Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs United Felt And Carpet on 28 May, 1999
Equivalent citations: 1999(111)ELT807(TRI-DEL)
ORDER C.N.B. Nair, Member (T)
1. The respondents are manufacturers of floor coverings. They had been clearing "semi-finished floor coverings of felt" under Rule 56B for latexing to another unit. The impugned Order-in-Appeal set aside the classification of these items under sub-heading 5602.90 as 'felt' and consequential demand of duty. These appeals of Revenue are directed against that Order-in-Appeal.
2. The appeals seek restoration of the original classification under sub-heading 5602.90 and reiterate the grounds relied upon in the Order-in-Original. It has been pointed out that fibres contained in the impugned items are loose at the pre-latexing stage and could easily be peeled off by application of some force and they become fit for use as floor covering only after they are latexed. Reliance has also been placed on the HSN Explanatory Notes to Chapter 57 that felt when backed by rubber and plastic gives rise to floor covering. Therefore, at the stage before latexing the item is felt and not floor covering.
3. The respondents have filed cross-objections and also additional grounds vide their letter dated November 16,1998.
4. As against the above contentions of the Revenue, the impugned order has held that the item in question does not satisfy the requirements for classification as felt under sub-heading 5602.90. The order notes that the item is neither felt according to the generally accepted identity of felt or the definition of needle loom felt. The order also notes that under commercial or market parlance the item is not treated or recognised as felt. The order further notes that Revenue has produced no material to show that the impugned goods are marketed or marketable as felt at the stage at which they are removed from the respondents' factory, while respondents have produced technical and trade opinions from I.I.T., Delhi and from traders to show that they are not recognised as felt technically or commercially.
5. Arguing the appeals, learned JDR Shri R.S. Sangia submitted that the Order-in-Original has clearly brought out the justification for classifying the Item as felt under Item 5602.90. He referred to the definition of felt, floor covering of felt, punched felt, punched felt ring considered in the order-inoriginal. The Assistant Collector has noted that according to the respondents "tacked web of fibres is kept on jute fabric and simultaneously needle punched". Therefore, what emerged is needle punched felt. The Assistant Collector has also observed that what emerges before latexing is more specifically covered by the description of sub-heading 5602.90 and that there is no stage where the item acquires the intermediate identity as semi-finished floor covering; either it is felt (prior to latexing) or after latexing becomes floor covering. The Assistant Collector has also relied on the definition given in Fairchild's Dictionary of Textiles, 6th edition. Shri Sangia also submitted that the Tribunal has already held in the case of United Felts and Carpets v. Collector of Central Excise, 1996 (81) E.L.T. 609 that semi-finished floor covering of felt is classifiable as felt under sub-heading 5602.90 of Central Excise Tariff and not as semi-finished floor covering of felt falling under sub-heading 5702.00 and 5702.90 and that there is no stipulation in Central Excise Tariff that both sides of jute fabric should be covered by fibre to treat the items as felt. He also referred to HSN Heading 57.04 "Carpets and other textile floor coverings, of felt, not tufted or flocked, whether or not made up." He submitted that the finding regarding marketability in the impugned order also is not correct, inasmuch as the Supreme Court has held in Andhra Pradesh State Electricity Board case, 1994 (70) E.L.T. 3 (S.C.) that what is relevant is not whether the goods are actually marketed by the manufacturer in question, but whether the goods are capable of being marketed. He also pointed out that according to the respondents themselves,the item in question is not sold as carpet. If that be so, it has got to be treated as felt. The learned DR also pointed out that the impugned order is incomplete, inasmuch as it holds that the item in question is not classifiable under sub-heading 5602.90, but does not answer the question where the goods are classifiable.
