Customs, Excise and Gold Tribunal - Calcutta
Bengal Waterproof Limited vs Commissioner Of Central Excise on 27 March, 2007
Equivalent citations: 2007(122)ECC285, 2007(148)ECR285(TRI.-KOLKATA)
ORDER D.N. Panda, Member (J)
1.1 These two appeals were filed by Assessees before this forum. One such Appeal was registered as Appeal case No. EDM-278/2005. That arose out of order-in-appeal No. 16/Kol-III/2005 dated 23.02.2005. The second one was registered as Appeal case No. EDM-366/2005 and that arose out of order-in-original No. 02-04/Commr./CE/Kol-III dated 30.03.2005. Both the appeals involving common question of classification were heard analogous and considered proper for common disposal by this order with the consent of both parties.
1.2 The issues before the authorities were whether Rubberised textile fabric manufactured by the Appellant is covered by Chapter 59 and Heading No. 59.06 and Rainwear manufactured out of such material is covered by Chapter 62 under heading No. 62.01 while Revenue claims rainwear to be classified under chapter Heading 4015.00. The authorities below relying on Chapter Note 2(a) of Chapter 62 held that Raincoat is an worn apparel and classifiable under chapter heading No. 4015.00.
2.1 The ld. Sr. Counsel Mr. Bagaria appearing for the Appellants submitted that the process of manufacture of rainwear requires raw materials such as: cotton fabrics, crumb rubber and sheet rubber which are natural rubber, synthetic rubber and few chemicals. Crumb rubber with other chemicals undergo processing for preparation of compound mixing and such mix is spread on fabrics. The fabric with a spread of mix is passed through rollers and thereby the mix gets properly and evenly coated on the fabric. The said processed fabric with a coat of the above mix is then cured which results in proper bonding between mix of rubber and chemicals with the cotton fabric and the fabrics get rubberised. The outcome so arrived is called rubberised textile fabrics. Such rubberised textile fabric is the basic raw-material to make rainwear through the process of cutting, stitching and all other activities. The rubberised textile fabric which is used in making of rainwear is an excisable goods and classified under the heading No. 59.06 of chapter 59 under Central Excise Tariff Act, 1985 which was not disputed by Revenue at any time.
2.2 It was submitted by the appellant that the rubberised textile fabrics manufactured by the appellant did not weigh more than 1.500 g/m2. Such aspect of the matter was not disputed by Department at any point of time. Rubberised textile fabric is the raw material for the rainwear was also never disputed by the Department. None of the show cause notices contradicted this aspect. It was therefore submitted by the ld. Sr. Counsel that when Department has no grievance as to the rubberised textile fabric falling under heading 59.06 there is no scope to hold rainwear manufactured out of such goods to fall outside Chapter 62 and not classifiable under sub-heading No. 6201.00 without testing the rainwear whether made out of vulcanised rubber. Holding rainwear classifiable under the Chapter heading No. 4015.00 was totally misconceived and devoid of merit. Relying on Chapter Note 2(a), the ld. authorities below erred in law when raw-material (input) for rainwear was undisputedly classifiable under heading No. 59.06.
2.3 According to the learned Counsel, the Chapter note 2(a) of chapter 62 reads as under:
...2. This Chapter does not cover:
(a) Worn clothing or other worn articles.
Taking shelter of above chapter Note, Revenue held raincoat is an worn apparel and hence classifiable under Chapter Heading 4015.00 of the Tariff. Also they held baselessly that the reliance placed by the appellant on the classification of fabrics (under Chapter Heading 59.06) used by them for making 'Raincoats' does not advance the appellant's case at all. The learned Counsel therefore submitted that Chapter 62 embraces made up article of any textile fabrics and the rainwear made out of rubberised textiles fabric squarely falls within its ambit. Chapter Note 2(a) of Chapter 62 categorises worn clothing or other worn articles to mean old and used clothing and article and not new article of apparel for wearing. Therefore, the exception made by note 2(a) of Chapter 62 does not take rain water into its fold in view of manufacture of new excisable goods which are not worn out, covered by sub-heading No. 62.01.00. Thus, the appellant manufacturing rainwear attracts that sub-heading.
