Customs, Excise and Gold Tribunal - Delhi
Good Year (India) Ltd. vs Commissioner Of Central Excise on 25 July, 2003
Equivalent citations: 2003(90)ECC151, 2003ECR441(TRI.-DELHI), 2003(157)ELT560(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. In this Appeal, filed by M/s. Good Year (India) Ltd., the issue involved is whether the rubberized and calendered tyre cord warp manufactured by them is classifiable under sub-heading 5902.10 of the Schedule to the Central Excise Tariff Act as confirmed by the Commissioner under the impugned order or under Heading 59.06 of the Tariff as claimed by them.
2. Shri Joseph Vellapally, learned Senior Advocate, submitted that the tyre cord fabric is first dipped in a Resorcinol solution and thereafter the rubber compound is applied and the fabric is calendered; that demands of duty had been raised against some tyre companies; that in some cases the demand was raised after the stage of calendering; that in the present matter also the demand has been raised after the stage of calendering; that under a letter dated 22-9-80 the Appellants were directed for the first time to apply for Central Excise Licence for the manufacture of cord warpsheet, that the Appellants under their letter dated 27-9-1980 had submitted their application for the licence under protest; that they had filed a Writ Petition No. 1353 of 1980 in the High Court of Delhi challenging levy of Additional Excise Duty; that similar Writ Petitions were also filed by other tyre companies; that the Department in reply filed in the High Court, had mentioned the manufacturing process which goes to show that the Department was fully aware of the processes undertaken by the Appellants; that the Appellants in their Re-joinder filed in the High Court had mentioned that the impugned product is an in process material and is not a marketable commodity and is not bought and sold in the market as such and that no duty of excise is payable in respect of rubber products. He, further, mentioned that a writ petition had also been filed by M/s. MRF Ltd. on the same issue in Bombay High Court which was allowed by the High Court as reported in 1985 (22) E.L.T. 5 (Bom); that the said judgment was accepted by the Board and a Circular was issued directing the Collectorate to drop other proceedings relating to levy of AED in respect of processed and rubberized tyre cord fabrics; that pursuant to this, the Department conceded the writ petition filed by the Appellant in the High Court of Delhi and their writ petition was accordingly allowed vide order dated 4-1-93. He also mentioned that the Superintendent visited their unit on 25th August, 1995 and verified the manufacturing process and satisfied himself about the correctness of the classification list filed by them.
3. The learned Senior Counsel for the Appellants, thus, contended that the demand is time-barred for the period beyond six months as there is no case of suppression as the facts were well within the knowledge of the Excise Authorities; that the findings of the Commissioner in Para 15 of the impugned order on the aspect of time-limit to the effect that "it cannot be construed to mean that the Department was in knowledge of the processing or manufacturing of such goods by the assessee, when no declaration regarding classification or price was filed by the assessee in respect of these goods" is against all decisions of the Supreme Court. He relied upon the decision in Pushpam Pharmaceutical Company v. CCE, 1995 (78) E.L.T. 401 (S.C.) and Lubri-Chem Industries Ltd. v. CCE, Bombay -1994 (73) E.L.T. 257 (S.C.) wherein the Supreme Court has held that in order to make a demand sustainable beyond a period of six months, "something more positive than mere inaction or failure on the part of the assessee or conscious or deliberate withholding of information when the assessee knew otherwise was required..." Reliance has also been placed on the decision in T.N. Dadha Pharmaceuticals v. CCE, Madras - 2003 (152) E.L.T. 251 (S.C.)
4. Coming to merits of the case, the learned Senior Counsel submitted that the issue regarding classification of the product has been settled by the Tribunal in a number of cases; that it has been held by the Tribunal in Vikrant Tyres Ltd, v. CCE, Bangalore - 1997 (90) E.L.T. 178 (T) that rubberized textile fabrics weighing not more than 1500 gms per squaremeter and in which rubber predominated in weight would fall under Heading 59.05 of the Tariff; that again in Falcon Tyres Ltd. v. CCE, Bangalore - 1996 (88) E.L.T. 450 (T), the Tribunal classified the calendered fabric under Heading No. 59.05. He mentioned that the process employed by all the tyre companies to manufacture tyre cord warp is same; that only compound may be different. He further contended that in the decisions referred to above the view of the Department itself was that the product in question would fall under Heading 59.05 of the Tariff. Reliance has also been placed on the following decisions :
(i) Apollo Tyres Ltd. v. CCE & Cus, Vadodara - 1999 (108) E.L.T. 247(T)
(ii) Birla Tyres v. CCE & Cus, Bhubaneswar-1 - 2001 (135) E.L.T. 1313 (T)
(iii) CEAT Ltd. v. CCE & Cus, Aurangabad - 1999 (111) E.L.T. 383 (T)
(iv) MRF Ltd. v. CCE, Goa & Chennai - 1999 (105) E.L.T. 619 (T)
4. Finally, the learned Senior Counsel submitted that the Appellants are not manufacturer of textile as their final products are tyres and tubes; that if the contention of the Revenue to classify the impugned product under Heading No. 59.02 is upheld, it would go to show that there is no manufacture as the input also falls under the same Heading and no different commercial commodity emerges; that in case a different commercial commodity emerges then it ceases to be classifiable under Heading 59.02 and hence no Additional Excise duty is leviable; that in any case AED cannot be charged twice; that penalty under Section 11AC of the Central Excise Act cannot be imposed for the period when Section 11AC was not in the statute book.
