COMMISSIONER OF CENTRAL EXCISE, DELHI-III versus M/S. UNI PRODUCTS INDIA LTD. on 1 May 2020

Conclusion

COMMISSIONER OF CENTRAL EXCISE, DELHI-III

v.

M/S. UNI PRODUCTS INDIA LTD.

(C. A. Nos. 302-303 of 2009)MAY 01, 2020

[DEEPAK GUPTA AND ANIRUDDHA BOSE, JJ.]

Central Excise Tariff Act, 1985 – First Schedule- Chapters57, 87 – Car mats to be classified under chapter-heading 57.03 or87.08 – Respondent-assessee was engaged in business ofmanufacture of textile floor coverings and car matting – Clearedgoods against Heading No. 570390.90 which inter alia had exciseduty @ 8% as compared to 16% if classified under heading8708.99.00 – Three show-cause notices issued over such clearanceof goods – Commissioner held car mattings to be parts andaccessories classifiable under Chapter 87.08 – Tribunal decidedin favour of respondent – On appeal, held: Chapter 87 does notcontain car mats as an independent tariff entry – Though in commonparlance the products involved may not be considered as carpets,in view of the wordings of the chapter, section notes, chapter notesand explanatory notes, the goods were classifiable under chapterheading 570390.90 – Subject-item does not satisfy the thirdcondition specified in Section XVII of the Explanatory Notes inrelation to “III-Parts and Accessories” – Subject-goods come underthe chapter-heading 570390.90 – Impugned decision sustained.

Dismissing the appeals, the Court

HELD: 1.1 Reference has been made to “HarmonizedCommodity Description and Coding System”, Explanatory Notesissued by the World Customs Organisation (2002). These Notes,termed HSN Explanatory Notes have been referred to by boththe parties. Strong persuasive value of these Explanatory Noteshas been recognised by this Court. General Rules for theInterpretation of the Harmonized System lay down the Principlesof Interpretation for classification of Goods in the Nomenclature.Clause 3 (a) of the General Rules For the Interpretation of First

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ASchedule to the Central Tariff Act, 1985 in cases wherepossibilities arise of a single item being classified under morethan one head corresponds to the said Rule 3(a) of the ExplanatoryNotes. Section Note 2 of Section XVII of Central ExciseTariff excludes eleven sets of items from being treated as partsand accessories. There is reference to “PARTS ANDBACCESSORIES” under the main heading “GENERAL”, inSection XVII of the HSN Explanatory Notes, 2002. Under thesub-heading “(iii) PARTS AND ACESSORIES”, a three-layer testhas been postulated. It is on satisfying all of these conditions aparticular item would come under that chapter head. TheCExplanatory Notes dealing with parts and accessories underchapter-head 87.08 includes floor mats (other than of textilematerials or unhardened vulcanised rubber). Chapter Notes toChapter 57 of the HSN Explanatory Notes, relating to carpetsand Other Textile Floor Coverings are relevant for effectiveadjudication of these two appeals. The said instrument, i.e. HSNDExplanatory Notes deal with four entries against tariff itemno.5703. [Para 6-9, 15 and 16][304-B-C, D, F-G; 305-C, E; 310-C-H]

CCE v. Wood Craft Products Ltd. (1995) 3 SCC 454 :[1995] 2 SCR 797; Collector of Central Excise vs.EBakelite Hylam [1997 (91) E.L.T. 13 (S.C.); Collectorof Customs v. BusinessForms Ltd. (2005) 7 SCC 143;Holostick India Ltd. v.Commissioner of Central Excise(2015) 7 SCC 401 : [2015] 4 SCR 576 – relied on.

1.2 “The common parlance test”, “marketability test”,F“popular meaning test” are all tools for interpretation to arriveat a decision on proper classification of a tariff entry. These tests,however, would be required to be applied if a particular tariff entryis capable of being classified in more than one heads. So far assubject-dispute is concerned, this Court has already referred toGChapter note 1 of Chapter 57. This note stipulates that carpetsand other floor coverings would mean floor coverings in whichtextile materials serve as the exposed surface of the Article whenin use. This feature of the car mats has not really been rejectedby the revenue authorities as untrue in the order of the H

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Commissioner, before whom assertion to that effect was madeby the respondent. Core issue in these appeals is as to whethercar mats come under chapter-heading 57.03 or not. In the secondappeal, the numerical representation of the product, as claimedby the assessee, was different but that difference is not of muchsignificance. Revenue’s case is that the goods are manufacturedin such a way that these can be used as accessories of cars. TheTribunal found that though in common parlance the productsinvolved may not be considered as carpets, in view of the wordingsof the chapter, section notes, chapter notes and explanatory notes,the goods were classifiable under chapter heading 570390.90.[Paras 23, 24][315-H; 316-A-D]

