Commnr. Of Central
Excise, Noida Vs. M/S. Kitply Industries Ltd.
J U D G M E N T
ANIL R. DAVE, J.
1.
The
present appeals arise out of the judgments and orders passed on 23.9.2002 and
6.6.2003 by the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi
and the Customs, Excise & Service Tax Appellate Tribunal, dismissing the appeals
filed by the appellant- Revenue 2Department. By this judgment, we dispose of Civil
Appeal Nos. 4462/2003 and 9736/2003 as they involve similar questions of law.
2.
The
issue which falls for consideration in the present appeals is whether laminated
panels of particle and medium density fiber board should be classified under sub-
heading no. 4406.90 and 4407.90 or under sub-heading no. 4408.90. The appellant
alleged that the product manufactured by the respondent herein was classifiable
under sub heading 4408.90. For this purpose the appellant relied on Chapter Note
5 of Chapter 44 of the Central Excise Tariff Act, 1985 (hereinafter referred to
as `the Act') which reads as under:-
"For the purposes
of heading No. 44.08, the expression "similar laminated wood"
includes blockboard, laminboard and battenboard, in which the core is thick and
composed of blocks, laths or battens of wood glued or otherwise joined together
and surfaced with the outer plies and also panels in which the wooden core is
replaced by other materials such as a layer or layers of particle board, fiberboard,
wood waste glued or otherwise joined together, asbestos or cork".For the
sake of convenience, the relevant headings are also extracted below:"44.06
- Particle board and similar board of wood or other ligneous materials, whether
or not agglomerated with resins or other organic binding substances. 34406.10-
Plain particle
boards. 4406.20- Insulation board and hardboard4406.30- Veneered particle board,
not having decorative veneers on any face4406.90-Other. 44.07 - Fiber board of
wood or other ligneous materials, whether or not bonded with resins or other
organic substances.4407.10-Insulation board and hardboard4407.90- Other. 44.08-Pplywood,
veneered panels and similar laminated wood. 4408.10 - Marine plywood and
aircraft plywood.4408.30- Decorative plywood4408.40- Cuttings and trimmings of plywood
of width not exceeding 5 centimeters4408.90 - Other".
3.
In
order to decide the issue arising in the present case in its proper perspective,
basic facts leading to filing of the present appeals are being recapitulated
hereunder: 4The respondent asessee, who is engaged in the manufacture of wood and
articles of wood falling under Chapter 44, was issued show cause notices dated 16.2.2000
and 27.12.2000 by the appellant authorities, inter alia, calling upon it to show
cause as to why classification of its products (1) Laminated Particle Board and
(2) Laminated Medium Density Fibre Board should not be changed to chapter
Sub-heading no 4408.90
The respondent replied
to the said notices refuting the allegations on merits as well as on limitation.
The said show cause notices were adjudicated and the demand proposed therein was
dropped by the Commissioner of Central Excise, Meerut-II vide Orders dated 20.4.2001
and 31.10.2001 respectively. The Commissioner, ultimately found that the pre
requisites of Chapter Note 5 of Chapter 44 were not satisfied and, therefore, no
further action was taken so far as the aforestated classification was
concerned.
4.
Aggrieved
by the orders, the Revenue filed appeals before the Tribunal. The Tribunal dismissed
the said appeals vide orders dated 23.9.2002 and 6.6.2003, upholding the
findings of the Commissioner.
5.
Aggrieved
by the orders of the Tribunal, the Reveue has filed the present appeals.
6.
The
learned counsel for the appellant submitted that the Tribunal had erred in not appreciating
that the manufacturing process, as stated by the factory manager clarified that
"pre-laminated" meant already laminated and as a result of the
process, the surface of the panels become water resistant as well as scratch resistant
and due to melamine surface, it resisted cigarette burns and also got an
attractive look. In spite of the above facts stated by the factory manager with
regard to the process, the respondent-assessee never mentioned the word
"Panel" in the manufacturing process submitted along with
classification declared under Rule 173 B of the Act.
7.
Learned
counsel for the appellant further argued that Chapter Note 44.08 specifically speaks
of plywood, veneered panels and `similar laminated wood'. He pointed out that
in the instant case, it is an admitted fact that the goods in question, which are
`wood products' are laminated and they are covered under chapter heading 44.08 and
not under chapter heading 44.06 as there is no mention of lamination in the
latter chapter sub heading.