5. Countering the arguments, Shri M. Chandrasekharan, learned Senior Advocate for Revenue, submitted that it is apparent from the processes undertaken by the Appellants that they manufacture rubberized and calendered fabrics for use in the manufacture of tyres; that it is well established that a process of manufacture is involved; that the change in Heading of the Tariff is not necessary to determine the question of manufacture as held by the Supreme Court in Laminated Packaging v. CCE - 1990 (49) E.L.T. 326 (S.C.). He, further, submitted that in all the decisions, relied upon by the appellants, the dispute was between Chapter 40 of the Tariff and Heading 59.05; that there is no decision dealing with the question involved in the present Appeal as to whether the impugned product is classifiable under Heading 59.02 or 59.06; that HSN Explanatory Notes below Heading 59.02 clarifies that the Heading covers "tyre cord fabrics whether or not dipped or impregnated with rubber or plastics". He finally mentioned that rubberized and calendered tyre cord fabrics are entirely different and distinct from the unprocessed tyre cord fabrics in composition as well as in character; that however, processed tyre cord fabrics would be classifiable under Heading 59.02 being "tyre cord fabrics of high tenacity yarn of nylon or other polyamides, polyesters or viscose rayon"; that Heading 59.06 covers rubberized textile fabrics other than those of Heading 59.02; that rubberized tyre cord fabrics are clearly outside the purview of Heading 59.06.
6. In reply, the learned Senior Advocate for the Appellants mentioned that in the case of Apollo Tyres Ltd., supra, the Appellants had claimed classification under Heading 59.05 and proceedings were initiated against them for classifying the goods under Heading 59.02; that, therefore, it cannot be claimed by Revenue that the decisions relied upon have not considered the classification of the impugned product under Heading 59.02 of the Tariff.
7. We have considered the submissions of both the sides. The rival Heading reads as under :
"59.02 Tyre cord fabrics of high tenacity yarn of nylon or other polyamides, polyesters or viscose rayon. 59.06 Rubberized textile fabrics other than those of Heading 59.02."
8. The facts which are not in dispute are that the grey tyre cord fabrics is dipped in a Resorcinol solution and thereafter the rubber compound is applied and the fabric is calendered. The Appellants thus get rubberized tyre cord fabric after the processing undertaken by them. Heading 59.02 specifically covers tyre cord fabrics of high tenacity yarn of nylon or other polyamides polyester or viscose rayon. According to the Explanatory Notes of HSN, "this heading covers tyre cord fabric, whether or not dipped or impregnated with rubber or plastic. This fabric is used in the manufacture of tyres and consists of a warp of parallel filament yarn held in place, at specific distance by waft yarn." The Explanatory Notes below Heading 59.06 clearly mentions that Heading 59.06 covers "textile fabrics impregnated, coated, covered or laminated with rubber, including dipped fabrics (other than those of Heading 59.02)". The Explanatory Notes further mention that these rubberised fabrics are used principally for the manufacture of water proof apron specifically ready-made garments, the pneumatic articles, camping equipment, sanitary goods, etc. It is thus apparent from the Explanatory Notes of HSN that all rubberised textile fabrics will fall under Heading 59.06 except the fabrics of Heading 59.02. Heading 59.02 specifically covers tyre cord fabric whether or not dipped or impregnated with rubber or plastics. As it is not in dispute that the impugned product is tyre cord fabric on which rubber compound has been applied and is used in the manufacture of tyres, the appropriate classification of the product will be under Heading 59.02 only and not under Heading 59.06. It is also settled law that the heading which provides the most specific description shall be preferred to heading which provides a mere general description. In the present matter Heading 59.02 provide very specific description of the product in question.