1.3. This Court does not find any error in such reasoning.Chapter 87 of the Central Excise Tariff of India does not containcar mats as an independent tariff entry. The various parts andaccessories listed against tariff entry 8708 have been reproducedearlier. All of them are mechanical components, and revenue wantcar mats to be included under the residuary sub-head “other” inthe same list. The HSN Explanatory Notes dealing withinterpretation of the rules specifically exclude “tufted textilecarpets, identifiable for use in motor cars” from 87.08 and placethem under heading 57.03. Revenue’s argument is that theExplanatory Notes have persuasive value only. But the level orquality of such persuasive value is very strong, as observed inthe judgments of this Court. Moreover, the Commissioner himselfhas referred to the Explanatory Notes in the order-in- originalwhile dealing with the respondent’s stand. Thus, there is noreason as to why a departure should be made from the generaltrend of taking assistance of these Explanatory Notes to resolveentry related dispute. Now, on referring to these ExplanatoryNotes, it is found that one category of carpets [Textile carpets(Chapter 57)] has been excluded specifically from parts andaccessories. The subject-item does not satisfy the third conditionspecified in Section XVII of the Explanatory Notes in relation to“III-Parts and Accessories”. A plain reading of clause (C) thereofexcludes “textile carpets” (Chapter 57). The main argument of AB

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Athe appellant is that because the car mats are made specificallyfor cars and are used also in cars, they should be identified asparts and accessories. But by that logic, textile carpets could nothave been excluded from Parts and Accessories. Such exclusionhas been referred to in the preceding paragraph. It has also beenurged on behalf of the revenue that these items are not commonlyBidentified as carpets but are different products. The Tribunal ondetailed analysis on various entries, Rules and Notes have foundthey fit the description of goods under chapter heading 570390.90.This finding of the Tribunal is accepted. Once the subject goodsare found to come within the ambit of that sub-heading, for theCsole reason that they are exclusively made for cars and not for“home use” (in broad terms), those goods cannot be transplantedto the residual entry against the heading 8708. As the Court findsthe subject-goods come under the chapter-heading 570390.90,and the other entry under the same Chapter forming the subjectof dispute in the second order of the Commissioner there is noDnecessity to import the “common parlance” test or any othersimilar device of construction for identifying the position of thesegoods against the relevant tariff entries. The impugned decisionof the Tribunal is sustained. [Paras 25-27][316-E-H; 317-A-E]

Plasmac Machine Manufacturing Co. Pvt. Ltd. v.ECollector of Central Excise, Bombay 1991 Supp. (1)SCC 57 : [1990] 3 Suppl. SCR 384 ; Dabur India Ltd.v. Commissioner of Central Excise, Jamshedpur (2005)4 SCC 9 : [2005] 3 SCR 144; A.P. State ElectricityBoard v. Collector of Central Excise, Hyderabad (1994)F2 SCC 428 : [1994] 1 SCR 499; Commissioner ofCentral Excise v. Wockhardt Life Sciences Limited(2012) 5 SCC 585 – relied on.

Collector of Central Excise, Bombay-II v. Sterling India(2000) 115 ELT 807; Collector of Central Excise v.GSwaraj Mazda (1993) 68 ELT 258; Jyoti CarpetIndustries v. Commissioner of Central Excise, Jaipur-I(2001) 132 ELT 458 – referred to.

COMMISSIONER OF CENTRAL EXCISE, DELHI-III v.M/S. UNI PRODUCTS INDIA LTD.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 302-303 OF 2009

From the Judgment and Order dated 16.07.2008 by the Customs,Excise and Service Tax Appellate Tribunal, Principal Bench, New Delhiin Excise Appeal Nos. 94 and 3226 of 2007.

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A.K. Srivastava, H. Raghavendra Rao, S.A. Haseeb, Ms.Saudamini Sharma, B. Krishna Prasad, V. Lakshmikumaran, AadityaBhattacharya, Ms. Ishita Mathur, Ms. Apeksha Mehta, Ms. MounicaKasturi, and Ms. Charanya Lakshmikumaran, Advs. for the appearingparties.

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The Judgment of the Court was delivered by ANIRUDDHA BOSE, J.

These two appeals against the decision of the Customs Excise &Service Tax Appellate Tribunal (CESTAT) rendered on 16th July, 2008require adjudication on the question as to whether “car matting” wouldcome within Chapter 57 of the First Schedule to the Central ExciseTariff Act, 1985 under the heading “Carpets and Other Textile FloorCoverings” or they would be classified under Chapter 87 thereof, whichrelates to “Vehicles other than Railway or Tramway Rolling-Stock andParts and Accessories Thereof”. The appeals are against a commondecision and we shall also deal with both these appeals together in thisjudgment. The respondent-assessee want their goods to be placed underChapter heading 5703.90. We shall refer to the specific entries againstthis item later in the judgment. The respondent, at the material point of F