2.4 Worn clothing or other worn articles are normally pre-manufactured goods and due to no utility thereof are discarded. Those are excluded by the Chapter Note 62 (a). Rainwear are manufactured excisable goods and dutiable by specific entry under sub-heading No. 62.01. If Revenue's contention that Chapter 2(a) of Chapter 62 is to be interpreted to cover the newly manufactured goods that shall defeat Legislative intent. According to the Appellant, meaning of the term "worn" not being defined by Central Excise Act, 1944 such term as commonly understood to admit already used and discarded clothes, shall be of good assistance to appreciate that worn out are not the goods meant for subsequent manufacture. According to Appellant, the Appellant finds support from HSN classification and the explanatory note to HSN does not support Revenue's contention. Relying on Customs Tariff 2002-2003, the Appellant submitted that old and used "worn" cloth does not attract Excise duty. The Customs Tariff Heading No. 62.09 further describing "worn" cloth and other "worn" article liable to import duty makes the position very clear relying on Notification No. 21/2001-CE. The learned Counsel therefore strongly urged that rainwear can only be classifiable under sub-heading No. 62.01. Revenue's contention that sub-heading No. 4015.00 deals with non-rubberized textile fabrics shall not be considerable for the reason that sub-heading No. 62.01.00 under Chapter 62 specifically deals with article of apparel of all sorts and more reasonably textiled apparel. The sub-heading 4015.00 reads as under:
40.15 4015.00 Articles of apparel and clothing (including gloves). for all purposes of vulcanized rubber other than hard rubber.
The raw-material out of which rainwear is manufactured can by no imagination be said to be made out of vulcanized rubber. According to him, when the raw material for rainwear was undisputedly all along accepted by Revenue to be falling under sub-heading 59.06 under Chapter 59 there shall be no quarrel to bring the finished products to the sub-heading No. 4015.00 under Chapter 40. All consequential benefit of such classification is to be given to the Appellant, in accordance with circulars/Notifications.
2.5. In support of its contentions the Appellant relied on following judgments:
(i) Bengal Waterproof Works Ltd. v. CCE, Calcutta-II
(ii) CCE v. MRF Limited 1998 (97) E.L.T. 23
(iii) India Water proofing & Deying Works .
2.6 The ld. Sr. Counsel submitted that the appellant having succeeded in its own appeal holding that Chapter Note 2 (a) of Chapter 40 does not cover the goods of Section XI (Textile and Textile Articles) it cannot be held otherwise in the present appeal. Air pillows and Air Mattress classified by authorities under heading 40.16 refers to other articles of vulcanised rubber (other than hard rubber) and for an item to be classified under Chapter 40, the same must be made out of the vulcanised rubber. Air Pillows and Air Mattress under consideration before the Tribunal in that judgment having been admittedly made out of Rubberised Textile Fabrics and was held to be classified under Chapter 59, they were held not to have been made out of vulcanised rubber. It was also held that Chapter Note 2 (a) excludes the goods of Section XI i.e. if they are made out of textile and if the same are textile articles. Accordingly, it was held therein that the Air pillow and Air Mattress having been made out of Rubberised Textile Fabrics and as such textile fabric classifiable under heading 59.05 by the authorities below, the proper classification of Air Pillow and Air Mattress were to be under the heading 6301.00.
2.7 The ld. Counsel to support his argument relied on the judgment of Hon'ble Supreme Court in Commissioner of Central Excise, Madras v. MRF Ltd. 1998 (97) E.L.T. 23 (S.C.). Heavily leaning on para 4 of the judgment, he submitted that when the undisputed position in relation to raw-material used for making rainwear was Rubberised Textile Fabric, classifying rainwear under sub-heading 4015.00 is inconceivable for the reason that the goods covered by this sub-heading is made out of Vulcanised Rubber. For proper appreciation of the principle laid down by the Hon'ble Supreme Court, Para 4 of the above reported judgment in MRF case (Supra) is reproduced below:
It seems to us that no argument based on Chapter Note 3 or otherwise can be of any avail to the Revenue, having regard to the undisputed position that what is used as a raw material to produce the said product is classified by the Revenue itself as vulcanised rubber. If the raw material is vulcanised rubber, the said product made from it cannot possibly be unvulcanised compounded rubber.
