1989(03)LCX0012

BEFORE THE CEGAT, SPECIAL BENCH ‘D’, NEW DELHI

S/Shri G. Sankaran, Senior Vice-President, Harish Chander, Member (J) and K. Prakash Anand, Member (T)

RAJASTHAN SYNTHETIC INDUSTRIES LTD.

Versus

COLLECTOR OF C. EX.

Order No. 74/89-D, dated 3-3-1989 in Appeal No. E/3307/87-D

Advocated By: Shri V. Lakshmikumaran and Shri A.R. Madhav Rao, Advocates, for the Appellants.

Shri L. C. Chakraborty, JDR, for the Respondents.

[Order per: K. Prakash Anand, Member (T)]. - In this matter, appellants are alleged by the department to have cleared HDPE woven fabrics, from November 1986 to March 1987, valued at Rs. 69,21,724.00, in the form of what the department calls “cut to the size of woven sacks as per the requirements of the purchasers after giving them necessary shape and size of the woven sacks except stitching operation”.

2. The Show Cause Notice to the party, relying on Rule 2(a) of the Rules for the Interpretation of the Schedule to the Central Excise Tariff 1985 (5 of 1986) alleged that the aforesaid goods being in the form of cut to the size and shape of woven sacks, fell within the purview of incomplete unfinished woven sacks classifiable under heading 63.01 of sub-heading 6301.00.

3. The Assistant Collector held that such pieces of fabrics are cut to specific length and size of woven sacks and bags and therefore, correctly classifiable under sub-heading 6301.00. This view was also upheld by the Collector of Customs and Central Excise (Appeals), New Delhi and it is against his order that the matter has come up in appeal before us.

4. We have heard Shri V. Lakshmikumaran and Shri A.R. Madhav Rao, Advocates on behalf of the appellants, and Shri L.C. Chakraborthy, JDR on behalf of the department.

5. It is submitted on behalf of the appellants that they are making HDPE fabrics both on flat looms and circular looms. Such fabrics are claimed to fall under heading 54.08 attracting nil rate of duty. It is alleged that the fabrics made out of HDPE tapes are bulky in nature and are, therefore, required to be cut to size to facilitiate packing, handling, transport etc. This is reported to be the universal practice of all manufacturers of HDPE fabrics.

6. It is added that the fabrics were being classified under heading 54.08 right from the beginning i.e. 28-2-1986 and the classification list to this effect was duly approved.

7. The principal submission of the appellants is that cut lengths of circular woven fabrics do not have the essential character of woven sacks and hence Rule 2(a) of the Interpretative Rules is not applicable. On the other hand, it is claimed that Note 5 to Section XI clearly rules out such fabrics in cut lengths being considered as made up articles.

8. From the department’s side, it is emphasized that the goods in question would appear to be nothing but cylindrical hollow tubings, cut and prepared as per customer’s specifications. It is contended that they only require stitching at the ends and are, therefore, to be considered as blanks of sacks. The Departmental Representative reiterated that these are semi-finished goods which have assumed the essential characteristic of bags.

9. On the other hand, the learned JDR also submits that the point made by the appellants regarding Note 5(a) of Section XI of the Tariff was not raised before the Assistant Collector. Nor did the process of manufacture of the impugned goods come in for detailed consideration. There is no finding whether the products can be considered as rectangular. It is submitted that tubular pieces cannot be considered rectangular or square. It is, however, conceded that on this factual aspect, there is no finding of the lower authority. Therefore, it is submitted on behalf of the department that the matter may be remanded for de novo consideration, keeping in view this aspect of the matter.

10. The learned Advocate strongly opposes remand of the matter. He contends that this is not a fit case for remand as the Assistant Collector has already given his findings on facts. It is stated that the exact nature of the product was fully discussed in appellant’s letter to the department dated 17th March, 1987. This also came up for observation during the personal hearing held on 7th May, 1987.

11. We have carefully considered the facts of the case and the submissions made before us. We find that HDPE tapes wound on bobbins are continuously fed into circular looms for weaving into fabrics. These fabrics have both “warp and weft”. The looms produce the fabrics in circular/tubular form. The fabric so produced is wound on trollies in roll form. Later, these rolls of fabrics are cut into desired length manually.

12. We observe that Rule 2(a) of the Rules for Interpretation read with Explanatory Notes of Harmonized Commodity Description and Coding System extends the scope of any heading which refers to a particular article to cover not only the complete article but also that article, incomplete or unfinished, provided that, as presented, it has the essential character of the complete or finished article. The provisions of this Rule also apply to blanks unless these are specified in a particular heading. The term ‘blank’ means an article, not ready for direct use, having the approximate shape or outline of the finished article or part and which can only be used, other than in exceptional cases, for completion into the finished article or part.

13. On the other hand, appellants rely on Section Note 5 of Section XI which reads as under:

For the purposes of this Section, ‘made up’ means: -

(a) Cut otherwise than into squares or rectangles;

(b) Produced in the finished state, ready for use (or merely need separation by cutting dividing threads) without sewing or other working (for example, certain dusters, towels, table clothes, scarf squares, blankets).

