2017 (12) TMI 708 - AT - Central Excise

Valuation - classification of goods - FRP Composite Doors and Frames - whether classified under CETH 3925.20 as articles of plastics or under CETH 4410.19 and 4410.90 as articles of wood - Held that - the appellant is engaged in the manufacture of FRP Composite Doors and Frames. Such articles are made from solid block of sal wood on which skin of fibre reinforced plastic material is glued, which is said to give the plastic moisture resistance - The Chartered Engineer has certified that the products are predominantly made of wood and plastic forms a minor part in terms of weight of the material as well as the value of the material. The classification of composite materials is required to be done in terms of Rule 3(b) of the General Rules for Interpretation of Central Excise Tariff. This Interpretation Rule provides that composite goods made up of more than one material shall be classified as if they consisted of the material which gives them the essential character insofar as this criterion is applicable - By appreciating the nature of the present commodity, which is doors and frames, the essential character stems from the wood which forms the core material without which the doors and frames will fail to have any rigidity or shape. No doubt, the plastic gives the door the additional character of moisture resistance but keeping the nature of use of the goods, we are of the view that the essential character is given by the wood and hence, in terms of Rule 3(b) of the Rules for Interpretation, the goods will need to be considered as if they are made entirely of wood. Such a view will decide the classification of the plastic under Chapter 44 i.e., articles of wood. Valuation - Held that - once the goods are classified under Chapter 44, they enjoy the exemption under Notification No.10/2003 and no duty becomes payable. Appeal allowed - decided in favor of appellant.

Summary

Issues: Classification of goods under Central Excise Tariff Heading, Valuation dispute

Classification Issue:
The appellant, engaged in manufacturing "FRP Composite Doors and Frames," claimed SSI exemption but faced a challenge regarding the classification of their goods. The department classified the goods under Central Excise Tariff Heading (CETH) 3925.20 as articles of plastics, rejecting the appellant's claim that the goods should be classified under CETH 4410.19 and 4410.90 as articles of wood. The appellant argued that the goods were predominantly made of wood, supported by a Chartered Engineer's certificate and trade certificates. The appellant cited relevant notifications and legal precedents to support their classification claim. The Tribunal analyzed the essential character of the goods, considering the predominance of wood in weight and value, and ruled in favor of the appellant, classifying the goods under CETH 4410.19 and 4410.90 as articles of wood. The Tribunal set aside the original authority's decision and allowed the appeals filed by the appellant and the Directors.

Valuation Dispute Issue:
In addition to the classification issue, a valuation dispute arose concerning amounts collected by the appellant for the erection of doors at customers' premises. The department demanded a differential duty, which the appellant contested. The Tribunal, after resolving the classification issue in favor of the appellant, concluded that once the goods were classified under Chapter 44, they were entitled to an exemption under Notification No.10/2003, resulting in no duty payable. Consequently, the Tribunal set aside the order demanding differential duty, allowing the appeal related to the valuation dispute. In summary, both impugned orders were set aside, and all appeals were allowed, providing a comprehensive resolution to the classification and valuation issues in favor of the appellant.