Customs, Excise and Gold Tribunal - Tamil Nadu
Commissioner Of Central Excise vs M.R.F. Ltd. on 13 April, 2006
Equivalent citations: 2006(109)ECC167, 2006ECR167(TRI.-CHENNAI), 2008(223)ELT408(TRI-CHENNAI)
JUDGMENT P.G. Chacko, Member (J)
1. All these appeals are by the Revenue. Appeals E/3170 to 3177/98 are against an order passed by the Commissioner (Appeals), Chennai vacating certain demands of duty on intermediate products of the respondents' factory at Thiruvottiyur for the period 1.3.1994 to 30.4.1997. Appeal No. E/3577/98 is against another similar order passed by the same Commissioner (Appeals) in respect of the same factory for the period May, 1997 to February, 1998. The remaining appeal E/1395/1998 is against an order passed by the Commissioner of Central Excise (Adjudication), Chennai setting aside a demand of duty on an intermediate product of the assessee's factory at Arakkonam for the period 5/1996 to 4/1997. While the lower appellate authority set aside demands of duty on Beads, Dip solution and Dipped Tyre Cord Warp Sheets (all intermediates emerging in the process of manufacture of "ADV tyres" i.e. tyres meant for animal-drawn vehicles) after holding that these items were not marketable and hence not excisable, the adjudicating authority below set aside a demand of additional excise duty (AED) on Rubberised Tyre Cord Warp Sheets (another intermediate as above) after holding that this item was classifiable under Heading 59.06 in the Schedule to the Central Excise Tariff Act. AED was not leviable on goods falling under this Heading.
2. The respondents are engaged in the manufacture of tyres, tubes and flaps. ADV tyres were exempt from payment of duty during the period of dispute (March, 1994 to February, 1998). Notifications 217/86-CE and 67/95-CE exempted captively consumed intermediate products from payment of duty where the final product was dutiable. In terms of these Notifications, intermediate products captively consumed were chargeable to duty if the final product was exempt. The Revenue took the stand that Beads, Bladders. Dip solution, Tyre Cord Warp Sheets and Compounded Rubber, all intermediates arising in the course of manufacture of ADV tyres, were, dutiable as the final product (ADV tyres) was exempt from payment of duty. Seven show-cause notices were, accordingly, issued to the respondents. Out of these, five notices covering the period 1.3.1994 to 30.4.1996 demanded basic excise duty (BED) on Beads, Bladder, Dip solution, Dipped Tyre Cord Warp Sheets (DTCWS) and Compounded Rubber and additional excise duty on DTCWS. The sixth notice for the period 1.5.1996 to 31.10.1996 raised a demand of BED on Beads, Bladder, Dip solution and DTCWS and a demand of AED on DTCWS and the remaining notice demanded both BED and AED on Beads, Bladder, Dip solution and Rubberised Tyre Cord Warp Sheets (RTCWS) for the period 1.11.96 to 30.4.1997). The original authority passed order No. 38/96 in adjudication of the first 5 show-cause notices confirming the demands of duty raised therein. He also passed separate orders No. 1/97 and No. 65/97 confirming the demands of duty raised in the 6th and 7th show-cause notices. The appeals preferred by the assessee against these three orders of adjudication were disposed of by the Commissioner (Appeals) in a common Order-in-Appeal No. 49 to 51/98 dated 23.3.98 wherein ld. Commissioner (Appeals) upheld the dutiability of compounded rubber and bladder and vacated the demands of duty on Beads, Dip solution and DTCWS. The appellate authority had no occasion to consider the dutiability of RTCWS as the same had not been challenged by the assessee. The assessee has conceded the dutiability of compounded rubber and bladder. The department is aggrieved by the decision of the Commissioner (Appeals) in regard to Beads, Dip solution and DTCWS. Hence the appeals H/3170 to 3177/98. In these appeals, it has been claimed that Beads were marketable, though not actually marketed. As regards Dip solution and DTCWS, it has been stated that these items had shelf life and were marketable. It is pointed out that Dip solution was actually being transferred between different units of the assessee, situated in Goa, Chennai, Andhra Pradesh and Kerala, and also that DTCWS was actually being purchased by the assessee from another party viz. M/s. SRF Ltd.
3. The department had issued two other show-cause notices to the respondents demanding BED and AED on Beads, Dip solution and RTCWS for the period May, 1997 to February, 1998. These notices were adjudicated upon by the original authority which passed order No. 12/98 confirming the demand of duty following its own earlier order No. 65/97 ibid. An appeal preferred by the assessee against this order No. 12/98 was disposed of by the Commissioner (Appeals) as per Order-in-Appeal No. 153/98, wherein the above demand of duty was vacated by the appellate authority following its earlier Order-in-Appeal No. 49-51/98. [Again, the dutiability of RTCWS did not arise for consideration by the appellate authority.] The present appeal No. E/3577/98 filed by the Revenue is against this Order-in-Appeal No. 153/98. This appeal is on the same grounds as those raised in Appeal Nos. E/3170-3177/98 as regards Beads and Dip solution. In the grounds of this appeal, there is no reference to RTCWS.
