Commr. of C. Ex. Vs. Shree Jai Jagdambe Plastic Indus. - Court Judgment

Excerpt:
1. revenue have filed these appeals being aggrieve d by the impugned orders passed by the learned commissioner (appeals). as the issue in both the appeals is the same they were heard together and are being disposed of by this common order. the learned commissioner (appeals) in the impugned order had held, "i find that the adjudicating authority has himself held in the impugned order that p.u. foam block covered in cotton cloth which has been shaped in a way that these pieces, which are held together by a special cover can be adjusted to assume such shapes as can be used both as a sofa or as bed depending on requirement or convenience. it is clear from the above that item manufactured, is to be used in sofa-cum-bed and not exclusively as cushion or mattress and therefore, merits classification under 9401.00 as claimed by the respondent. this being so the classification of the item merely on the ground that it can also be used otherwise can not be the basis for classification under chapter/heading i.e. 9404.00. on this count the impugned order is not sus-tainable. this being so the consequential demand raised on this count also fails on merit. in view of the discussions and findings the impugned orders are set aside and the appeals are allowed".2. the facts of the case in brief are that respondents herein are engaged in the manufacture of p.u. foam block in primary form, plates, sheets, film and strips. foam mattress supports articles of bedding i.e. mattress, pillows, cushions etc. the departmental authorities observed that during the period from feb., 1998 to july, 1998 and from august, 1998 to nov., 1998 the assessee had cleared sheets whether or not convertible into beds and parts thereof and paid duty at a rate of 18%. the department was of the view that the goods cleared by the respondents herein the rate of duty correctly applicable should be 25%.accordingly, show cause notices were issued to the respondents herein asking them to explain as to why duty short-paid should not be demanded from them and why penalty should not be imposed. the main contention of the respondents herein was that the goods were a combination of mattress and cushion put inside and was covered; that these two items i.e. mattress and cushion are individually covered under sub-heading no. 9404.00 and therefore, the combination was classifiable under chapter sub-heading 9401.00.3. none appeared for the respondents herein as they have requested a decision on merits.4. arguing the case for the appellant-revenue shri atul dikshit learned sdk submits that the commissioner (appeals) had fallen in error in holding that it is a combination of mattress and cushion which are individually covered under sub-heading 9404.00. therefore the combination is rightly classifiable under ch. s. h. 9401.00.5. we have heard the submissions of the learned sdk for revenue. we have also perused the evidence on record. we note that similar issue had come up before the commissioner (appeals) in the case of m/s. soft foam industries pvt. ltd. we further note that the learned commissioner (appeals) in the order nos. 144 to 146/2001/c.e., dated 7-8-2001 held that sofa-n-sofa bed and wonder couch manufactured by the respondents are correctly classifiable under chapter sub-heading 9401.00 of the schedule to the tariff act, 1985. we further note that information given by the commissioner, hyderabad shows that this order has been accepted by the department. we note that similar view has been taken by the commissioner (a) in the present case without going into detailed examination. we have examined the order passed by the learned commissioner(a), hyderabad. we note that the learned commissioner examined the position in detail as under : "(ii) i find that the appellants are clearing these products, covered with zipped cloth cover in a ready to use condition. in the case of sofa-n-bed, the same is used as sofa during the day and as bed in the night. it is available in two sizes 6' x 2.5', 6' x 5'. wonder couch is sold as a sofa or a seat - single seater or double seater. hence the assistant commissioner noted that in note 10 to chapter 39, the expression in heading nos. 39.20 and 39.21, "plates, sheets, film foil and strip" applies only to plates, sheets, film, foil and strip and to blocks or regular geometric shape, whether or not printed or otherwise surface-worked, uncut or cut into rectangles (including squares) but not further worked (even if when so cut they become articles ready for use). if naked pu foam blocks are cleared from the factory, the same would definitely be classifiable under 3921.11, which would have been a more appropriate heading than 3926.10. but the appellants are clearing the impugned goods completely manufactured and in a ready to use condition as sofas. heading 94.01 of hsn covers seats (other than those of heading no. 94.02), whether or not convertible into beds, and parts thereof. this heading covers all seats (including those for vehicles, provided that they comply with the conditions prescribed in note 2 to this chapter) for example - lounge chairs, arm chairs, folding chairs, deck chairs, infants' high chairs. arm chairs, couches, settes etc. remain in this heading even if they are convertible into beds (pp 1699 and 1700 of the hsn). heading 94.01 of the schedule to central excise tariff act, 1985 is indentically worded to heading 94.01 of the hsn. hence, the hsn notes, referred to above, can be relied upon in interpreting the scope of heading no. 94.01 of the schedule to ceta, 1985. (iii) according to note 2 to chapter 94, the articles (other than parts) referred to in heading no. 94.01 are to be classified in that heading only if they are designed for placing on the floor or ground. sofa-n-bed and wonder couch are designed to be used when those are kept on the floor or ground. heading 39.26 is of general and residuary nature covering 'other articles' of plastics and articles of other materials of heading nos. 39.01 to 39.14. as per hsn note (p 622), this heading covers articles, not elsewhere specified or included of plastics (as defined in note 1 to the chapter) or of other materials of headings 39.01 to 39.14. however, in contrast the heading 94.01 is a specific one for seats (other than those of heading no. 94.02), whether or not convertible into beds, and parts thereof. as such, as per rule 3(a) of the rules for interpretation of the tariff schedule, the heading which provides the most specific description shall be preferred to the heading providing a more general description. it is a settled law that for resolving the classification dispute and interpretation of the central excise tariff the hsn explanatory notes are relevant and are useful guide. the hon'ble supreme court has also held that the expressions occurring in the tariff schedule have to be construed in the sense in which the persons who deal in such goods understand them. the impugned goods are bought and sold in the market as sofa-n-bed, wonder couch and these are known as such in the trade parlance. keeping in view all the above aspects, i hold that the sofa-n-beds and wonder couch manufactured by the appellants are correctly classifiable under 9401.00 of the schedule to ceta 1985. the impugned orders passed by the assistant commissioner are not sustainable." 6. in view of the detailed examination undertaken by the learned commissioner (appeals) in the above order for coming to the conclusion that goods are classifiable under chapter sub-heading 9401.00 we agree with he findings not only based on detailed examination of the issue but also or he sake of uniformity in classification of a product. the goods shall be classifiable under sub-heading no. 9401.00- having regard to this aspect the appeals filed by the revenue are rejected.

