TMI Blog2011 (7) TMI 972X X X X Extracts X X X X X X X X Extracts X X X X ..... ed surface as a whole, it is jute fibre which pre-dominates by weight and it is on this basis that the Appellant, relying upon sub-heading Note 2(A) readwith Note 2 of Section XI plead that the carpets, in question, have to be treated as non-woven carpets of Jute falling under sub-heading 5703.20. Prima facie view - held that:- the carpets, in question, which are non-woven carpets with base/ground fabric of jute and exposed surface consisting of polyester/polypropylene fibre, are correctly classifiable as “other carpets” under sub-heading 5703.90. Appellant had at no stage disclosed the detailed manufacturing process of the carpets - appellant have not been able to establish prima facie case in their favour and hence this is not the case for waiver from the requirement of pre-deposit. - Stay granted partly. - E/977/2010 - 683/2011-EX(PB), - Dated:- 4-7-2011 - Justice R.M.S. Khandeparkar, Shri Rakesh Kumar, JJ. Shri V.L. Kumaran, Advocate, for the Appellant. Shri Nitin Anand, DR, for the Respondent. [Order per : Rakesh Kumar, Member (T)]. Commissioner of Central Excise, Allahabad vide order-in-original No. MP (Dem-55, 57/09, 53/09, 54/09, 52/09, 56/09) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is polyester/polypropylene carpet covered under sub-heading 5703.90 of the tariff and hence chargeable to duty. According to the department, the appellant during the period of dispute were not eligible for SSI exemption, as their clearances of all excisable goods during 2000-2001 had exceeded Rupees three crores. The department also alleges that the appellant suppressed the fact of manufacture of dutiable carpets from the department, as during the period of dispute, they were not filing any RT-12 return/ER-1 return and besides this, in the declaration filed by them under Erstwhile Rule 173B of Central Excise Rules, 1944, they had misdeclared the description of the carpets manufactured by them as jute carpets classifiable under sub-heading 5703.20. Besides this, the department also found that during the above-mentioned period of dispute, the appellant were also manufacturing felt car mats of sub-heading 5602.90 and felt fabrics classifiable under sub-heading 5602.10 of the Tariff, which though dutiable, had been cleared by them without payment of duty. 1.3 In view of the above facts the following show cause notices for demand of duty alongwith interest and imposition of pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder No. 667/10-EX., dated 19-11-10. 3. Heard both the sides in respect of Stay Application on 19-11-2010. After hearing both the sides, this Bench vide Misc. Order dated 19-11-10 directed the appellant to file written submissions by 26th November 2010 and directed the respondent to file their written submissions by 3rd December 2010. 3.1 Shri V.L. Kumaran, Advocate, the learned Counsel for the appellant, in his oral as well as written submissions made by him pleaded that the bulk of the duty demand is in respect of carpets, that from the manufacturing process it is very clear that the Appellant s main product is textile floor covering of jute and they are not manufacturing any felt fabric, that tacked web, which is an intermediate product, is not felt fabric and is not excisable, that the floor covering manufactured by the appellant consists of jute and polyester/ polypropylene fibres, that all the test reports indicate that it is the jute fibre which predominates by weight, that the floor coverings manufactured by the appellant do not have loop or pile surface, that in view of this, the provisions of sub-heading Note 2(B)(ii) of Section XI of the Central Excise Tariff are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this case, that the department s plea that in view of sub-heading Notes 2(B)(ii) of Section XI, for determining the nature of the carpet as to whether it is carpet of wool or polyester or other textile fibres, no account shall be taken of the ground fabric (base fabric) is not correct as this section note is applicable only in the case of textile floor covering consisting of a ground fabric and a loop or pile surface, while the carpets in question, do not have loop or pile surface, that even if interpretory Rule 3 of the Rules of interpretation of Central Tariff is applied, in terms of the provision of sub-heading Note 2(B)(i) of Section XI, the goods, in question, would still be classifiable as floor coverings of jute, as it is jute which predominates by weight in the entire product, that the department s contention that the classification of the floor covering, in question, is to be determined only on the basis of textile material of the exposed surface is totally incorrect and contrary to the judgments of the Apex Court in the cases of CCE v. UNI Products (I) Ltd. (supra) and CCE, Bhubaneswar-I v. Champdany Industries Ltd. (supra), that in view of this, neither duty demand is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication has been considered in that case, there was no base fabric while in this case there is no dispute that the carpets, in question, have base fabric of jute, that Hon bie Supreme Court in the case of CCE, Bhubaneswar-I v. Champdany Industries Ltd. (supra) has also observed that applicability of rules of interpretation to Central Excise Tariff cannot be considered, as this point had not been raised in the show cause notice and thus the applicability of sub-heading Note 2(B)(i) of Section XI of the Central Excise Tariff had not been considered at all in that case, while in this case, this is one of the grounds raised in the show cause notice, that judgment of Hon ble Supreme Court in the case of CCE v. UNI Products (I) Ltd. (supra) is judgment based purely on the Tribunal s findings of fact in that case, as is clear from para 19 of the judgment and hence the ratio of this judgment cannot be applied to the present case, that Hon ble Supreme Court in the case of CCE, Bhubaneswar-I v. Champdany Industries Ltd. (supra) did not consider the observations made by three Judges Bench of the Hon ble Supreme Court in the case of M/s. O.K. Play (India) v. CCE reported in 2005 (180) E.L.