4. Two other show-cause notices had also been issued by the department demanding AED from the assessee on RTCWS captively consumed in the manufacture of ADV tyres during the period May, 1996 to April, 1997. In adjudication of these notices, the Commissioner of Central Excise passed Order-in-Original No. 5/97 DT.25.9.97 dropping the demand of duty on the ground that RTCWS was classifiable under Heading 59.06 and not chargeable to AED. In the Revenue's appeal No. E/1395/98 against this order of the Commissioner, the challenge is mainly on the ground that the classification of the goods in question under Heading 59.06 is beyond the scope of the relevant show-cause notices. The appellant has submitted that the assessee had filed classification list under Rule 173B classifying the above item under Heading 59.02; that they had cleared the goods during the period of dispute under this Heading only; that they even did not claim re-classification of the goods under any other entry in their reply to the show cause notices; that they claimed classification under Heading 40.05 for the first time in their written submissions filed before the adjudicating authority; that, in such circumstances, classification of the goods was not at all an issue for adjudication and that, in any case, the revised classification of the goods under Heading 59.06 could not have retrospective effect to cover the period of dispute.
5. Shri M. Chandrasekharan, Sr. Advocate, appeared for the Revenue in all the appeals except appeal No. E/1395/98, wherein the appellant-Revenue was represented by SDR Smt. R. Bhagya Devi. Ld. Sr. Advocate submitted that as Dip solution used to be transferred between different units of the assessee located in different parts of the country, there could be no gainsaying that the item had no shelf life or that it was not marketable. In respect of DTCWS, it was submitted that, as the assessee used to buy the item from another party (SRF Ltd.), there was no need of farther proof of its marketability. According to ld. Sr. Counsel, the Revenue could establish marketability of the items and was entitled to subject them to levy of excise duty. Ld. Counsel relied on the Tribunal's decision in the case of Good Year (India) Ltd. v. CCE, New Delhi wherein tyre cord fabric obtained by dipping grey tyre cord fabric in Resorcinol solution, applying rubber compound thereafter and finally calendering the fabric, was held to be covered specifically under Heading 59.02 and not under Heading 59.06. Ld. Counsel also referred to the decision of this Bench in Madura Coats Ltd. v. CCE, Madurai 2000 (125) ELT 726 (T), wherein it was found that the department had accepted the assessee's classification of DTCWS under heading 59.02 for a certain period. On the other hand, Shri Ignatius, Counsel for the respondents, relied on the Bombay High Court's decision in the case of CEAT Tyres of India Ltd. v. UOI and Ors. holding that Dip solution, not being stable and marketable, was not liable to levy of duty of excise. Counsel pointed out that this decision of a learned Single Judge of the High Court was affirmed by a Division Bench of the Court in UOI v. CEAT Tyres of India Ltd. 1989 (43) ELT 267 (Bom). Ld. Counsel also relied on Order-in-Original No. 5/97 dated 5.8.97 of the Commissioner of Central Excise, Goa, wherein it had been found that Dip solution was not marketable for want of shelf life. As regards Beads, ld. Counsel submitted that, in MRF's own case, this Tribunal had held that the item, having very short shelf life and being incapable of being retained as a commodity, was not marketable and hence not liable to duty vide CCE, Panaji (Goa) v. MRF Ltd. . With regard to DTCWS and RTCWS, it was submitted that this very items had been held to be classifiable under Heading 59.06 (erstwhile Heading 59.05) in MRF's own case vide MRF Ltd v. CCE, Goa and Chennai and therefore AED was not liable to be charged on any of these items. At this stage, it was also pointed out by the Sr. Advocate that the department had filed Civil Appeals against the Tribunal's order and the same were pending. It was also suggested that the present appeals be kept pending in view of the pendency of the above appeals with the apex Court.
6. In appeal No. E/1395/98, ld. SDR reiterated the grounds of the appeal. The respondents' Counsel raised an objection against taking up this appeal of the Revenue without restoring the assessee's appeals E/62 & 63/98 which had been dismissed on 20.7.98. We shall instantly consider this objection. Appeal No. E/1395/98 is against the Commissioner's order No. 5/97 DT.25.9.97. It was against this order of the Commissioner that M/s. MRF Ltd. filed appeals E/62 & 63/98. These two appeals of the assessee were dismissed as not pressed vide paragraphs 12 and 13 of the Final Order dated 20.7.98 of this Bench . The relevant extract from Final Order dated 20.7.98 reads as under:
v) Appeal Nos. 62, 63/98:
12. These appeals arise out of order-in-original No. 5/97 dated 25.9.1997, wherein the Commissioner (Adjudication) has classified the said product under 59.05 (now 59.06) and dropped the demands. In this case, learned Senior Advocate submitted that in view of the citations of the tribunal led by him which holds classification on the same lines as the impugned order-in-original, he has been instructed to pray that the appeals may be permitted to be withdrawn as not pressed.
