| SooperKanoon Citation | sooperkanoon.com/5182 |
| Overruled By | Fenner (India) Ltd. Vs. Collector of Central Excise, Madurai |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Delhi |
| Decided On | Sep-14-1989 |
| Reported in | (1989)(24)ECC115 |
| Appellant | Collector of C. Ex. |
| Respondent | Fenner (India) Ltd. |
2. In appeal No. E/1670/88-C filed by the Revenue the facts, in brief, are that the respondents M/s. Fenner (India) Ltd. are manufacturers of "PVC impregnated flame resistant colliery conveyer belting" and "PVC inpregnated cotton conveyor belting (food quality). The above products were classified under Tariff sub-heading 3922.90 under the Central Excise Tariff Act, 1985 vide classification list No. 153/3/85-86 dated 7-3-86, effective from 1-3-86 and the same was approved. Later on, it was felt by the Department that the products were correctly classifiable under Tariff sub-heading No. 3920.11 or 3920.12, as the case may be, depending upon whether the products are rigid or flexible, since the products manufactured are in running length and not cut to size. A show cause notice was issued to the respondents on 12-6-87 requiring them to show cause to the Assistant Collector of Central Excise, Madurai as to why the aforesaid products should not be classified under Tariff sub-heading 3920.11 or 3920.12, as the case may be, read with Notification No. 132/86-C.E., dated 1-3-86. as amended, attracting Central Excise duty @ 35% ad valorem and why differential duty amounting to Rs. 99,47,235.00 should not be demanded in respect of clearances of the the goods during the period from 1 -12-86 to 31-5-87 under Section 11-A of the Central Excises & Salt Act, 1944. In reply to the show cause notice, the respondents herein pleaded that Tariff Heading 39.20 did not apply to these goods and the same would attract duty under Tariff sub-heading 3922.90 from 1-3-86 to 9-2-87 and under sub-heading 3926.90 w.e.f. 10-2-87 @ 15% ad valorem. They also pleaded that the approved classification could not be changed retrospectively prior to issue of the show cause notice on 12-6-87. Another show cause notice was is sued by the Department to the respondents on 27-11-87 on the same issue demanding differential duty of Rs. 87,555.50 on the clearances of the goods in question for the period from 1-6-87 to 14-6-87 under Section 11-A of the Central Excises & Salt Act, 1944. The Assistant Collector of Central Excise confirmed the classification of the above two products under Tariff sub-heading 3920.11/3920.12 of the Central Excise Tariff Act, 1985, as the case may be, depending upon the rigidity or flexibility of the conveyor beltings, read with Notification No.l32/86-C.E., dated 1-3-86 as amended, attracting duty at the rate of 35% ad valorem. He also demanded the differential duty amounting to Rs. 1,00,34,790.50 on the goods cleared during the period from 1-12-86 to 14-6-87 under Section 11-A of the Act ibid. The order of the Assistant Collector was challenged by the respondents by filing appeal before the Collector of Customs & Central Excise, Madras, who has set asid the order of the Assistant Collector and has allowed the appeal by the impugned order. While setting aside the Assistant Collector's order, the Collector (Appeals) has observed as follows :- "I find that on page 575 of the Harmonised Commodity Description and Coding System, Tariff Heading 39.26 covers other articles of plastics and articles of other materials of heading Nos. 39.01 to 39.14. This heading covers articles not elsewhere specified or included of plastics or of other materials of heading Nos. 39.01 to 39.14 and they include transmission, conveyor or elevator belts, endless and cut to length or joined and to end or fitted with fasteners. Therefore, trans mission, conveyer and elevator belts even if they are endless and made out of plastic materials covered under headings 39.01 to 39.14 are to be classified under Tariff Heading No. 39.26. Accordingly, the Assistant Collector's contention that belts which are not cut to size are not classifiable under this Tariff Heading, is not correct." By the present appeal, Revenue has challenged the order of the Collector (Appeals).
3. In appeal No. E/129/89-C the facts are that M/s. International Conveyors Ltd. filed classification lists effective from 10-2-87 and 1-3-87 for their product "PVC Fire Resistant Antistatic Conveyor Belting" of various sizes and types under Tariff Heading 3926.90 of the Central Excise Tariff Act, 1985 claiming Central Excise duty @ 15% ad valorem under Notification No. 132/86-C.E., dated 1-3-86, as amended.
In his letter dated 4-4-87, the Assistant Collector of Central Excise intimated to the appellants that their product fell under Tariff sub-heading 3920.12 attracting duty at 35% ad valorem under Notification No. 132/86-C.E., dated 1-3-86, as amended, and they were directed to classify their product under the said heading accordingly.
