Gujarat Raffia Industries Ltd. Vs. Commr. of C. Ex. - Court Judgment

Excerpt:
1. in this appeal, filed by m/s. gujarat raffia industries ltd., the issue involved is whether 'tarpaulin & tents' manufactured by them are classifiable under heading no. 63.06 of the schedule to the central excise tariff act as claimed by them or under heading no. 39.26 as confirmed by the commissioner (appeals) under the impugned order.2.1 shri paresh dave, learned advocate, submitted that the appellants manufacture plastic tapes, fabrics, laminated fabrics, made-up articles like tarpaulin, tents, etc., that the process of manufacture of tarpaulin is as under: "the hope granules are converted into flat yarn of lower denier having width not exceeding 5 mm, known as tapes. such flat yarn is manufactured on an extruder machine and then is converted into fabrics on flat looms, such.....

Judgment:
1. In this Appeal, filed by M/s. Gujarat Raffia Industries Ltd., the issue involved is whether 'Tarpaulin & Tents' manufactured by them are classifiable under Heading No. 63.06 of the Schedule to the Central Excise Tariff Act as claimed by them or under Heading No. 39.26 as confirmed by the Commissioner (Appeals) under the impugned Order.

2.1 Shri Paresh Dave, learned Advocate, submitted that the Appellants manufacture plastic tapes, fabrics, laminated fabrics, made-up articles like tarpaulin, tents, etc., that the process of manufacture of tarpaulin is as under: "The HOPE granules are converted into flat yarn of lower denier having width not exceeding 5 mm, known as tapes. Such flat yarn is manufactured on an extruder machine and then is converted into fabrics on flat looms, such HDPE/Plastic fabrics are, thereafter, coated/laminated with LDPE on one side and then cut into required size. The sides of cut pieces are trimmed, stitched and eyelets of prices are also stitched and the plastic or metal eyelets are fixed at the required places. The tents or Tarpaulins are used for covering, securing and protecting goods, commodities etc. " 2.2 The learned Advocate, further, submitted that the Assistant Commissioner, under Order-in-Original No. 168/99 dated 8-4-1999 classified the impugned products under sub-heading 3926,90 holding that as the Tarpaulin was manufactured out of HDPE fabrics coated with LDPE, the basic raw material was an article of plastic and resultant product would also be an article of plastic; that Commissioner (Appeals) also, under the impugned Order rejected their Appeal holding that issue of classification of the product had already been settled in Commissioner of Central Excise, Ahmedabad v. Texel Plastic Ltd., 1998 (112) E.L.T.286 (T) and Raj Pack Well Ltd. v. Union of India 2.3 The learned Counsel contended that in the case of Texel Plastics, the rival sub-headings were 3920.38 and 3926.90 of the Central Excise Tariff; that Heading 63.06 was not at all considered by the Tribunal in Texel Plastic case; that accordingly the said decision is not binding in the present matter; that in Raj Pack Well case, the controversy was in relation to classification of tapes and sacks and not in relation to fabrics which is the issue involved in the present matter. He, further, mentioned that in the case of Porritts and Spencer (Asia) Ltd. v. State of Haryana, 1983 (13) E.L.T. 1607 (S.C) has considered as to what is 'textile'; that the Supreme Court has held as under :- "The word 'textiles' is derived from the Latin 'texere' which means 'to weave' and it means any woven fabric. When yarn, whether cotton, silk, woollen, rayon, nylon or of any other description or made out of any other material is woven into a fabric, what comes into being is a 'textile' and it is known as such ..... The method of weaving adopted may be the warp and woof pattern as is generally the case in most of the textiles, or it may be any other process or technique.

There is such phenomenal advance in science and technology, so wondrous is the variety of fabrics manufactured from materials hitherto unknown or unthought of and so many are the new techniques invented for making fabric out of yarn that it would be most unwise to confine the weaving process to the warp and woof pattern.

Whatever, be the mode of weaving employed, woven fabric would be 'textiles'. What is necessary is no more than weaving of yarn and weaving would mean binding or putting together by some process so as to form a fabric." 2.4 He mentioned that in Raj Pack Well case, the Madhya Pradesh High Court had not considered the definition of textile as given by the Supreme Court in Porritts and Spencer case and as such the said decision cannot be applied to decide the present matter as the said decision was rendered per in curiarn. He relied upon the decision in Collector of Customs v. State of Kerala, 1993 (66) E.L.T. 351 (Ker.) wherein it has been held that "the decision in cu-rinm does not have the sway of a binding precedent." He also mentioned that the fabrics is obtained by the Appellants on account of weaving and as per judgment in Porritts and Spencer case, their fabrics is 'textile'; that the findings reached in Para 19 of Raj Pack Well case is not correct as Nylon which is specifically mentioned in Porritts & Spencer case is also nothing but plastic.

