Speedway Rubber Co. Vs. Commissioner, Central Excise, Chandigarh & Ors
 Insc 260 (7 May
Babu & Ruma Pal Rajendra Babu, J. :
is a statutory appeal by the appellants under Section 35L(a) and (b) of the
Central Excises & Salt Act, 1944, against the judgment and order of the
Custom, Excise and Gold (Control) Appellate Tribunal [hereinafter referred to
as 'the Tribunal'] dated 30.12.1998. The dispute is over classification of the
impugned goods under the Central Excise Tariff Act, 1985 [hereinafter referred
to as 'the Act'], and determination of the rate of duty payable on the goods
manufactured by the appellants.
duty demand is for the period between July 1989 to December 1989 prior to the
stand of the Department is that the impugned goods are classifiable under
sub-heading 4016.99, prior to the 1990 budget. After the 1990 budget, they are
classified under sub-heading 4008.21. The contention of the appellants is that
the impugned goods were classifiable under sub-heading 4008.21 before the 1990
budget and even thereafter.
impugned goods were cleared under sub-heading 4008.21 of the Act as per the
approved classification under Rule 173B of the Central Excise Rules, 1944. In
Classification List No.35/89-90 dated 7.4.1989, impugned goods were claimed
under sub-heading 4008.21, and were fully exempted from the excise duty vide
notification No.47/76 of the Central Excise dated 9.3.1976. This Classification
List was duly approved without modification by the Assistant Collector, Central
Excise, Jalandhar, by order dated 28.12.1989.
the original Classification List No.35/89-90 was pending, on account of the
change of rate of duty qua ADV tyres, [14% ADV instead of specific rate of duty
of Rs.42 per tyre], the appellants submitted another Classification List
No.173/89-90 on 6.11.1989. The Department chose to approve the original
Classification List No.35/89-90 without any modifications. The original list
was neither reviewed nor revoked.
the Superintendent, Central Excise, Range II, Jalandhar, on 2.2.90 vide show
cause notice issued under C.No.CE- 20/Demand/R.II/98/139, demanded duty of
Rs.5,57,300.99 for the period between July 1989 and December 1989 by
classifying the goods under sub-heading 4016.99 of the Act.
30.3.1990, another show cause notice was issued under C.No.V-40(30)
12/Val/86/3566-67, by the Assistant Collector, Central Excise, Jalandhar, and
the classification of the impugned goods in Classification List No.173/89-90
was objected to, on the ground that Classification List No.173/89-90 was
effective retrospectively with effect from 1.4.1989.
addition, another show cause notice dated 5.4.90 was issued under C.No.V-40(30)II/Val/96/3712-13,
by the Assistant Collector, Central Excise, Jalandhar. The Classification List
filed by the appellants effective from 22.9.1989 was also objected.
pertinent to mention that show cause notice for demand of duty was issued on
2.2.1990, whereas Classification List No.173/89-90 was objected on 30.3.1990.
The demand of duty was objected to on the following grounds:
was without objecting to or in revocation of the original Classification List.
period from July 1989 to 5.11.1989 was covered by the Original Classification
List, which was duly approved by the Department.
Classification List No.173/89-90 filed on 6.11.1989 could not be effective
retrospectively with effect from 1.4.1989. It could only be effective with
effect from 6.11.1989.
Demand for the above period was in contravention of Classification List
No.35/89-90 which was duly approved on 30.12.1989.
Clearance during the period 6.11.1989 to 12/1989 was covered by Classification
the observations in this show cause notice dated 30.3.1990 with respect to
Classification List No.173/89-90 are contended to be factually incorrect.
appellants filed on 25.5.1990 an interim reply to the show cause notice dated
5.4.1990 and submitted that it has been reversing the credit of duty taken
against inputs used in the manufacture of subject goods in view of Rule 57C of
the Central Excise Rules, 1944. It further stated that if the Department holds
that the subject goods are dutiable then there is no bar of rule. In this view
of the matter they were entitled to avail the credit of duty against the
manufacture of the impugned goods. The appellants had reversed a sum of BED
Rs.11,61,951.29, SEB Rs.8,097.54 in the RG 23 A Part II Register, and requested
that this credit may be allowed.
Assistant Collector, Central Excise, Jalandhar vide order-in- original
No.55-57/AC/Demand/Val/90 dated 31.7.1990 issued C.No.V- 30(5)D/90/9672 dated
4.9.1990 holding that:
confirm the demand for Rs.5,57,300.99 under Section 11A of the Central Excises
and Salt Act, 1944. Classification List Nos.173/89-90 and No.163/89-90
effective from 1.4.1989 and 22.9.1989 filed by the appellants, both of which
stand approved accordingly classifying the impugned goods under sub-heading
4016.99 of the 1985 Act and consequently exemption under notification No.47/76
dated 9.3.1976 is denied." Being aggrieved by the order of the Assistant
Collector, the appellants filed appeals with the Collector [Appeals], Central
Excise, Chandigarh. The Collector, vide
order-in-appeal No.372-374/CE/Chd/91 dated 13.3.1991, set aside order of the
Assistant Collector and ordered classification of impugned goods under
Department then filed appeals to the Tribunal. The Tribunal, by majority
opinion, allowed all the three appeals filed by the Department, and upheld the
order of the Assistant Collector classifying the impugned goods under
sub-heading 4016.99. Therefore, this appeal has been filed against the impugned
order of the Tribunal.
nature of the goods manufactured by the appellants is crucial in determining
the sub-heading under which they would be classified.
appellants have indicated four stages of their production as under:
Natural/synthetic rubber is mixed with certain chemicals including black carbon
with the help of a mixing mill.
material so obtained is fed into extruder hopper.
dye is of the required size and shape.