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Atime were engaged in the business of manufacture of textile floorcoverings and car matting. The subject-goods have been referred tointerchangeably by the revenue also as car mattings and car carpets.The respondent, at the material time, were clearing the goods declaringthem to be goods against Heading No.570390.90. Effective rate of exciseduty on goods under that entry was 8% and education cess at theBapplicable rate for the subject period. We find this rate of duty, inter-alia,from the order of the Commissioner dealing with the first and the secondshow-cause notices. The rate of basic excise duty would have been16% apart from education cess if these goods were classified againstgoods specified in heading no.8708.99.00. Altogether three show-cause-Cnotices were issued against the respondent over clearance of goodsunder the said heading. These notices required them to answer as towhy they should not be charged the differential rate of duty and interest.We would like to point out here that in the show-cause notices, therespective chapter sub-headings have been referred to as 8708.99.00and 570390.90 and in the order of the Tribunal also, the sub-headingsDhave been referred to as such. But the authorities themselves in certainplaces described the sub-headings in shorter numerical forms, as 5703.90and 8708.00. We find these minor variations in the paper-book. But thisvariation of the sub- headings represented in numerical form is not ofany significance so far as adjudication of these appeals are concerned.EThe respondent were also to answer as to why penalty should not beimposed upon them in terms of Section 38A of the Central Excise Act,1944 read with Rule 25 of the Rules made thereunder. The first show-cause notice is dated 9th August, 2005 in regard to clearance of goodsmade during the period between 9th July, 2004 and 31st March, 2005.They had cleared altogether 8,65,777 pieces of those items in differentFsizes in that period. The second show-cause notice was issued on 2ndMay, 2006 and related to clearance of 12,02,482 pieces of the samegoods for the period between 1st April, 2005 and 31st January, 2006.The third show- cause notice is of 7th March, 2007 and the clearanceinvolved 20,15,412 pieces from 1st February, 2006 to 31st January, 2007.GFor the period involved in the third show-cause notice, clearance wasmade by the respondent under Chapter sub-heading no.570500.19, whichcarried effective rate of duty @8%.

2. By the time the third show-cause notice was issued, theadjudicating authority of first instance (Commissioner Central Excise,H

Delhi III) had passed the order against the respondent on 29th September,2006, upon considering their responses to the said two show-cause notices.In this judgment, we shall mainly refer to this order, while examining thedecision of the Tribunal. The authorities’ stand has been that the subject-items ought to be classified under sub-heading 8708.99.00. Against chapterheading 8708, the goods described are “parts and accessories of motorvehicles of headings 8701 to 8705”. The sub-headings against tariff itemnos.8701 to 8705 refer to five categories of vehicles. These are (i) tractors(except those falling under 8709), (ii) motor vehicles for the transport often or more persons, including the driver, (iii) motor cars and other motorvehicles principally designed for the transport of persons (other thanthose of heading 8702) including station wagons and racing cars (iv)motor vehicles for transport of goods (v) special purpose motor vehicles,other than those principally designed for the transport of persons or goods.The description of goods in Chapter 87 of the Central Excise Tariff ofIndia (2004-05) in the eight digit format list the tariff-items of chapter8708 have been depicted in the following manner:- A

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3. As would be evident from the above-referred table, there aretotal seventeen items under the said sub-heading of tariff-item specifiedDas parts and accessories (including those referred to as “other”) and theitem against which the excise authorities want the car mattings to betreated is in the nature of a residuary item, referred to in that table as“other”. On the other hand, the relevant parts of Chapter 57 of CentralExcise Tariff of India, 2004-2005 stipulates:- E“Notes:

1. For the purposes of this Chapter, the term ‘carpets and othertextile floor coverings’ means floor coverings in which textilematerials serve as the exposed surface of the article when in useand includes article having the characteristics of textile floorFcoverings but intended for use for other purposes.

Heading No.Sub-heading|No.Description of goods

(1) (2)(3) 57.01xxxxG 57.02Carpets and other textile floorcoverings (other than those ofheading No. 57.01), knotted,woven, tufted, or flocked,whether or not made up.

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COMMISSIONER OF CENTRAL EXCISE, DELHI-III v.M/S. UNI PRODUCTS INDIA LTD. [ANIRUDDHA BOSE, J.]

4. Before the authority of first instance (Commissioner, CentralExcise, Delhi-III, Gurgaon), the respondent explained their manufacturingprocess in course of hearing on the first two show- cause notices. Thisis recorded in the order of the Commissioner passed on 29th September,2006. We reproduce below that part from the said order:- E

“…….Depending upon the variety of Moulded Car Carpets, thefibre i.e. polyester/polypropylene is fed in opening and blendingequipment’s, from where it is transported to carding equipment’s.After carding, the same is put for Needle punching. After needlepunching, the fabric is then chemically treated in order to providestrength to the carpet fabric as per customer requirement. Afterchemical binding, the fabric is laminated as per customerrequirement. The laminated fabric/impregnated fabric is thenmoulded as per the requirement and trimmed to be fixed in thevehicle. After trimming the Namda felt is fixed on the back of thecarpet as per requirement. Thereafter, the child parts as well asgrippers are fixed wherever required. The resultant product is themoulded car carpets which was classified under sub-heading5703.90.”

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(quoted from the order of the Commissioner)

A5. The respondent’s argument that the Chapter heading 5703.90covered carpets and other textile floor coverings and they weremanufacturing those items only was rejected by the Commissioner. Thisplea, however, was subsequently accepted by the Tribunal.