The appellants requested for a speaking order after issue of a show cause notice and giving them an opportunity to explain the correct position. They, however, filed a classification list classifying the goods under sub-heading 3920.12 as directed by the Assistant Collector, under protest. A show cause notice was, therefore, issued to the appellants on 29-6-87 asking them to explain why their product should not be classified under Tariff sub-heading 3920.12 read with Notification No. 132/86-C.E. @ 35% ad valorem. After considering the representation of the appellants and giving them necessary personal hearing the Assistant Collector of Central Excise decided that the PVC fire resistant antistatic conveyor belting manufactured by the appellants would fall under Tariff sub-heading 3920.12 of the Central Excise Tariff Act, 1985 and duty should be charged at 35% ad valorem as per Notification No. 132/86-C.E., dated 1-3-86, as amended. In deciding the classification under the aforesaid heading, the Assistant Collector considered Rule 4 of the Rules for Interpretation of the Schedule to the Central Excise Tariff Act, 1985 which says that "goods which cannot be classified in accordance with the above Rules shall be classified under the Heading appropriate to the goods to which they are more akin". The Assistant Collector held that the PVC fire resistant belting was more akin to the strip of the flexible plastic and merited classification under sub-heading 3920.12 as it contained PVC predominatly, rather than textile fabric impregnated or coated. The decision of the Assistant Collector of Central Excise was upheld by the Collector (Appeals) in the impugned order. Hence the present appeal before us. The Collector (Apeals) has observed that in Chambers' 20th Century Dictionary, Page 114, New Edition, "belt" has been described as an article for fastening, fitted with fastening device at both the ends after cutting to sizes. But "belting" has been described as a continuous length and regarded as a material for belt, when it will be cut to sizes with devices at both the ends. Since the impugned product is in running length and not cut to sizes, it is a belting and not belt, and as such, classification of the impugned product under sub-heading 3920.11 or 3920.12 as rigid or flexible strip of PVC is more appropriate. The Collector (Appeals) has further observed that Tariff Heading 39.26 which is claimed by the appellants is a residuary item which will take effect only if a product does not fall under any specific heading. Since, in this case, the product of the appellants falls under heading 39.20, the residuary heading 39.26 is not applicable. Accordingly, he upheld the classification decided by the Assistant Collector.
4. In appeal No. E/129/89-C M/s. International Conveyors Ltd. filed a Misc. Application on 8-2-89 seeking permission to introduce additional grounds in their appeal memorandum. After going through the additional grounds we have observed that the points were already raised in the grounds of their main appeal and the present additional grounds are in the nature of further elucidation. In the interest of justice and proper appreciation of the issue involved, we have allowed the additional grounds to be introduced.
5. During the hearing before us, Shri Sunder Rajan has argued for the Revenue. Shri V. Lakshmikumaran has argued for M/s. Fenner (India) Ltd. and Shri R.N. Baner-jee has argued for M/s. International Conveyors Ltd. 6. Shri Sunder Rajan's argument is that the conveyor belting manufactured by both the assessees are correctly classifiable under Tariff sub-heading 3920.11 or 3920.12, as the case may be, depending on the rigidity or flexibility of the belting. The claim of the assessees is for classification of the products under Tariff sub-heading 3922.90 upto 9-2-87 and under sub-heading 3926.90 from 10-2-87 as Chapter 39 of the Central Excise Tariff Act, 1985 had undergone change with effect from 10-2-87. With effect from 10-2-87 Tariff Heading 39.26 was introduced and Chapter Note 11 (k) of Chapter 39 was omitted. With effect from 10-2-87 Heading 39.22 was re-numbered as 39.26. Both are residual headings. Shri Sunder Rajan has drawn our attention to page 554 of the Explanatory Notes to the Harmonized Commodity Description and Coding System, in which it has been stated that plastic plates, sheets, etc., whether or not surface-worked (including squares and other rectangular, cut therefrom), with ground edges, drilled, milled, hemmed, twisted, framed or otherwise worked or cut into shapes other than rectangular (including square), are generally classified in headings 39.18,39.19 or 39.22. to 39.26. He has argued that the conveyor beltings of the assessees herein are not with ground edges, drilled, milled, hemmed, twisted, framed or otherwise worked or cut into shape, and hence the same cannot fall under Tariff Heading 39.22 or 39.26. He has also drawn our attention to Serial No. (7) under sub-heading 3926.90 at page 575 of the said Explanatory Notes in which it has been stated that sub-heading 3926.90 includes transmission, conveyor or elevator belts, endless or cut to length and joined end to end, or fitted with fasteners. This serial number does not include belting". He has also argued that in the decision reported in 1984 (16) E.L.T. 301 (Tribunal) in the case of Multiple Fabrics Co. Pvt. Ltd. v.Collector of Central Excise, Calcutta, the Tribunal over-ruled classification of the same product under Tariff Heading 15A(2) of the Central Excise Tariff and classified the same under Tariff Item 68, which has been upheld by the Supreme Court in the judgment reported in 1987 (29) E.L.T. 481 (S.C.) - Collector of Central Excise, Calcutta v.Multiple Fabrics Pvt. Ltd, etc. He has argued that Headings 39.22 and 39.26 me pan materia to Tariff Item 15A(2). Therefore, classification under Headings 39.22 and 39.26 is ruled out. The correct classification of the products in question is heading 39.20. In support of his argument, Shri Sunder Rajan has relied on this Tribunal's decisions reported in 1983 (13) E.L.T.1216 (Tribunal) and 1983 (14) E.L.T. 2441 (Tribunal) in addition to 1983 (16) E.L.T. 301 (Tribunal) (supra).