Extruder material is taken to water tank for cooling and over conveyor belt.
extruded material is placed in dye and is pressed with the help of hydraulic
press and what emerges out is vulcanized grooved material called procured
40.08 reads as "Plates, Blocks, Sheets, Strips, Rods, and profile shapes
of vulcanized rubber other than hard rubber" and sub- heading 4008.21 reads
as "Plates, Sheets, and Strips for resoling or repairing or retreading
rubber tyres". On the other hand, Heading 40.16 reads as "Other
articles of vulcanized rubber other than hard rubber and sub-heading 4016.99
again states "other".
of Chapter 40 before its amendment in 1990 states :- "In heading Nos.
40.01, 40.02, 40.03, 40.05 and 40.08, the expressions 'plates', 'sheets', and
'strips' apply only to plates, sheets and stripes and to blocks of regular
geometric shape, whether or not having the character of articles and whether or
not printed or otherwise surface-worked, but not otherwise cut to shape or
heading No. 40.08, the expressions 'rods', 'profile shapes' apply only to such
products, whether or not cut to length or surface- worked but not otherwise
worked." Under Finance Act of 1990, Chapter 40 Note 9 was changed as under
heading Nos. 40.01, 40.02, 40.03, 40.05 and 40.08, except as otherwise
provided, the expressions 'plates', 'sheets', and 'strips' apply only to plates,
sheets and strip and to blocks of regular geometric shape, uncut or simply cut
to rectangular (including square) shape, whether or not having the character of
articles and whether or not printed or otherwise surface worked, but not
otherwise cut to shape or further worked." Moreover, explanatory notes to Harmonised
Commodity Description and Coding Systems at page 579, states : 'plates, sheets
and strips (heading Nos.40.01, 40.02, 40.03, 40.05 and 40.08) of Chapter 40 are
to be read as follows :
expressions are defined in note 9 to this chapter and include blocks of regular
geometric shape. Plates, sheets and strips may be surface worked (printed,
embossed, grooved, channeled, ribbed, etc.) or simply cut to rectangular
(including square) shape, whether or not having the character of articles, but
may not be otherwise cut to shape or further worked." Therefore, the
question that arises for consideration is whether the appellant manufacturer's
process of placing the plates, sheets and strips in the dye and subjecting the
same to pressing in the hydraulic press is in the nature of 'further working'.
appellants contended that the amendment was effective only from 31.05.1990 and,
therefore, the same could not be extended to the classification list filed by
them prior to that date. The amendment was merely clarificatory in nature and
it neither restricted nor enlarged the scope of heading No. 40.08 or 40.16.
Hence, the primary issue for consideration is the interpretation and
application of Note 9 of Chapter 40 before its amendment in 1990. A plain
reading of Note 9 before its amendment would show that what is covered are
plates, sheets and strips which are of regular geometric shape, whether uncut
or cut to rectangular shapes, whether printed or surface worked "but not
otherwise cut to shape or further worked." To determine the nature of the
impugned goods, the difference between "surface worked" and
"further worked" is significant. 'Surface working' means working on
the surface of the material. 'Surface working' may include coating, polishing, colouring,
embossing, corrugating or even grooving when such grooving is only on the
surface of the material.
Department contended that though at the initial stage the goods manufactured by
the respondents emerged in the form of plates, sheets or strips, thereafter
they are moulded, when their edges are rounded off and the shape of the cross
section becomes an trapezoid.
result, the final products do not remain plates/sheets/strips as defined under
Note 9 of Chapter 40, since they are further processed and hence, cannot be
classified under sub-heading 4008.21. The classification under sub-heading
4016.99 as "other" articles of vulcanised rubber was more appropriate
and, therefore, the exemption Notification No. 47/76, as amended, was not
applicable to the appellants. The two members of a Bench of the Tribunal having
difference in their view the matter was referred to the Third Member.
majority view of the Tribunal held that the basic character of the goods
changed when they were subjected to the process of dye and grooving by
hydraulic press. In their opinion, "even after the emergence of plates,
sheets or strips after extrusion, the material had to undergo the hydraulic
press stage to become the plates, sheets and strips meant for resoling,
repairing or retreading under the sub-heading No. 4008.21." This process
fell within the meaning of "further worked" and, therefore, the
impugned products could not be classified under sub-heading No.4008.21 as held
by the Collector.
minority opinion held that the types of processes or activities, which lead to
'surface working' were illustrated and indicated in the bracket after the words
'surface worked'. This meant that further working would constitute some process
or activity, which is to be undertaken after surface working. As the
manufacturing process claimed by the appellants had neither been contradicted
nor shown to be wrong, it was held that the impugned goods were only 'surface
worked' and 'further worked' and could, therefore, be classified under
notice that as per Rule 3(a) of the Interpretation Rules to Central Excise
Tariff Act, 1985, "The heading which provides the most specific
description shall be preferred to headings providing a more general
description." Accordingly, the heading No. 40.08 provides more specific
description to the impugned goods than heading No. 40.16 and hence, the
specific entry should overrule the general entry. Moreover, the manufacturing
process involved 'surface working' of the types described above and does not
include 'further working'. This is evident from the interpretation of Note 9 of
Chapter 40, that further working would envisage an activity other than those
mentioned therein. Hence, on the basis of the aforesaid discussion, the
impugned goods would be classified under sub-heading 4008.21 and not under
sub-heading 4016.99 as claimed by the Department.
these appeals stand allowed by setting aside the order of the Tribunal and
restoring that of the Collector.
RAJENDRA BABU ] J.
PAL ] MAY 7, 2002.