2005 (3) TMI 117 - SC - Central Excise

Whether the goods Textiles namely; grey cotton canvas cloth hundred per cent cotton/grey cotton belting and duck are classifiable under Tariff Headings (TH) 52.02 54.08 or 59.09 of the Schedule to the Central Excise Tariff Act 1985? Held that - The rules for the interpretation of the Schedule to the Central Excise Tariff Act 1985 have been framed pursuant to the powers under Section 2 of that Act. According to Rule 1 titles of Sections and Chapters in the Schedule are provided for ease of reference only. But for legal purposes classification shall be determined according to the terms of the headings and any relevant section or Chapter Notes . If neither the heading nor the notes suffice to clarify the scope of a heading then it must be construed according to the other following provisions contained in the Rules. Rule-I gives primacy to the Section and Chapter Notes along with terms of the headings. They should be first applied. If no clear picture emerges then only can one resort to the subsequent rules. The appellants have relied upon Rule 3. Rule 3 must be understood only in the context of sub-rule (b) of Rule 2 which says inter alia that the classification of goods consisting of more than one material or substance shall be according to the principles contained in Rule 3. Therefore when goods are prima facie classifiable under two or more headings classification shall be effected according to sub-rules (a) (b) and (c) of Rule 3 and in that order. As in respect of other years the Tribunal had taken the same view as has been taken by it in the order impugned in these appeals and classified the respondent s products under Chapters 52 and 54. No appeal has been preferred from those decisions by the Revenue and the finding for those years remain unchallenged.For these reasons the appeals are dismissed

Summary

Issues Involved:
1. Classification of goods under Tariff Headings 52.02, 54.08, or 59.09 of the Central Excise Tariff Act, 1985.
2. Applicability of the decision in Simplex Mills Co. Ltd. v. CCE, Nagpur (Simplex I).
3. Interpretation of "made up" goods under Section XI of the Central Excise Tariff.
4. Relevance of the Central Board of Excise and Customs Circulars.
5. Overruling of Simplex I by the Larger Bench in Jyoti Overseas Limited v. CCE, Indore.
6. Application of the Rules for the interpretation of the Schedule to the Central Excise Tariff Act, 1985.

Detailed Analysis:

1. Classification of Goods:
The primary issue was whether the respondent's textiles, specifically grey cotton canvas cloth, hundred percent cotton/grey cotton, belting, and duck, should be classified under Tariff Headings (TH) 52.02, 54.08, or 59.09. The appellant argued for classification under TH 59.09, while the respondent classified the goods under TH 52.02 or 54.08. The Assistant Collector confirmed the demand based on the earlier decision in Simplex Mills Co. Ltd. v. CCE, Nagpur (Simplex I), which classified the goods under TH 59.09.

2. Applicability of Simplex I:
Simplex I held that fabrics for industrial use fall under TH 59.09, which covers "all other textiles products and articles of a kind suitable for industrial use." The Tribunal in Simplex I applied Rule 3(a) of the Interpretation Rules, prioritizing the specific description of industrial fabrics under TH 59.09 over the general descriptions under TH 52.05 or 54.08.

3. Interpretation of "Made Up" Goods:
The definition of "made up" goods in Section XI of the Central Excise Tariff was crucial. "Made up" goods include items cut to size, hemmed, or assembled by sewing, among other criteria. Non-made up goods, therefore, refer to running lengths of textiles unprocessed as specified in the Section Note. The Tribunal in Jyoti Overseas held that only "made up" articles could be classified under Chapter 59.09, and unprocessed textile fabrics do not fall within this heading.

4. Relevance of Central Board of Excise and Customs Circulars:
The Central Board of Excise and Customs issued a circular on 5th November 1993, classifying grey cotton canvas, cotton ducks, cotton tyre cord fabrics, and cotton belting fabrics under TH 52.05, leading to the dismissal of the respondent's appeal for non-prosecution. However, a subsequent circular on 30th June 1997 superseded the earlier one, classifying the goods under TH 59.11, aligning with the decision in Simplex I.

5. Overruling of Simplex I by Jyoti Overseas:
The Larger Bench in Jyoti Overseas Limited v. CCE, Indore overruled Simplex I, holding that:
- Only "made up" articles can be classified under Chapter 59.09.
- TH 59.09 is a residuary heading, and goods falling under any other heading of Section XI cannot be classified under it.
- Textile products or articles referred to in 59.09 are not textile fabrics but items made from fabrics.
- Unprocessed textile fabrics do not fall within TH 59.09.

6. Application of Interpretation Rules:
According to Rule 1, classification should be determined by the terms of the headings and any relevant section or Chapter Notes. Rule 3(a) prefers the most specific description, while Rule 3(b) and 3(c) provide guidance when goods are classifiable under multiple headings. The Tribunal in Jyoti Overseas correctly applied these rules, concluding that unprocessed textile fabrics should not be classified under TH 59.09.

Conclusion:
The Supreme Court upheld the Tribunal's decision in Jyoti Overseas, confirming that the respondent's products should be classified under Chapters 52 and 54, not TH 59.09. The appeals were dismissed without any order as to costs, affirming the correct interpretation and application of the relevant tariff headings and rules.