7. Arguing for the respondents in appeal No. E/1607/88-C, Shri Lakshmikumaran has stated that Tariff Heading 39.20 of the Central Excise Tariff Act, 1985 is also pan materia to Tariff Item 15A(2) of the erstwhile Central Excise Tariff because both the Tariff Headings include sheets, films, foils, and strips of plastics. If Tariff Heading 39.22 or 39.26 of the Central Excise Tariff Act is excluded, then heading 39.20 should also be over-ruled. He has argued that conveyer belts are specifically covered by Tariff sub-heading "3926.90 - others", in view of Item (7) of the Explanatory Notes to Harmonized Commodity Description and Coding System below sub-heading 3926.90. He has further argued that this fire resistant conveyor belting for underground use in coal mines has been manufactured according to the standard prescribed in Indian Standard Specification IS : 3181-1978. In the said specification, the terms "belt" and "belting" have been used.
This shows that belt/belting is distinct from sheets, strips, etc. In this connection, he has drawn our attention to Tariff Heading 40.08 which covers rubber plates, sheets, strips, rods, etc. and heading 40.10 which covers conveyor or transmission belts or belting of vulcanised rubber. Since strip and conveyor or transmission belt/belting have been mentioned against two separate Tariff Headings, Shri Lakshmikumaran has argued that this is another reason for stating that conveyor belting is separate from sheets or strips. Shri Lakshmikumaran has further stated that in the Finance Minister's speech on the Central Excise Tariff Act, 1985, it was indicated that the object of the new bill was to preserve, by and large, the existing duty structure as prevailed prior to 28-2-1986 and keeping in view the above object, a number of exemption notifications were issued after the new Tariff Act became operative so as to preserve, by and large, effective rates of duties of excise as they existed prior to the commencement of the said Act on 28-2-1986. Shri Sunder Rajan has opposed the relevance of the Finance Minister's speech in the matter of classification. Shri Lakshmikumaran has further argued that this conveyor beltings were classifiable under Tariff Item 68 of the erstwhile Central Excise Tariff. The identity of the goods does not change by the change in the Tariff Entry under the new Central Excise Tariff introduced w.e.f.
28-2-1986 and in support of this argument he has relied on this Tribunal's Order No. 52-54/89-C dated 16-2-1989 printed in 1989 (43) E.L.T. 660 (Tribunal).
8. Arguing in appeal No. E/129/89-C for M/s. International Conveyors Ltd, Shri R.N. Banerjee has drawn our attention to the process of manufacture of the appellants' PVC conveyor belting for underground coal mining, at page 4 of the appeal memorandum filed by them. He has stated that PVC sheets of strips do not come into existence at all in the process of manufacture and hence these products cannot fall under subheading 3920.11 or 3920.12. This product is manufactured strictly according to the ISI specification. He has argued that the classification should be decided following the trade parlance and not on the basis of technical description. Regarding the validity of the demand for duty, the learned Advocate has argued that the demand could be raised only from the date of show cause notice and not earlier. He also adopted the arguments advanced by Shri Lakshmikumaran.
9. In Appeal No. E/129/89-C, Shri Sunder Rajan adopted his arguments advanced in Appeal No. E/1607/88-C. He has further added that heading No. 39.20 is a broad entry. In view of Chapter Note (10) and Note 11(k) (prior to 10-2-1987) of Chapter 39, the products of both the assessees herein fell under the broad Tariff Entry 39.20. Opposing Shri Lakshmikumaran's reliance on the Tribunal's order No. 52-54/89-C dated 16-2-1989 in the case of Collector of Central Excise, Ahmedabad v.Metro Wood Pvt. Ltd. printed in 1989 (43) E.L.T. 660 (Tribunal). Shri Sunder Rajan has argued that this point is not relevant as this decision took out the relevant product from the whole of Chapter 39 and classified the same under Chapter 85 of the Central Excise Tariff Act, 1985. Regarding Tariff Heading 40.08 and 40.10, Shri Sunder Rajan has argued that so far as conveyor belting of vulcanised rubber is concerned, the legislature deliberately inserted it in the Tariff in a separate heading 40.10 whereas in Chapter 39, legislature has not provided for a separate heading like 40.10 for conveyor belting and this is why the present conveyor belting will fall under Tariff Heading 39.20. In reply to Shri R.N. Banerjee's argument that demand for duty could be raised only from the date of show cause notice, Shri Sunder Rajan has argued that Section 11A of the Central Excises and Salt Act empowers the Department to raise demand for a period of six months prior to the date of issue of show cause notice, which period can be extended to five years in case of suppression of facts and mis-statement etc. as referred to in the proviso to Section 11A(1).