6. Learned Counsel, Shri Sridharan submitted on behalf of the respondents that the order of the Tribunal in United Felts and Carpets case, 1996 (81) E.L.T. 609 (T) was passed in a different context when the manufacturing processes undertaken by the respondents included a stage where Polypropylene fibre emerged as a densely punched web prior to punching the web with jute fabric. He submitted that the Tribunal took note of the fact that felt included needle loom felt and fabrics consisting of a web of textile fibres the cohesion of which has been enhanced by a stitch-bonding process using fibres from the web itself and that after dry punch the product becomes a finished product and that there was no stipulation in the HSN Notes that both ends should be covered by fibre to treat the item as felt. He submitted that in the instant case as the densely punched web does not emerge on account of change in manufacturing process, the decision is distinguishable on account of this reason. During the period covered by the impugned order, loosely punched web of Polypropylene fibre was directly punched with jute fabric backing bringing into existence semi-finished floor covering. He submitted that the Collector has correctly held that the item is not needle loom felt and he referred to the definition of needle loom felt in HSN Explanatory Notes which states that "needle loom felt is made either by punching a sheet or web of fibres without a textile fabric base textile, with notched needles or by needling such textile fibres through a base of textile fabric or other material which is finally more or less hidden by the fibres." He submitted that in the instant case the textile fabric (jute) is given as backing for the fibres. However, there is no needling of the textile fibres through the base of textile fabric so as to make the textile fabric more or less hidden by the fibres. In the instant case, the textile fibre (jute) remained clearly visible and the staple fibres were only on one side of the textile (jute) fabric. He submitted that such an item where the textile fabric is fully visible, and not more or less hidden by fibres, cannot be called needle loom felt. He produced during hearing both the type of samples to bring out the difference. Shri Sridharan also submitted that the CEGAT order in United Felts and Carpets, 1996 (81) E.L.T. 609 was passed without this vital difference being brought to its notice. He also submitted that a commonly recognised and traded item like felt should be classified depending upon the commercial understanding and not technical understanding. The Collector (Appeals) had with reference to the marketability noted that the Department had produced no evidence to show that the goods were marketable, while the respondents had produced evidence both of technical authorities and trade that the item in the stage at which it was cleared was not recognised as felt. He, therefore, submitted that the respondents' case is distinguishable from the Supreme Court decision in Andhra Pradesh State Electricity Board case, 1994 (70) E.L.T. 3 (S.C), inasmuch as in the Andhra Pradesh State Electricity Board case it was an admitted fact that the goods in question, namely, electricity poles, were being sold by other parties, thus, the marketability of the item was not in dispute. In the instant case, it is on record that the goods will not be recognised as felt in the condition in which they are cleared by the respondents. In this context, he also referred to the decision of the CEGAT Final Order No. E/78/98-D, dated 2-1-1998 in Appeal E/1686/90-D, Unipwducts (India) Ltd. v. Collector of Central Excise, New Delhi wherein the Tribunal accepted that since the marketability is sine quo non for the purpose of excisability, unless the product is marketable, it will not be liable to duty and that the "felt" manufactured by the appellant being not marketable, is not excisable. Shri Sridharan, therefore, submitted that on the ground of marketability alone the respondents are entitled to succeed. In this context, he referred to several decisions on the importance of marketability criterion as under :-
(1) Union Carbide v. Union of India, 1986 (24) E.L.T. 169 (S.C.).
(2) Bhor Industries Ltd. v. Collector of Central Excise, 1989 (40) E.L.T. 280 (S.C.). (3) Union of India v. Delhi Cloth & General Mills Co. Ltd., 1997 (92) E.L.T. 315 (S.C). (4) Collector of Central Excise v. Hindustan Cocoa Products Ltd., 1996 (87) E.L.T. 299 (Tribunal). (5) Superintendent of Central Excise v. Ancher Treads Pvt. Ltd., 1993 (65) E.L.T. 480 (Ker.). (6) Reckitt & Colman of India Ltd. v. Collector of Central Excise, 1996 (88) E.L.T. 641 (S.C). (7) C.C.E., Bombay v. Eastern Aeromatics Pvt. Ltd., [1998 (29) R.L.T. 132 (T).
7. Shri Sridharan also submitted that at the stage at which the floor coverings are removed for latexing, they are in a semi-finished condition and are not fit for use. It is in crude, elementary and unfinished form. The jute fabric is protruding from both edges. A number of operations such as cutting, trimming, finishing etc. are to be carried out before it can be marketed. In this stage, the item becomes marketable and ready for removal only after the remaining processes including latexing are carried out. As the item does not become goods before completion of these processes, it is not liable for assessment to Central Excise Duty either as felt under sub-heading 5602.90 or as floor covering under sub-heading 5702.90. He, therefore, submitted that the impugned order is entirely according to law and facts of the case and is required to be confirmed. He also submitted that even if it is held that the item is liable to duty at the semi-finished stage, there would be no revenue effect as proforma credit under Rule 56A(8) was available.
8. We have perused the records and have considered the rival submissions. We find that the impugned order has set aside the classification and duty demand both on the ground that the item in question is not felt as classifiable under sub-heading 5602.90 and on the ground that the item is not marketable. The Revenue's appeals challenge the classification but have not contested at all the finding that the goods are not marketable. It is settled law that marketability being an essential attribute of goods, if the product at the stage of removal is not marketable, the question of classification and assessment of Central Excise Duty does not arise. In the instant case, the respondents have produced technical evidence from IIT and commercial evidence from traders of felt to show that the items at the stage of their removal under Rule 56B for further processing are not known as felt or marketable as felt. The Revenue have produced no evidence at any stage of the proceedings including before us to controvert the finding of the Commissioner (Appeals) that the goods are not marketable and, therefore, are not liable to Central Excise Duty. In this context we also observe that in the case of one of the respondents, this Tribunal has held in its Final Order No. E/78/98-D, dated 2-1-1998 in Appeal E/1686/90-D that unless the product is marketable, it will not be liable to Central Excise Duty. We, therefore, feel that these appeals are capable of being disposed of on the ground of marketability of the impugned items alone. As evidence on this score and findings are entirely in favour of the conclusion that the goods are not marketable, we find no error in the impugned order. Accordingly, the appeals fail and are dismissed and the impugned order is confirmed.