2000(10)LCX0009

IN THE CEGAT, COURT NO. III, NEW DELHI

Ms. Jyoti Balasundaram, Member (J) and Shri V.K. Agrawal, Member (T)

UNIPATCH RUBBER LTD.

Versus

COMMISSIONER OF CENTRAL EXCISE, BHOPAL

Final Order No. 477/2000-C, dated 27-10-2000 in Appeal No. E/316/99-C

Cases Quoted

Madras Rubber Factory v. Collector — 1983(05)LCX0009 Eq 1987 (031) ELT 0071 (Tribunal) — Distinguished [Paras 4, 8]

MRF Ltd. v. Collector — 1993(10)LCX0038 Eq 1993 (068) ELT 0876 (Tribunal) — Referred................................... [Para 3]

DEPARTMENTAL CLARIFICATIONS CITED

C.B.E. & C. Circular No. 18/90-CX 3, dated 29-3-1990 ...................................................... [Para 6]

C.B.E. & C. Circular No. 58/90 CX. 3, dated 18-11-1990 .................................................... [Para 6]

Advocated By :   Shri V. Lakshmikumaran, Advocate, for the Appellants.

Dr. Ravinder Babu, JDR, for the Respondent.

[Order per : V.K. Agrawal, Member (T)]. - In this appeal, filed by M/s. Unipatch Rubber Ltd., the issue involved is whether criss-cross patches of vulcanised/unvulcanised rubber, manufactured by them, are classifiable under Sub-heading No. 4008.21 and 4006.10 respectively as confirmed by the Commissioner (Appeals) under the impugned Order No. 873/98 dated 28-12-98 of the Schedule to the Central Excise Tariff Act or under Sub-headings 4016.99 and 4006.90 respectively as claimed by the Appellants.

2. Shri V. Lakshmikumaran, learned Advocate explained the process of manufacture as under :-

Tyre cord fabric is coated, clicked into widths and chopped into small pieces, sizes as per specifications ; the small pieces are assembled; a minimum of two layers (which may go up to eight) of cord fabric are placed one over the other in criss-cross fashion; top and floater gum and layers of cord fabric are built into one unit which is covered with top and floater gum and is clicked to flower shape with die; at this stage an unvulcanised patch emerges. The whole structure is then placed in a specially designed press and vulcanised at approximately 150°C under pressure between 60-65 pounds ; after taking it out of the press, facing gum is used ; thereafter the entire unit is stiched between the two rollers; the facing gum duly stiched is trimmed to the dimension of the patch.

3. The learned Advocate submitted that unvulcanised rubber patches are not classifiable under sub-heading 4006.10 as the products mentioned therein are in running length and are all extruded products and not in the nature of cut-to-size individual piece; that the expression ‘for resoling or repairing or retreading rubber tyres’ used in Sub-heading 4006.10 would not mean that all items used for resoling or repairing or retreading rubber tyres would straightaway be classified under Sub-heading, the product should be either camel-back striptread rubber, cushion compound, cushion gum, tread gum, tread packing strips; that since the impugned product is not in running length and it cannot be covered by any of the items specified in 4006.10, it cannot be classified under Sub-heading 4006.10. He relied upon the decision in the case of MRF Ltd. v. CCE, 1993(10)LCX0038 Eq 1993 (068) ELT 0876 (T) wherein it was held that unless a product is specifically mentioned in Sub-heading 4006.10 by name, they would fall under Sub-heading 4006.90 only; that unvulcanised rubber patches have least resemblance to any of the specified product and are not bought and sold as any of these products and hence are classifiable under Sub-heading 4006.90.

4. The learned Counsel, further, submitted that criss-cross patch is not a plate sheet or strip of rubber and as such it cannot be classified under Sub-heading 4008.21; that the Tribunal in Madras Rubber Factory v. CCE, Madras, 1987 (031) ELT 71 has held that the product is not covered by Item 16A(2) of the erstwhile Central Excise Tariff which covers plate, sheets and strips of rubber. He also mentioned that according to Revenue, HSN Explanatory Notes below Heading 40.16 (page 599) indicates that the Heading covers patches used for repairing inner tubes and, therefore, patches used for repairing tyres were not covered under the said sub-heading; that HSN Explanatory Notes merely indicate that Heading 40.16 includes the products mentioned therein; that one of the products mentioned is patches for repairing inner tubes which is in the nature of an illustration and not an exhaustive enumeration of all the products that can fall under Heading 40.16; that Explanatory Notes nowhere says that Heading includes ‘only’ patches used for repairing inner tubes and Notes does not exclude from its purview patches used for repairing of tyres. He also contended that on a plain reading of Note 9 to Chapter 40 of the Central Excise Tariff, it would be clear that the said Note explains the scope of the expression ‘plates, sheets and strips’ ; that once it is decided that rubber patches cannot be classified as plates, sheets and strips at all, their classification under Sub-heading 4008.21 is straightaway ruled out; that Note 9 applies also to Heading 40.05 also and the impugned product is not plate, sheet or strip for that Heading, it cannot be classified under Heading 4008.21; that for the purpose of Note 9 to Chapter 40, plate sheet or strip has to come into existence first which is not the case in their matter as they manufacture individual patch which are in definite dimension. He also referred to HSN Explanatory Notes below Heading 40.08 which provides that the Heading excludes :-

“Plates, sheets and strip, whether or not surface -worked (including square or rectangular articles cut therefrom) with bevelled or moulded edges, or with rounded corners, openwork borders or otherwise, or cut into shapes other than rectangular (including square) (heading 40.14, 40.15 or 40.16).”