10. Shri R.N. Banerjee has argued that the onus of correct classification is on the department. He has argued that in the case of Multiple Fabrics Co. Pvt. Ltd. (supra), the Tribunal and then the Supreme Court considered only two competing entries, namely, Tariff Item 19 and Tariff Item 68. Other items were not argued before the Tribunal. In reply to this argument, Shri Sunder Rajan has stated that by implication Supreme Court considered all the entries encluding Tariff Item 15A(2) when it classified the product under Tariff Item 68 inasmuch as the product could be classification under Tariff Item 68 after the scope of classification under all other Items No. 1 - 67 was ruled out. In the case of Geep Flashlight Industries Ltd., reported in 1985 (22) E.L.T. 3 (SC), the Hon'ble Supreme Court held that any article which was not wholly made of plastic but contained anything other than plastic should go outside Tariff Item 15A(2). He has also cited 1986 (23) E.L.T. B-32 and 1974 (95) ITR 151 (Delhi) - Delhi Flour Mills v. C.I.T. In 1986 (23) E.L.T. B-32 the main features of the Central Excise Tariff Bill, 1985 (Bill No. 202 of 1985) have been stated. In paragraph-4(1) of the statement of objects and reasons of the Bill it has been stated that "the Tariff included in the Schedule to the Bill has been made more detailed and comprehensive, thus obviating the need for having a residuary Tariff Item. Goods of the same class have been grouped together to enable parity in treatment".
11. The points for determination which emerge out of the arguments of the learned Advocate and the learned Departmental Representative are as follows :- (i) Whether the conveyor beltings manufactured by the assessees herein are correctly classifiable under Tariff sub-heading 3920.11/3920.12 as contended by the Revenue or sub-heading 3922.90/3926.90 as pleaded by the assessees; and (ii) Whether differential duty could be demanded for a period of six months prior to the issue of the show cause notice under Section 11-A of the Central Excises and Salt Act, 1944 or such demand for duty could be raised only from the date of issue of the show cause notice.
12. For proper appreciation of the issue at (i) above, it is necessary to reproduce below the Tariff sub-headings 3920.11/3920.12 and 3922.90/3926.90 and the relevant Chapter Notes to Chapter 39 and Explanatory Notes to the Harmonised Commodity Description and Coding System cited by both the parties before us. The same read as follows :- (A) (i) Tariff Heading 39.20 and the sub-headings 3920.11 and 3920.12 of the Central Excise Tariff Act, 1985 :"39.20 Other plates, sheets, film, foil and strip, of plastics, noncellular, whether lacquered or metallised or laminated, supported or similarly combined with other materials or not3920.11 -- Rigid, plates, shets, film, foil and strip3920.12 -- Flexible, plates, sheets, film, foil and strip" (ii) Tariff Heading 39.22 and the sub-heading thereof:"39.22 Other articles of plastics and articles of materials of Heading Nos. 39.01 to 39.143922.10 - Articles of polyurethane foam3922.90 - Other" (iii) This Tariff Heading 39.22 was re-numbered as Tariff Heading 39.26 w.e.f. 10-2-1987. Tariff Heading 39.26 and the sub-headings thereunder :-"39.26 Other articles of plastics and articles of materials of Heading Nos. 39.01 to 39.143926.10 - Articles of polyurethane foam3926.90 - Other" (B) (i) Chapter Note 10 to Chapter 39 of the Central Excise Tariff Act, 1985 :- "10. In heading Nos. 39.20 and 39.21, the expression "plates, sheets, film, foil and strip" applies only to plates, sheets, film, foil and strip (other than those of Chapter 54) and to blocks of regular geometric shape, whether or not rpinted or otherwise surface-worked (even if when so cut, they become articles ready for use)." "11. Heading No. 39.22 applies inter alia to the following articles, namely :- (k) Transmission, conveyor or elevator belts, endless, or cut-to-length and joined end-to-end, or fitted with fasteners;" (C) (i) Explanatory Notes at Page 554 to Harmonized Commodity Description and Coding System, Section VII, Chapter 39 (In short H.S.N.) :- The Expression "plates, sheets, film, foil and strip", used in the headings 39.20 and 39.21 is defined in Note 10 to the Chapter.
Such plates, sheets, etc., whether or not surface-worked (including squares and other rectangles cut there from), with ground edges, drilled, milled, hemmed, twisted, framed or otherwise worked or cut into shapes other than rectangular (including square), are generally classified in headings 39.18,39.19 or 39.22 to 39.26.
Wall or ceiling coverings which comply with Note 9 to this Chapter are classified under heading 39.18. Otherwise, the classification of plastics and textile combinations in essentially governed by Note l(h) to Section XI, Note 3 to Chapter 56 and Note 2 to Chapter 59.