13. In view of our aforesaid decisions in the other appeals (S.No. I to VI Para 2 to 11) to apply the ratio of the said three decisions of the tribunal, we find that since the order-in-original itself is in consonance with three decisions of the tribunal as well as our own decisions contained above, therefore the prayer of the Learned Senior Advocate for appellants merits consideration and the appeals are dismissed as not pressed. However, Learned Sr. Advocate submitted that the said prayer is with liberty to file cross objections in case at future date, the Revenue agitates this issue in any manner. We consider this prayer to be fair and accede to it.
It appears from the records and submissions that, against the above dismissal of the assessee's appeals E/62 & 63/98, M/s. MRF Ltd. filed Civil Appeal Nos. 1494 and 1495/99 before the Supreme Court and that these Civil appeals were dismissed by the apex Court as per Order dated 27.9.01, which reads as under:
Pursuant to the show cause notice which was issued the Commissioner by order No. 5 of 1997 dated 25th September, 1997 dropped the proceedings against the respondent and held that the item in question was classifiable under Heading 59.06. The appeal filed against the same by the respondent was withdrawn by it. This being so, there can be no occasion for the appellant to file an appeal challenging here for the first time the correctness of the order dated 25th September, 1997 of the Commissioner. These appeals are, accordingly, dismissed.
Obviously the Revenue's appeal (E/1395/98) against the Commissioners order No. 5/97, which had been challenged by the assessee in appeals E/62 and 63/98, was pending before this Bench when the above order was passed by the apex Court. Apparently, this pendency of the Revenue's appeal with the Tribunal was not brought to the notice of the apex Court. In any case, the above order of the apex Court is final and binding on both sides and there is no question of restoring the appeals, E/62 & 63/98. The Tribunal's order in the two appeals E/62 & 63/98 merged with the apex Court's order dated 27.9.2001 in Civil Appeal Nos. 1494 and 1495/99 during the pendency of the present appeal E/1395/98 of the Revenue. The effect is that the present appeal ceased to be maintainable on the date of such merger (27.9.01). Therefore, appeal No. E/1395/98 is dismissed as not maintainable.
7. In the surviving appeals of the Revenue, ld. Sr. Advocate has heavily relied on the Tribunal's decision in the case of Good Year (India) Ltd. (supra). In that case, noticeably, the assessee had, inter alia, relied on the Tribunal's decision in MRF's case . We find that the decision in MRF's case was not considered by the Bench while holding, in the facts of Good Year (India) Ltd's case, that Rubberised Tyre Cord Fabric was classifiable under Heading 59.02 and not under Heading 59.06. The remand order of this Bench in Madura Coats case does not offer any final view on the classification issue. In the circumstances, we have got to examine the classifiability of the MRFs RTCWS with reference to how MRF manufactured it. We observe that, after considering MRF's method of manufacture, this Tribunal classified Dipped/Rubberised Tyre Cord Fabrics of the assessee under Heading 59.06 (erstwhile heading 59.05) as per Final Order No. 1370-1388/98 dated 20.7.98 vide . Though the appeals filed by the Department against this Final Order dated 20.7.98 of the Tribunal was admitted by the apex Court, the operation of our Final Order was not stayed. In the circumstances, we think, we can follow the ratio of the decision contained in our Final Order dated 20.7.98. As regards classification and durability of Dipped Tyre Cord Warp Sheets (DTCWS), this item has been held to be classifiable under Heading 59.06 and no BED/AED is leviable on it vide Final Order dated 20.7.98 ibid. However, as regards Rubberised Tyre Cord Warp Sheets, even Final Order dated 20.7.98 cannot help the assessee inasmuch as the demand of duty on Rubberised Tyre Cord Warp Sheets confirmed in Order-in-Original No. 65/97 of the Assistant Commissioner was not challenged by the assessee. As regards this item, Order-in-Original No. 65/97 of the original authority has become final and binding and consequently, the assessee is liable to pay BED/AED on Rubberised Tyre Cord Warp Sheets cleared for captive consumption during the period November, 96 to April, 1997. As regards Beads, the question whether this intermediate product of the respondents is excisable is no longer res integra inasmuch as this Tribunal has held in their own case, that this item is not marketable and hence not liable to duty of excise on account of its very short shelf life vide . In respect of Dip solution, again, there is already a reliable authority on the question whether the item is dutiable or not. The Bombay High Court's judgment in the case of CEAT Tyres of India Ltd. (supra) squarely covers this issue in favour of the respondents. It was held by the High Court that Dip solution was not marketable and hence not liable to duty of excise. The Revenue has not shown that the Dip solution of CEAT was different from that of MRF. In the circumstances, we follow the High Court's judgment in CEAT Tyres' case and hold that the Dip solution in question was not excisable for want of sufficient shelf life for marketability. In the result, appeal Nos. E/3170 - 3177/98 are rejected.