6. Reference has been made before us to “HarmonizedBCommodity Description and Coding System”, Explanatory Notesissued by the World Customs Organisation (2002). These Notes, termedHSN Explanatory Notes have been referred to by the learned Counselfor both the parties. Strong persuasive value of these Explanatory Noteshas been recognised by this Court in the cases of CCE vs. Wood CraftProducts Ltd. [(1995) 3 SCC 454], Collector of Central Excise vs.CBakelite Hylam [1997 (91) E.L.T. 13 (S.C.)], Collector of Customsvs. Business Forms Ltd. [(2005) 7 SCC 143] and Holostick IndiaLtd. vs. Commissioner of Central Excise [(2015) 7 SCC 401].General Rules for the Interpretation of the Harmonized System lay downthe Principles of Interpretation for classification of Goods in theDNomenclature. Rule 3(a) thereof provides:- “Rule 3(a) The heading which provides the most specificdescription shall be preferred to headings providing a more generaldescription. However, when two or more headings each refer topart only of the materials or substances contained in mixed orEcomposite goods or to part only of the items in a set put up forretail sale, those headings are to be regarded as equally specificin relation to those goods, even if one of them gives a morecomplete or precise description of the goods.”

Clause 3 (a) of the General Rules For the Interpretation ofFFirst Schedule to the Central Tariff Act, 1985 in cases where possibilitiesarise of a single item being classified under more than one headcorresponds to the said Rule 3(a) of the Explanatory Notes.

The Explanatory Note IV (b) to this Rule i.e. 3 (a), of the Rulesfor Interpretation of the HSN Explanatory Notes specifies:-G“(iv) It is not practicable to lay down hard and fast rules by whichto determine whether one heading more specifically describesthe goods than another, but in general it may be said that:- (a)xx xx xx H

(b) If the goods answer to a description which more clearlyidentifies them, that description is more specific than onewhere identification is less complete.

Examples of the latter category of goods are:

(1) Tufted textile carpets, identifiable for use in motor cars,which are to be classified not as accessories of motor cars inheading 87.08 but in heading 57.03, where they are morespecifically described as carpets.

(2) ………”

7. Section Note 2 of Section XVII of Central Excise Tariff excludeseleven sets of items from being treated as parts and accessories. SectionNote 3 further provides:- “3. Refences in Chapters 86 to 88 to “parts” or “accessories” donot apply to parts or accessories which are not suitable for usesolely or principally with the articles of those Chapters. A part oraccessory which answers to a description in two or more of theheadings of those Chapters is to be classified under that headingwhich corresponds to the principal use of that part or accessory.”

8. There is reference to “PARTS AND ACCESSORIES” underthe main heading “GENERAL”, in Section XVII of the HSN ExplanatoryNotes, 2002. Under the sub-heading “(iii) PARTS AND ACESSORIES”,a three-layer test has been postulated. It is on satisfying all of theseconditions a particular item would come under that chapter head. Thesub-head III reads:- “(III) PARTS AND ACCESSORIES

It should be noted that Chapter 89 makes no provision for parts(other than hulls) or accessories of ships, boats or floatingstructures. Such parts and accessories, even if identifiable as beingfor ships, etc., are therefore classified in other Chapters in theirrespective headings. The other Chapters of this Section eachprovide for the classification of parts and accessories of thevehicles, aircraft or equipment concerned.

It should, however, be noted that these headings apply only tothose parts or accessories which comply with all three of thefollowing conditions:

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(a) They must not be excluded by the terms of Note 2 tothis Section (see paragraph (A) below).

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and(b)They must be suitable for use solely or principallywith the articles of Chapters 86 to 88 (see paragraph(B) below).

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and(c)They must not be more specifically includedelsewhere in the Nomenclature (see paragraph (C)below).”

9. Paragraph (B) and relevant extract from Paragraph (C) to thesame document stipulates: -C

“(B) Criterion of sole or principle use.

(1) Parts and accessories classifiable both in Section XVIIand in another Section.

Under Section Note 3, parts and accessories which are notDsuitable for use solely or principally with the articles ofChapters 86 to 88 are excluded from those Chapters.

The effect of Note 3 is therefore that when a part oraccessory can fall in one or more other Sections as well asin Section XVII, its final classification is determined but itsprincipal use. Thus the steering gear, braking systems,road wheels, mudguards, etc., used on many of the mobilemachines falling in Chapter 84, are virtually identical withthose used on the lorries of Chapter 87, and since theirprincipal use is with lorries, such parts and accessories areclassified in this Section.

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(2) Parts and accessories classifiable in two or moreheadings of the Section.

Certain parts and accessories are suitable for use on morethanone type of vehicle (motor cars, aircraft, motorcycles,etc.); examples of such goods include brakes, steeringsystems, wheels, axles, etc. Such parts and accessories areto be classified in the heading relating to the parts andaccessories of the vehicles with which they are principallyused.

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(C) Parts and accessories covered more specificallyelsewhere in the Nomenclature –

Parts and accessories, even if identifiable as for thearticles of this Section, are excluded if they arecovered more specifically by another headingelsewhere in the Nomenclature, e.g: - xx xx xx xx xx xx

(7) Textile carpets (Chapter 57)

xx xx

xx xx”

Moreover, the Explanatory Notes dealing with parts andaccessories under chapter-head 87.08 includes floor mats (other than oftextile materials or unhardened vulcanised rubber).