3. The learned Advocate, further, submitted that for tarpaulin, Heading 63.06 is most specific Heading as 'tarpaulin' is specifically mentioned therein; that the word Tarpaulin' has not been qualified by using any restrictive word; that as per Rule 1 of the Rules for the Interpretation of the Tariff "the titles of Sections and Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the Heading and any relative Section or Chapter Notes...."; that accordingly tarpaulin of any material would fall under Heading 63.06. He also mentioned that it is a settled legal position that a specific Heading would prevail over a general Heading, that sub-heading 3926.90 under which Revenue wants to classify tarpaulins is very general as it is a residuary classification for articles of plastics. He also contended that the authorities below have failed to appreciate that the decisions relied upon by them were about classification of tapes and bags/sacks and there was no decision about classification of plastic fabrics; that flat yarn/tapes of HDPE produced by extruding process in the Appellant's factory are woven into fabrics, know as flat woven fabrics and used for manufacture of tarpaulin and thus tarpaulin were made from fabrics; that the said fabrics not having been coated/laminated with LDPE on both sides, is classifiable under Chapter 59 and the resultant tarpaulin is, therefore, a product of textile material. Finally, the learned Advocate submitted that neither the facts of the case justify any penalty nor is a specific reason given in the impugned Order for imposing penalty; that this being a matter of classification for which classification list was field on 17-11-93, involving genuine difference of opinion, no penalty is warranted.

4. Shri R.S. Dinkar, learned Advocate as intervener on behalf of M/s.

Shree Ram Multitech, as per direction of the Gujarat High Court, submitted that the Supreme Court in Porritts & Spencer case has observed that "..... it must be remembered that the concept of 'textile' is not a static concept. It has, having regard to newly developing materials, methods, techniques and processes, a continually expanding content and new kinds of fabric may be invented which may legitimately, without doing any violence to the language, be regarded as 'textile', "He, thus contended that the Supreme Court recognizes advancement in technology in the field of textiles and new kinds of fabrics may be called textiles. He also mentioned that the moment a process of weaving takes place, the resultant product is textile; that decision in the case of Raj Pack Well, supra, is per incuriam as it has not considered the judgment in Porrittis & Spencer case. Shri Paresh Dave, learned Advocate, also referred to the decision in the case of Punjab National Fertilizers and Chemicals Ltd. v. Commissioner of Central Excise -1991 (54) E.L.T. 115 (T) wherein it has been held that Tribunal is not bound by the earlier decision of the Tribunal provided there is change in law or fresh material to be considered.

5.1 Countering the arguments, Shri Vikas Kumar, learned Senior Departmental Representative, submitted that the M.P. High Court has discussed the process of manufacture of HDPE tapes, fabrics, or sacks in Para 15 of the decision in Raj Pack Well case; that it is clearly mentioned in the decision that "plastic tapes are wound in bobbins and then these plastic tapes are woven into tubular fabric" ; that it is thus apparent that the Hon'ble High Court was well aware about the product and fabric coming into existence from the stage of strip and before its conversion intb sacks (bags); that the High Court has then held that "in the manufacture of the aforesaid tapes, sacks and fabric the material used is the plastic granules". He mentioned that the High Court has also referred to the decision of the Tribunal in the case of Shree Radhe Industries v. Collector of Customs and Central Excise - 1983 (12) E.L.T. 379 wherein it was held that "since the HDPE tapes are neither man made filament yarn nor cellulosic spun yarn, therefore, they do not fit into any category of Item 18 of the old Central Excise Tariff. H.D.P.E. is a well known plastic raw material, therefore, tapes made from the material would be covered as articles made of plastics.

This decision of the CEGAT was taken to the Supreme Court by the Union of India, but the Appeal was dismissed on merits in C.A. No. 8369 of 83 dated 21-10-1983. The learned Senior Departmental Representative then submitted that the decision in Raj Pack Well case was rendered on the basis of decision confirmed by the Supreme Court.

5.2 He also contended that everything that is woven is not textile; that in the case of Porritts & Spencer, the issue involved was whether 'dryer felts' fell within the category of "all varieties of Cotton, woollen or silken textiles" specified in Item 30 of Schedule B of the Punjab General Sales Tax Act, 1948; that the question was whether it could be said that 'dryer felts' constituted a variety of cotton or woollen textiles; that in this context the Supreme Court has held that "it would be most unwise to confine the weaving process to the warp and woof pattern" and held that dryer felts were textiles; that the Supreme Court was not considering the plastic tapes which are woven into fabric which is then used to make tarpaulin. The learned Senior Departmental Representative further referred to Para 19 of Raj Pack Well decision wherein the MP. High Court has referred to the Textile Committee Act, 1963 in which the word 'fibre' has been defined as under :- "Fibre" means man made fibre including regenerated cellulose rayon, nylon and the like.