8. We have already noted that, in appeal No. E/3577/98, the challenge is against an order passed by the Commissioner (Appeals) solely on the basis of his own earlier Order-in-Appeal No. 49 to 51/98, which we have already upheld. As already noted, the order impugned in the present appeal was passed by the lower appellate authority in an appeal of the assessee filed against Order-in-Original No. 12/98 of the Assistant Commissioner which was solely based on earlier Order-in-Original No. 65/97. We have already held that Order-in-Original No. 65/97 became final and binding in regard to classification and dutiability of Rubberised Tyre Cord Warp Sheets. It is not the respondents' case that they had challenged the original authority's decision with regard to RTCWS, in their appeal against Order-in-Original No. 12/98. It would follow that the assessee's liability to pay BED/AED on Rubberised Tyre Cord Warp Sheets for the period May 1997 to February 98 stands admitted. In respect of the remaining items (Beads and Dip solution), the view which we have already taken in appeals E/3170 - 3177/98 will prevail for the purpose of the present appeal for the reasons already stated. In the result, appeal No. E/3577/98 stands rejected.
9. The assessee's Counsel has raised a plea that, in the event of any part of the demand of duty being affirmed, they should be given the benefit of Modvat credit on inputs. We have no reason to deny this benefit to them in connection with the demand of duty on Rubberised Tyre Cord Warp Sheets. The original authority shall re-quantify the demand of BED on RTCWS after allowing to the assessee the benefit of Modvat credit of appropriate duty paid on eligible inputs used in the said intermediate product for the relevant period.
(Order pronounced in open court)
10. While agreeing with the view taken by my learned brother Shri P.G. Chacko, Member (J) that Appeal Nos. E/3170 to 3177/98 filed by the Revenue should be rejected, I would like to add that so far as the item Dip Solution is concerned, the plea of the learned Sr Counsel for the Revenue, as recorded on page 9 of the order, is that as Dip solution used to be transferred between different units of the assessee located in different parts of the country, there could be no gainsaying that the item had no shelf life or that it was not marketable. The plea taken by the Revenue is not supported by any material whatsoever that this product has shelf life and if so for what period and the time taken by the assessee in transferring the product from one place to another. On the other hand, there are a number of judgments wherein it was held that the said product not being stable and marketable, is not liable to excise duty. Few such judgments are (i) in the case of CEAT Tyres v. UOI , (ii) UOI v. CEAT Tyres of India Ltd. reported in 1989 (42) ELT 565 (Bom.) (iii) UOI v. CEAT Tyres of India Ltd. reported in 1989 (43) ELT (Bom.), (iv) Madura Coats Ltd. v. Assistant Collector of Central Excise, (v) Moti Laminates Pvt Ltd. v. CCE, Ahmedabad . Therefore, I fully agree with the view taken by my learned Brother in rejecting Appeal Nos. E/3170 to E/3177/98.
Jeet Ram Kait, Member (T)
11. So far as the remaining two appeals, viz E/1395/98 and E/3577/98 filed by the Revenue are concerned, I am not able to persuade myself to agree with the view taken by learned Member (J).
12. First I take up Appeal No. E/1395/MAS. This appeal is directed against the order in original No. 5/97 dated 25.9.97 passed by the Commissioner of Central Excise Chennai. The Revenue has come in appeal against the said order as per the direction of the Board vide order No. 78-R/98 dated 11.3.98 in terms of Section 35E(1) of the CE Act, 1944.
12.1. There are two show cause notices which have been dealt with by the Commissioner in the impugned order. Ist show cause notice dated 3.12.96 was issued by the Supdt of Central Excise, proposing to levy AED of Rs. 1,82,90,724/- (Rupees One crore, eighty two lakhs, ninety thousand, seven hundred and twenty four) on Rubberised Tyre Cord Warp Sheet (RTCWS) for the period from 5/96 to 10/96 and the Second show cause dated 3.6.97 was issued by the Assistant Commissioner proposing to demand AED of Rs. 1,99,29,030/- on the same product for the period from 11/96 to 4/97. The total AED involved in this appeal is Rs. 3,82,19,754/- (Rupees Three Crores, eighty two lakhs, nineteen thousand, seven hundred and fifty four). The allegation in the show cause notices is that the product viz. RTCWS falling under sub-heading 5902.10 is exempt from the payment of Basic Excise duty for captive use as per Notification No. 67/95-CE dated 16.3.95, but there is no specific exemption from AED. The show cause notice culminated in the order of adjudication passed by the Commissioner against which is the present appeal. By the impugned order, the Commissioner classified the product under heading 59.06. and held that no AED is leviable under 59.06 and dropped the proceedings initiated under the two show cause notices ibid. It is against this order of the Commissioner that the Revenue has filed the appeal on direction from the Board, on the following grounds:
(a) Initially M/s MRF had filed classification declaration classifying coated/rubberised tyre cord Warp Sheet under heading 59.02 and the said classification list was approved. They had cleared the RTCWS to their sister units on payment of duty by adopting the said classification.