The following products are also covered by this Chapter : (a) Felt impregnated, coated, covered or laminated with plastics, containing 50% or less by weight of textile material or felt completely embedded in plastics; (b) Textile fabrics and non-wovens, either completely embedded in plastics or entirely coated or covered on both sides with such material, provided that such coating or covering can be seen with naked eye with no account being taken of any resulting change of colour; (c) Textile fabrics, impregnated, coated, covered or laminated with plastics, which cannot, without fracturing, be bent manually around a cylinder of a diameter of 7 mm, at a temperature between 15C and 30rfC. (d) Plates, sheets and strips of cellular plastics combined with textile fabrics, felt or non-wovens where the textile is present merely for reinforcing purposes." "According to Note 10 to this Chapter, the expression "plates, sheets, film, foil and strip" applies only to plates, sheets, film, foil and strip and to blocks of regular geometric shape, whether or not printed or otherwise surface-worked (for example, polished, embossed, coloured, merely curved or corrugated), uncut or cut into rectangles (including squares) but not further-worked (even if when so cut, they become articles ready for use, for example, table-cloths).
Plates, sheets, etc., whether or not surface-worked (including squares and other rectangles cut therefrom), with ground edges, drilled, milled, hemmed, twisted, framed or otherwise worked or cut into shapes other than rectangular (including square) are generally classified as articles of headings 39.18,39.19 or 39.22 to 39.26." (iii) Explanatory Notes at Page 575 below sub-heading No. "3926.90 - Others" of H.S.N. :- "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.
(7) Transmission, conveyor or elevator belts, endless, or cut to length and joined end to end, or fitted with fasteners.
Transmission, conveyor or elevator belts or belting of any kind, presented with the machines or apparatus for which they are designed, whether or not actually mounted, are classified with that machine or apparatus (e.g., Section XVI)." 13. Tariff Headings 39.22 and 39.26 refer to Heading Nos. 39.01 to 39.14. It is, theiefore, necessary to reproduce Heading Nos. 39.01 to 39.14 alongwith Chapter Note 1 to Chapter 39. The same are as follows :- "1. Throughout the Nomenclature the expression "plastics" means those materials or Heading Nos. 39.01 to 39.14 which are or have been capable, either at the moment of polymerisation or at some subsequent stage, of being formed under external influence (usually heat and pressure if necessary with a solvent or plasticiser) by moulding, casting, extruding, rolling or other process into shapes which are retained on the removal of the external influence.
Throughout the Nomenclature any reference to "plastics" also includes vulcanised fibre. The expression, however, does not apply to materials regarded as textile materials of Section XI."___________________________________________________________________________________________Heading Sub-heading Description of goodsNo. No.______________________________________________________________________________________________________________________________________________________________________________________39.01 Polymers of ethylene, in primary forms 3901.10 - Polyethylene having a specific gravity of less than 0.94 3901.20 - Polyethylene having a specific gravity of 0.94 or more39.02 Polymers of propylene or of other olefins, in primary forms39.03 Polymers of styrene, in primary forms 3903.10 - Polystyrene 3903.20 - Styrene-acrylonitrile (SAN) Copolymers 3903.30 - Acrylonitrile-butadiene-styrene (ABS) terpolymers39.04 Polymers of vinyl chloride or of other halogenated olefins, 3904.10 - Polyvinyl chloride, not mixed with any other substances39.05 Polymers of vinyl acetate or of other vinyl esters in primary forms; other, vinyl polymers in primary forms 3905.20 - Polyvinyl alcohols, whether or not containing unhydrolysed acetate groups39.06 Acrylic polymers in primary form 3906.10 - Polymethyl methacrylate39.07 Polyacetals, other polyethers and epoxide resins,in primary forms, polycarbonates, alkyd resins, polyallyl - Alkyd resins including maleic resins andfumericresins: 3907.51 - Moulding powder and compounds in any form 3907.59 -- Other39.08 3908.00 Polyamides in primary forms39.09 Amino-resins, polyphenylene oxide phenolic resinsand39.10 3910.00 Silicones in primary forms39.11 Petroleum resins, coumarone-indene resins, polyter- penes, polysulphides, polysulphones and other products specified in Note 3 to this Chapter, not elsewhere specified or included, in primary forms39.12 Cellulose and its chemicals derivatives, and cellulose ethers, not elsewhere specified or included in primary39.13 Natural polymers (for example, alginic acid) and modified natural, polymers (for example, hardened proteins, chemical derivatives of natural rubber)not else-39.14 3914.00 Ion-exchangers based on polymers of Heading Nbs. 39.01 14. Tariff Heading 39.22 upto 9-2-1987 and Heading 39.26 from 10-2-1987, and the sub-headings thereunder are meant for "Other articles of plastics and articles of materials of Heading Nos. 39.01 to 39.14". During the period from 18-6-1977 to 28-2-1986, "Articles of plastics" were classifiable under Tariff Item 15A(2). In the case of Geep Flashlight Industries Ltd. v. Union of India and Ors., reported