"textiles" means any fabric or cloth or yarn or garment or any other article made wholly or in part of - 5.3 The learned Senior Departmental Representative mentioned that the Hon'ble M.P. High Court, then, observed that ''nowhere in the aforesaid definition of 'fibre' or 'textile' plastic has been mentioned as a commodity to be included in the definition of 'fibre' or 'textile'." He also mentioned that Note l(h) to Section XI of the Tariff excludes woven fabrics impregnated, coated, covered or laminated with plastics or articles thereof, of Chapter 39; that Heading 68.05 which falls under Section XIII of the tariff applies to woven fabric of asbestos and it does not fall under Section XI dealing with Textiles and Textile Articles. In reply the learned Advocate mentioned that Note 2(1) to Chapter 39 excludes Articles of Section XI (textiles and textile articles) from the purview of Chapter 39. Finally the learned Senior Departmental Representative mentioned that Heading 63.06, as per Explanatory Notes of HSN covers a range of textile articles made from strong, close woven canvas and as such all tarpaulin are not covered by the said Heading. He also referred to the decision in the case of Delhi Cloth and General Mills Co. ltd. v. R.R. Gupta, 1976 (38) STC 113 (SC).

6. We have considered the submissions of both the sides. The main contention of the Appellant is that the finished product Tarpaulin is made out of HDPE/plastic fabric and as such is classifiable under Heading 63.06 of the Tariff. They have heavily relied upon the decision of the Supreme Court in the case of Porritts & Spencer (Asia) Ltd. wherein the Supreme Court has held that when yarn made out of any material is woven to a fabric, what comes into being is a textile.

Their contention is that as the HOPE fabric is obtained by weaving, it is a textile and tarpaulin made out of it will be falling under Heading 63.06. It has also been contended by them that the decision of the M.P.High Court in Raj Pack Well Ltd. is not applicable as the High Court was considering the classification of HOPE strips and sacks made out of them and not of fabrics. We find ourselves unable to agree with this contention of the Appellant. Firstly the process of manufacture of tarpaulin as given by the Appellants is more or less similar to the process of manufacture of HOPE sacks as given in the Raj Pack Well decision. According to the Appellants HDPE granules are converted to flat yarn in an extruder machine and the yarn is then converted into fabric on flat looms which is coated/laminated with LDPE on one side.

Thereafter the coated fibre is cut into required sizes. The sides of which are stitched to make tarpaulin. Similarly, we observe from the decision in Raj Pack Well that the raw material therein was also HDPE granules and the manufacturing process was undertaken in the following steps - extrusion of granules into tubular films, then cutting of tapes into flat films, then films are slitted into strips, then the strips are stretched into plastic tapes, then plastic tapes are wound in bobbins and then plastic tapes are woven into tubular fabric, this fabric is laminated with LDPE and is cut into desired length, these pieces are stitched into sacks of required shape and size. In our view, it can, therefore, be not said that the decision in Raj Pack Well will not be applicable to the facts of the present matter inasmuch as in the said decision also the strips were woven into tubular fabric. The M.P.High Court after referring to the definition of the fibre and textile as given in the Textile Committee Act, 1963 observed that according to these definitions, "any fabric or cloth or yarn or garment, if made fully or in part of cotton, wool, silk, artificial silk or other fibre, shall be called textiles" and "nowhere in these definitions, plastic has been mentioned as a commodity to be included in the definition of "fibre" or 'textiles'." The High Court also referred to the decision in the case of Shellya Industries v. Commissioner of Central Excise, Bangalore,Shree Radhe Industries v.Collector of Customs & Central Excise, 1983 (12) E.L.T. 379 wherein it has been held "that the HDPE sacks are articles made of plastic; they are made of high density polyethylene, which is a plastic raw material and it has been further held that they are not man made filament yarn but are articles of plastic." The High Court has also observed that "in common parlance also the HDPE woven sacks are known as plastic woven sacks industry". The High Court also referred in the said decision to a letter of Deputy Director of Ministry of Textile, Office of Textile Commissioner, that the HDPE/PP Weaving activity of regular looms as well as Circular looms manufacturing fall under the purview of DGTD and no installation permission or registration of circular looms is required under Textile (Control) Order, 1986. The High Court observed that "As such the woven sacks are not treated as an item of textile by the Commissioner of Textiles and the DGTD (Plastic and Polymer Directorates) has registered it as an Industry producing HDPE woven sacks. The raw material used for the production of HDPE strips is covered under Chapter 39 and in absence of anything on the record to show that the HDPE strips are synthetic textile material, the only fact that their width is less than 5 mm. would not automatically put that item under entry No. 54.06 ..... If the strip is a strip of plastic only and not a synthetic material and is also known in the common parlance as a commodity of plastic, and the finished goods that is the HOPE woven sacks are also known in the common parlance as plastic woven sacks, then it cannot be held that the strips with which such bags are woven are the strips of synthetic textile material." 7. As rightly pointed out by the learned Senior Departmental Representative the decision in the case of Porrits & Spencer, the Supreme Court was considering the question as to whether "dryer felts" fall within the category of "all varieties of cotton, woollen or silken textiles" specified in Item 30 of Schedule 'B' of the Punjab General Sales Tax Act, 1948. While considering the question whether 'dryer felts' are textile or not within the ordinarily accepted meaning of that word, the Supreme Court observed that when yarn is woven into a fabric, textile comes into being and the method of weaving may be a warp or woof pattern or any other process or technique. The Supreme Court was not considering in Porritts & Spencer case whether fabric made out of HDPE strips/yarn would be covered by the term 'textiles and textile articles' as mentioned in Section XI of the Schedule to the Central Excise Tariff Act. In view of this, it cannot be claimed that the judgment in the case of Raj Pack Well was given per incuriam.

