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Unit 3: Classification and Valuation of Excisable Goods

Notes


Caselet CCEx., Bhubaneshwar v. Champdany Industries
Limited 2009 (241) E.L.T. 481 (S.C.)

he assessee was engaged in the manufacture of the carpets in which jute predominated
by weight over every other single textile material. However, Revenue contended
Tthat the same should be classified as polypropylene carpet.
In this regard, the Apex Court considered the following points:-
(i) Relying on Note 1 to Chapter 57, Revenue argued that the surface of the carpet being
entirely of polypropylene, the same should be classified as polypropylene carpet.
The Supreme Court viewed that role of Chapter Note is limited to decide whether
the goods in question are "carpets and other textile floor coverings" for the purposes
of Chapter 57 or not. Once the goods are carpets and falling under Chapter 57, the
role of Chapter Note 1 comes to an end.

Further referring to the relevant statutory provisions laid down in Section Notes
2(A) and 14(A) of Section XI2, the Apex Court held since the impugned goods
admittedly fell under Chapter 57 and consisted of more than two textile materials,
it had to be classified on the basis of that textile material which predominated by
weight over any other single textile material. As, in the goods in question, jute
admittedly predominated by weight over each other single textile material, the said
carpet could only be classified as jute carpets and nothing else. The contrary
interpretation given by the Revenue was incorrect.
(ii) Relying on the concept of essentiality test, Revenue argued that as the exposed
surface of the carpet was polypropylene fiber and not jute, these goods could not be
classified as jute carpets. The Court held the said argument of the Revenue to be
erroneous because it was against the principle of predominance test.
(iii) Learned counsel for the Revenue further argued that the common parlance test
should be applied for classifying the carpets and the carpets, to the common man,
would not appear to be jute carpet but polypropylene carpet. The Supreme Court
observed that it is already established principle that while interpreting statutes like
the Excise Tax Acts or Sales Tax Acts, the common parlance test can be accepted only
if any term or expression is not properly defined in the Act. Therefore, going by the
aforesaid principle, the Court held that common parlance test did not have any
application here.

(iv) Learned counsel for the Revenue argued that for the purpose of classification in this
case, rule 3 of the 'Rules for the Interpretation of the First Schedule to the Central
Excise Tariff Act, 1985' should be applied. Applying the said rule, Revenue wanted
to classify the carpets under the residuary sub-heading 5702.90 of Heading 57.02 -
"others". In this regard, the Apex Court observed that Revenue's stand in this case
was contrary to the decision of Supreme Court in HPL Chemicals Ltd. v. CCE,
Chandigarh (2006) 5 SCC 208, wherein it was held that rule 3(a) of the Interpretative
Rules provides that if the goods are covered by a specific heading, the same cannot
be classified under the residuary heading at all.

Contd....

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