Judgment:
1. Revenue have filed these appeals being aggrieve d by the impugned orders passed by the learned Commissioner (Appeals). As the issue in both the appeals is the same they were heard together and are being disposed of by this common order. The learned Commissioner (Appeals) in the impugned order had held, "I find that the adjudicating authority has himself held in the impugned order that P.U. Foam Block covered in cotton cloth which has been shaped in a way that these pieces, which are held together by a special cover can be adjusted to assume such shapes as can be used both as a sofa or as bed depending on requirement or convenience. It is clear from the above that item manufactured, is to be used in sofa-cum-bed and not exclusively as cushion or mattress and therefore, merits classification under 9401.00 as claimed by the respondent. This being so the classification of the item merely on the ground that it can also be used otherwise can not be the basis for classification under chapter/heading i.e. 9404.00. On this count the impugned order is not sus-tainable. This being so the consequential demand raised on this count also fails on merit. In view of the discussions and findings the impugned orders are set aside and the appeals are allowed".

2. The facts of the case in brief are that respondents herein are engaged in the manufacture of P.U. Foam Block in primary form, plates, sheets, film and strips. Foam mattress supports articles of bedding i.e. mattress, pillows, cushions etc. The Departmental authorities observed that during the period from Feb., 1998 to July, 1998 and from August, 1998 to Nov., 1998 the assessee had cleared sheets whether or not convertible into beds and parts thereof and paid duty at a rate of 18%. The Department was of the view that the goods cleared by the respondents herein the rate of duty correctly applicable should be 25%.

Accordingly, show cause notices were issued to the respondents herein asking them to explain as to why duty short-paid should not be demanded from them and why penalty should not be imposed. The main contention of the respondents herein was that the goods were a combination of mattress and cushion put inside and was covered; that these two items i.e. mattress and cushion are individually covered under sub-heading No. 9404.00 and therefore, the combination was classifiable under Chapter sub-heading 9401.00.

3. None appeared for the respondents herein as they have requested a decision on merits.

4. Arguing the case for the appellant-Revenue Shri Atul Dikshit learned SDK submits that the Commissioner (Appeals) had fallen in error in holding that it is a combination of mattress and cushion which are individually covered under sub-heading 9404.00. Therefore the combination is rightly classifiable under Ch. S. H. 9401.00.

