Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Premier Tyres Ltd. on 9 December, 1996
Equivalent citations: 1997(90)ELT407(TRI-DEL)
ORDER Shiben K. Dhar, Member (T)
1. This Revenue Appeal is directed against the Order-in-Appeal No. 242/87-C, dated 31-8-1987 of Collector of Central Excise, Madras.
2. Collector of Central Excise (Appeals) has held that Tyre cord warpsheets which are dipped in Resorcinol Solution are classifiable under Tariff Item 16A(2) of erstwhile Central Excise Tariff as Rubber products and not under Item 22.1(B) of Central Excise Tariff as existed prior to 28-2-1986.
3. Arguing for the Revenue the ld. D.R. submitted that the Respondents purchased unprocessed tyre cord fabrics and subjected them to process of dipping in resorcinol formaldehyde latex solution and drying by heat setting. The fabric even after this treatment predominates the decision of the Bombay High Court in case of M.R.F. Ltd. v. C.C.E. -1985 (22) E.L.T. 5 is not applicable. The Hon'ble Apex Court in case of Delhi Cloth & General Mills Co. Ltd. v. State of Rajasthan and Ors. -1980 (6) E.L.T. 383 (SC) held that tyre cord warp sheets is a fabric and is to be considered as processed fabrics only and therefore liable to duty under Tariff Heading 22 of Central Excise Tariff Act. The case of Madura Coats v. C.C.E. -1985 ECR 1625 (SC) relied upon by the Collector (Appeals) is distinguishable. In that case the issue was whether Tyre Cord sheet itself could be classified under Tariff Heading 68.
4. Arguing on behalf of the Respondents ld. Counsel submitted that they only purchased Tyre cord warp sheets which are the Nylon cord warp sheet and Rayon Cord Warp sheet held together by cotton threads. They are merely dipped into resorcinol solution. He placed reliance on the judgment of the Bombay High Court in the case of M.R.F. Ltd. v. U.O.I. and Ors. - 1985 (22) E.L.T. 5 (Bom.) where it was held that rubberised tyre cord sheets can be classified under Item 16A of C.E.T. Act. Calcutta High Court in case of G.O.I, v. Madura Coats -1982 (10) E.L.T. 129 (Cal.) held that such goods remain as yarn and are not classifiable under Tariff Item 16A. He submitted that the goods are not fabrics and no processed fabrics come into existence.
5. We have heard both sides. The question of classification of tyre cord warpsheets came up before the Hon'ble Apex Court in the case of Delhi Cloth and General Mills Co. Ltd. v. State of Rajasthan and Ors. -1980 (6) E.L.T. 383 (S.C.). The Hon'ble Apex Court held that Item 22 of the first schedule of Central Excise Tariff Act speaks of "all varieties of fabrics" which expression is wide enough to include the rayon tyre cord fabric manufactured by the appellants. The Hon'ble Apex Court on the basis of Technical books dealing with textile terms and also ISI specifications held that tyre cord warp fabrics are fabrics. The relevant portions of the judgment are extracted below :
"9. What is fabric ? The "Mercury" Dictionary of Textile terms defines "fabrics" as a term which covers "all textiles no matter how constructed, how manufactured or the nature of the material from which made" and the expression "Textile" is described as "any product manufactured from Fibres through twisting, interlacing, bonding, looping or any other means, in such a manner that the flexibility, strength and other characteristic properties of the individual fibres are not suppressed". The Man-made Textile Encyclopaedia (1959) defines fabric as a "collective term applied to cloth no matter how constructed or manufactured and regardless of the kind of fibres or filaments. Textile fabrics include the following varieties, bonding felted, knitted, braided and woven." The Fairchild's Dictionary of Textiles (1959) says that fabric is a "cloth that is woven or knit, braided, netted, with any textile fibre..." and "Textile" is said to refer to "a broad classification of any material that can be worked into fabric, such as fibre and yarns including woven and knitted fabric, felt, netted fabric, lace and couched goods." In "Textile Terms and Definitions" (1960) the word cloth is defined as "a generic terms embracing all textile fabrics and laminar felts" and "Textile" is applied in its modern sense "to any manufacture from fibres, filaments, or yarns, natural or artificial, obtained by interlacing," The 1967 Annual Book of ASTM Standards defines cloth as "any textile fabric but specially one designed for approval domestic or industrial use" and textile fabric as "a planer structure consisting of interlaced yarns or fibres." The 1973 Annual Book of ASTM Standard reproduced those definitions.
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19. The unconditional exemption from sales tax granted on the sale of rayon fabrics, that is to say, without the condition that additional excise duty was paid by the manufacturer, was withdrawn by a notification dated 5th March, 1973 made by the Rajasthan State Government under S. 4(2) of the Rajasthan Sales Tax Act. The notification provided that in the case of unprocessed rayon and artificial silk fabrics the exemption from sales tax would apply only if the additional duty is leviable on them under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and such goods had not specifically been exempted from the said duty and the dealers thereof furnished proof to the satisfaction of the assessing authority that such duty had been paid. Therefore, as from 5th March, 1973 the exemption from tax under the Rajasthan Sales Tax Act was available only if additional excise duty was leviable and the dealer had established that he had paid such duty. At about the same time, The Rajasthan Taxation Laws (Amendment) Act, 1973 deleted Item 18 in the schedule to the Rajasthan Sales Tax Act with effect from 5th March, 1973. It is evident, therefore, that a dealer was entitled to exemption from Sales Tax upto 4th March, 1973 without the requirement of payment of the additional excise duty. The conclusion is inescapable that even if the appellant did not pay additional excise duty, he was exempt from sales tax on the turnover of rayon tyre cord fabric for the assessment years under consideration."