10. The Commissioner found that car mattings satisfied all thetests enumerated in the said explanatory notes of HSN to be treated asparts and accessories classifiable under Chapter 87.08.

11. One of the reasons for such finding was that the car mattingswere suitable for use solely or principally with the vehicle and that werenot excluded by provisions of Notes to Section XVII. Then he appliedthe “market test”, and concluded that if anybody asked for car mattingin the market, the consumer would get a product which could only beused in a car, with fixed length and width. In his order, the Commissionerfound that what was excluded was textile carpets of Chapter 57 and notcar mattings.

12. The Commissioner, thus, did not accept the assessee’s standand observed:- “(A) what is excluded are the Textile carpets of Chapter 57 andnot car mattings. One can only safely infer of exclusion of carmatting in the list, provided, if it is established that “car mattings”are nothing but ordinary textile carpets of Chapter 57. But as hasbeen already discussed supra car mattings are commerciallyknown differently in the market than ordinary textile carpets of AB

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Chapter 57. From the point of view of its manufacturing processthese are entirely different from ordinary carpets. My discussionand logic given in para 18.7.1 clearly indicates that, the “carmattings” are different products. Board’s Circular No.117/28/05-CX dt. 17.4.95 clearly states car mattings different product alltogether.

The observations advanced in the judgments of Hon’ble Tribunalin the cases of Sterling India (2000(115) ELT-807-Trib., JyotiCarpet Industries (2001 (132) ELT-458-Trib-Delhi), Swaraj Majda(1993 (68 ELT 258 Trib) clearly indicates that “car mattings” areentirely different than ordinary textile carpets of Chapter 57 (Allthese judgments are discussed in latter paras)

B-1 The HSN Clarificatory Notes on Chapter 57 (page 783 ofHSN Clarificatory Notes Volume-II) states the following categoryof products are classifiable under Chapter 57:

“The above products are classified in this chapter whethermade-up (i.e. made directly to size, hemmed, lined, fringed,assembled etc.) in the form of carpet squares, beside rugs,hearth rugs, or in the form of carpets for installation in rooms,corridors, passages or stairs, in the lengths for cutting andmaking up. They may also be impregnated (i.e. with latex) orpacked with woven or non-woven fabrics or with cellular rubberor plastics.”

B-2 From the above notes it is clear that not only the carpets inrunning length, but also made ups (i.e. made directly to size,hemmed, lined, fringed assembled etc.) in the form of carpetsquares, or in the form of carpet installation in rooms, corridors,passages or stairs are required to be classified under Chapter 57.

B-3 From the above explanation, it is seen that, carpets coveredunder Chapter 57 are simple carpets in running length may bemade up directly to size, hemmed, lined, fringed, assembled etc.in the form of carpet squares, or in the form of carpet installationin rooms, corridors, passages or stairs and not certainly coverscar mattings which undergo further processing like moulding,chemical treatment to provide strength to the carpet fabric as percustomer requirement, lamination as per customers requirements,and trimming for fixing in the vehicle with NamdA fixing on the back. The car mattings although is of textile carpet origin arenot ordinary carpets as explained in the Explanatory Notes ofHSN for Chapter 57 and certainly not covered under Chapter 57.

When car mattings are not by definition covered under Chapter57 (as explained above taking reference of the clarificatory notesof HSN) those are not excluded from para-C of HSN GeneralExplanatory Notes on Section XVII referring to parts andaccessories Part-III para (c) (Sl.No.7) (page 1412 of HSNExplanatory Notes Vol.4).

Thus “car mattings” satisfies the test 2-C.

18.7. From the above discussion it is clear that “car matting”satisfies all the tests enumerated in the explanatory notes of HSNfor Chapter XVII, to be treated as a part and accessory classifiableunder chapter 87.08 of motor vehicles of Chapter 87.05- 87.07.”

13. The other order of Commissioner in connection with the thirdshow-cause notice was passed on 5th January, 2007. The reasoning andconclusion of this order was in the same line with the order passed on29th September, 2006. Thus, in both the orders the Commissionersustained the directions for payment rejecting the reply of the assesseeand the orders charged on the respondent duty differential and interestand also imposed penalty.

14. The two appeals of the respondent before the Tribunal weredecided in their favour by a composite decision. This decision is assailedbefore us by the revenue authorities in these two appeals. The Tribunalobserved and held:-

“5.3 We find that chapter 57 covers not only carpets but alsoother floor coverings. What has to be considered is that betweenthe terms ‘carpets and other floor coverings’ the terms ‘parts andaccessories’ which can be considered more specific. Even if theclaim of the Department that at no stage the carpets come intoexistence is accepted, it cannot be denied that the article can beconsidered as other floor coverings meant for other application.We also find that in the interpretative notes for rule 3(a) in HSN,where by way of an example, it has been clarified that “textilecarpet identifiable for use in motor cars to be classified not asaccessories of motor cars in heading 8708 but in heading 5703where they are more specifically described as carpets”. Though, A

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in common parlance the impugned product may not be consideredas carpets, in view of the wordings of the chapter, the sectionnotes, chapter notes and the explanatory notes extracted abovewe are of the considered opinion that the impugned goods iscorrectly classifiable under chapter heading 570390.90 as claimedby the assessee.”