5. We have heard the submissions of the learned SDK for Revenue. We have also perused the evidence on record. We note that similar issue had come up before the Commissioner (Appeals) in the case of M/s. Soft Foam Industries Pvt. Ltd. We further note that the learned Commissioner (Appeals) in the Order Nos. 144 to 146/2001/C.E., dated 7-8-2001 held that sofa-n-sofa bed and wonder couch manufactured by the respondents are correctly classifiable under Chapter sub-heading 9401.00 of the Schedule to the Tariff Act, 1985. We further note that information given by the Commissioner, Hyderabad shows that this order has been accepted by the Department. We note that similar view has been taken by the Commissioner (A) in the present case without going into detailed examination. We have examined the order passed by the learned Commissioner(A), Hyderabad. We note that the learned Commissioner examined the position in detail as under : "(ii) I find that the appellants are clearing these products, covered with zipped cloth cover in a ready to use condition. In the case of sofa-n-bed, the same is used as sofa during the day and as bed in the night. It is available in two sizes 6' x 2.5', 6' x 5'.

Wonder Couch is sold as a sofa or a seat - single seater or double seater. Hence the Assistant Commissioner noted that in Note 10 to Chapter 39, the expression in Heading Nos. 39.20 and 39.21, "Plates, sheets, film foil and strip" applies only to plates, sheets, film, foil and strip and to blocks or regular geometric shape, whether or not printed or otherwise surface-worked, uncut or cut into rectangles (including squares) but not further worked (even if when so cut they become articles ready for use). If naked PU foam blocks are cleared from the factory, the same would definitely be classifiable under 3921.11, which would have been a more appropriate heading than 3926.10. But the appellants are clearing the impugned goods completely manufactured and in a ready to use condition as sofas. Heading 94.01 of HSN covers seats (other than those of Heading No. 94.02), whether or not convertible into beds, and parts thereof. This heading covers all seats (including those for vehicles, provided that they comply with the conditions prescribed in Note 2 to this Chapter) for example - Lounge chairs, arm chairs, folding chairs, deck chairs, infants' high chairs.

Arm chairs, couches, settes etc. remain in this heading even if they are convertible into beds (pp 1699 and 1700 of the HSN). Heading 94.01 of the Schedule to Central Excise Tariff Act, 1985 is indentically worded to heading 94.01 of the HSN. Hence, the HSN notes, referred to above, can be relied upon in interpreting the scope of Heading No. 94.01 of the schedule to CETA, 1985.

(iii) According to Note 2 to Chapter 94, the articles (other than parts) referred to in heading No. 94.01 are to be classified in that heading only if they are designed for placing on the floor or ground. Sofa-n-bed and Wonder Couch are designed to be used when those are kept on the floor or ground. Heading 39.26 is of general and residuary nature covering 'other articles' of plastics and articles of other materials of Heading Nos. 39.01 to 39.14. As per HSN Note (p 622), this heading covers articles, not elsewhere specified or included of plastics (as defined in Note 1 to the Chapter) or of other materials of Headings 39.01 to 39.14. However, in contrast the Heading 94.01 is a specific one for seats (other than those of Heading No. 94.02), whether or not convertible into beds, and parts thereof. As such, as per Rule 3(a) of the Rules for interpretation of the tariff schedule, the heading which provides the most specific description shall be preferred to the heading providing a more general description. It is a settled law that for resolving the classification dispute and interpretation of the Central Excise Tariff the HSN explanatory notes are relevant and are useful guide. The Hon'ble Supreme Court has also held that the expressions occurring in the tariff schedule have to be construed in the sense in which the persons who deal in such goods understand them. The impugned goods are bought and sold in the market as sofa-n-bed, wonder couch and these are known as such in the trade parlance.

Keeping in view all the above aspects, I hold that the sofa-n-beds and Wonder Couch manufactured by the appellants are correctly classifiable under 9401.00 of the Schedule to CETA 1985. The impugned orders passed by the Assistant Commissioner are not sustainable." 6. In view of the detailed examination undertaken by the learned Commissioner (Appeals) in the above order for coming to the conclusion that goods are classifiable under Chapter sub-heading 9401.00 we agree with he findings not only based on detailed examination of the issue but also or he sake of uniformity in classification of a product. The goods shall be classifiable under sub-heading No. 9401.00- Having regard to this aspect the appeals filed by the Revenue are rejected.