The Hon'ble Apex Court thereafter held that on a comprehensive consideration of the material before their Lordships "There is no escape from the conclusion that by and large a tyre fabric is regarded as textile fabric." It is a woven fabric in which the intermediate process of weaving the weft thread across the warp cord is an integral stage of manufacture. Negativing the contention of the ld. Counsel of the Respondents that Industrial fabrics are not envisaged within the expression "Rayon Fabric" in Item 22 of the First Schedule to the Central Excise and Salt Act, the Hon'ble Apex Court held that the item refers to "all varities of fabrics" and it will be noticed that Item 22(30) speaks of fabrics impregnated or coated with preparations of cellulose derivatives or of other artificial plastic materials which we are told would include rubberised cloth, tarpaulin cloth, P.V.C. Cloth, Water proof cloth and tent cloth. A whole range of fabric is included.
6. It was contended that the Hon'ble' Apex Court's decision in case of D.C.M. Ltd. v. State of Rajasthan and Ors. (supra) concerned Sales Tax matters. This, however, does not materially alter the position. In fact Hon'ble Apex Court was considering the question of classification of fabrics for the purpose of additional duty of Excise under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and held that goods were classifiable under Item 22.
7. Madras High Court in case of Madura Coats Ltd. v. C.C.E., Madurai -1995 (79) E.L.T. 567 (Mad.) while examining the classification of the Tyre Cord fabric relied upon the Hon'ble Apex Court judgment in case of D.C.M. (supra) which held such goods to be fabrics.
8. The ld. Counsel placed considerable emphasis on the fact that the processes as undertaken do not amount to manufacture. However, Bombay High Court in case of M.R.F. Ltd. v. C.C.E. - 1985 (22) E.L.T. 5 (Bom.) on which he himself placed reliance held that it amounts to manufacture as a new product comes into existence and constituted a complete and independent product when they are used in the manufacture of tyres. This position is now well settled through the decision of the Hon'ble Apex Court in the case of Empire Industries v. U.O.I. -1985 (20) E.L.T. 179 (SC). The Hon'ble Apex Court held that if through application of labour and skill an object is transformed to the extent that it is commercially known differently it will suffice to say that the manufacture has taken place for the purpose of Central Excise. The degree of transformation and labour and skill spent are irrelevant. In case of C.C.E. v. Fenoplast (P) Ltd. -1994 (72) E.L.T. 513 (SC) Hon'ble Apex Court examined the question of classification of coated cotton fabrics known as rexine cloth and held that the goods are classifiable under Tariff Item 19(3). The Hon'ble Apex Court held that the decision in case of C.C.E. v. Multiple Fabrics P. Ltd. - 1987 (29) E.L.T. 481 (SC) does not lay down correct provision of law since the proviso was not brought to the notice of the Hon'ble Supreme Court and for that reason significance of the proviso escaped the Court's notice. The Hon'ble Court observed in Para 10 (521) 1994 E.L.T. (72) in case of C.C.E., Hyderabad v. Fenoplast (Pvt.) Ltd.
"We have already held that the predominance or the percentages referred to in clauses (i) and (ii) (occurring at the end of the first para of the Tariff Item) is applicable only in relation to the base fabric as clarified and defined in the Proviso and Explanation (I). It must follow therefrom that the question of predominance or percentages is irrelevant in the case of respondents product inasmuch as the base fabric in the respondent's production is 100% cotton. The argument to the contrary is, however, based upon decision of this Court in Multiple Fabrics. The said decision dealt with Tariff Item 22 and the product concernedi was P.V.C. conveyor belting manufactured by the Respondent therein. Tariff Item 22 deals with "man-made fabrics" and the Entry is substantially in the same terms as Tariff Item 19. Tariff Item 22 contains a proviso and Explanation (I) corresponding to the Proviso and a Explanation (I) in Tariff Item 19. But unfortunately the proviso was not brought to the notice of the Court. Though Explanation was noticed, its purport was not given effect to while holding that "in view of the higher percentage of P.V.C. Compound in commodity, it becomes difficult to treat the ultimate goods as man-made fabrics for holding that it is covered by Item 22." Indeed, the above reason is the second of the two reasons given for holding in favour of the respondent-manufacturer. The first reason is that since the manufacture of fabric and application of Compound is simultaneous, there is no pre-existing base fabric for the purposes of and within the meaning of Tariff Item 22. Be that as it may, since the proviso was not brought to the notice of this Court and for that reason the significance of Explanation (I) escaped the Court's notice, it is difficult to hold that the said decision lays down the correct interpretation of Tariff Item 22 or that it helps the respondent before us in interpreting Tariff Item 19."
Both Collector (Appeals) as well as Revenue have relied upon the predominance or the percentage of the materials, Revenue contended that the fabric predominates and Collector (Appeals) holding that the Assistant Collector has not clearly stated that after dipping in resorcinol solution the rubber cord warpsheet is more or less in comparison to the other materials. However, as observed by the Apex Court in case of C.C. v. Fenoplex (P) Ltd. (supra) Tariff Item 22 makes clear that predominance is only in relation to the base fabrics which are impregnated, coated or laminated as the case may be.
9. In view of this we hold that goods are classifiable under Tariff Heading 22 of erstwhile Central Excise Tariff. In the result we set aside the impugned order and allow the Revenue Appeal.