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ept in mind - the aspect of undue hardship to the appellant and imposing conditions for safeguarding the interest of revenue, and that for establishing undue hardship, the appellant has to establish that complying with the requirement of pre-deposit of entire duty demand, interest and penalty would cause a hardship which is not warranted by the circumstances and his conduct. Another criteria for determining as to what would constitute undue hardship with regard to compliance with the provisions of Section 35F has been prescribed by Hon ble Allahabad High Court in the case of LG Electronics India Pvt. Ltd. v. CCE, Noida reported in 2009 (16) S.T.R. 136 (All.), wherein in para 18 of the judgment, Hon ble court has observed that uniform view of various High Courts of the country on the question of waiver from the requirement of pre-deposit of duty and penalty under Section 35F has been that while considering the question of waiver, the authority concerned has to examine the question as to whether the appellant has a good prima facie case so as to justify the dispensation of the requirement of pre-deposit of the disputed amount of duty and penalty. Thus the main criteria for granting d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this chapter note for the purposes of this chapter, the term carpets and other textile floor coverings means the floor coverings in which the textile materials serve as the exposed surface of the article when in use and includes the articles having the characteristics of textile floor coverings but intended for use for other purposes. Thus, if the exposed portion of a floor covering is of textile material, the same would be classifiable under Chapter 57 as carpet or other textile floor covering . Once the classification of a particular product been determined under Chapter 57, the question of its exact classification under Heading 57.01 or 57.02 or 57.03 has to be determined by applying sub-heading Notes 2(A) and 2(B) to Section XI, readwith Chapter Note 2 of this Section. In this regard, the relevant Section notes are reproduced below :- Section note 2 to Section XI 2(A) Goods classified in Chapters 50 to 55 or in heading No. 58.09 or 59.02 and of a mixture of two or more textile materials are to be classified as if consisting wholly of that one textile material which predominates by weight over any other single textile material. When no one textile material predomina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isting wholly of that material which would pre-dominate by weight, this rule is subject to certain conditions, the two conditions, relevant for this case are - (a) where appropriate, only the part which determines the classification under Rule 3 for interpretation of Schedule to Central Excise Tariff Act, 1985 shall be taken into account; and (b) in case of textile products consisting of ground fabric and a pile or loop surface, no account shall be taken of the ground fabric. 8. The product, in question, consists of a ground fabric - jute cloth and as discussed above, it has a non-woven surface consisting of polyester or polypropylene fibre web which is attached to the jute base fabric. In this product, obviously it is the material of the exposed surface, polyester, polypropylene, acrylic or wool which would give it its essential character, the jute cloth only provides the backing for the exposed surface. The value of such carpets is determined by the type, quality and quantity of the textile fibre used in the exposed surface, and therefore, it is the textile material of the exposed surface of the carpet, not of the backing, which would determine the type of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra) for determining the classification of an article in the HSN based Central Excise Tariff, equal importance must be given to the Rules of interpretation of tariff - more so when the sub-heading Note 2(b)(i) of Section XI itself provides for this. 8.2 The appellant have cited the judgment of Hon ble Supreme Court in the case of CCE, Bhubaneswar-I v. Champdany Industries Ltd. (supra). But this judgment, prima facie, does not appear to be applicable as, as its clear from para 4 of its judgment, the carpets whose classification has been decided in this case did not have any base fabric. Moreover in this case the applicability of Rule 3 of the Rules of Interpretation had not been considered, as this point had not been raised in the show cause notice while in this case this is one of the point raised in the show cause notice. In the case of CCE v. UNI Products (I) Ltd. (supra), the applicability of sub-heading 2(B)(i) readwith Rule 3 of the Rules of Interpretation of Central Excise Tariff has not been considered at all. In fact as observed in para 19 of the judgment, the same is based on factual findings of the Tribunal in that case. We are, therefore, of prima facie view that the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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