in 1985 (22) E.L.T. 3 (S.C.), it has been held by the Hon'ble Supreme Court that "Articles of plastic" do not mean articles made from plastics alongwith other material. It has been clearly laid down in that judgment that for the purpose of classification under Tariff Item 15A(2) of the erstwhile Central Excise Tariff as articles of plastic, the products must be made wholly of plastic and not of plastic with other materials. The description of the Tariff Headings 39.22 and 39.26 is similar to that of erstwhile Tariff Item 15A(2). Headings 39.01 to 39.14 cover various plastic materials. In the circumstances, the judgment of the Hon'ble Supreme Court in Geep Flashlight Industries case is applicable to decide whether the conveyor belting manufactured by the assessees in these appeals is assessable under Heading 39.22/39.26. From the Order-in-Original No. 78/87 dated 17-12-1987 passed by the Assistant Collector of Central Excise, which is the subject-matter in appeal No. E/1607/88-C, we observe that the "PVC impregnated flame resistant colliery conveyor belting and PVC impregnated cotton conveyor belting (food quality)" manufactured by M/s. Fenner (India) Ltd. is made of 65.7% PVC compound and the balance textile material. It is also stated in paragraph-2 of the said order-in-original that the textile material is completely embedded in plastics. Similarly, from the statement of facts in appeal No.E/129/89-C filed by M/s. International Conveyors Ltd., we observe that the composition of their "PVC Fire Resistant Antistatic Conveyor Belting" was composed of plastic 59%, cotton yarn 21% and nylon yarn 20% as per the statement filed by them on 17-12-1986, vide paragraph-2 of the statement of facts. Thus, the conveyor beltings of both the assessees are not wholly made of plastic. Consequently, according to the judgment of the S.C. in Geep Flashlight's case (supra), these are not "articles of plastic" and cannot be classified under Tariff Heading 39.22/39.26. In our view, the "Transmission, conveyor or elevator belts" mentioned in Chapter Note 11(k) to Chapter 39 of the Tariff and in Note (7) of the Explanatory Notes below Heading 39.26 at Page 575 of the Harmonised Commodity Description and Coding System should be transmission, conveyor or elevator belts made wholly of plastic and not of plastic with other materials. This view is supported by the following Notes below Heading 39.26 at the said Page 575 :- "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." Chapter Note 1 of Chapter 39 says that the expression "plastics" means materials of headings No. 39.01 to 39.14. This Chapter Note and the Explanatory Note below heading 39.26 at Page 575 of H.S.N. read with the judgment of the Supreme Court [supra] make it very clear that only those articles which are wholly made of plastic and not made of plastic with other materials, are classifiable under heading 39.22 prior to 10-2-1987 and heading 39.26 from 10-2-1987. It is also to be noted in this context that the Chapter Note 11(k) to Chapter 39 of the Tariff and Note (7) of the Explanatory Notes at Pages 575 of the H.S.N. do not say that "Transmission, conveyor or elevator belts" made of plastic with other materials are also covered by these notes, nor do these notes say that all types of "Transmission, conveyor or elevator belts" irrespective of the composition are covered by them. The notes also do not say that such fire resistant PVC impregnated colliary conveyor beltings/PVC impregnated cotton conveyor belting (food quality) are covered by them. The fact that these assessees' beltings are manufactured according to the Indian Standard specification cannot take them outside the Tariff Heading 39.20 and place them in heading 39.22/39.26.
Further, the learned Departmental Representatives has argued that these conveyor belts are not ground edged, drilled, milled, hemmed, twisted, frammed or otherwise worked. This argument has not been controverted by the learned advocates. According to Explanatory Notes in the third paragraph of page 572 of the H.S.N. the impugned products cannot, therefore, fall under sub-headings 39.22 and 39.26.
In the circumstances, we rule out the classification of the impugned conveyor beltings under Headings 39.22 and 39.26, as the case maybe.
15. We shall now examine whether the products are covered by Heading 39.20. This Heading covers plates, sheets, film, foil and strip, of plastics, whether laminated, supported or similarly combined with other materials or not. These conveyor beltings which are made of plastics and textile materials are, therefore, covered by the description of this Tariff Heading. Explanatory Notes under Heading 39.20 at Page 554 of the H.S.N. read with Note (10) to Chapter 39 makes it very clear that such beltings made of plastics and textile material are clearly covered by Heading 39.20.
16. Shri Sunder Rajan has relied on a few decisions of this Tribunal in support of his argument that the impugned conveyor beltings are not classifiable under Heading 39.22/39.26, but are classifiable under Heading 39.20. These are discussed herein. In the case of Multiple Fabrics Co. Pvt. Ltd. v. Collector of Central Excise, Calcutta, reported in 1984 (16) E.L.T. 301 (Tribunal), classification of PVC conveyor belting was in dispute. The composition of the belting was PVC compound 56.7% and textile fabrics 43.3%. The Tribunal held that the belting was correctly classifiable under the erstwhile Tariff Item 68.
