
4. Arguing for the Revenue, Shri Chakraborty has drawn our attention to paragraph 9 of the Order-in-Original of the Assistant Collector, extract of which have been given by us in paragraph 2 (Supra) and has stated that the classification of such latex foam sponge cushion seats were already decided by this Tribunal vide Order No. 686/83-D, dated 18-11-1983 reported in 1984 (15) ELT 198 (Tribunal) in the case of Collector of Central Excise, Madras v. MM. Rubber Co. Ltd., Madras and also in the order No. 569/88-D, dated 22-8-1988 in the case of Collector of Central Excise, Madras v. MM Rubber Co. Ltd. Order No. 686/83-D, dated 18-11-1983 covers classification relating to the period from 1-4-1976 to 31-3-1977 and the Order No, 569/88-D, dated 22-8-1988 relates to the periods prior to and after re-structuring of the Central Excise Tariff Item 34-A with effect from 11-5-1979. In both these orders, the Tribunal decided the classification of these products under Tariff Item 16A(1) as Latex Foam Sponge and not under Item 34-A of the Tariff as motor vehicle parts.
5. Shri Lukose, for the respondents, has argued that there was no reason for the Government of India to come to the tentative conclusion that the Order-in-Appeal of the Appellate Collector was not legal and proper. The Central Government had, therefore, no jurisdiction to exercise the power under Section 36(2) of the Central Excises and Salt Act, 1944 (as it then existed). In support of this argument he has relied on the decision reported in 1986 (26) ELT 471 (Cal.) in the case of Gonterman Peipers (India) Ltd. v. Additional Secretary to the Government of India, in which it was held that for assuming jurisdiction under Section 36(2) of the Central Excises and Salt Act, 1944, there must be sufficient material on the record to show that the order sought to be revised was not correct, legal and proper. He has disputed the facts stated in the Order No. 569/88-D, dated 22-8-1988 and has said that the said decision of the Tribunal should not stand in the way of deciding the present case in favour of the respondents. He has argued that there is no res-judicata in tax matters and on this point he has relied on the judgments reported in AIR 1967 S.C. 762,1987 (10) E.T.R. 792 (Tribunal) and 1987(30) ELT 562 (Tribunal). On merits of the case, the learned Advocate has argued that the impugned latex foam seats are manufactured by the respondents directly from liquid latex as per orders of the customers and this product becomes motor vehicle part and not foam sponge. The product is, therefore, correctly classifiable under Tariff Item 34-A. He has cited Order No. 518 of 1980, dated 16-7-1980 passed by the Member, Central Board of Excise and Customs, New Delhi. He has also argued that the functional character of the excisable product should be the deciding factor for classification and for this argument he has relied on the following decisions :-
(i) 1986 (25) ELT 473 (S.C.) - Atul Glass Industries Ltd. and Ors. v. Collector of Central Excise and Ors.
(ii) 1987 (27) ELT 709 (Tribunal) - Sarong Spring Manufacturing Company v. Collector of Central Excise, Baroda
(iii) 1987 (32) ELT 735 (Tribunal) -Automotive Ancillary Services v. Collector of Central Excise, Madras
(iv) 1987 (31) ELT 369 (Bom.) - P.M.P. Auto Industries Ltd. v. Union of India and Ors.; and
(v) 1987 (31) ELT 344 (Bom.) - T.I. Miller Ltd. v. Union of India and Anr.
He has pleaded for quashing the review show cause notice and confirming the Order-in-Appeal of the Appellate Collector.