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6. The orders of commissioner are set aside and the appeals areallowed with consequential relief.”

15. Chapter Notes to Chapter 57 of the HSN Explanatory Notes,relating to carpets and Other Textile Floor Coverings are relevant forCeffective adjudication of these two appeals. The said Chapter Notesread:- “Chapter Notes.

1.- For the purposes of this Chapter, the term “carpets and othertextile floor coverings” means floor coverings in which textileDmaterials serve as the exposed surface of the article when in useand includes articles having the characteristics of textile floorcoverings but intended for use for other purposes.

2. This Chapter does not cover floor covering underlays.

GENERALE

This Chapter covers carpets and other textile floor coverings inwhich textile materials serve as the exposed surface of the articlewhen in use. It includes articles having the characteristics of textilefloor coverings (e.g., thickness, stiffness and strength) but intendedfor use for other purposes (for example, as wall hangings or tableFcovers or for other furnishing purposes).

The above products are classified in this Chapter whether madeup (i.e., made directly to size, hemmed, lined, fringed, assembled,etc.), in the form of carpet squares, bedside rugs, hearth rugs, orin the form of carpeting for installation in rooms, corridors, passagesGor stairs, in the length for cutting and making up.

They may also be impregnated (e.g., with latex) or backed withwoven or nonwoven fabrics or with cellular rubber or plastics.”

16. The said instrument, i.e. HSN Explanatory Notes deal withHfour entries against tariff item no.5703 in following terms:- “57.03 – CARPETS AND OTHER TEXTILE FLOORCOVERINGS, TUFTED, WHETHER OR NOT MADE UP.

5703.10- Of wool or fine animal hair

5703.20- Of nylon or other polyamides

5703.30- Of other man-made textile materials 5703.90- Of other textile materials This heading covers tufted carpets and other tufted textile floorcoverings produced on tufting machines which, by means of asystem of needles and hooks, insert textile yarn into a pre-existingbacking (usually a woven fabric or a nonwoven) thus producingloops, or, if the needles and hooks are combined with a cuttingdevice, tufts. The yarns forming the pile are then normally fixedby a coating of rubber or plastics. Usually before the coating isallowed to dry it is either covered by a secondary backing ofloosely woven textile material, e.g., jute, or by foamed rubber.

Products of this heading are distinguished from the tufted textilefabrics of heading 58.02 by, for example, their stiffness, thicknessand strength, which render them suitable for use as floorcoverings.”

17. Learned counsel for the revenue has argued, referring to threeearlier orders of the Customs Excise and Gold (Control) AppellateTribunal (CEGAT-the predecessor of CESTAT) and has also relied on acircular issued by the excise authorities dated 17th April, 1995. The saidcircular (bearing no.117/28/95-CX) specifies:- “Car Mattings made from non-woven materials in roll form– Dutiability of Circular No.117/28/95-CX, dated 17-4-1995

[From F.No.57/1/94-CX.1]

Government of India

Ministry of Finance (Department of Revenue) New Delhi Subject: Dutiability of Car Mattings made from non-wovenmaterials in roll form – Regarding I am directed to refer to Board’s <<15391$Circular No.5/Floor- Coverings/87>> (F. No.57/1/87-CX.1), dated 23-6-1987wherein it was clarified that duty liability would not be attracted A

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on car mattings made from duty paid non-woven material in rollform. It has been brought to the notice of the Board that thisposition may not hold good after extension of Modvat to theseitems.

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2. The matter has been re-examined by the Board. The Board isBof the view that there are two clear stages i.e. non-woven materialemerging as excisable and dutiable goods in roll form and finallycar mattings emerging as different final products. Duty has to becharged at both stages as the processes of conversion of non-woven material in roll form into car mattings involves the processesof cutting, stitching, sizing etc., and both products are knownCdifferently in the market.

3. It is, therefore, clarified that appropriate Central Excise Duty ispayable on floor coverings in the form of non-woven material inrolls when cleared from the factory, as well as, on the car mattingssubsequently manufactured out of duty paid floor coverings in theDform of non-woven material in rolls.

4. The Board’s earlier <<15391$Circular No.5/Floor Coverings/87>> (F. No.57/1/87-CX.1) dated 23-6-1987 may be treated aswithdrawn and assessments may be finalized in terms of therevised instructions.”E

This circular deals with a situation in which non-woven materialsin roll form which were excisable goods, emerged as a different productwhen the former is transformed as car matting upon application of certainprocess. For this reason, it was stipulated, that duty would be leviable attwo stages. But in these two appeals, we are to determine as to whetherFcar mattings came within the aforesaid tariff under Chapter 57. Theseappeals do not raise the question as to whether car mattings themselveswould be subjected to excise duty or not. The question here is underwhich tariff-head the duty should be paid. The aforesaid circular doesnot assist the revenue in the subject appeals.