(b) The classification of the product was not sought to be revised in the show cause notice. Further, MRF in their reply to the show cause notice dated 3.12.96 and 23.6.97 had not disputed the classification of the product RTCWS. It was only in their written submission dated 22.8.97 that contended that the classification of RTCWS under heading 59.02 is not correct and requested for classification under heading 40.05. Therefore, when the classification of RTFWS was not the subject matter of the show cause notice, the Commissioner by changing the classification has traversed beyond the scope of the show cause notice. Further as per Rule 173B, the proper officer to decide the classification was the Assistant Commissioner.
(c) The plea for reclassification of the product under heading 40.05 was raised by the assessee after issue of SCN only, presumably for the reason that no AED was payable during the material period on goods classifiable under Chapter 40.
Therefore, the present belated plea for reclassification retrospectively does not have legal force as held in the case of Veekey General Industries v. CCE .
(d) In the write up of RTCWS furnished by M/s MRF their letter E/A/G/SG/231 dated 23.11.96, it was stated as under :
Rubberised tyre cord fabric is essentially a nylon Warp Sheet containing nylon cords made by twisting the fabling two or more number of yarn plies. This is dipped in resorcinol, Formal Dehyde, VP latex dip-solution to impart the property of adhering to rubber. This will be rubberised by passing through a calender and applying rubber compound on both the sides of the warp sheet
(e) The Revenue in their appeal have stated that the respondents in the written submission dated 22.08.1997, have stated that rubberising the fabric consisted of two stages as under:
(1) Rubberisation Stage -I : Dipped fabric (2) Rubberisation Stage-II : Calendered fabric The process carried at the second stage of rubberisation is known as coating or calendering the tipped tyre cord warp sheets in the calendering machine with two or more rollers operated at selected surface speeds and controlled temperature for coating rubber on both sides of the dipped tyre cord warp sheets to a controlled thickness and the resultant product is called as coated or RTCWS and are used in the manufacture of tyres.
(f) As per page No. 815 of the HSN Explanatory notes, the heading 59.02 covers, tyre cord fabric whether or not dipped or impregnated with rubber or plastics.
(g) It is well settled that any change in classification can only take prospective effect.
13. Smt Bhagyadevi, learned SDR appearing on behalf of the Revenue reiterated the grounds taken by the Revenue. She has also referred to the decision of the Tribunal in the case of Good Year (India) Ltd. v. CCE, New Delhi , wherein it was held that tyre cord fabric obtained by dipping grey tyre cord fabric in Resorcinol solution, applying rubber compound thereafter and finally calendering the fabric, was held to be specifically covered under heading No. 59.02 and not under heading 59.06.
14. On the other hand Shri Ignatius, learned Counsel for the assessee relied upon the decision of the Tribunal in their own case viz. MRF v. CCE Goa and Chennai (Final Order No. 1370 to 1388/98 dated 20.7.98) in support of his contention that the product RTCWS falls under heading 59.06 and accordingly AED was not liable to be paid on the said product.
15. The assessee had also filed two appeals viz. Appeal No. E/62 & 63/98 against the said order of the Commissioner which were dismissed by the Tribunal as not pressed, as . It is seen from the records that MRF filed Civil appeal Nos. 1494 and 1495/00 before the Hon'ble Apex Court against the dismissal of their appeals by the Tribunal, though their appeals were dismissed by the Tribunal, as withdrawn. The Hon'ble Apex Court has dismissed their appeals vide order dated 27.09.01 holding that the appeals filed by the assessee against the order of the Commissioner was withdrawn by them and therefore, there can be no occasion for them to file appeal challenging the correctness of the order of the Commissioner dated 25th September 1997. The above position is discussed by my learned brother on page 12 to 15 of the order proposed by him.
16. Learned brother on page 14 & 15, vide para 6 dismissed the Appeal No. E/1395/98 as not maintainable on the ground that the Tribunal's order dismissing the two appeals of the assessee as withdrawn has merged with the order of the Hon'ble Apex Court. Objection was raised by the respondent's Counsel for taking up Revenue Appeal No. E/1395/98 without restoring the assessee's appeal Nos. E/62 & 63/98 which had been dismissed on 20.7.01, as withdrawn by the Hon'ble Apex Court (Page No. 13 of the order). While I agree that plea of the assessee for restoring Appeals No. E/62 & 63/98 cannot be countenanced as the order of the Apex Court dismissing their appeals, is binding on both the sides, I am not able to subscribe to the view taken by learned M(J) that the Revenue Appeal bearing No. E/1395/98 is to be dismissed as not maintainable, in view of my discussion in the succeeding paragraphs.