3.1 The ld. JDR appearing for Revenue submitted that the order passed by the authorities below did not suffer from any legal infirmity. He supported the order of the authority below and submitted that the appellant is not entitled to benefit of any exemption Notification and for the wrong availment they were rightly dealt under law both in respect of levy of duty as well as penalty. According to Revenue, classifying the goods under sub-heading 4015.00 under Chapter 40 is well founded since the goods were apparel and clothing. Whether such goods used or not is irrelevant. However, Revenue did not dispute that the goods manufactured were rainwear and manufactured out of Rubberised Textile Fabric squarely falling under sub-heading 59.06. According to him, apparel and clothing for all-purpose being covered by sub-heading 4015.00 under Chapter 40, the sub-heading covers both rain cloth and other clothes within its fold. The rubberised fabric were vulcanised rubber and not entitled to any exemption but dutiable.
3.2 In support of his arguments the ld. DR submitted that the Appellants have no case in view of the decision of this Tribunal in the case of Commissioner of Central Excise, Kolkata-II v. Trimurti Waterproof Pvt. Ltd. . He submitted that the judgment in Trimurti Waterproof Pvt. Ltd. was made by Tribunal on 20.02.2001 holding Raincoat and Rainsuit made out of rubberised fabrics classifiable under sub-heading 4015.00 and not under sub-heading 6201.00. But on 20.09.2001 i.e. soon after 7 months of that decision, judgment was made by Tribunal in the case of present appellant holding Air pillow and Air mattress made out of rubberised textile fabric shall fall under the heading 63.01. However, while deciding that case, the principles of Trimurti Waterproof Pvt. Ltd. case was not followed. The judgment of this Tribunal in Trimurti Waterproof Pvt. Ltd. case being a direct one that should also apply in the case of the appellant in both these appeals. It was also submitted by the ld. JDR that the word 'worn' used in Chapter Note (a) of Chapter 62 implies the cloth which shall be used but not already used cloth. Therefore, the appellant should be equally dealt by the decision of the Tribunal in the case of its rainwear manufactured, following Trimurti decision (Supra).
3.3 The ld. Sr. Counsel relying on the judgment of Hon'ble Supreme Court in the case of CCE v. MRF Ltd 1998 (97) E.L.T. 23 (S.C) and on the judgment in the case of India Water Proofing and Deying Works countered the argument of the ld. JDR. He submitted that the decision in Trimurti case was considered by this Tribunal in the assessee's own case reported in 2006 (203) E.L.T. 80 and held that raincoats in the case of Trimurti were not argued to have been manufactured out of rubberised textile fabrics covered by SH 50.06 and the said decision was rendered sub-silentio, having not considered, the provisions of the note of HSN classification in regard to the inputs under Chapter 62 which would be binding to arrive at a classification under the Central Excise Act. That decision did not consider the argument of Chapter 62 for which that shall not prevail in view of interpretations being given to the term "worn apparel" by Para 2 of the Judgment reported in 2006 (203) E.L.T. 80.
3.4 He further submitted that in view of Apex Court Judgment in Commissioner of Central Excise v. MRF Ltd. 1998 (97) E.L.T. 23 holding that if the raw-material was vulcanised rubber the product made from that cannot possibly be unvulcanised compounded rubber, such law declared by the Hon'ble Court being law of the land under Article 141 of the Constitution of India, is binding on Revenue. This resolved entire conflict raised by judgment of Tribunal in Trimurti case gets resolved. He further submitted that the judgment of the Tribunal in Trimurti Waterproof Pvt. Ltd. case (Supra) also suffers from infirmity since that was sub-silentio for the following reasons:
(a) Relevant provisions of HSN and its Explanatory Notes were not considered. From the said provisions of HSN, it was quite clear that the expression "worn" in Chapter Note 2(a) of Chapter 62 only means the old and used articles which have already been worn. Similarly, the same position was also clear from the Customs Tariff but it was also not considered.
