Customs, Excise and Gold Tribunal - Calcutta
Commissioner Of Central Excise vs Champdany Industries Ltd. on 5 April, 2005
Equivalent citations: 2005(101)ECC63
ORDER M.P. Bohra, Member (J)
1. These two appeals have been filed by the Revenue. It would be relevant to mention at this stage that out of two appeals before this Bench, Appeal No. ER-416/2000 relates to classification of jute carpets and Appeal No. ER-14/2001 relates to quantification of the disputed demand. The aforesaid two appeals were decided in favour of the Respondent's Company vide Orders dated 26.9.2000 and 9.2.2001 passed by this Tribunal. This Tribunal followed the decision of the Hon'ble Andhra Pradesh High Court in the case of Charminar Nonwovens Limited v. CCE, 1998 (25) RLT 445. The department filed Civil Appeals before the Hon'ble Supreme Court against the judgment in the case of Charminar Nonwovens Limited as well as various decisions of the CEGAT wherein CEGAT had followed the judgment of the Hon'ble Andhra Pradesh High Court Hon'ble Supreme Court decided all the said matters together vide the judgment reported in 2004(267) ELT 372. These matters were also remanded back to the Tribunal for deciding the same afresh in accordance with law.
Facts relating to Appeal No. 416/2000 are given below:
This appeal has been filed by the Department against the Order-in-Appeal dated 13th March, 2000, passed by the Commissioner of Customs & Central Excise (Appeals), Shillong. The Commissioner (Appeals) allowed the appeal filed by the Respondent's Company against the order dated 26.11.99 passed by the Assistant Commissioner of Central Excise & Customs, Bhubaneswar. The period involved is December 1991 to February 1999. The process of manufacture of the carpets as disclosed by the Respondents at the factory of the Respondent Company is as under:
The said carpets are manufactured by interlacement of three yarns which are simultaneously interlaid on the looms during the weaving process. For manufacture of the said carpets, the respondent buys or procures from its other units different types of yarn, such as, jute yarn, cotton yarn and polypropylene yarn. The said carpets are manufactured by the respondents only and exclusively out of yarn and the same do not consist of any base fabric. In the said carpets, jute always predominates by weight over each of the other single textile material. Earlier, the matter went to the Commissioner (Appeals). He passed Order-in-Appeal dated 27.6.95. By the said order, the Commissioner (Appeals) remanded the matter to the adjudicating authority with the following remarks:
"That being the case, I remand the matter to the original Adjudicating Authority to decide the case afresh after obtaining the necessary technical report as mentioned supra, also allowing the natural justice to the appellant in accordance with law. The case disposed of accordingly."
After the remand order, the Department sent the samples of the carpets to the Jute Commissioner's Office for testing purposes. The Jute Commissioner, therefore, got the said samples tested by the export body on Jute Industry, namely, Indian Jute Industries Research Association. As per the reports of Indian Jute Industries Research Association, Jute predominated by weight over each of the other single textile material in the said carpets and the extent of jute therein was found to be 51.02%, 49.37%, 50.12%, 51.45% & 52.10 in different samples. The said expert body also found that the said carpets do not have any base fabric.
3. The Deputy Commissioner of Central Excise as well as the Departmental Chemical Examiner also visited the respondent Company and examined the entire process of manufacture and also tested the samples drawn on the spot. The Department Chemical Examiner also found and opined that the said carpets do not have any base fabric and that jute predominated therein by weight over each of the other single textile material and the percentage of jute was in fact more than 50%. This position was also admitted by the Assistant Commissioner in the show-cause notice issued on 28.5.1999. The Assistant Commissioner rejected the submissions of the respondent's Company vide order dated 26.11.99. The Respondent's Company filed an Appeal before the Commissioner (Appeals) who allowed the same by Order-in-Appeal dated 13th March, 2000. It is against the aforesaid order dated 13th March, 2000 passed by the Commissioner (Appeals) that the Appeal No. ER-416/2000 has been filed by the Department.
Facts Relating to Appeal No. ER-14/2001 are given below:
4. Consequent to the Assistant Commissioner's Order dated 26.11.1999, the Superintendent of Central Excise issued two show-cause notices dated 8.2.2000 and 23.2.2000 seeking to demand differential duty for the period from December 1992 to January 2000. The demand was confirmed by the Assistant Commissioner vide his Order dated 30th March, 2000. The respondent Company filed an appeal before the Commissioner (Appeals). The Commissioner (Appeals) following the earlier order dated 13.3.2000, allowed the said appeal vide Order-in-Appeal dated 25th August, 2000. Against this order, the present Appeal No. ER-14/2001 has been filed by the Department.
5. We have heard Shri J.R. Madhiam, Ld. JDR for the Appellant-Revenue and Shri S.K. Bagaria, Ld. Sr. Advocate alongwith Shri Partha Banerjee, Ld. Advocate for the respondents.