17. The classification of the product was not sought to be revised in the show cause notice. Nevertheless, the Commissioner proceeded to change the classification on his own. Further, MRF in their reply to the show cause notice dated 3.12.96 and 23.6.97 had not disputed the classification of the product RTCWS under heading 59.02. It was only in their written submission dated 22.8.97 that they contended that the classification of RTCWS under heading 59.02 is not correct and requested for classification under heading 40.05. Therefore, when the classification of RTFWS was not the subject matter of the show cause notice, the Commissioner by changing the classification has traversed beyond the scope of the show cause notice. Further as per Rule 173B, the proper officer to decide the classification was the Assistant Commissioner and for the purpose of re-classification or making any amendment to the already approved classification, the procedure for revising the classification, as per Rule 173B have to be followed.
18. The Revenue in their present appeal viz. Appeal No. E/1395/98 has challenged the impugned order of revising classification of the product RTCWS suo motu by the Commissioner. The grounds advanced by Revenue such as :
(a) Commissioner traversed beyond the scope of the Show cause notice, and reclassified the product under a different heading, more particularly when the classification proposed by them was approved and they were clearing the goods on payment of duty in consonance with the approved classification.
(b) they have not disputed the approved classification list in reply to the show cause notice.
(c) No Specific exemption to the AED on RTCWS in terms of the Notification.
(d) The belated plea for re-classification retrospectively i.e. 5/96 to 4/97.
(e) Adherence to Rule 173B regarding amendment/reclassification of the approved classification within the specified time.
(f) The difference between the DTCWS and RTCW in view of the specific write up submitted by the assessee.
(g) The HSN Explanatory notes covering the product falling under heading 59.02, viz. tyre cord fabric whether or not dipped or impregnated with rubber or plastics.
(h) Well settled law that any change to the approved classification list can only have prospective effect and not retrospective.
have to be addressed and decided on merits by the Tribunal in accordance with law. The dismissal as withdrawn of the appeals filed by the assessee, by the Hon'ble Apex Court, against the said order of the Commissioner by the Apex Court cannot be a ground for dismissal of the Revenue Appeal which challenged the Commissioner's order classifying the product RTCWS under heading 59.06 and that too when there was no proposal in the show cause notice regarding re-classification of the product. Further, the Revenue has also challenged the order of the Tribunal classifying the product under sub heading 59.06 in the matter of MRF Ltd v. CCE Goa and Chennai (final order No. 1370 to 1388/98 dt 20.7.1998), wherein it was held that DTCWS/RTCWS/Calendered Tyre Cord Fabrics would be classifiable under heading 59.05 (now 59.06) and was not liable to AED, and the Revenue's appeal has been admitted and is pending before the Apex Court. It was for this reason, that the learned Sr. Counsel for the Revenue suggested that the present appeals be kept pending. This position is discussed by my learned brother on page 11 & 12 of his order. Further, I also note that as recorded by learned Member (J) on page 16 of the order, the appeal filed by the Revenue against the Tribunal order dated 20.7.98 has been admitted by the Hon'ble Apex Court, though no stay has been granted. I note that the Hon'ble Supreme Court in the case of UOI v. West Coast Paper Mills Ltd has held in para 14 & 15 thereof as under :
14. ...Once a Special Leave is granted and the appeal is admitted the correctness or otherwise of the judgment of the Tribunal becomes wide open. In such an appeal, the Court is entitled to go into both the questions of fact as well as law. In such an event, the correctness of the judgment is in jeopardy.
15. Even in relation to a Civil dispute, an appeal is considered to be a continuation of the suit and a decree becomes executable only when the same is finally disposed of by the Court of Appeal.
19. In view of the above, I am of the opinion that the suggestion of the learned Sr Counsel for the Revenue, to keep Appeal No. E/1395/98 pending till the outcome of the decision of the Hon'ble Supreme Court, is acceptable and I order accordingly.
20. I also note learned Member (J) on page 17 has held that the assessee is liable to pay duty BED/AED on RTCWS for the period from 11/96 to 4/97 for the reason that demand of duty on RTCWS continued by order in Original No. 65/97 of the Assistant Commissioner was not challenged by the assessee and consequently the assessee is liable to pay AED/BED on RTCWS. The period involved in the appeal No. E/1395/98 is 5/96 to 4/97. There is, therefore, a contradictory view taken by the learned Member (J) with regard to the product RTCWS, that is, while learned Member (J) has held that inasmuch as the assessee has not challenged the order in Original No. 65/97, they are required to pay BED/AED on RTCWS for the period from 11/96 to 4/97. Whereas in respect of the same product learned M(J) has dismissed the appeal No. E/1395 as not maintainable. If Appeal No. E/1395/98 is dismissed as not maintainable, the effect is that no AED would be payable for the period from 5/96 to 4/97.
