1983 (3) TMI 292 - AT - Central Excise

Issues Involved: Classification of raincoats and caps under the Central Excise Tariff, applicability of exemption notifications, and the requirement for obtaining a Central Excise license.

Issue-wise Detailed Analysis:

1. Classification of Raincoats and Caps:
The primary issue revolves around whether raincoats and caps manufactured by the appellant should be classified under Tariff Item 22D as "ready-to-wear apparel" or under Tariff Item 68 as "goods not elsewhere specified." The appellant argued that raincoats and caps are ready-made garments and should be classified under Item 22D, thus exempt from duty under Notification No. 95/71 and later Notification No. 86/76. The Assistant Collector and Appellate Collector, however, classified these items under Item 68, stating that they are not commonly known as ready-made garments but are special articles meant for protection against rain, snow, and wind.

2. Applicability of Exemption Notifications:
The appellant contended that raincoats and caps should be exempt from duty under the mentioned notifications. They argued that these items were inspected and treated as ready-made garments by other government agencies, including the Ministry of Commerce. The Assistant Collector and Appellate Collector rejected this claim, stating that these items do not fall under the category of ready-made garments as they are not used for personal decoration or ordinary dress.

3. Requirement for Obtaining a Central Excise License:
The appellant explained that they did not obtain a license for manufacturing raincoats and caps initially because these items were exempted from the requirement under various notifications issued under Rule 174-A of the Central Excise Rules. They argued that this should not detract from their claim that these goods fall within the category of ready-made garments.

Judgment Analysis:

1. Classification of Raincoats and Caps:
The Tribunal carefully considered the arguments and found that raincoats and caps are made from duty-paid fabrics and are cut, tailored, and stitched like any other garment. They are available in different sizes and ready for use without further changes. The Tribunal referred to Webster's dictionary, which defines "ready to wear" as something ready-made, and "clothing" as an article of outer cover, such as a coat. The Tribunal also considered the Customs Cooperation Council Nomenclature (Explanatory Notes), which includes raincoats and caps under the heading "garments." The Tribunal concluded that these items fall within the category of "ready-made garments."

2. Applicability of Exemption Notifications:
The Tribunal found that the appellant's explanation for not obtaining a license was acceptable, as several notifications exempted manufacturers of certain categories of goods from obtaining a license. The Tribunal held that the appellant's representation was justified and that these goods were exempt from duty as items of "ready to wear apparel" by virtue of the mentioned notifications.

3. Requirement for Obtaining a Central Excise License:
The Tribunal accepted the appellant's explanation regarding the exemption from obtaining a license and found that the Assistant Collector's and Appellate Collector's observations had no justification. The Tribunal directed that the appellant be allowed consequential relief by way of a refund, subject to rules as to limitation.

Dissenting Judgment:
One member of the bench disagreed with the majority view regarding the classification of caps. While agreeing that raincoats fall within the category of "ready-to-wear apparel," the dissenting member argued that caps should be classified as articles of headgear, not as garments. The member referred to the Customs Cooperation Council Nomenclature, which has a separate chapter for headgear, and concluded that caps are not commercially known as "ready-made garments." Therefore, the dissenting member allowed the appeal for raincoats but rejected it for caps.

Conclusion:
The majority decision held that both raincoats and caps are "ready-made garments" and thus exempt from duty under the relevant notifications. The dissenting opinion agreed only in respect of raincoats, classifying caps as headgear. The Tribunal directed the refund of duty paid on these items, subject to limitation rules.

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