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2020 (5) TMI 63 - SC - Central ExciseClassification of goods - car matting - classified within Chapter 57 of the First Schedule to the Central Excise Tariff Act, 1985 under the heading Carpets and Other Textile Floor Coverings or they would be classified under Chapter 87 thereof, which relates to Vehicles other than Railway or Tramway Rolling-Stock and Parts and Accessories Thereof ? HELD THAT - Three cases have been decided by the Tribunal in COLLECTOR OF C. EX., BOMBAY-II VERSUS STERLING INDIA 1999 (7) TMI 704 - CEGAT, NEW DELHI , COLLECTOR OF CENTRAL EXCISE VERSUS SWARAJ MAZDA 1993 (7) TMI 186 - CEGAT, NEW DELHI , and JYOTI CARPET INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR-I 2001 (4) TMI 316 - CEGAT, NEW DELHI which obviously has no precedent value for us - We however, discussed these cases only for the purpose of ascertaining as to whether the revenue authorities had been treating car mats as a subject head under sub-heading 8708, on proper analysis of competing claim of the assessees to include them in sub-heading 5703. We do not find so from these decisions of the Tribunal. There are authorities in which it has been held that the popular meaning among consumers would be a major factor for interpretation of dispute relating to classification - This principle has been laid down in the cases of PLASMAC MACHINE MFG. CO. PVT. LTD. VERSUS COLLECTOR OF CENTRAL EXCISE 1990 (11) TMI 142 - SUPREME COURT and DABUR (INDIA) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, JAMSHEDPUR 2005 (4) TMI 57 - SUPREME COURT - In the case of Dabur India Ltd, it was held that In classifying a product the scientific and technical meaning is not to be resorted to. The product must be classifiable according to the popular meaning attached to it by those using the product. Emphasis on technical meaning has been highlighted in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS M/S WOCKHARDT LIFE SCIENCES LTD 2012 (3) TMI 40 - SUPREME COURT for resolving classification related disputes of goods. In this case, it has been held that a commodity cannot be classified in a residuary entry if there is a specific entry, even if the specific entry requires the product to be understood in a technical sense. The common parlance test , marketability test , popular meaning test are all tools for interpretation to arrive at a decision on proper classification of a tariff entry. These tests, however, would be required to be applied if a particular tariff entry is capable of being classified in more than one heads. So far as subject-dispute is concerned, we have already referred to Chapter note 1 of Chapter 57. This note stipulates that carpets and other floor coverings would mean floor coverings in which textile materials serve as the exposed surface of the Article when in use. This feature of the car mats has not really been rejected by the revenue authorities as untrue in the order of the Commissioner, before whom assertion to that effect was made by the respondent - Chapter 87 of the Central Excise Tariff of India does not contain car mats as an independent tariff entry. We have reproduced earlier the various parts and accessories listed against tariff entry 8708. All of them are mechanical components, and revenue want car mats to be included under the residuary sub-head other in the same list. The HSN Explanatory Notes dealing with interpretation of the rules specifically exclude tufted textile carpets, identifiable for use in motor cars from 87.08 and place them under heading 57.03. The main argument of the appellant is that because the car mats are made specifically for cars and are used also in cars, they should be identified as parts and accessories. But if we go by that logic, textile carpets could not have been excluded from Parts and Accessories. We have referred to such exclusion in the preceding paragraph. It has also been urged on behalf of the revenue that these items are not commonly identified as carpets but are different products. The Tribunal on detailed analysis on various entries, Rules and Notes have found they fit the description of goods under chapter heading 570390.90. We accept this finding of the Tribunal. Once the subject goods are found to come within the ambit of that sub-heading, for the sole reason that they are exclusively made for cars and not for home use (in broad terms), those goods cannot be transplanted to the residual entry against the heading 8708 - As the subject-goods come under the chapter-heading 570390.90, and the other entry under the same Chapter forming the subject of dispute in the second order of the Commissioner, there is no necessity to import the common parlance test or any other similar device of construction for identifying the position of these goods against the relevant tariff entries. Appeal dismissed.
Issues Involved:
1. Classification of "car matting" under the Central Excise Tariff Act, 1985. 2. Applicability of Chapter 57 vs. Chapter 87 for "car matting". 3. Interpretation and application of Harmonized Commodity Description and Coding System (HSN) Explanatory Notes. 4. Imposition of differential duty and penalty. Detailed Analysis: 1. Classification of "Car Matting" under the Central Excise Tariff Act, 1985: The primary issue is whether "car matting" falls under Chapter 57 ("Carpets and Other Textile Floor Coverings") or Chapter 87 ("Vehicles other than Railway or Tramway Rolling-Stock and Parts and Accessories Thereof") of the Central Excise Tariff Act, 1985. The respondent-assessee classified their goods under Chapter heading 5703.90, which had a lower excise duty rate of 8%, while the revenue authorities argued for classification under Chapter heading 8708.99.00, which had a higher duty rate of 16%. 2. Applicability of Chapter 57 vs. Chapter 87 for "Car Matting": The Tribunal accepted the respondent's classification under Chapter 57, specifically heading 5703.90, which covers "Other carpets and other textile floor coverings." The Tribunal found that the goods, although referred to as "car matting," fit the description of textile floor coverings intended for use in vehicles, thus falling under Chapter 57. The revenue authorities contended that the goods should be classified under Chapter 87 as parts and accessories of motor vehicles, but the Tribunal disagreed, citing the specific description in Chapter 57. 3. Interpretation and Application of Harmonized Commodity Description and Coding System (HSN) Explanatory Notes: The HSN Explanatory Notes were crucial in this case. The Tribunal and the Supreme Court referenced these notes, which have strong persuasive value, to determine the appropriate classification. Rule 3(a) of the General Rules for Interpretation of the HSN Explanatory Notes states that the heading providing the most specific description should be preferred. The Explanatory Notes explicitly mention that "tufted textile carpets, identifiable for use in motor cars," should be classified under heading 57.03 and not as accessories of motor cars under heading 87.08. This interpretation was pivotal in the Tribunal's decision to classify the goods under Chapter 57. 4. Imposition of Differential Duty and Penalty: Three show-cause notices were issued to the respondent for clearing goods under the incorrect heading, leading to a demand for differential duty and interest, as well as the imposition of penalties. The Commissioner initially upheld these demands, classifying the goods under heading 8708.99.00. However, the Tribunal overturned this decision, leading to the appeals by the revenue authorities. Tribunal's Decision: The Tribunal found that the goods, although not commonly considered carpets, fit the description under Chapter 57 based on the wording of the chapter, section notes, chapter notes, and explanatory notes. The Tribunal held that the goods should be classified under heading 570390.90, thus setting aside the Commissioner's orders and allowing the appeals with consequential relief. Supreme Court's Analysis: The Supreme Court upheld the Tribunal's decision, emphasizing the strong persuasive value of the HSN Explanatory Notes and the specific exclusion of "textile carpets" from parts and accessories under Chapter 87. The Court found no error in the Tribunal's reasoning and concluded that the goods should be classified under Chapter 57. The appeals were dismissed, and the Tribunal's decision was sustained. Conclusion: The Supreme Court dismissed the appeals, sustaining the Tribunal's decision to classify "car matting" under Chapter heading 570390.90 of the Central Excise Tariff Act, 1985, based on the specific descriptions and exclusions provided in the HSN Explanatory Notes. The imposition of differential duty and penalties by the Commissioner was overturned, providing relief to the respondent.
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