Judgment:
1. South Asia Tyres Limited, Waluj, is engaged in the manufacture of tyres for Ceat. Among the material required for manufacture of tyres is rubberised tyre cord. This is obtained by coating with rubber the bare tyre cord fabrics on which is generally made out of nylon or rayon.
2. The assessee purchased the bare tyre cord fabrics from its manufacturer and sent it to the factory of Ceat, Bhandup under Rule 57F(3) for conversion into dip or rubberised tyre cord. After this was done it utilised the dipped tyre cord rubber fabrics which it received in the manufacture of tyres. The notice issued to it noted that while goods manufactured in a factory and captively consumed therein were exempted from payment of excise duty by notification 67/95 that exemption did not extended to the additional duty of excise leviable under the Additional Duty of Excise (Goods of Special importance) Act, 1957. Therefore, it proposed to recover such duty from the appellant for the fabrics that it received during the period between 15th March, 1994 and 29-4-1994. The notice also alleged suppression by the assessee of the fact of conversion of the tyre cord fabrics. After considering the cause shown and hearing the appellant the Commissioner passed the order confirming the duty liability and imposing penalty on the appellant. Hence this appeal.
3. It is contended by the learned counsel for the appellant that classification of tyre cord fabrics under heading 59.06 has been settled by the various decisions of the Tribunal. Goods classifiable under heading 59.06 are not liable to additional duty of excise and hence no duty is payable.
4. It is further contended that the notice is barred by limitation. The appellant had intimated the department of its intention to avail of the procedure under Rule 57F(3) and that informed it of the processes involved. The department is therefore fully aware of the facts and there was no intention to evade payment of duty.
5. In our opinion the classification in heading 59.03 of the tariff of fabrics not elsewhere specified, coated, covered or impregnated with rubber requires reconsideration. The decisions of the Tribunal holding to this effect rely upon one or both of two decisions, Falcon Tyres v.CCE - 1998 (88) E.L.T. 450 or Vikrant Tyres v. CCE - 1997 (90) E.L.T.178. Neither of these decisions, however, takes note of the fact that the Explanatory Notes to the Harmonised System of Nomenclature specifically provide that heading 59,02, which is for tyre cord fabrics of high density nylon or other polyamides, polyester or viscose rayon, "covers tyre cord fabrics whether or not dipped or impregnated with rubber or plastics." The words of heading 59.02 and heading 59.07 of the Harmonised System of Nomenclature are identical with the words respectively of heading 59.02 and 59.06 at the relevant time (now heading 59.07). In such a situation, it is settled law that the assistance of the Explanatory Notes to the Harmonised System of Nomenclature be taken in deciding classification. Therefore, except where, on account of the predominance of textile material classification in heading 40.05, 40.08, or certain specified kinds of rubberised fabrics, both of which are specified in these Notes, tyre cord fabrics, whether or not coated with rubber, would be classifiable in heading 59.02.
6. However, we do not propose to refer them for reconsideration to larger bench. In our view, the appeal would have to be allowed on the ground of limitation. By its letter dated 30-9-1994 to the Assistant Collector the appellant intimated them that it propose to avail of procedure under Rule 57F(3). The intimation and the prescribed form that was enclosed to this letter indicated as the resultant goods after processing of masticated rubber, compounded rubber and calendered fabrics falling in heading 4006.90.
7. The departmental representative contends that calendering is a process of smoothening of fabrics and by no means from this description the officers could not have understood that the fabrics was subject to the process of coating with rubber. Technical material shows this is to be incorrect. The Dictionary of Rubber published by Applied Science Publishers Limited prescribes calendaring as "machine used to produce smooth, uniform sheeting and to coat and friction textiles". The Rubber Products Manufacturing Technology, edited by Anil K. Bhowmick, Malcolm M. Hall and Henry A. Benarey, published by Marcel Dek-ker, Inc., indicates various process of coating for products, among those coating by calendering in which the process is described as the malted rubber is applied on the fabrics by means of calendering rolls. The book Rubber Technology Handbook by Werner Hofmann also describes coating of fabrics by means of calendering.
8. No doubt the departmental officers not being experts in rubber tyre technology could not be expected to understand the meaning and significance of these terms. It is therefore possible to say that from a bare reading of the intimation it could not be concluded that the process involved coating of the fabrics with rubber. However, it cannot be said that the appellant misdeclared and suppressed any information.
Even assuming, that the officers were not aware of the significance of the terms they could by simple reference to technical books, have determined what calendering signified. The appellant would have been aware of this fact, it will also be evident that the appellant itself would have believed that calendering included coating of tyre cord fabrics with rubber. Since the appellant had intimated to the department the process that will be undertaken it cannot be considered to have suppressed or misdeclared facts. The extended period of limitation was therefore not available.