(b) Chapter Note 1 of Chapter 62, which was quite vital, was also not considered. The said Chapter Note made it quite clear that if the articles of apparel are made of textile fabrics, these are classifiable under Chapter 62.
(c) Definition of the expression Rubberised Textile Fabrics in Chapter Note 4 of Chapter 59 was also not considered.
(d) It was not considered that if the articles for wear are excluded from Chapter 62, what would remain in the said chapter inasmuch as all articles for wear will get out of the said Chapter and Heading No. 62.01 itself will become meaningless and nugatory.
(e) Effect of various notifications mentioned above was not considered. In the said notifications, the Central Govt. itself accepted that raincoats and other articles of apparel are covered by Chapter 62.
(f) Even the assessee had not furnished any evidence in the said matter that its rainwear were manufactured out of Rubberised Textile Fabrics falling under Chapter 59.
(g) Earlier binding decision of the Hon'ble CESTAT in the Appellant's case and was not considered.
(h) It was also not considered that if articles of apparel or articles for wear are held to be not classifiable under Chapter 62, there will be no other heading for classification of textile garments.
3.5 To argue that the principles of sub-silentio has been applied by this Tribunal in various cases, he cited following decisions:
(i) State of UP v. Synthetics & Chemicals Ltd.
(ii) CCE v. Surgichem.
(iii) Industrial Cables (India) Ltd. v. CC.
(iv) 1991 (55) ELT 564 Tat Engg. Locomotive Co. Ltd. v. CC
(v) Hindustan Motors Ltd. v. CCE.
(vi) (Bombay High Court) Sheel Thermoplastics Ltd. v. UOI.
The Appellant also submitted that one additional or different fact make the world of differences and earlier decision cannot be followed if factually there are differences and if relevant provisions of law were also not considered.
4.1 Heard both sides and perused the record.
4.2 The real controversy is not relating to the raw-material used in the rainwear and not disputed to be covered by sub-heading No. 59.06 under chapter 59. But the dispute was whether any Rainwear (apparel or clothing) manufactured out of Rubberized Textile Fabric can be said to have been manufactured out of vulcanised rubber and classifiable under heading 62.01 or heading 4015. When the contents of raw-material of Rainwear was not disputed at all at any point of time and such raw-material had undergone processing to manufacture articles of apparel i.e. rainwear, in our opinion, the gene shall not given rise to a different specie when both remained proved on record. No test report of Chemical Examiner has proved that the raw material used for manufacture of Rainwear was Vulcanised Rubber. When no part of the rainwear was proved by evidence to have been made of vulcanised rubber that cannot be assumed to have been made of Vulcanized Rubber and Classifiable under a head which does not admit the same. We are not inclined to unsettle a settled position of Law following the raito laid down by Hon'ble Supreme Court in the case of CCE v. MRF Ltd. 1998 (97) E.L.T. 23 and following the ratio laid down by that Court in the case of CCE v. India Water proofing & Deying Works holding that rain coats are articles of apparel and are liable to be classified as such. Further, Notification No. 6/2002-CE dt. 01.03.2002 declaring raincoats falling under Chapter 62 liable to Nil rate of duty provides rationale and intent of Legislature to make its citizen burden free from duty on such goods at public interest. Such cause cannot be defeated by a misclassification without proper basis. Therefore, articles of apparel made of Rubberised Textile Fabric shall only be of such kind classifiable under heading 62.011. More particularly when the heading No. 6210 of 2005-06 Tariff admits garments made up of fabrics of heading No. 59.06 to its fold conveying Legislative intent to remove barrier, Raincoat having been made up of the raw-material falling under sub-heading 59.06 of Chapter 59 shall not go out of classification under heading 6210 for aforesaid reasons. Consequently, all consequential benefits of CBE&C Circulars and Notifications shall be applicable to the goods manufactured by the Appellant if the appellant is not otherwise disqualified/denied.