(c) Hemmed or with rolled edges or with a knotted fringe, but excluding fabrics, the cut edges of which have been prevented from unravelling by whipping or by other simple means;

(d) Cut to size and having undergone a process of drawn thread work;

(e) Assembled by sewing, gumming or otherwise (other than piece goods consisting of two or more lengths of identical material joined end to end and piece goods composed of two or more textiles assembled in layers, whether or not padded);

(f) Knitted or crocheted to shape, presented in the form of a number of items in the length.

14. Appellants’ state that although these are circular fabrics they are cut into squares or rectangles and, therefore, cannot be considered as made up articles. It is added that when fabrics like suit lengths, trouser lengths, shirtings etc. are purchased, cut pieces of such fabrics are not considered as made up articles.

15. The answer to the issue before us lies in interpretation of Interpretative Rule 2(a) and Section Note 5 of Section XI of the Tariff. We are not at all impressed with the argument of the appellants which rests on comparison of their goods with suit lengths, trouser lengths, shirt pieces etc. Nor can the impugned goods be considered as cut into square or rectangles. Fabrics in tubular shape cannot be considered as cut into squares or rectangles.

16. We have also considered Interpretative Rule 2(a), which provides that incomplete or unfinished goods which have the essential character of complete or finished goods, should be considered as covered by the heading pertaining to the goods. It has not been denied by the appellants that the fabrics, although tubular in nature are cut to size for finishing or completion. All that is required is stitching at the ends. The goods therefore can be said to have the essential character of complete or finished goods. If the fabric was to be cleared in pieces of running length which were not related to the exact specification of the woven sacks and if the finishing involved anything more complicated or elaborate than mere stitching at the end, one could dispute that they were not goods having the essential character of complete or finished goods. The facts in this case, however, are against the appellants.

17. In the light of the above discussion, I hold that the goods are correctly classifiable under heading 63.01 of sub-heading 6301.00 and uphold the order of the lower authority.

Dismissed.

18. [Order per: G. Sankaran, Senior Vice-President]. - The question for consideration is classification of hollow tubular fabrics made of HDPE which have been cut into the required lengths for ultimately being stitched into HDPE sacks.

19. According to Rule 1 of the Rules for the Interpretation of the Excise Tariff Schedule, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the provisions in the said Rules. Thus, it is clear that the Rules for Interpretation will come into play, and can be invoked, if and only if the classification cannot be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided, such headings or Notes do not otherwise require. In other words, if the headings, read in the light of the Section or Chapter Notes, are clearly determinative of the classification, the Rules for Interpretation cannot be invoked. We have to see whether, in the present case, the classification can be determined having regard to the headings and the relative Section and Chapter Notes.

20. Heading 63.01 covers made up textile articles not elsewhere specified. Evidently, hollow tubular HDPE fabrics, cut into desired lengths, with no further operation carried out thereon, cannot be equated to made up textile articles. This is from a prima facie reading of the heading. Now, let us see the matter from the meaning assigned to the expression “made up” for the purpose of Section XI in which Chapter 63 occurs. A hollow tubular fabric cut into required lengths cannot be said to be “cut into squares or rectangles”. They are, therefore, “cut otherwise than into squares or rectangles”. But this factor by itself is not determinative of the classification. The fabrics are not articles in the finished state ready for use without sewing or other working. Unless the bottom is firmly stitched, the tubular fabric cannot be said to have attained the shape of a sack. The present goods have not been stitched at the bottom. This operation is to be done elsewhere. Therefore, the goods, as presented for assessment, cannot be described to be sacks or resembling sacks. In my opinion, having regard to the meaning assigned to the term “made up” in the Section Note, there is no occasion to invoke Interpretation Rule 2(d). Assuming for the nonce that the said Rule could be invoked, the question would be whether cut lengths of tubular fabrics have the essential characteristics of the complete or finished article viz. sacks. In my opinion, they do not have. In the unstitched state, they neither resemble sacks nor have the essential characteristics of sacks. They cannot also be regarded as blanks having the appropriate shape or outline of finished sacks. They are semi-manufactures not yet having the essential shape of finished sacks. The subject goods are not, therefore, “made up” articles within the meaning of heading 63.01, sub-heading 6301.00.

21. What, then, is the alternative heading? Heading No. 54,08, sub-heading 5408.00 covers fabrics of man-made filament yarn (a) woven, and (b) not subjected to any process. That the subject goods are woven fabrics is not in dispute. There is nothing to show that hollow tubular fabrics are not fabrics within the meaning of “fabrics” in heading 54.08. Accordingly, I am of the view that the appropriate heading for classification of the goods is 54.08, sub-heading 5408.00.

I therefore allow the appeal.

I agree with the views of my learned Brother Shri G. Sankaran, Senior Vice-President.

In accordance with the view of the majority, the appeal is allowed.

Equivalent 1989 (42) ELT 24 (Tribunal)