2017 (11) TMI 712 - AT - Central Excise

Classification of goods - Fibre Glass Pressure Vessels - components for industrial water treatment plants - The department has contended that as per Chapter Note 1 (c) of Chapter 84, the product Components for Industrial Water Treatment Plants are excluded from Chapter No.84 and taking into consideration the manufacturing process, raw materials used and end use the products are correctly classifiable under CSH No.7014.00 as Article of Glass Fibres coated/covered with Plastics attracting duty @ 18% advalorem. Held that - the respondent is admittedly manufacturing glass fibre vessel wherein the ingredients of glass fibre is predominant, i.e. in case of FRP vessel content of fibre glass is of 57% and in respect of the product composite vessel is 63% and in respect of the composite vessel, the fibre glass present is 38% but remaining 62% is of all other materials used. Therefore in all the three products, the predominent part of material used is fibre glass. According to the predominate principle, the products should be classified under chapter 70.14 - there is no dispute that the product in question in the present case is FRP glass fibre vessel wherein the predominent material is glass fibre. Therefore, it will be preferably classifiable under Chapter 70.14. Since the product in question is classifiable under Chapter 70, even though it is a part used with the goods of Chapter 84. It will not cover under Chapter 84, if it is made out of glass. This chapter note 1 (c) absolutely clear that the product FRP glass fibre vessel correctly classifiable under Chapter 70.14 and will not cover under Chapter 84. The Tribunal while remanding the matter in the first round given a categorical finding that the classification has to be decided on the basis of predominance of the material used in the product. Therefore, it was not open for the Commissioner to go into any other aspects except the principles of predominance of material contained in the finished goods. For this reason also the impugned order is not sustainable. The goods glass fibre vessels are correctly classifiable under 70.14 - appeal allowed - decided in favor of Revenue.

Summary

Issues:
Classification of goods under Chapter sub-heading No.7014.00 or Chapter sub-heading No.8421.10 - Predominant material used in manufacturing - Interpretation of Chapter Note 1 (c) of Chapter 84 - Applicability of judicial precedents on classification.

Analysis:
1. The case involved the classification of goods manufactured by the respondents under Chapter sub-heading No.7014.00 or Chapter sub-heading No.8421.10. The department argued that the goods should be classified under Chapter sub-heading No.7014.00 based on the manufacturing process, raw materials used, and end use. Show-cause notices were issued for recovery of differential duty, which were confirmed by the adjudicating authority. The Commissioner (Appeals) set aside the orders-in-original, leading to an appeal by the Revenue before the CESTAT.

2. The adjudicating authority, in a denovo adjudication, once again confirmed the demand by classifying the goods under Chapter sub-heading No.7014.00. The Commissioner (Appeals), however, allowed the appeal of the respondent, setting aside the demand and classifying the product under Chapter sub-heading No.8421.10, prompting the Revenue to appeal before the CESTAT.

3. The Revenue argued that classification should be based on the predominant material used in the product, emphasizing that the glass fiber content was significant, leading to classification under Chapter 7014. The Revenue relied on specific judicial precedents to support its argument.

4. The respondent contended that classification should be based on the essential characteristic of the product, asserting that the glass fiber pressure vessel is a component of a water treatment plant, thus correctly classifiable under Chapter 8421. The respondent also cited various judicial precedents to support this position.

5. The CESTAT analyzed the predominant nature of the material used in the products, noting that the glass fiber content was substantial in all three products, leading to classification under Chapter 7014. The CESTAT distinguished the case law cited by both parties based on the facts of the present case.

6. The CESTAT referred to Section Note 2(a) of Section XVI of CETA and Chapter Note 1 (c) of Chapter 84 to support the classification of the goods under Chapter 7014, even if used as part of goods falling under Chapter 84 or 85. The Tribunal also cited a previous decision regarding the classification based on the predominant material in the final product.

7. Based on the analysis and legal provisions, the CESTAT concluded that the goods were correctly classifiable under Chapter 7014 due to the predominance of glass fiber in the manufacturing process. The CESTAT set aside the impugned order and allowed the Revenue's appeal, emphasizing the principle of material predominance in classification.

8. The CESTAT highlighted that the Commissioner's order was not sustainable as the classification should have been based solely on the predominance of the material used in the product, as directed in the previous remand order.

9. The final decision pronounced on 08/11/2017 upheld the classification of the glass fiber vessels under Chapter 7014, setting aside the previous order and allowing the Revenue's appeal.