8.
The
learned counsel for the appellant also submitted that the Tribunal failed to
appreciate that if a product is capable of being classified under two chapter
headings, then Rule 3 (c) of the Rules for interpretation of the Act 6envisages
that classification under the heading, which occurs last in the numerical order.
Therefore, chapter sub-heading 4408.90 would be the appropriate sub heading for
classification of the products in question.
9.
To
substantiate his claim, he relied on the cases of CCE, SHILLONG v. WOOD CRAFT PRODUCTS
LTD. 1995 (77) ELT 23, M/S SAUSASHTRA CHEMICALS v. COLLECTOR OF CUSTOMS, BOMBAY
1986 (23) ELT 283, DECORATIVE LAMINATED (INDIA) PVT LTD v. COLLR. OF C. EX., BANGALORE
1996 (86) ELT 186 (S.C.).
10.
On
the other hand, the learned counsel for the respondent submitted that for
Chapter Note 5 of Chapter 44 to apply, an essential pre-requisite is that the
similar laminated wood must be surfaced with outer piles, which is conspicuously
absent in the present case and hence the said chapter note would not apply. He also
submitted that the impregnation is only an additional process, which is done on
the particle board to increase its strength and, therefore, the goods would
still continue to fall under heading 4406.
11.
The
learned counsel also submitted that the decision in the case of Wood Craft
Products Ltd. (supra) would not be applicable to the instant 7case as it was
with respect to classification of block board. The respondent relied on the
case of CCE, INDORE v. BOMBAY BURMAH TRADING CORPN. LTD. 2000(39) RLT 184 to substantiate
its claim that pre-laminated particle board is classifiable under heading 44.06
and not under heading 44.08.
12.
We
have heard the learned counsel for the parties and perused the records.
13.
It
is not in dispute that the product before the lamination is not classifiable under
tariff heading 44.08. However, it is the case of the appellant that after the
lamination, the panels so obtained become a distinct product falling outside the
purview of 44.06. Hence, what needs to be determined by us is whether even after
the lamination, the products falls under sub-heading 4406.90 and 4407.90 or
would it fall under sub- heading 4408.90.
14.
For
this purpose, it is important to refer to the statement of the factory manager
Shri B.V Rao, who stated that in the process of manufacture of the panels, plain
panels of the mother boards (plain particle/MDF fiber) are used. Papers are
passed through the impregnating unit wherein the resin and other required chemicals
are spread on the paper and the paper gets impregnated. The impregnated paper is
further dried and cut into required length. These paper sheets are assembled
with the mother boards in such a way that the impregnated paper is placed on
the upper side and one layer of impregnated design paper is placed over one layer
of impregnated tissue paper. This assembly is put for pressing under the required
heat and pressure. The above assembly is taken out as pre-laminated boards and is
ready for dispatch.
15.
From
the above process, it is clear that the products are pre-laminated wood, most aptly
falling under chapter heading 44.08 as the said chapter heading specifically speaks
of plywood, veneered panels and similar laminated wood. The word
"similar" discussed in the above para has been discussed by this court
in the case of CCE, Shilling v M/S Wood Craft Products Ltd. (supra) wherein a
similar issue with regard to "Block board" had arisen. For sound
reasons recorded, this Court held that `Block board' should be classified under
heading No. 44.08.
The logic applied in
the case of `Block board' can very well be applied in the instant case. In the
said judgment, this Court observed as under in paras 5 and 6 "5. It is
significant that Heading No. 44.12 of the HSN is the same as Heading No. 44.08
of the Indian tariff and reads "Plywood, veneered panels and similar laminated
wood." The explanatory notes on the HSN indicate the meaning of the expression
"similar laminated wood" as under:- "similar laminated wood. This
group can be divided into two categories: Block board, lamin board and batten
board, in which the core is thick and composed of blocks, laths or battens of
wood glued together and surfaced with the outer plies. Panels of this kind are very
rigid and strong and can be used without framing or backing." 6. It is clear
that if the expression "similar laminated wood" in the Indian Tariff
is understood as it meant under the HSN on which pattern the Central Excise Tariff
Act is based, then block boards of all kinds would fall within the expressionn "similar
laminated wood". This is how the amended Chapter Note reads expressly. The
question is whether it can be so read even for the earlier periods particularly
the first period before amendment of Chapter Note 5 to expressly include block board
in the expression "similar laminated wood".