21. I further note that there are conflicting decisions by different Benches of the Tribunal in regard to the classification of the product RTCWS. In the case of Good Year (India) Ltd. v. CCE, New Delhi it was ruled that Tyre cord fabric obtained by dipping grey tyre cord fabric in Resorcinol solution, applying rubber compound thereafter and calendering the fabric is specifically covered under heading 59.02 and not under heading 59.06. On the other hand the South Zonal Bench in the case of MRF Ltd. CCE Goa & Chennai as reported in 1999 (80) ECR 398 has held that Dipped Tyre Cord Fabrics/Rubberised/Calendered Tyre Cord Fabrics would be classifiable under heading 59.06 (earlier 59.05). I find that the decision rendered by the Delhi Bench of the Tribunal in the case of Good Year India Ltd v. CCE New Delhi is a later decision. In that decision, the Delhi Bench has referred to the decision of the South Zonal Bench in the case of MRF Ltd. v. CCE, Chennai & Goa and has held that the product RTCWS is classifiable under heading 59.02 and not under Heading No. 59.06. For convenience of reference. I reproduce below both the headings :
59.02 : Tyre cord fabrics of high tenacity yarn of nylon or other poliyamides, polyesters or viscose rayon 5906 : Rubberized textile fabrics other than those of heading 59.02 It is not in dispute that the grey tyre cord fabrics is dipped in a Resorcinol solution and thereafter rubber compound is applied and the fabric is calendered. The assessee thus get rubberized tyre cord fabric after the processing is undertaken by them. Heading No. 59.02 specifically covers tyre cord fabrics of high tenacity yarn of nylon or other polyamides polyester or viscose yarn. Further, in the write up furnished by the respondents assessee vide their letter No. E/A/G/SG/231 dated 23.11.96, the assessee has stated as under :
Rubberised Tyre Cord Fabrics is essentially a nylon Warp Sheet containing nylon cord made by twisting the fabling two or more number of yarn plies. This is dipped in Resorcinel, Formal Dehyde, VP latex dip solution to impart the property of adhering to rubber. This will be rubberized by passing through a calender and applying rubber compound on both the side of the warp sheet Rubberising the fabric as submitted by MRF itself consisted of two stages :They are as under :
(i) Rubbnerisation Stage-1 : Dipped fabric
(ii) Rubberisation Stage-II : Calendered fabric The second stage of rubberisation is known as coating or calendering the dipped tyre cord warp sheets in the calendering machine with two or more rollers operated at selected surface speeds and controlled temperature for coating rubber on both sides of the dipped tyre Cord Warp sheet to a controlled thickness and the resultant product is called as coated or Rubberised Tyre Cord Warp sheet (RTCWS) and are used in the manufacture of tyres. This second stage of rubberisation is carried out at the assessees' Arakonam factory. It would thus be seen that rubberised and calendered tyre cord sheets (RTCWS) (stage-2 of the rubberising) are entirely different from unprocessed tyre cord warp sheet or DTCWS (Stage 1 of the rubberising). The South Zonal Bench has not attempted to bring out this difference and merely held as under:
Dipped Tyre Cord Fabrics/Rubberised/Calendered Tyre Cord Fabris would be classifiable under heading 59.05 (now 59.06) It would thus be seen that South Zonal Bench in their decision in the case of MRF Ltd v. CCE Goa & Chennai has not specifically held that RTCWS would be classifiable under heading 59.06 and they have merely combined the item Dipped Tyre Cord Warp Sheet (Stage-1 of rubberisation) and Rubberised/Calendered Tyre Cord Wharp Sheet (Stage 2 of the rubberisation) to hold that RTCWS would be classifiable under heading 59.06. It is this decision which has been challenged by the Revenue before the Hon'ble Apex Court and the Hon'ble Apex Court has admitted the appeal and is pending. Delhi Bench of the Tribunal in their decision in the case of Good year India Ltd. v. CCE New Delhi has held that RTCWS would be classifiable under heading 59.02 and not under heading 59.06. In the said decision, the Tribunal has referred to various decisions of the Tribunal including that of the South Zonal Bench cited supra. The Delhi Bench of the Tribunal in their decision has gone into in great detail about the Explanatory notes below heading 59.06 before coming to the conclusion that the product RTCWS would be classifiable under heading 59.02. In para 8 they have held as under :
... Heading No. 59.02 specifically covers tyre cord fabric of high tenacity yarn of nylon or other polyamides polyester or viscose rayon. According to 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 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 fabric of Heading 59.02. Heading No. 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 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.
In view of the above, respectfully following the ratio of the decision of the Delhi Bench of the Tribunal, I hold that the product RTCWS would be classifiable under heading 59.02 and not under heading 59.06. However, since the matter is pending before the Hon'ble Apex Court, as noted above, I am of the considered view that the question with regard to classification of the product RTCWS should be kept in abeyance till the outcome of the Revenue Appeal before the Apex Court is known. Accordingly, as suggested by Shri M. Chandrasekharan, Sr Counsel for the Revenue, Appeal No. E/1395/98 should be kept pending and cannot be dismissed as not maintainable as held by learned M(J).
