1983 (11) TMI 299 - AT - Central Excise

Issues Involved:
1. Classification of PVC Conveyor Belting under Central Excise Tariff.
2. Applicability of previous Tribunal decisions.
3. Interpretation of "man-made fabrics" under Item 22(3) of the Central Excise Tariff.
4. Consideration of trade terminology and composition.
5. Relevance of judicial precedents and authoritative texts.
6. Validity of penalty imposed on the appellants.

Detailed Analysis:

1. Classification of PVC Conveyor Belting under Central Excise Tariff:
The primary issue in this appeal is whether the PVC Conveyor Belting manufactured by the appellants is chargeable to Central Excise duty under Item 22(3) of the Central Excise Tariff. The Collector of Central Excise, Calcutta, had classified the goods under Item 22(3), which pertains to "man-made fabrics," and demanded a duty amounting to Rs. 14,70,858.01, along with a penalty of Rs. 5 lakhs for contravention of various rules of the Central Excise Rules, 1944.

2. Applicability of Previous Tribunal Decisions:
The Tribunal noted that previous decisions, both by the Collector (Appeals) and the Tribunal itself, had a bearing on this case. The Collector (Appeals) had previously classified similar goods under Item 68, not under Item 22. The Tribunal had also ruled in favor of classifying the goods under Item 68 in the case of M/s International Conveyors Ltd. The Tribunal found that the goods in the present case were materially the same as those in the previous cases and thus should be classified under Item 68.

3. Interpretation of "Man-made Fabrics" under Item 22(3) of the Central Excise Tariff:
The Tribunal examined whether the goods could be termed as "man-made fabrics" under Item 22(3). The item description begins with "Man-made fabrics means all varieties of fabrics manufactured either wholly or partly from man-made fibres or yarn." Sub-item (3) specifies "Fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials." The Tribunal concluded that the goods, being 9 mm thick and containing 56.7% PVC compound, did not fit the general or usual understanding of "fabrics."

4. Consideration of Trade Terminology and Composition:
The appellants argued that the Department relied solely on the Chemical Examiner's report and not on trade terminology. They emphasized that PVC was the predominant component (56.7%) and that the goods were recognized in trade as "Fire Resistant Conveyor Belting," not as "Art Silk Fabric." The Tribunal agreed, noting that the goods should be classified based on their final form and trade recognition, not merely their composition.

5. Relevance of Judicial Precedents and Authoritative Texts:
The Tribunal considered various judicial precedents and authoritative texts. The Gujarat High Court in Hind Engineering Company Rajkot held that superimposition of rubber on canvas changes its character, making it a different commercial commodity. The Tribunal also referred to the Supreme Court's judgment in Dunlop India Ltd., which emphasized that trade and commercial usage should determine classification. The Tribunal found that authoritative texts like "The New Encyclopaedia of Textiles" and ISI specifications did not conclusively support classifying the goods as "fabrics."

6. Validity of Penalty Imposed on the Appellants:
Given the Tribunal's decision to reclassify the goods under Item 68, the penalty of Rs. 5 lakhs imposed on the appellants was set aside. The Tribunal directed that the goods be reclassified under Item 68, and the duty payable, if any, be recalculated accordingly.

Conclusion:
The Tribunal concluded that the PVC Conveyor Belting should be classified under Item 68 of the Central Excise Tariff, not under Item 22(3). The duty demand was to be recalculated based on this classification, and the penalty imposed on the appellants was set aside. The appeal was substantially allowed.

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