4.3. In order to appreciate the application of principles of sub-silentio we quote the relevant portion of the judgment of the Hon'ble Supreme Court in the case in the State of UP v. Synthetics and Chemicals Ltd. as under:
In Jaisri Sahu v. Rajdewan Dubey this Court while pointing out the procedure to be followed when conflicting decisions are placed before a bench extracted a passage from Halsbury's Laws of England incorporating one of the exceptions when the decision of an appellate court is not binding.
Does this principle extend and apply to a conclusion of law, which was neither raised nor preceded by any consideration. In other words can such conclusions be considered as declaration of law? Here again the English courts and jurists have carved out an exception to the rule of precedents. It has been explained as rule of sub-silentio.
A decision passes sub-silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind." (Salmond on Jurisprudence 12th Edn., p.153). In Lancaster Motor Co. (London) Ltd. v. Bremith Ltd. (1941) KB 675, 677 : (1941) 2 All ER 11 the Court did not feel bound by earlier decision as it was rendered without any argument, without reference to the crucial words of the rule and without any citation of the authority. It was approved by this Court in Municipal Corporation of Delhi v. Guman Kaur . The bench held that, 'precedents sub-silentio and without argument are of no moment.' The courts thus have taken recourse to this principle for relieving from injustice perpetrated by unjust precedents. A decision which is not express and is not founded on reasons nor it proceeds on consideration of issue cannot be deemed to be a law declared to have a binding effect as is contemplated by Article 141. Uniformity and consistency are core of judicial discipline. But that which escapes in the judgment without any occasion is not ratio decidendi. In B. Shama Rao v. Union Territory of Pondicherry it was observed, 'it is trite to say that a decision is binding not because of its conclusions but in Regard to its ratio and the principles, laid sown therein.' Any declaration or conclusion arrived without application of mind or preceded without any reason cannot be deemed to be declaration of law or authority of a general nature binding as a precedent. Restraint in dissenting or overruling is for sake of stability and uniformity but rigidity beyond reasonable limits is inimical to the growth of law.
4.4 Tribunal has also followed the rule of such sub-silentio. One such instance was in the matter of Surgichem in 'Salmond on Jurisprudence' Twelfth Edition Section 27 page 153 it is opined that A decision passed sub-silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind. The Court may consciously decide in favour of one party because of point A, which it considers and pronounces upon. It may be shown, however, that logically the court should not have decided in favour of the particular party unless it also decided point B in his favour; but point B was not argued or considered by the court. In such circumstances, although point B was logically involved in the facts and although the case had a specific outcome, the decision is not an authority on point B. Point B is said to pass sub-silentio. A good illustration is Gerard v. Worth of Paries, Ltd. (1936) 2 All E.R. 905 (C.A). There, a discharged employee of a company, who had obtained damages against the company for wrongful dismissal, applied for a garnishee order on a bank account standing in the name of the liquidator of the company. The only point argued was on the question of the priority of the claimant's debt, and, on this argument being heard, the Court of Appeal granted the order. No consideration was given to the question whether a garnishee order could properly be made on an account standing in the name of the liquidator. When, therefore, this very point was argued in the subsequent case before the Court of Appeal- Lancaster Motor Co. v. Bremith Ltd. (1941), 1 KB 675 at 677 (C.A.) the court held itself not bound by its previous decision. Sir Wilfrid Greene, M.R. said that he could not help thinking that the point now raised had been deliberately passed sub-silentio by counsel in order that the point of substance might be decided. We went on to say that the point had to be decided by the earlier court before it could make the order which it did; nevertheless, since it was decided "without argument, without reference to the crucial words of the rule, and without any citation of authority", it was not binding and would not be followed.
The rule that a precedent sub-silentio is not authoritative goes back at least to 1661 - R.V. Warner (ward) 1 Keh. 661 Lev.8 when counsel said: "An hundred precedents sub-silentio are not material"; and Twisden, J., agreed: "Precedents sub-silentio and without argument are of no moment". This Rule ever since has been followed.
5. In view of our conclusion in para 4.2, both the appeals are allowed.
(Pronounced in the Open Court on 26.06.07).