9. It has been contended by the Appellants that the issue regarding classification of the product has been decided by the Tribunal in respect of other tyre companies in many decisions. The first decision is in the case of Falcon Tyres Ltd. where the dispute was between sub-heading 4005.00 and Heading 59.05 (present 59.06). The Appellate Tribunal relying on Note 3a(i) of Chapter 59 held that "in view of the specific entry for rubberised textile fabrics this entry should prevail over general entry. As there is a specific entry for calendered fabrics which are nothing but rubberised textile fabrics, we hold that fabrics are classifiable under Heading 59.05." In this decision Heading No. 59.02 of the Central Excise Tariff was not at all considered. Similarly, in the case of Vikrant Tyres Ltd. again the conflict was between sub-heading 4006.90/4005.00 and Heading No. 59.05. There was no reference to Heading No. 59.02. The decision in the case of Apollo Tyres was given following the ratio of the decision in Falcon Tyres and Vikrant Tyres. No doubt Heading No. 59.02 was claimed by the Revenue in Apollo Tyres case, the Tribunal disregarded the same observing that "the classification of calendered/rubberised tyre cord fabrics captively consumed in the manufacture of tyre which also undergoes prior process of dipping as being assessable to duty under Heading 59.05 (now 59.06) of the CETA has been settled by the decision of the Tribunal in falcon Tyres and Vikrant Tyres (supra). The Board has also clarified that the product falls for classification under that Heading. The Supreme Court decisions cited above make it clear that the Departmental authorities are bound by such clarification and are to follow the decisions on classification by the higher forum. Though the Commissioner in the impugned order has not dealt with the implication of the precedent decision and clarification of the Board, we find that the matter is settled clearly enough about the classification of the goods in dispute which have to be followed by the Departmental authorities." The Appellate Tribunal therefore, allowed the Appeal filed by M/s. Apollo Tyres by classifying the product under Heading 59.05 without examining as to whether the tyre cord fabric will fall under Heading 59.02. Similarly, in other cases also the Appellants have been contesting classification of the product under Heading 59.06 on the basis of Tribunal's earlier decision in Vikrant Tyres etc. without discussing the classification of the product under Heading 59.02. However in view of the specific Tariff Heading for tyre cord fabrics and in view of the Explanatory Notes of HSN, the product is appropriately classifiable under Heading 59.02. We also observe that Board's Circular No. 10/87-CX, dated 29-7-87 was pertaining to classification of dipped fabrics and not specifically tyre cord fabrics. In our view the said Circular does not advance the case of the Appellants that the tyre cord fabric which is rubberised and calendered will fall under Heading 59.06 (earlier 59.05) and not under Heading 59.02.
10. We also do not agree with the submissions of the learned Senior Advocate for the Appellants that if the impugned product is classified under Heading 59.02, no excise duty will be chargeable as the inputs is also classifiable under the same Heading. For the purpose of levying the Central Excise duty, it is not necessary that there should be change in Tariff Heading of the finished product. The Supreme Court in the case of Laminated Packings (P) Ltd. v. CCE -1990 (49) E.L.T. 326 (S.C.) did not accept the contention of the Appellant that excise duty is not chargeable because the goods belonged to the same entry. The Supreme Court has held that if the goods are different identifiable goods, known as such in the market, "the manufacture occurs and if manufacture takes place, it is dutiable".
11. We, however, agree with the learned Senior Advocate for the Appellants that the part of demand of duty pertaining to the period 1-4-95 to 31-7-97 is hit by time-limit under Section 11A(1) of the Central Excise Act. In view of the facts narrated by the senior Counsel it cannot be claimed by the Department that there was no suppression on their part in not filing the classification declaration. The Department was aware of the manufacturing process undertaken by the Appellants as the issue regarding the classification of the impugned product has been raised as early as September, 1980 by the Department. It has been held by the Supreme Court in Pushpam Pharmaceutical Company (supra) that "a perusal of the proviso to Section 11A(1) of the Central Excise Act indicates that the expression "suppression" has been used in company of such strong words as fraud, collusion or wilful default. Infact it was the mildest expression used in the proviso. Yet the surroundings in which it has been used, it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties, omission by one, to do what he might have done and not that he must have done, does not render it suppression." We, therefore hold that demand beyond the period of six months prior to the date of issue of show cause notice is time-barred. As the issue involved is one of interpreting the Tariff Heading under which the impugned product will be classifiable, this is not a fit case for warranting imposition of any penalty on the Appellants. We, therefore, set aside the penalty imposed on them. The Appeal is disposed of in the above terms.