6. Shri Madhiam submits that instead of rectified Assistant Commissioner's order for revising classification list with effect from December 1991 till April 1994, the Commissioner (Appeals) committed an error by deciding afresh issue of classification during the aforesaid period which had already attained finality. He, therefore, submits that the Commissioner's (Appeals) order on classification pertaining to the period December 1991 to April 1994, is not legal and correct. He submits that in respect of the period w.e.f. 25th April, 1994 and onwards while deciding the issue of classification, the Commissioner (Appeals) did not take into account Chapter Note No. 1 to Chapter 57. The Chapter Note 1 to Chapter 57 defines the term, carpets and other textile floor coverings' means floor coverings in which textile materials serve as the exposed surface of the article when in use. So far, rate of duty is applicable only on these floor coverings of jute which specifies its parameter given in Note 1 to Chapter 57. He submits that Chapter Note 1 to Chapter 57 describes that to be classified as jute carpets. The jute materials should serve as exposed surface of the carpet. In the present case, the polypropylene materials consisted the exposed surface of the product. By application of Chapter Note read with Rules for interpretation of schedule product cannot be classified as jute carpet. He, therefore, submits that the exemption benefit allowed by the Commissioner (Appeals) does not appear to be legal and correct. He, therefore, submits that both the appeals may kindly be allowed and the orders of the Commissioner (Appeals) may kindly be set aside.
7. Shri Bagaria submits that in view of the undisputed factual position, there is no scope to classify the said carpets as otherwise than jute carpets. He submits that it is admitted by the Department that the said carpets, jute predominated by weight over each of the other single textile materials. He also submits that the said carpets have got no base fabric and it has been admitted by the Departmental Chemical Examiner as well as by the Indian Jute Industries Research Association. This position has been admitted by the Assistant Commissioner. He submits that carpets and floor coverings of jute during the entire relevant period were covered by specific sub-headings as mentioned above. Accordingly, the said carpets, during the entire relevant period were correctly classifiable as jute carpets. He submits that only ground in the Department's appeal for classifying the said carpets otherwise than as jute carpets is the purported reliance on Chapter Note 1 of Chapter 57 of the Central Excise Tariff. He submits that the said Chapter Note only defines the expression carpets and other textile floor coverings for the purposes of Chapter 57. The limited use of the said Chapter Note is to decide the issue as to whether the goods in question are carpets for the purposes of Chapter 57 or not. He submits that there is no dispute at all in the present case. According to the Department, the goods are classifiable as carpets falling under Chapter 57. He submits that whereas the goods are carpets falling under Chapter 57, the role of Chapter Note 1 comes to an end. The classification of such carpet has to be decided based on description of such heading/sub-heading read with the relevant Section Notes and Chapter Notes. For this purpose, the said Chapter Note 1 is not at all relevant. He submits that the carpets manufactured by the respondent Company, the exposed surface was made of polypropylene yarn which was also a textile material falling under Chapter 55. Thus by applying Chapter Note 1 of Chapter 57, the goods in question were carpets and there was no dispute.
He submits that in the carpets manufactured by the respondent company, jute admittedly predominates by weight over each of the other single textile material. The said carpets do not have any base fabric. In such cases, the test of predominance of jute over each of the other single textile material is the deciding factor for classification purposes as statutorily laid down in Section Note 2 (A) read with Section Note 14A of Section XI of Central Excise Tariff. This position prevailed upto 1994-95. From 1995-96 onwards, the same position continued to prevail under Section 2(A) read with Sub-heading Note 2 (A) of Section XI of the Central Excise Tariff. He, therefore, submits that the said carpets containing two or more textile materials are to be regarded as consisting wholly of that textile material which predominates by weight over any other single textile materials. In the present case he submits that the jute predominates by weight over each other single textile material, the said carpets could only be classified as jute carpets. He submits that the classification lists were initially approved by classifying the said carpets as jute carpets. Subsequently, two provisional assessments orders were passed on 18.6.1993 and 24.7.1995 as stated in the order of the Assistant Commissioner dated 26.11.1999. Thereafter, for the entire period from December 1991 onwards, the classification was changed as other than jute carpets vide the said order dated 26.11.1999 of the Assistant Commissioner. The respondent company had filed the appeal against the said order of the Assistant Commissioner before the Commissioner (Appeals). No appeal was filed by the Department against the said order dated 26.11.99. The Commissioner (Appeals) accepted the respondent Company's submissions relating to classification, obviously, such decision of the Commissioner (Appeals) applied to the entire period covered by the Assistant Commissioner's Order. He submits that so far Appeal No. ER 14/2001 is concerned, this is only consequential to the classification issue and there is no new ground in this appeal. He, therefore, submits that both the appeals filed by the Revenue may kindly be dismissed.
8. After carefully considered the submissions made from both the sides, we find that the only ground in the Department's appeal for classifying the said carpets otherwise than as jute carpets is the purported reliance on Chapter Note 1 of Chapter 57 of the Central Excise Tariff. The said Chapter Note 1 is set out herein below:
"For the purposes of this Chapter, the term 'carpets and other textile floor coverings' means floor coverings in which textile materials serve as the exposed surface of the article when in use and includes article having the characteristics of textile floor coverings but intended for use for other purposes."
