2019 (3) TMI 1420 - AT - Central Excise

Classification of goods - Polyurethane Foam - whether the polyurethane products manufactured by the appellant are classifiable under 9401 as seats or under chapter heading 39263010 as fittings for furniture, coach work or the like of polyurethane ? - Held that - It is not in dispute that the articles in question are made of polyurethane and nothing else but they can be used only for seats. It is also not in dispute that they are not seats by themselves but become seats when attached to the frame and covered with upholstery. Chapter note 1(d) of chapter 94 excludes articles falling under chapter 39 from this chapter. Similarly, chapter note 2(x) of chapter 39 excludes articles falling under chapter 94. Thus, the chapter notes mutually excluding each other do not help in determining the classification. Therefore, Rule 3(a) of the general rules of interpretation must be applied to which is a more specific entry. The article in question is a polyurethane article made specifically for fitting on furniture or coach seats, etc., and is not a seat in itself. This, is a more specific description of the goods in question than a seat. Therefore, the goods in question are correctly classifiable under 3926 3010. Confiscation - Penalty - Held that - The classification in favour of the revenue. However, this being a classification issue, we find that the assessee may have entertained a genuine belief that their goods were classifiable under 9401. Therefore, no allegation of fraud, misstatement or suppression of facts can be attributed to them - Confiscation of the goods and imposition of penalties are also not justified in this case. Appeal allowed in part.

Summary

Issues: Classification of polyurethane foam products as seats under chapter heading 9401 or as articles of foam under chapter heading 39263010.

In this case, the appellant, engaged in manufacturing polyurethane foam products in the form of seat cushions, classified them as seats under chapter heading 9401 of the Central Excise Tariff. The Revenue contended that the products should be classified as articles of foam under chapter heading 39263010, leading to the appellant losing the benefit of SSI exemption. The Adjudicating Authority held in favor of the appellant, classifying the products as seats under chapter heading 9401, making them eligible for the exemption. The Department's appeal argued that the products were merely polyurethane foam molded into shape and should be classified under chapter 39. The Tribunal examined various precedents and legal provisions to determine the correct classification.

The key issue revolved around whether the polyurethane foam products should be classified as seats under 9401 or as fittings for furniture under 39263010. The Adjudicating Authority considered 9401 as a more specific heading and relied on precedents where similar products were classified under 9401. However, the Department argued for classification under chapter 39 based on the nature of the products as polyurethane foam. The Tribunal noted that the specific use and nature of the products were crucial in determining the correct classification, ultimately ruling in favor of classification under 39263010.

The Tribunal found that the classification issue was not definitively addressed in previous cases cited by both parties. It emphasized the need to examine the case on its merits, considering that the products were made solely of polyurethane and designed specifically for fitting on furniture or coach seats. The Tribunal applied Rule 3(a) of the general rules of interpretation to determine the more specific entry, concluding that the products were correctly classifiable under 39263010. Despite ruling in favor of the Revenue on classification, the Tribunal acknowledged the appellant's genuine belief in their classification and thus dismissed allegations of fraud or misstatement. The Tribunal upheld the differential duty and interest within the normal period while setting aside proposals for confiscation and penalties.

In conclusion, the Tribunal partially allowed the Revenue's appeal, classifying the polyurethane foam products as articles of foam under chapter heading 39263010. The decision highlighted the importance of considering the specific nature and use of products in determining their correct classification under the Central Excise Tariff.