6. We have considered the records of the case and the arguments of both sides. The argument of the learned Advocate challenging the jurisdiction of the Central Government to exercise power of review under Section 36(2) of the Central Excises and Salt Act, 1944, as it then existed, is not acceptable as the Government of India have given reasons in paragraph 4 of the show cause notice dated-27-2-1982 as to why they came to the tentative view that the Order-in-Appeal of the Appellate Collector was not proper, legal and correct. The judgment of Hon'ble Calcutta High Court reported in 1986 (26) ELT 471 (Cal), relied on by the learned Advocate, is not, therefore, applicable to the facts of the present case. The proposition that there is no res-judicata in tax matters is not disputed. The learned Advocate has been given full liberty to argue this case, including the merits thereof. But we are unable to accept his contention that the impugned latex foam seats are not correctly classifiable under Tariff Item 16A(1). Latex foam sponge is classifiable under T.I. 16A(1). The products manufactured by the respondents are latex foam sponge although they are directly manufactured from liquid latex and are given particular shape and size. These cushions are not used as bus/car/motor cycle seats in the naked form in which they are cleared from the factory. Rexin or leather covers are put on the latex foam sponge cushions for the purpose of using them as bus/car/motor cycle seats, which is admitted in para 20 of the reply to the review show cause notice and also by the learned Advocate during the hearing. The latex foam cushions as manufactured by the respondents are not ready for use as motor vehicle parts as such. End use is also not relevant for deciding classification as already held in the judgments reported in (i) 1983 ELT 1566 (S.C.) - Dunlop India Ltd. & Madras Rubber Factory Ltd. v. Union of India and Ors. (Para 42), (ii) 1985 (21) ELT 3 (S.C.) - Indian Aluminium Cables Ltd. v. Union of India and Ors. (Paragraph 13), (iii) 1984 (18) ELT 141 (Bom.) - Sainet Pvt. Ltd. and Anr. v. Union of India and Anr. (Paragraph 18) and (iv) 1987 (27) ELT 273 (A.P.) - Golden Press v. Deputy Collector of Central Excise, Hyderabad and Anr. Paragraphs 13 & 17). Exactly similar issue as in the case came for detailed examination before this Tribunal, in the respondents' own case and this Tribunal, vide Paragraphs 5 & 6 of the order No. 686/83-D, dated 18-11-1983, reported in 1984 (15) ELT 198 (Tribunal), held as follows :-
"5. We have carefully considered the matter. A part or accessory of a motor vehicle is one which is ready for fitment to the motor vehicle either as original equipment or as replacement. This is the popular or common understanding of the concept of machinery parts or spare parts. No customer of a part or accessory for his motorcycle or scooter would like to buy an unfinished article which cannot straightaway be used by him for fitment. Cushion seats cleared by the appellants in unfinished or naked form cannot be called a part or accessory of a motor vehicle. No doubt, they are purchased by manufacturers of motor vehicle. But the point is that those manufacturers cannot and do not use the naked seats as such. They have to carry on further manufacturing operations thereon like stitching the leather or rexin cover before the seats become ready for fitment to the motor vehicle. We, therefore, hold that the subject cushion seats, in the form they are cleared from the respondents' factory, do not merit classification under Item 34A of the Tariff. The argument that the seats were specially designed for a specific use ultimately cannot decide classification of the unfinished seats at the time of clearance. All the authorities cited by the respondents relate to cases of finished articles which could straightaway be fitted to the appliance or machinery and they do not, therefore, advance the respondents' case for classification of the subject goods as parts and accessories of motor vehicles.
6. The only question that remains to be decided by us is whether the subject seats could be classified as "Latex Foam Sponge" under item 16A(1). The respondents had been clearing their latex foam sponge pillows, cavity sheeting, chair cushions, cinema seats, scooter seats, bus seats etc. under the broad description "Latex Foam Sponge Brand 'M .M. Foam'". There has, therefore, never been any doubt that all these articles were only different varieties of latex foam sponge and the entry 16A(1) covered by them specifically. We were informed by the respondents that their subject seats are moulded as such from latex and are not cut from any bigger piece of latex foam sponge. The explanation added to Item 16A(1) on 1-3-1983 to include thereunder "articles made of latex foam sponge", is, therefore, hardly relevant for classification of the subject seats. We hold that the original entry "Latex foam sponge" covered latex foam sponge in all its forms and varieties and hence the subject seats too were covered by it."
The present case is covered on all fours by the above decision. We find no justification to hold a different view. Respectfully following the said decision, we hold that the disputed products of the respondents are correctly classifiable under Item 16A(1) of the Central Excise Tariff and not under Tariff Item 34-A as motor vehicle parts.
7. We, therefore, set aside the impugned order of the Appellate Collector and allow this appeal.