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G18. In the three Tribunal decisions cited on behalf of revenueauthorities, such car mattings were treated as parts and accessories ofmotor cars. The first case cited is that of Collector of Central Excise,Bombay-II vs. Sterling India [(2000) 115 ELT 807]. This was a decisionof CEGAT, New Delhi. Before the Tribunal in this case, the assesseewent unrepresented. The goods involved were canvas canopy, floorH

mattings and seat covers. The Tribunal upheld the Collector’s order thatthe said articles were not classifiable as floor coverings under sub-headingNo.5702.90 of the Tariff and those were to be classified under HeadingNo. 8708.00. The order of the Tribunal does not contain any analysis orreasoning and reads: -

“3. We have gone through the facts on record. We find that boththe Asstt. Collector of Central Excise, Bombay, who hadadjudicated the matter and the Collector of Central Excise(Appeals), Bombay, had held that the goods in dispute were notthe carpets and floor mattings but were accessories of motorvehicles. The goods in dispute are canvas canopy, floor mattingand seat covers for motor vehicles. Floor matting was made fromjute coated with PVC. Other items also were not used as floorcoverings. The Collector of Central Excise (Appeals) has alsoreferred to the HSN Explanatory Notes and the relevant ChapterNotes to arrive at his conclusion that the type of the goods involvedin these proceedings were not to be classifiable as floor coverings.”

19. The next case is that of Collector of Central Excise vs.Swaraj Mazda [(1993) 68 ELT 258]. This is also a decision of CEGAT.This case relates to availability of Modvat credit on floor mats for motorvehicles. In this case floor mats had been cleared on payment of dutyunder sub-heading No.8708, which covered parts and accessories ofmotor vehicles of heading 87.01 to 87.05. Applicability of that entry wasnot in lis in that appeal. The Tribunal found that floor mats could be anitem entering into the stream of completion of the manufactured productrendering it fit for marketing. On that ground input credit under theModvat provisions was allowed. The third case, which was cited onbehalf of the revenue was that of Jyoti Carpet Industries vs.Commissioner of Central Excise, Jaipur-I [(2001) 132 ELT 458]decided by the CEGAT. This was a case where the manufacturerclassified textile floor covering of jute as product under sub-heading5703.20 in the relevant years. The assessee in this case had beenprocuring raw-materials from different manufacturers and out of suchmaterials, they had been producing car mattings and other mattings aswell, such as bath mats, telephone mats, floor foot mats etc. with the aidof power operated machines. The process of manufacture involvedcutting as per standards, overlocking and stitching etc. Following thecase of Sterling India (supra), it was held that floor mats of cars could A

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Abe classifiable under head No.8708. But again, like in the case of SterlingIndia (supra), the Tribunal has not given any reasoning for suchclassification in this decision. The Tribunal in these appeals, followingthe case of Sterling India (supra) found that the subject-goods wereclassifiable under Chapter 8708.

BAll these three cases have been decided by the Tribunal, whichobviously has no precedent value for us. We however, discussed thesecases only for the purpose of ascertaining as to whether the revenueauthorities had been treating car mats as a subject head under sub-heading 8708, on proper analysis of competing claim of the assessees toinclude them in sub-heading 5703. We do not find so from these decisionsCof the Tribunal.

20. There are authorities in which it has been held that the popularmeaning among consumers would be a major factor for interpretation ofdispute relating to classification. This principle has been laid down in thecases of Plasmac Machine Manufacturing Co. Pvt. Ltd. vs. CollectorDof Central Excise, Bombay [1991 Supp.(1) SCC 57] and Dabur IndiaLtd. vs. Commissioner of Central Excise, Jamshedpur [(2005) 4SCC 9]. In the case of Dabur India Ltd (supra), it has been held: -

“9. From the abovementioned authorities, it is clear that inclassifying a product the scientific and technical meaning is not toEbe resorted to. The product must be classifiable according to thepopular meaning attached to it by those using the product. Asstated above, in this case the appellants have shown that all theingredients in the product are those which are mentioned inAyurvedic textbooks. This by itself may not be sufficient but theFappellants have shown that they have a Drug Controller’s licencefor the product and they have also produced evidence by way ofprescriptions of Ayurvedic doctors, who have prescribed thesefor treatment of rickets. As against this, the Revenue has notmade any effort and not produced any evidence that in commonparlance the product is not understood as a medicament.”

