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TMI Blog1989 (3) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... e Cloth in the market. In the first instance the company obtained licence for both the units for the manufacture of goods under T.I.19-III. They filed the classification list accordingly. They however by their letter dated 9.3.81 contended that the product does not deserve to be classified under Tariff Item 19-III. Thereafter they went in writ-petition to the High Court of Andhra Pradesh on 2.4.81. On the insistence of the department, however, they filed another classification list in respect of their product under T.I.19-III vide their letter dated 18.4.81 under protest subject to their letter of objection dated 9.3.81 and writ-petition filed before the Andhra Pradesh High Court on 2.4.81. 2.1. In the meantime the Andhra Pradesh High Court gave an interim stay order to the department not to collect any excise duty by the respondent company subject to furnishing of necessary bank guarantee. The company furnished 100% bank guarantee as per High Court s directions and cleared the goods. The Andhra Pradesh High Court decided the writ petition by remanding the case to the department with a direction that an opportunity be given to the respondent company to represent their case and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic is used as raw material for the manufacture of rexine. He, therefore, decides that the rexine cloth under consideration does not get classified under T.I.19-III. He does not, therefore, discuss other points and thus allows the appeal. 4. The Appellant Collector have urged the following grounds :- (i) The lower appellate authority has erred in holding that only in cases where cotton fabric is subjected to coating and impregnation and even after such treatment the cotton fabric is identifiable as cotton fabric, the same will fall under T.I.19-III; if however the cotton fabric does not remain cotton fabric after coating and impregnation, it will fall outside the scope of the Tariff Item. In other words the Appellant Collector states that the lower appellate authority has gone wrong in classifying rexine on the basis of trade parlance alone despite the specific definition of cotton fabric given in the subject Tariff Item. (ii) Tariff definition or description of cotton fabric v. Tariff Item 19-III leaves no doubt that in case of coated fabric predominance of cotton or percentage of cotton in blended cloth has to be seen with reference to the base fabric. He submits that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy s case that the process undertaken by the respondent company is not a process of manufacture of some goods. 7. Learned Advocate for the respondent company Shri V. Lakshmikumaran, on the other hand while repeating the arguments of the lower appellate authority states that the new classification sought to be advanced by the learned SDR under T.I. 22(B) is not correct, firstly because this was never the case of the lower authority and a new case cannot be advanced at this stage and secondly, 22(B) speaks of impregnated coated textile fabrics which are not elsewhere specified. Since coated impregnated cotton fabrics are specified elsewhere in 19-III, T.I. 22(B) would not cover coated cotton fabrics. This item, according to the learned Advocate, would cover coated fabrics of other textiles such as jute, wool or silk fabrics. As regards classification of T.I. 68 learned Advocate submits that while he would not have any dispute with the classification of the product under that item, a question would arise whether the respondent company would be eligible for certain exemption notifications therein or not. In case the Tribunal, according to him, comes to a finding that the classificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the judgment of Collector of Central Excise, Kanpur v. Krishna Carbon Paper Co. [1988 (37) E.L.T. 480 (SC)]. Para8 of the said report is reproduced as follows :- It is well-settled, as mentioned before, that where no definition is provided in the statute itself, as in this case, for ascertaining the correct meaning of a fiscal entry reference to a dictionary is not always safe. The correct guide, it appears in such a case, is the context and the trade meaning. In this connection reference may be made to the observations of this Court in Commissioner of Sales Tax, U.P. v. M/s. S.N. Brothers, Kanpur (AIR 1973 S.C. 78) at page 80 Para 5. [Emphasis supplied] 9.2. In other words where a definition is provided in a fiscal entry for a particular commodity we have to go by that particular definition. In that case we are not required to go by the popular meaning given to the commodity by the persons who deal in the trade or industry with that commodity. In Para 4 of the report, 1981 E.L.T. 325 (SC) this principle has been more clearly expressed as follows :- If any term or expression has been defined in the enactment then it must be understood in the sense in which it is defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would fall within the definition of the cotton fabric as given in T.I.19 and consequently the product under consideration would fall under T.I.19-III. 10. The respondent company has relied very stongly on Supreme Court judgement in the case of Multiple Fabrics [1987 (29) E.L.T. 481 SC] mentioned Supra. In order to examine the applicabilty of this judgment in the instant case we reproduce the factual position as recorded in Para 2 of the said report :- The Tribunal has recorded a finding that P.V.C. compounding was done simultaneously with weaving of the fabric from yarn which clearly indicated that the process of manufacture was conversion from yarn to fabric as also the application of the P.V.C. Compound carried on at the same point of time. Learned Counsel for the appellants who initially attempted to challenge this fact was ultimately obliged to accept the situation as a finding of act. In fact before the Tribunal the departmental representative had relied upon this position as would appear from the judgment of the Tribunal. 11. After recording the factual position and the definition of the man-made fabric under T.I.22, findings of the Supreme Court are reproduced below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture in the instant case is the same as in the case of Multiple Fabric as is apparent from the said report at Page 1223. Here too, base fabric does not come into existence. 