The carpets manufactured by the respondents-Company, the exposed surface was made of polypropylene yarn which was a textile material falling under Chapter 55. Thus by applying test incorporated in Chapter Note 1 of Chapter 57, the goods in question were carpets and there was no dispute. As can be seen from this Note at the top of the Chapter 57, it defines only the term 'carpets and other textile floor coverings' and does not deal with the manner in which a carpet made out of different textiles are to be classified. This situation is dealt in Note 2(A) read with Section Note 14A of Section XI of the Central Excise Tariff. Section 2A and Section Note 14A of Section 11A of Central Excise Tariff states as follows :
"2.(A) Articles classifiable in Chapters 50 to 55 or in Heading No. 58.06 or 59.02 and of a mixture of two or more textile materials are to be classified as if consisting wholly of that one textile material which predominates by weight over any other single textile material.
14(A) Products of Chapters 56 to 63 containing two or more textile materials are to be regarded as consisting wholly of that textile material which would be selected under Note 2 above for the classification of a product of Chapters 50 to 55 consisting of the same textile materials.
(B) For the application of this Rule:-
(i) In the case of textile products consisting of a base fabric and a pile or looped surface, no account shall be taken of the base fabric ;
(ii) In the case of embroidery, only the base fabric shall be taken into account."
This criterion, however, does not apply to a case where the textile product consisting of ground fabric and piled or looped surface in which case no account is to be taken of the ground fabric.
9. In the carpets manufactured by the respondent Company, jute admittedly predominates by weight over each of the other single textile material. The Assistant Commissioner has admitted in his order dated 26.11.99 that the said carpets, jute always predominated by weight over each of the other single textile material. As per the tests done by the Departmental Chemical Examiner on the spot and during visit to the respondent Company's factory, the percentage of jute in the said carpets was found to be 51.45 and 52.56. As per different test reports of Indian Jute Industries Research Association, the percentage of jute in the said carpets was found to be more than 50%. As per Indian Jute Industries Research Association, the said carpets have got no base fabric. The same position was also found by the Departmental Chemical Examiner on testing the goods during his visit to the factory. The aforesaid factual position was specifically admitted by the Assistant Commissioner in his order and he has held that in the said carpets jute predominated by weight over each of the other single textile material and the said, carpets did not have any base fabric. In such circumstances, the test of predominance of jute over each of the other single textile material is the deciding factor for classification purposes as statutorily laid down in Section Note 2 (A) read with Section Note 14A of Section XI of the Central Excise Tariff. This position prevailed upto 1994-95. From 1995-96 onwards, the same position continued to prevail under Section Note 2 (A) read with Sub-heading Note 2 (A) of Section XI of the Central Excise Tariff. As per the said statutory provisions, the said carpets containing two or more textile materials are to be regarded as consisting wholly of that textile material which predominates by weight over any other single textile material. In the present case, in the said carpets, jute predominates by weight over each other single textile material, the said carpets could only be classified as jute carpets. Therefore, it is clear from the criteria, where two textile materials are mixed to produce the goods in question, the textile material which predominates by weight over the other textile material has to be taken as the proper classification of the goods. It is clear from the reasons mentioned above, the interpretation sought to be given by the Department to Chapter Note 1 of Chapter 57 is totally contrary to and inconsistent with the said Chapter Note itself and is wholly misconceived. The said carpets can only be classified as jute carpets and nothing else. As stated above, the said carpets, jute predominates by weight over each of the other single textile material and the said carpets did not have any base fabric. In view of the aforesaid position, the carpets can only be classified as jute carpets. We are entirely in agreement with this approach of the Appellate Commissioner and we are of the opinion that as the Section and Chapter Notes stand, this is the correct position and the goods of the respondents have been rightly classified as jute carpet.
10. In so far as the ground in Appeal No. ER-416/2000, the position is factually incorrect. For the period mentioned in the said ground, the classification lists were initially approved by classifying the said carpets as jute carpets. Subsequently, two provisional assessments orders were passed on 18.6.1993 and 24.7.1995 as stated by the Assistant Commissioner's Order dated 26.11.99. Thereafter, the classification was changed for the entire period from December 1991 and onwards and it was classified other than jute carpets vide the said order dated 26.11.1999 of the Assistant Commissioner. The respondent Company had filed the appeal before the Commissioner (Appeals). No appeal was filed by the Department against the said order dated 26.11.1999. When the Commissioner (Appeals) accepted the respondent Company's submissions relating to classification, obviously, such decision of the Commissioner (Appeals) is the final and applied to the entire period covered by the Assistant Commissioner's Order. Therefore, we do not find force in the contentions raised by the appellant-Revenue.
11. Insofar as the ground in Appeal No. ER-14/2001 is concerned, this is only the consequential to the classification issue.
12. In view of the aforesaid discussions, we are of the opinion that there is no force in both the appeals filed by the Revenue. Consequently, we dismiss both the appeals filed by the Revenue. Ordered accordingly.