1994 (6) TMI 16 - SC - Central Excise

Whether the said product, rexine cloth falls within T.I. 19(III) of the Schedule to the Central Excises and Salt Act, as it obtained at the relevant time? Held that - The reasons are shown and no material is placed before us to show that the said opinion of the Member of the Tribunal (Shri P.C. Jain) who rejects the argument holding that P.V.C. formulation being used by the respondent-company is certainly governed by the expression 'other artificial plasticizers' is not correct. The only submission has been that the matter be remitted to the Tribunal for a decision on this question. We are not inclined to do so, for if this were the case, the respondent ought to have put forward this argument at the forefront and not concern itself with the interpretation of the Tariff Item. It could have simply said, 'my coating material is not one contemplated by the Tariff Item', and if it were so, no further question would have arisen. Instead, it concentrated upon the applicability of the clauses relating to predominance and percentages relying upon the decision of this Court in Multiple Fabrics. Before the Collector (Appeals) it relied upon Tariff Item 15A and submitted that since its coating material is not covered by Tariff Item 15A, Tariff Item 19 is also not attracted. For all the above reasons, we are not inclined to accede to the request for remand of the matters to the Tribunal for deciding the said question. The appeals are accordingly allowed. The orders of the CEGAT and Collector (Appeals) are set aside who said that the rexine cloth manufactured by the respondent cannot be called a 'cotton fabric'

Issues Involved:
1. Classification of rexine cloth under Tariff Item 19(III) of the Central Excises and Salt Act.
2. Interpretation of the term "cotton fabrics" in the context of predominantly non-cotton materials.
3. Applicability of commercial or common parlance test in classification.
4. Relevance of Government of India's interpretation in a specific case.
5. Identity of the product post-coating and its classification.
6. Validity of the decision in Collector of Central Excise, Calcutta v. M/s. Multiple Fabrics Pvt. Ltd.
7. Nature of the coating material used by the respondent.

Detailed Analysis:

1. Classification of rexine cloth under Tariff Item 19(III):
The respondent-company manufactures rexine cloth by coating 100% cotton cloth with PVC resin and other plasticizers. The main issue is whether this product falls under Tariff Item 19(III) of the Central Excises and Salt Act. The Original Authority held that it does, but the Collector (Appeals) and the majority of the CEGAT members disagreed. The Supreme Court had to decide if rexine cloth is considered "cotton fabrics" for excise duty purposes.

2. Interpretation of the term "cotton fabrics":
The respondent argued that since cotton fabric constitutes only 8% of the final product by weight, rexine cloth should not be classified as "cotton fabrics". The Revenue contended that the Parliament expressly included coated fabrics within the definition of cotton fabrics, making the predominance of cotton in the final product irrelevant. The Court examined Tariff Item 19, which defines cotton fabrics and includes fabrics impregnated, coated, or laminated with artificial plastic materials. The proviso and Explanation (I) clarified that the predominance of cotton should be assessed in relation to the base fabric, which in this case is 100% cotton.

3. Applicability of commercial or common parlance test:
Shri Sorabjee, the respondent's counsel, cited several decisions advocating for the commercial or common parlance test in interpreting taxing statutes. However, the Court noted that this test applies only when the terms are not defined in the Act. Since "cotton fabrics" is defined in the Act, the commercial parlance test was deemed irrelevant.

4. Relevance of Government of India's interpretation:
The respondent cited a decision by the Government of India in Dunlop India Limited v. Government of India, where it was held that if the end-product loses its identity as cotton fabric, it should not be classified as such. The Court dismissed this argument, stating that it is not bound by the Government's interpretation and reaffirmed its authority to interpret the Tariff Item.

5. Identity of the product post-coating:
The respondent argued that the coated cotton fabric loses its identity as cotton fabric, becoming a new distinct commodity. The Court rejected this argument, emphasizing that the Parliament has the authority to include coated fabrics within the definition of cotton fabrics, and this inclusion is not open to question.

6. Validity of the decision in Collector of Central Excise, Calcutta v. M/s. Multiple Fabrics Pvt. Ltd.:
The respondent relied on the Multiple Fabrics case, where the Court held that a product with a higher percentage of PVC compound could not be treated as man-made fabrics. The Court noted that the proviso and Explanation (I) of Tariff Item 22 were not considered in that decision, making it inapplicable to the present case.

7. Nature of the coating material used by the respondent:
The respondent contended that the coating material does not fall under "preparations of cellulose derivatives or other artificial plastic materials" as specified in Tariff Item 19. The Court examined the composition of the coating material and concluded that it predominantly consists of artificial plastic materials, thus falling within the scope of Tariff Item 19.

Conclusion:
The Supreme Court allowed the Revenue's appeal, setting aside the orders of the CEGAT and Collector (Appeals), and restored the Original Authority's order. The Court held that rexine cloth manufactured by the respondent falls within the definition of "cotton fabrics" under Tariff Item 19(III) and is subject to the prescribed excise duty.

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