2005 (2) TMI 139 - SC - Central Excise

Coiled Cord - Classification - whether the coiled cord (which is a PVC insulated tinsel thread fitted between the receiver and the main telephone apparatus) is classifiable under Tariff Heading 85.44 or 85.17 of the Central Excise and Tariff Act, 1985 as it stood at the relevant period in question which is 1990-91 - Held that - It is clear from a reading of the two clauses to the Section Note that Clause-b would only apply once it was found that the items in question were not specifically classifiable under their respective headings. As has been clearly said by the Collector (Appeals) from the sequence of the paragraphs given under Section Note 2 it is clear that the question of switching over to Section Note 2(b) can arise only after ensuring that the parts are not covered by Section Note 2(b) which begins with the expression other parts meaning thereby that the parts which are not covered by Section Note 2(a) would be considered for coverage by Section Note 2(b). One cannot therefore directly jump over to Section Note 2(b) without exhausting the possibility of Section Note 2(a) - Tribunal erred in wholly ignoring Section Note 2(a) and only considering the applicability of 2(b). The decision is, therefore, erroneous and we, accordingly set it aside - Decided in favour of assessee.

Summary

Issues: Classification of coiled cord under Tariff Heading 85.44 or 85.17 of Central Excise and Tariff Act, 1985.

The judgment revolves around the classification of a coiled cord under Tariff Heading 85.44 or 85.17 of the Central Excise and Tariff Act, 1985. The Assistant Collector classified the item under Tariff Heading 85.17, relying on Section Note 2(a) to 2(b) of Section 16. However, the Collector classified it under Tariff Heading 85.44, considering Section Note 2(b) as a residuary clause. The Tribunal reversed the Collector's decision, solely relying on Section Note 2(b) without considering Section Note 2(a) at all.

The Supreme Court analyzed Section Note 2(a) and (b) and emphasized that Clause-b applies only if the items are not specifically classifiable under their respective headings. The Court highlighted that the sequence of paragraphs in Section Note 2 indicates that consideration of Section Note 2(b) should come after exhausting the possibility of Section Note 2(a). The Court criticized the Tribunal for ignoring Section Note 2(a) and focusing solely on 2(b, deeming the decision erroneous and setting it aside.

Ultimately, the Supreme Court allowed the appeals, ruling in favor of classifying the coiled cord under Tariff Heading 85.44. The judgment clarifies the proper application of Section Note 2(a) and 2(b) in determining the classification of goods under the relevant tariff headings, emphasizing the need to exhaust the possibility of Section Note 2(a) before considering 2(b.