2018 (2) TMI 774 - AT - Central Excise

Classification of goods - carpets/floor coverings - car mats, made up of felt - predominance test - whether classified under Chapter Sub-heading No.5703.20 of the CETA or under under Chapter Sub-heading No.5703.90? - Held that - the mere fact that the surface of the carpet is polypropylene fibre, it does not cease to be jute carpets. The argument of Revenue on the basis of surface or essentially test was held to be erroneous. - Rule 3 of the Rules of interpretation of the schedule to the Act should be applied and by applying the said Rule the goods manufactured by the respondent company - Champdany Industries Ltd., should be covered under the heading others . Hon ble Supreme Court in M/s Champadany Industries Ltd. 2009 (9) TMI 7 - SUPREME COURT OF INDIA have been followed by coordinate Bench of this Tribunal in UNI Products India Ltd. versus CCE 2009 (9) TMI 6 - SUPREME COURT OF INDIA , wherein under similar facts and circumstances of classification of jute carpets having content of about 75% to 80% of jute and rest of other textile material. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Classification of carpets/floor coverings under Chapter Sub-heading No.5703.20 vs. 5703.90 of CETA.
2. Eligibility of appellant for S.S.I. exemption under Notification No.08/2002-CE for car mats made of felt and felt fabric.

Classification Issue Analysis:
The dispute revolves around the classification of carpets/floor coverings by the appellant under Chapter Sub-heading No.5703.20, while the Department asserts it should be under Chapter Sub-heading No.5703.90. The Department argues that the essential character of the carpet should be determined by the exposed surface, not the ground fabric. The appellant contends that their classification is correct based on the essential character of the item, citing general Rules of interpretation and the judgment in M/s O. K. Play (India) vs. CCE. The Tribunal, following the ruling of the Hon'ble Supreme Court in Champdany Industries Ltd., holds in favor of the appellant, emphasizing the predominance test over the surface material for classification.

S.S.I. Exemption Issue Analysis:
The second issue pertains to the S.S.I. exemption eligibility for car mats made of felt and felt fabric. The Department links this issue to the classification of textile floor coverings under Chapter Sub-heading No.5703-90, which affects the total clearances exceeding the threshold for S.S.I. exemption. However, upon review, it is found that the clearance values of car mats and fabrics are below the threshold limit of &8377;300 lakhs, qualifying the appellant for the S.S.I. exemption under Notification No.08/2002. The Tribunal upholds the appellant's entitlement to the S.S.I. exemption based on the clearance values presented.

In conclusion, the Tribunal allows the appeal on both grounds, setting aside the impugned order and directing the appellant to receive the controversial benefits as per the law. Additionally, the High Court's interim order and final disposal emphasize the Tribunal's authority to decide the appeal on merits without requiring any pre-deposit.