This decision of the Tribunal has been upheld by the Hon'ble Supreme Court in the judgment reported in 1987 (29) E.L.T. 481 (S.C.). In two other cases of Mis. International Conveyors Pvt. Ltd., reported in 1983 (13) E.L.T. 1216 (CEGAT) and 1983 (14) E.L.T. 2441 (CEGAT), the classification of their conveyor belting was in dispute. The composition of the product was polyvinyl chloride 60%, cotton yarn 21% and other ingredients 19%. The Tribunal held that the product was classifiable under Item 68 of the erstwhile Central Excise Tariff. The Tribunal in all these three cases and the Supreme Court in the case of Multiple Fabrics Co. Pvt. Ltd. by implication, ruled out Tariff Item 15A(2) since a product could be classified under the erstwhile Tariff Item 68 if it did not fall under any of the Tariff Items 1 to 67.
17. The Department's case is that the conveyor beltings in question are strips and they fall under sub-heading 3920.11/3920.12 in view of Chapter Note 10 to Chapter 39 of the Tariff Schedule. There is no definition of "strip" in Chapter 39 in respect of plastic strip. In some other Chapters relating to iron or steel products, Aluminium, Copper and Zinc products, there are definitions of strips, but there is no uniformity in these definitions as shown below :- (a) Iron and steel strips, vide Chapter Note l(xiv) to Chapter 72 of the Schedule to the Central Excise Tariff Act, 1985 : "(xiv) strips - Hot or cold-rolled products, rolled approximately in rectangular cross-section, of thickness usually 10 millimetres and below, with mill, rolled, trimmed or sheared edges and supplied in coil or flattened coil (straight length) form but excludes hoop and skelp." "(vii) Strip: A flat product whose thickness exceeds 0.15 millimetre but does not exceed 10 millimetres, of any width and generally not cut to length and usually in coil." "(vii) Strip: A product of rectangular section, supplied in coil or flat form, of thickness exceeding 0.15 millimetre but below 6 millimetres, with length more than eight times the width." (d) Zinc strip, as defined in Chapter Note 1 (vii) to Chapter 79 ibid : "(vii) Strip: A flat product, generally not cut to length, whose thickness exceeds 0.15 millimetre but docs not exceed 10 millimetres, and width does not exceed 500 millimetres." In the absence of any definition of "Strip" in Chapter 39 of the Tariff and in the absence of uniformity of definitions in the other Chapters of the Tariff, we should follow the dictionary meaning of the word "Strip". According to Concise Oxford Dictionary, New Seventh Edition, strip means long narrow piece. From the copies of the Customers' orders placed in the Paper Book filed by M/s. Fenner (India) Ltd., we observe that the length of the beltings in rolls varied from 100 metres to 400 metres. Width varied from 600 mm to 1200 mm. Thickness of the beltings varied between 7 mm and 9.5 mm (vide Pages 9,13, 23, 31, 48, 50, S3, 59, 65 and 75 of the Paper Book). Only in the copy of the purchase order at Page 72 of the Paper Book, the nominal thickness of the belting was shown as 11 mm. Considering the length, width and the thickness of the beltings we are inclined to conclude that these fall within the term "strip" as per the above dictionary meaning. The name given to the product by the assessees is "belt/belting". The customers placed the orders under this name. But the belts/beltings are covered by the general dictionary meaning of "strips".
18. Therefore, having regard to the composition of the impugned goods, the descriptions given in the Tariff Headings, the Chapter Notes in Chapter 39 of the Tariff, the Explanatory Notes in the H.S.N.(Harmonised Commodity Description and Coding System) and the ratio of the judgments of the Supreme Court and of the earlier decisions of this Tribunal, we hold that the impugned products are correctly classifiable under Tariff Heading 3920.11 or 3920.12 depending upon whether they are rigid or flexible strips, 'these products of the assessees before us are not assessable under sub-heading 3922.90 or 3926.90, as contended by them. In this view of the matter, we do not consider it necessary to enter into further discussion on the terms "belts" and "beltings".
19. We shall now examine the second issue, viz., whether demand for duty can be raised for a period of six months prior to the issue of show cause notice. The law on this point is now well settled in view of the following judgments of Sureme Court :-Tata Iron & Steel Co. Pvt. Ltd. v.Union of India (Decided In this case, right from 1962 the appellant was filing classification list containing the description of the items manufactured by them and showing them liable to payment of excise duty only under Item 26AA(ia) of the CET and these lists were accepted and approved by the Excise Authorities. The Hon'ble S.C. held that it could not be said that the appellant was guilty of any suppression or mis-statement of facts, fraud, collusion or contravention of provisions of Excise Act. In view of this, it was held that the period of limitation would clearly be only six months and the extended period of five years was inapplicable.
In this connection, paragraph 7 of the judgment is reproduced below :- "7 Regarding the question of limitation, the dispute is whether, assuming that the demand made by the Collector was valid, what is the period to which it could relate, it being common ground that as far as composite units comprising wheels, tyres and axles supplied by the appellant to the Indian Railways are concerned the demand under Item No. 68 of the Central Excise Tariff was justified. The question here is as to whether that demand could extend only to six months prior to the service of the show cause notice as contended by the appellant or upto a period of five years prior to that notice as contended by the respondent. In this regard, Section 11A is the relevant provision. The said section has been amended in 1978, but we are not concerned with that amendment. A perusal of sub-section (1) of that section shows that where any duty of excise has not been levied or short-levied or short-paid or erroneously refunded, the Central Excise Officer concerned may, within six months from the relevant date, serve notice on the person chargeable with that duty.