5.  Finally, he submitted that the classification of indentical rubber patches was being done by the department under Sub-heading 4016.99. In support, he relied upon the order-in-original dated 29-11-96 and order-in-original dated 19-12-91 passed by the Assistant Commissioner, Coimbatore and Dindigul. Finally, the learned Advocate submitted that no penalty is imposable since they had not violated any of the provisions of the Rules or the Act; that even there is no such an averment in the show cause notice since all the assessments had been finalised up to April, 1996 ; that this is only a matter of change in the opinion of the Department and change in assessment on issue of classification and in such circumstances, penal provisions are not invokable ; that in any case, Section 11AC of the Central Excise Act is totally inapplicable since the short levy is not on account of fraud or collusion or suppression of facts, etc.

6. Countering the arguments, Dr. Ravinder Babu, learned D.R., reiterated the findings of the Commissioner (Appeals) in the impugned order to the effect that Heading 40.08 covers not only ‘plates, sheets and strips’ but also ‘blocks, rods, and profile shapes’ of vulcanised rubber; that further Note 9 to Chapter 40 clearly provides that “Sub-heading No. 4008.21 shall also apply to ‘plates’, ‘sheets’ and ‘strips,’ whether or not cut to shape and surface worked or further worked so as to tender them fit for resoling or repairing or re-treading of rubber tyres.” He also reiterated that plate can also be rectangular or in other shapes as also in the form which emerges as a result of placing the plates cut into rectangular shapes one upon another in criss-cross manner. The learned D.R. also drew support from Board’s Circular No. 18/90-CX. 3, dated 29-3-1990 and Circular No. 58/90-CX. 3, dated 18-11-1990 wherein it was clarified that Sub-heading 4008.21 is more specific for tyre retreading material and all such plates/sheets/strips of vulcanised rubber which are further worked would merit classification under Sub-heading 4008.21 and not 4016.99. The learned D.R. emphasised that Note 9 is applicable in the present matter as it speaks of blocks of regular geometric shape, uncut or simply cut to rectangular (including square) shape and the impugned product has not been further worked.

7. We have considered the submissions of both the sides. Main rival Headings of the Central Excise Tariff reads as under :-

Note 9 to Chapter 40 reads as under :-

“9. In heading Nos. 40.01, 40.02, 40.03, 40.05 and 40.08, except as otherwise provided, the expressions ‘plates’, ‘sheets’ and ‘strips’ apply only to plates, sheets and strip and to blocks of regular geometric shape, uncut or simply cut to rectangular (including square) shape, whether or not having the character of articles and whether or not printed or otherwise surface-worked, but not otherwise cut to shape or further worked.

In heading No. 40.08, the expressions ‘rods’ and ‘profile shapes’ apply only to such products, whether or not cut to length or surface-worked but not otherwise worked.

Sub-heading No. 4008.21 shall also apply to “plates”, “sheets” and “strips”, whether or not cut to shape and surface-worked or further worked so as to render them fit for resoling or repairing or re-treading of rubber-tyres.”

8. There is substantial force in the submissions of the learned D.R. that Heading 40.08 applies not only to plates, sheets or strip but also to profile, shapes. Note 9 to Chapter 40 further provides that expressions ‘plates’, ‘sheets’ and ‘strips’ apply also to blocks of regular geometric shape, uncut or simply cut to rectangular (including square) shape. In view of this, there is no force in the submissions of the Appellants that to fall under Heading 40.08 it is first to be proved that the impugned product is a plate, sheet or strip. The decision in the case of Madras Rubber Factory, 1983(05)LCX0009 Eq 1987 (031) ELT 0071 (T) is not applicable to the present matter as there was no Note 9 in respect of Tariff Item 16A of the erstwhile Central Excise Tariff and in absence of which the product was classified under Residuary Tariff Item 68 (Goods not elsewhere specified). We, therefore, find no reason to interfere with the findings of the Commissioner (Appeals) regarding classification of criss-cross patches of vulcanised rubber manufactured by the Appellants and we hold that the product is classifiable under Sub-heading 4008.21 of CETA (Now 4008.22) and not under Residuary Sub-heading 4016.99 of CETA.

9. We, however, agree with the learrned Advocate for the Appellants that no penalty is imposable under Rule 173Q of the Central Excise Rules read with Section 11AC of the Act as it relates to the classification of product and the Appellants had filed the classification declaration and assessments were finalised for the past period. As far as classification of criss-cross patches of unvulcanised rubber is concerned, the impugned order does not contain any finding given by the Commissioner (Appeals). Accordingly we remand the matter regarding classification of Criss cross patches of unvulcanised rubber to the Commissioner (Appeals) with a direction to pass a speaking well reasoned order in respect of the said product after following the principles of natural justice.

10. The appeal is, thus, disposed of in these terms.

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Equivalent 2001 (130) ELT 348 (Tri. - Del.)

Equivalent 2001 (042) RLT 0508