16.
Heading
44.08 in the instant case covers "plywood", "veneered panels"
together with all kinds of "similar laminated wood". In other words, it
is treating "plywood" or "veneered panels" as "laminated
wood". Therefore, it covers all kinds of laminated wood bearing any
resemblance to "plywood" or "veneered panels". The word
used is "similar" and not "same". Thus, some resemblance to
"plywood" or "veneered panels" is enough, 10provided the
article can be treated as "laminated wood". The sweep of the heading
is, therefore, quite wide.
17.
Therefore,
for the product to be classified under the above heading, it is enough if it is
similar to laminated wood, which in the instant case is proved beyond reasonable
doubt. Even factory manager, Shri B.V. Rao admitted the facts with regard to
lamination. At this point we may again refer to the case of M/s. Wood Craft
Products Ltd. (supra). It has been mentioned therein that "The meaning of the
significant words and description of the wood products as intermediate materials
meant for manufacture of final products clearly indicate that "laminated
wood" means a wood product prepared by placing layer on layer and
"block board" is a plywood board with a core of wood. Any plywood board
with a core of wood in which there are layers, one above the other is,
therefore, laminated wood similar to plywood or, veneered panels. It is
"similar laminated wood" included in the heading "Plywood, veneered
panels and similar laminated wood". Similarity with, and not identity with
plywood or veneered panels is required".
18.
From
the above, it is clear that the product is similar to plywood and veneered panels
and hence tariff heading 44.08 is squarely applicable. Further, in the instant
case, the core layer is made up of the particle board or MDF board (referred to
as "mother boards" in the process mentioned above) and joined together
with the help of resins and then laminated with plasticised paper (paper impregnated
with melamine formaldehyde resin). Hence it is also clearly seen that the
laminated panels manufactured by the respondent are covered under Chapter Note
5 to Chapter 44 of the schedule to the Act. The product need not be same as
plywood or veneered panels but mere similarity with them is enough for chapter
note 5 to apply.
19.
The
Tribunal has erred in holding that as "particle board" is specifically
covered under heading 44.06, laminated particle board will come under the scope
of "similar board of wood" under the said heading. It is clear that the
product after the lamination is a distinct marketable commodity different from the
original one. This conclusion is further substantiated by the fact that Shri B.V.
Rao said in his statement that the panels after lamination, become water resistant
and look attractive due to printed paper and brings about a change in the name,
usage etc. Therefore, the Tribunal's conclusion that the laminated board is similar
to `particle board' is incorrect and cannot be accepted.
20.
The
respondent has placed reliance on the pari materia heading in the HSN 44.10 to
contend that the product is classifiable under chapter heading 44.06. We cannot
accept this argument. In the proviso to the said heading, it has been mentioned
that if the manufacturing process gives the product the essential character of articles
of another heading, then chapter heading 44.12 will not apply. In the instant case,
going by the statement of the respondent's own officer, the product after lamination
assumes a distinct marketability and brings about a change in the product. This
change, after lamination makes the product fall outside the purview of chapter heading
44.06 and that would place the product under chapter heading 44.08 as the word used
under chapter heading 44.08 is "similar laminated wood" (emphasis
supplied).
Further recourse may
also be taken to rule 3 (c) of the Rules for interpretation of the Act which
envisages that if the products are capable of classification under two chapter headings,
then as per the said rule, the classification must be under the heading which occurs
last in the numerical order. Therefore, heading 4408.90 would be the
appropriate sub heading for classification of the product in question.
21.
In
terms of the above conclusions arrived at and on appreciation of the materials on
record, we are of the view that the findings arrived at by the Tribunal are
unjustified and cannot be accepted. The impugned judgments and orders passed by
the Tribunal in both the appeals are, therefore, set aside and it would be open
to the appellant to assess the respondent as per the above findings.
Accordingly, the appeals are allowed but leaving the parties to bear their own
costs.
..................................................J.
(Dr. MUKUNDAKAM SHARMA)
..................................................J.
(ANIL R. DAVE)
New
Delhi
September
7, 2011.
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