This provision would clearly show that the period for which the demand could be made was only six months prior to the service of the notice. Now, in the present case, it has been found by the High Court and, in our opinion, rightly, that there was no suppression or mis-statement of facts or fraud by the appellant to which the alleged short-levy or non-levy could be attributed. In fact, it is common ground that right from 1962 the appellant was filing classification lists containing the description of the items and showing them as liable to the payment of excise duty only under Item No. 26AA(ia) and these lists were accepted and approved by the excise authorities. In these circumstances, we fail to see how it could be said that the appellant was guilty of any sup- pression or mis-statement of facts or collusion or violation of the provisions of Central Excise Act as contemplated under the proviso to Section 11A of the said Act. In view of this, the period of limitation would clearly be only six months prior to the service of the show cause notice. The demand for excise duty against the appellant on the said composite units under Item No. 68 of the Excise Tariff, to the extent that it exceeds the period of six months prior to the service of the show cause notice must, therefore, be struck down."Collector of Central Excise, Baroda v. Kosan Metal Products Ltd. (Decided In this case, classification list filed by the assessee was approved.
Central Excise duty was paid according to the approved classification list availing of the benefit of set-off of duty paid on the inputs as stipulated under Notification No. 178/77-C.E., dated 18-6-1977. The Range Suprintendent pointed out short payment of duty of Rs. 38,460.12 on RT12 returns for the months of April, 1979 and August, 1979. A show cause notice dated 19-1-1980 was issued to the assessee by the Range Superintendent requiring it to explain why duty amounting to Rs. 51,261.88 for the period from 24-7-1978 to 31-3-1979 should not be recovered from it under Rule 10 of the Central Excise Rules and why penalty should not be imposed under Rule 173Q. The Hon'ble Supreme Court held that as proper notice was not issued merely on the ground of short entry in RT 12 return, Section 11A of the Central Excises and Salt Act would not be attracted and that when in such circumstances a demand is made under the Act for recovery, then such demand must be under Section 11A of the Act. There was no fraud, collusion or wilful mis-statement or suppression of facts on the part of the assessee.
Therefore, the Hon'ble Supreme Court held, Section 11A clearly applied to the facts of the case.Elson Machines Pvt. Ltd. v. Collector of Central Excise (Decided In this case, the assessee availed of the benefit of Notification No.80/80-C.E., dated 19-6-1980. The Department issued show cause notice demanding duty on the ground that based on the value of clearances, the benefit of notification was not admissible to the assessee. The demand was confirmed and the matter came before the Tribunal. The Tribunal dismissed the assessee's appeal, The decision of the Tribunal was challenged before the Supreme Court, who upheld the Tribunal's decision and dismissed the assessee's appeal. A submission was made before the Supreme Court that the classification list had been approved earlier and the Excise Authority was estopped from taking a different view.
Hon'ble Supreme Court held :- "Plainly (here can be no estoppel against the law. The claim raised before us is a claim based on the legal effect of a provision of law and, therefore, this contention must be rejected." - Ref. Para 7 of the judgment.Collector of Central Excise v.Chemphar Drugs & Liniments (Decided In this case, the assessee submitted classification lists from time to time showing the various products manufactured by it including those falling under Items No. 14E and No. 68 of the Central Excise Tariff.
The Central Excise Officer visited the factory as was seen from the survey register at the factory and took note of the various products manufactured by the assessee. In view of this, the Tribunal held that the longer time-limit of five years could not be invoked by the Department for raising demand for duty under Rule 10 of the Central Excise Rules and proviso to Section 11A(1) of the Central Excises and Salt Act, 1944. Hon'ble Supreme Court observed that the Department had the knowledge of the products and there was no suppression of facts warranting application of five years' limitation for raising demand for duty. It was held by the Supreme Court in para 9 of the judgment that in view of the requirement of Section 11A of the Act, the claim for duty had to be limited for a period of six months as the Tribunal did.
20. In view of the ratio of the aforesaid four judgments of Supreme Court, we hold that even in cases where duty has been paid in terms of approved classification, demand for duty can be raised under Rule 10 of the Central Excise Rules or Section 11A of the Central Excises and Salt Act for a period of six months, or for a period of five years where there was fraud, collusion or wilful mis-statement or suppression of facts on the part of the assessee, prior to issue of the show cause notice. In the present case, there was no suppression of facts, wilful mis-statement etc. Hence, the demand for duty should be limited to a period of six months prior to the show cause notice.
21. In the light of the foregoing discussions, we allow the appeal No.E/1607/88-C filed by Revenue and dismiss the appeal No. E/129/89-C filed by M/s. International Conveyors Ltd. We, however, restrict the demand for duty to a period of six months prior to the issue of show cause notice.