14. Learned Advocate has drawn attention to a judgment of Andhra Pradesh High Court, which is directly on this point, in the case of Insulation and Plastic Pvt. Ltd. [1988 (35) E.L.T. 445]. We observe that no doubt this is a judgment directly applicable to the product under consideration. We, however, find that the judgment merely follows the Supreme Court s judgment in the case of Multiple Fabric Co. discussed and distinguished above. Obviously, therefore, the judgment of Andhra Pradesh High Court does not apply to the facts of this case. 15. Other judgments relied upon by both the sides on the question of merits i.e. classification of the product are not considered necessary for discussion here inasmuch as they do not deal with the definition of the cotton fabric as given in T.I.19 as reproduced above. They deal with the definition of fabric pertaining to earlier periods or pertaining to sales tax entries which did not have the definition pari materia the definition under consideration here. 16. Another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The admitted composition of the rexine cloth is that cottonfabrics constitute 8% and the rest 92%; namely, PVC Resin 24.5%, plasticizers 13% and others 54.5%. 21. The so-called rexine cloth which we are examining here was manufactured by the Respondent by the process of coating of PVC formulation on a base cotton fabric. Detailed arguments were advanced by Shri Lakshmi Kumaran that the so-called rexine cloth is not known as a fabric much less a cotton fabric in the commercial parlance. This submission of the Respondent is supported by three decisions of the High Courts, namely: 1. Saravanan Rexine v. Union Territory ofPondicherry -1983 (54) STC 53 2. State of Tamilnadu v. East India Rubber Works -1974 (34) STC 399 3. Commissioner of Sales Tax v. Habib Khan -1987 (65) STC 75 It appears to me that a line has to be drawn somewhere to treat a finished product as a textile. In the instant case cotton fabric contained in the finished product is 8%. To treat the finished product as a fabic, much less a cotton fabric would be incorrect. That is why the High Courts have decided that the so-called rexine cloth is not known as fabrics or textiles in the commercial parlance. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s PVC leather cloth fall under Item 19 which is cotton fabrics" ? For the purpose of classification what needs to be considered is the final item as it emerges from the process of manufacture. The manner in which this item is manufactured is immaterial for the purpose of classification. This is so held by the Supreme Court in the case of Union of India v. Ahmedabad Manufacturing and Calico Printing Co. Ltd., decided in 1985 (21) E.L.T. 633 (S.C.). In that case the Supreme Court was concerned with a fabric known as Calikut Special which contained 38.48% cotton and 61.52% artificial silk at the final finishing stage. At the intermediate stage this fabric contain 54% of cotton and 46% of artificial silk. The Supreme Court said that contents of the fabric at the final finishing stage after all integral processess had been completed is the basis for classification. The nature and character of goods at intermediate stage is irrelevant. It therefore held that the fabric was to be classified under Tariff Item 22 which deal with man-made fabrics and not under Item 19." [Emphasis supplied] 22. I agree with the well established proposition that where the statute provides a definition, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith this contention urged by the first respondent in the counter that the predominance of cotton is to be reckoned with reference to the base fabric and not with reference to the end-product. It is not denied that if the cotton content is to be reckoned with reference to end-product and if it is less than 40% of the total weight then the products manufactured by the petitioner do not qualify to be classified as cotton fabrics", within the meaning of Tariff Item No. 19(III). Our attention is invited to the decision of the Supreme Court in Collector of Central Excise v. Multiple Fabrics Pvt. Ltd. -1987 (2) SC 289 = 1987 (29) E.L.T. 481 (SCt. The question that arose for consideration in the above case was whether PVC Conveyor Be.l.t.ing manufactured by the assessee in those cases fell within the Tariff Item 22 or would be governed by the residuary entry 68 for purposes of excise duty under the Central Excise Tariff. The goods manufactured were chemically analysed and it was found that it is composed of synthetic resin of PVC type, reinforced with textile fabric containing 43.3% by weight of cotton and the rest viscose (man-made filament yarn of cellulosic origin). Thus the percentage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated in the counter that the certificates produced by the Petitioner suggesting that the cotton content in the goods manufactured by him is less than 40%, are totally irrelevant. According to the first Respondent, it is irrelevant because the cotton content should be reckoned in relation to the base fabric and not the end or ultimate product. Therefore, the dispute between the parties is only limited to the question whether the percentage of cotton should be reckoned in relation to the ultimate product or it should be reckoned in relation to the base fabric. As already observed above, this question has since been settled by the Supreme Court in Multiple Fabrics case referred to in para 5 supra. The Supreme Court held that the percentage should be reckoned with reference to the ultimate product. Once this controversy is resolved, there is nothing further that requires examination." (Emphasis supplied) 24. My learned Brother distinguishes the judgment of the Supreme Court in the Case Multiple Fabrics Co. on the ground that in that case the Supreme Court was considering the classification of the product where the emergence of the fabric and the conveyor belt was in a continuous p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h High Court as well as Bombay High Court judgments. Under these circumstances I am of the view that we have to necessarily follow the decisions of the Supreme Court as also those of Andhra Pradesh and Bombay High Court. In the result I hold the so-called rexine cloth was not classifiable under Tariff Item 19. 26. One of the major grounds urged by the Appellant Collector and by the learned SDR before us is that the learned Collector (Appeals) had not decided the alternate classification. This cannot be a ground for setting aside the impugned order. If the assessing authorities can determine the alternate classification in accordance with law they are free to do so. As far as we are concerned, the Tribunal cannot empower an assessing authority to decide alternate classification of a product, if in law he cannot determine the same now. Also, the Tribunal cannot stop the assessing authority from determining the alternate classification of the product if he has powers to do so under the law. Thus, the ground urged before us, that the Collector (Appeals) did not decide the alternate classification in the impugned order, does not survive. The Department is free to act, under the law, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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