22. Now I proceed to take up Appeal No. E/3577/1998. This has been dealt with by learned Member (J) on page 18 & 19 of his order. In this case, the order in Original No. 12/98 dated 9.6.98 dealt with two show cause notices Nos. 184/97 dated 1.12.97 and 360/98 dated 24.3.98. Both the show cause notices proposed demand of BED and AED on the following intermediate products:
(1) Beads (2) Dip Solution (3) RTCWS In the Order in original passed by the Assistant Commissioner, he has held that all these products are marketable and confirmed BED of Rs. 1,57,71,352/- and AED of Rs. 29,19,531/- under Section 11A of the CE Act, 1944. Against the said order the assessee filed appeal before the Commissioner (Appeals) and Commissioner (Appeals) vide order in Appeal No. E/153/98 (M-I) dated 20.8.98 held that Beads and Dip solutions are not marketable and set aside the demand on these products. It is seen from para 4.5 of his order that he has discussed in detail about the product Dipped Tyre Cord Warp Sheet (DTCWS) and reached a conclusion that dipping of tyre cord warp sheet into a solution being the first stage of processing, is not excisable and accordingly he set aside the demand of duty on DTCWS. It would thus be seen that the Commissioner (Appeals), instead of dealing with the product RTCWS which was the subject matter of the show cause notices and the order in original, has dealt with a separate product i.e. DTCWS. The Commissioner (Appeals) has misdirected himself in dealing with DTCWS instead of RTCWS. Strangely enough, in the appeal filed by the Revenue against the decision of the Commissioner (Appeals), the Revenue, in the EA-3 Form against serial No. 8 has mentioned the items such as Dip Solution. Beads and DTCWS. Further, in the statement of facts, it is stated that the Assistant Commissioner's order regarding RTCWS has been upheld by the Commissioner (Appeals), which statement is again factually incorrect. In the grounds of appeal also it is stated that Commissioner (Appeals) has allowed appeal in respect of items viz. Dip Solution & Beads while in fact he has allowed appeal in respect of DTCWS also, though that product was not the subject matter in the Show cause notice as noted above. It shows how carelessly Revenue appeal has been prepared and filed. However, for the above discrepancy. I am not inclined to remand the matter. In respect of Beads & Dip solution, it is settled that they are not subject to levy of duty. In respect of RTCWS, I hold same view as I have taken in appeal No. E/1395/98, that is, to await the decision of the Hon'ble Supreme Court. Ordered accordingly.
23. The Registry is directed to place the records before the President to refer the following points of difference for the opinion of a third Member:
(1) Whether appeal No. E/1395/98 is liable to be dismissed as not maintainable as held by Member (Judicial) OR Whether it should be kept pending to be disposed of on the basis of final outcome of the Revenue's appeal filed in the Supreme Court against the Tribunal's Final Order No. 1370-88/98 dated 20.7.98 in the case of M.R.F. Ltd. v. CCE, Goa & Chennai vide 1995 (105) ELT 619 (T), as held by Member (Technical);
(2) Whether appeal No. E/3577/98 is liable to be dismissed as held by Member (Judicial) OR Whether it should be kept pending for a decision on the classification and dutiability of Rubberised Tyre Cord Warp Sheets on the basis of final outcome of the Revenue's appeal filed in the Supreme Court against the Tribunal's Final Order No. 1370-88/98 dated 20.7.98 in the case of M.R.F. Ltd v. CCE, Goa & Chennai vide 1995 (105) ELT 619 (T), as held by Member (Technical).
C.N.B. Nair, Member (T)
24. The issues referred are to be found in paragraph 23 of the Division Bench order. The reference relates to Appeals No. E/1395/98 & No. E/3577/98-Ex.
25. I have perused records and heard both sides.
26. The first issue referred is the maintainability of appeal No. E/1395/98-Ex. learned Counsel for the respondent states that this issue is not being contested. Thus, this issue is not in contest. Therefore, I answer that the appeal is maintainable.
27. The second issue is as to whether Appeal No. E/3577/98-Ex. is to be dismissed. In regard to this issue also, the respondent does not contend that the appeal should be dismissed at the threshold. The submission is that the appeal may be considered on merits and order passed. I answer this issue also accordingly. In sum, the appeals are required to be considered on merits by the Division Bench in the light of the judgment of the Hon'ble Supreme Court.
28. The reference is answered as above and registry is directed to place the appeals before the Division Bench.
[Dictated & pronounced in the open Court].
29. In terms of the Majority decision on the first point of difference and in view of the Hon'ble Supreme Court's judgment in CCE v. MRF Ltd , Appeal No. E/1395/98 is dismissed. In view of the finding recorded by the learned 3rd Member on the second point of difference on the basis of the consensus between the parties to the appeal as to the applicability of the Hon'ble Supreme Court's judgment in the case of MRF Ltd (supra), Appeal No. E/3577/98 is also dismissed.
(Pronounced in open Court on 13th April 2006)