Learned Senior Departmental Representative has rightly mentioned that everything which is woven is not covered by Section XI of the Central Excise Tariff Heading 68.05 of the Tariff covers, within its ambit, "fabricated asbestos fibres; mixtures with a basis of asbestos or with a basis of asbestos and magnesium carbonate; articles of such mixtures or of asbestos (for example, thread, woven fabric, clothing, head gear, footwear, gaskets)". This view is further strengthened by Note I (h) to Section XI which provides that Section XI does not cover "woven, knitted, or crocheted fabrics, felt or non-wovens, impregnated, coated, covered or laminated with plastics, or articles thereof, of Chapter 8. We also do not find any force in the submissions of the learned Advocate that Tarpaulin is specifically mentioned in Heading No. 63.06 without any qualifying words and as such the tarpaulin should be classified in the specific Heading instead of Heading No. 39.26 which is a residuary Heading. It has been held by the Supreme Court in the case of Commissioner of Central Excise, Shillong v. Woodcraft Ltd., 1995 (77) E.L.T. 23 (S.C.) that "any dispute relating to Tariff Classification must, as far as possible, be resolved with reference to nomenclature indicated by the HSN unless there be an expressed different intentions indicated by the Central Excise Tariff Act, 1985 itself." A reference to Explanatory Notes of HSN below Heading 63.06 (similar to Heading 63.06 in Central Excise Tariff) reveals that Heading 63.06 covers a range of Textile articles usually made from strong industrially woven canvas. It, further, mentions that tarpaulin are generally made of coated or uncoated man made fibre, fabrics, or heavy to fairly heavy canvas (of hemp, jute, flax or cotton). It is thus apparent that Heading 63.06 covers tarpaulin which are made of man made fibre fabric of heavy canvas of hemp, jute, flax or cotton and as HDPE/Plastic strip yarn is not man made fabric, tarpaulin made of the said material would not fall under Heading 63.06. Further Heading 39.26 applies to articles of plastics and articles of other materials of Heading No. 39.01 to 39.14. No doubt Heading No. 39.26 is residuary Heading but it is residuary to Chapter 39 as all articles of plastics, which are not covered by earlier Headings, would fall under 39.26. As far as any article is made of plastic it will fall either in any one of the specific Headings in Chapter 39 and failing which under Heading 39.26. As the impugned products are made of plastic and arc not mentioned specifically in any of the Headings of Chapter 39, they are appropriately classifiable under Heading 39.26. This is also evi dent from the Explanatory Notes of HSN below Heading 39.26 wherein it is mentioned that "this Heading covers articles, not elsewhere specified or in cluded, of plastics (as defined in Note I to the Chapter) or other materials of Heading 39.01 to 39.14." We also observe that awnings which are specifically mentioned in Heading No. 63.06, if made of plastic, are classifiable under Heading 39,26 as per Explanatory Notes of HSN. We, therefore, find no rea son to interfere with the impugned Order. Accordingly the Appeal is re jected.