2025 (1) TMI 24 - HC - Customs

Refusal to extend certain benefits claimed by it under the Merchandise Exports from India Scheme (MEIS) on goods exported - car seat covers manufactured by the petitioner fall under the Harmonized System (HS) Code 87089900 or not - HELD THAT - In Mehra Brothers V. Joint Commercial Officer 1990 (11) TMI 144 - SUPREME COURT , the Apex Court considered the question as to whether car seat covers are accessories to motor vehicles. After referring to the dictionary meaning of the term accessory , the Apex Court found that car seat covers or upholstery is accessories as an addition; an adjunct; an accompaniment for comfortable use of the motor vehicles or for elegance to the seat . The Court also noticed that the items concerned were being sold as automobile parts . Thus, with reference to the Sales Tax and Central Excise levies, the question was addressed, holding that even if the seat covers are being made up of textile fabric, in so far as they are used as an addition/accompaniment for the motor vehicle, they are accessories of the Motor vehicle/car seat. It is also noticed that the afore findings of the CEGAT were accepted by the Central Exercise Department, which is produced as Ext. P17. Similarly, the Director General of Foreign Trade has also accepted the afore classification as seen from Ext. P20. Likewise, Ext. P25 communication is issued by the 6th respondent, accepting the classification as seat covers as covered under 87089900 irrespective of whether made up of textile or not. Conclusion - The petitioner's products, which are exported are to be classified under serial No. 4558 having HS 8708990. The impugned orders/proceedings by which the benefit under the Scheme stood denied to the petitioner, would stand set aside. Petition allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the car seat covers manufactured by the petitioner fall under the Harmonized System (HS) Code 87089900, thereby making them eligible for benefits under the Merchandise Exports from India Scheme (MEIS).
Whether the classification of car seat covers as accessories of motor vehicles under the aforementioned HS Code is valid despite the respondents' contention that they should fall under a different chapter due to their textile composition.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification under HS Code 87089900

Relevant Legal Framework and Precedents: The Merchandise Exports from India Scheme (MEIS) was introduced to promote the export of notified commodities. The petitioner argued that their product, car seat covers, should be classified under HS Code 87089900, which pertains to "Other Parts and Accessories of Vehicles of Heading 8701-8705". The petitioner relied on precedents such as the Supreme Court's decision in Mehra Brothers v. Joint Commercial Officer, which recognized car seat covers as accessories to motor vehicles.
Court's Interpretation and Reasoning: The court referenced the Supreme Court's interpretation in Mehra Brothers, where car seat covers were deemed accessories due to their role in enhancing comfort and aesthetics. The court also considered the Customs, Excise and Gold (Control) Appellate Tribunal's (CEGAT) decision in Guru Overseas Pvt Ltd. v. Collector of Central Excise, which aligned with the Supreme Court's view.
Key Evidence and Findings: The petitioner provided evidence of previous classifications and acceptance of their product under the claimed HS Code by various authorities, including the Central Excise Department and the Director General of Foreign Trade.
Application of Law to Facts: The court applied the legal principles from the cited precedents to the facts of the case, determining that the petitioner's car seat covers qualify as accessories under HS Code 87089900.
Treatment of Competing Arguments: The respondents argued that car seat covers, being made of textile, should be classified under Chapter 63, which pertains to made-up textile articles. However, the court found that the functional role of the seat covers as accessories justified their classification under the claimed HS Code.
Conclusions: The court concluded that the petitioner's car seat covers are rightfully classified under HS Code 87089900 and are therefore eligible for MEIS benefits.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "I am of the opinion the petitioner's products, which are exported as above, are to be classified under serial No. 4558 having HS 87089900 as contended by it."
Core Principles Established: The court reinforced the principle that the classification of goods should consider their functional role and usage, not merely their material composition. It emphasized that the onus to prove a different classification rests on the department if the petitioner has made a valid claim supported by precedents.
Final Determinations on Each Issue: The court set aside the impugned orders that denied the petitioner benefits under the MEIS. It declared that the petitioner is entitled to the benefits under the Scheme with reference to HS Code 87089900.

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