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21. In the case of A.P. State Electricity Board vs. Collector ofCentral Excise, Hyderabad [(1994) 2 SCC 428], the marketabilitytest has been applied, which is, in a way, a corollary to the “popularmeaning” test. In this case it has been held: - H

“10. It would be evident from the facts and ratio of the abovedecisions that the goods in each case were found to be notmarketable. Whether it is refined oil (non- deodorised) concernedin Delhi Cloth and General Mills or kiln gas in South BiharSugar Mills or aluminium cans with rough uneven surface inUnion Carbide or PVC films in Bhor Industries or hydrolysatein Ambalal Sarabhai the finding in each case on the basis of thematerial before the Court was that the articles in question werenot marketable and were not known to the market as such. The‘marketability’ is thus essentially a question of fact to be decidedon the facts of each case. There can be no generalisation. Thefact that the goods are not in fact marketed is of no relevance. Solong as the goods are marketable, they are goods for the purposesof Section 3. It is also not necessary that the goods in questionshould be generally available in the market. Even if the goods areavailable from only one source or from a specified market, it makesno difference so long as they are available for purchasers. Now,in the appeals before us, the fact that in Kerala these poles aremanufactured by independent contractors who sell them to KeralaState Electricity Board itself shows that such poles do have amarket. Even if there is only one purchaser of these articles, itmust still be said that there is a market for these articles. Themarketability of articles does not depend upon the number ofpurchasers nor is the market confined to the territorial limits ofthis country. The appellant’s own case before the excise authoritiesand the CEGAT was that these poles are manufactured byindependent contractors from whom it purchased them. This pleaitself — though not pressed before us — is adequate to demolishthe case of the appellant. In our opinion, therefore, the conclusionarrived at by the Tribunal is unobjectionable.”

22. Emphasis on technical meaning has been highlighted in thecase of Commissioner of Central Excise vs. Wockhardt LifeSciences Limited [(2012) 5 SCC 585] for resolving classification relateddisputes of goods. In this case, it has been held that a commodity cannotbe classified in a residuary entry if there is a specific entry, even if thespecific entry requires the product to be understood in a technical sense.

23. “The common parlance test”, “marketability test”, “popularmeaning test” are all tools for interpretation to arrive at a decision on ABC

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Aproper classification of a tariff entry. These tests, however, would berequired to be applied if a particular tariff entry is capable of beingclassified in more than one heads. So far as subject-dispute is concerned,we have already referred to Chapter note 1 of Chapter 57. This notestipulates that carpets and other floor coverings would mean floorcoverings in which textile materials serve as the exposed surface of theBArticle when in use. This feature of the car mats has not really beenrejected by the revenue authorities as untrue in the order of theCommissioner, before whom assertion to that effect was made by therespondent.

24. The core issue in these appeals is as to whether car matsCcome under chapter-heading 57.03 or not. In the second appeal, thenumerical representation of the product, as claimed by the assessee,was different but that difference is not of much significance. Revenue’scase is that the goods are manufactured in such a way that these can beused as accessories of cars. The Tribunal found that though in commonDparlance the products involved may not be considered as carpets, inview of the wordings of the chapter, section notes, chapter notes andexplanatory notes, the goods were classifiable under chapter heading570390.90.

25. We do not find any error in such reasoning. Chapter 87 of theECentral Excise Tariff of India does not contain car mats as an independenttariff entry. We have reproduced earlier the various parts and accessorieslisted against tariff entry 8708. All of them are mechanical components,and revenue want car mats to be included under the residuary sub-head“other” in the same list. The HSN Explanatory Notes dealing withinterpretation of the rules specifically exclude “tufted textile carpets,Fidentifiable for use in motor cars” from 87.08 and place them underheading 57.03. Revenue’s argument is that the Explanatory Notes havepersuasive value only. But the level or quality of such persuasive valueis very strong, as observed in the judgments of this Court to which wehave already referred. Moreover, the Commissioner himself has referredGto the Explanatory Notes in the order-in- original while dealing with therespondent’s stand. Thus, we see no reason as to why we should makea departure from the general trend of taking assistance of theseExplanatory Notes to resolve entry related dispute. Now, on referring tothese Explanatory Notes, we find that one category of carpets [Textilecarpets (Chapter 57)] has been excluded specifically from parts andH

accessories. In our opinion, the subject-item does not satisfy the thirdcondition specified in Section XVII of the Explanatory Notes in relationto “III-Parts and Accessories”. A plain reading of clause (C) thereof,which we have quoted above, excludes “textile carpets” (Chapter 57).

26. The main argument of the appellant is that because the carmats are made specifically for cars and are used also in cars, they shouldbe identified as parts and accessories. But if we go by that logic, textilecarpets could not have been excluded from Parts and Accessories. Wehave referred to such exclusion in the preceding paragraph. It has alsobeen urged on behalf of the revenue that these items are not commonlyidentified as carpets but are different products. The Tribunal on detailedanalysis on various entries, Rules and Notes have found they fit thedescription of goods under chapter heading 570390.90. We accept thisfinding of the Tribunal. Once the subject goods are found to come withinthe ambit of that sub-heading, for the sole reason that they are exclusivelymade for cars and not for “home use” (in broad terms), those goodscannot be transplanted to the residual entry against the heading 8708.As we find the subject-goods come under the chapter-heading 570390.90,and the other entry under the same Chapter forming the subject of disputein the second order of the Commissioner, in our opinion, there is nonecessity to import the “common parlance” test or any other similardevice of construction for identifying the position of these goods againstthe relevant tariff entries.

27. For these reasons, we dismiss the appeals. The impugneddecision of the Tribunal is sustained.

28. Any connected applications shall also stand disposed of.

There shall be no order as to costs.

Divya Pandey

Appeals dismissed.

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