9911796707
TMI Blog2006 (8) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... ess: The 'upper sole mix' received from the Calicut unit is fed into a kneader mill and mixed with chemicals such as Sulphur, Ureka-F, TMT etc. and subjected. to a heating process, whereby the sole mix in plastic condition becomes elastic. The output from the kneader mill is fed into the upper extruder in a sheeting machine, wherefrom vulcanised 'upper sole sheets' are obtained as extruded product in white colour. Similarly, the 'lower sole mix' received from the Calictt unit is fed into the kneader mill and mixed with chemicals such as Sulphur. Ureka- F, TMT, processing oil etc. and subjected to a heating process. The output from the kneader mill is then fed into the lower extruder in the sheeting machine wherefrom vulcanised 'lower sole sheets' are obtained as extruded product in a different colour. The upper and lower sole sheets drawn from the extruders in the sheeting machine are joined and passed through rollers, when the two sheets. Placed one above the other, get bonded into a single sheet, which is cooled n a cooling chamber and cut to size. The resultant sheets are then pressed in a hydraulic press at high temperature to make grooves and emboss designs and brand-name ("Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up to 30-6-2000 was determined in terms of Rule 6b(ii) of the Central Excise (Valuation) Rules, 1975 and the assessable value of the goods cleared after that date was determined in terms of the corresponding provisions of the Central Excise (Valuation) Rules, 2000. The show-cause notice also demanded interest on duty under Section 11AB of the Central Excise Act and also proposed penalty on M/s. PFP under Rule 173Q of the Central Excise Rules, 1944/Rule 25 of the Central Excise (No. 2) Rules, 2001/Rule 25 of the Central Excise Rules, 2002 and under Section 11AC of the Central Excise Act. Separate penalties under Rule 209A of the Central Excise Rules, 1944/Rule 26 of the Central Excise (No. 2) Rules, 2001/Rule 26 of the Central Excise Rules, 2002 were also proposed on M/s. KEP and Shri M. Joy Verghese, Managing Director of M/s. PEP and Managing Partner of M/s. KFP. 3. In their reply to the show-cause notice, M/s. PEP questioned the classification of the 2 products proposed by the department. They claimed classification of the Micro-cellular rubber sole sheets under SH 4008.11 attracting 'nil' rate of duty. In respect of Strap sheets, classification was claimed as parts of Hawai cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 2(a) of the Interpretative Rules, the item should be held classifiable as straps (part of Hawai chappal) under SH 6401.92. In this connection, reliance was placed on Bharath Enterprises v. Commissioner of Central Excise, Delhi-I [2002 (139) E.L.T. 321 (Tri-Del.)]. Learned Counsel submitted that the straps were manufactured and cleared in the form of sheets only for convenience of transportation and that, at the receiving end, these sheets were cut into straps and the straps, after some trimmings, were used in the manufacture of Hawai chappals. In this connection, he referred to the Supreme Court's judgment in Nanya Imports & Exports Enterprises v. Commissioner of Customs, Chennai [2006 (197) E.L.T. 154 (S.C)], wherein sheets of 'insoles' and 'midsoles' which were imported in rolled- up form for convenience of loading and transportation were held to be eligible for exemption under Notification No. 20/99-Cus. and the proposal of the Revenue for denying the benefit to the importer by treating the goods as films/sheetings was rejected. As regards rubber waste, it was submitted that its value of clearance was within SSI exemption limit and hence any duty was not liable to be deman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets under Heading 40.08, the plap could be classified only under the same heading. A continuous sheet of rubber, from which individual straps could be obtained only by the mechanical processes of cutting and trimming, could not be considered as a part of Hawai chappal. The "essential character" test under Interpretative Rule 2(a) would fail in respect of the product inasmuch as a bundle of straps in the form of a continuous sheet could not be said to have the essential character of an individual strap. Thus learned SDR argued that Strap plap was classifiable only as a sheet of vulcanised rubber (other than hard rubber) under Heading 40.08. She ruled out its classification under SH 4008.21 and SH 4008.22 and submitted that its appropriate place was under SH 4008.29. Learned SDR also contested the appellants' plea of limitation. The appellants never informed the department that they were manufacturing Sole sheets and Strap plaps of vulcanised rubber, both of which were dutiable. They did not choose to take registration from the department for such activity. The goods were manufactured and removed clandestinely. The process of manufacture of the goods came to the knowledge of the depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; Description of the goods No. heading No. 40.08 Plates, blocks, sheets, strip, rods, and profile shapes, of valcanised rubber other then hard rubber - Of cellular rubber 4008.11 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; and heels combined, for footwear 4008.22 - Plates, sheets and strip, for resoling or repairing or retreading rubber tyres 4008.29 - Other * * * * &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these sheets are classifiable under SH 4008.11 or SH 4016.11. Prima facie, sheets of micro-cellular rubber used in the manufacture of soles for footwear are classifiable under SH 4008.11. Learned SDR invoked Chapter Note 9 to say that the product would not be a 'sheet' falling within the ambit of Heading 40.08. It was submitted that vulcanisation of rubber had taken place in the initial stage of manufacture and that the vulcanised rubber sheets were "further-worked" in the later stages of the process of manufacture and, therefore, the expression "sheet" occurring in Heading No. 40.08 did not apply to the goods in question. It was contended that the goods could be classified only under Heading No.40.16. According to the assessee, the vulcanisation was complete only at the final stage of the process of manufacture and the vulcanised rubber sheets were only "surface-worked" and not "further-worked" On this basis, it was contended that the sole sheets were covered by Heading 40.08 and, since they were to be used in the manufacture of soles for footwear, they were correctly classifiable under SH 4008.11. We have already given an account of the process of manufacture of the subject good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment wanted the item to be classified under SH 4016.99 for the pre-Budget period. For the post-Budget period, the department was agreeable for classification of the item under SH 4008.21. When the dispute came up before the Tribunal, a majority of Members of the Bench held in favour of the department and classified the goods under SH 4016.99 for the pre-Budget period. The minority view was in favour of SH 4008.21. In the civil appeal filed by the assessee against the decision of the Tribunal, the Hon'ble Supreme Court endorsed the minority view. Their Lordships considered the method of manufacture of the product and proceeded to decide as to whether the process undergone by the extruded material in the final stage of manufacture was in the nature of "surface-working" or "further-working" in terms of Chapter Note 9. The different stages of manufacture considered by the court are reproduced below: "1. Natural/synthetic rubber is mixed with certain chemicals including black carbon with the help of a mixing mill. 2. The material so obtained is fed into extruder hopper. Extruder dye is of the required size and shape. 3. Extruder material is taken to water tank for cooling and over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, which is to be undertaken after surface working. As the manufacturing process claimed by the appellants had neither been contradicted nor shown to be wrong, it was held that the impugned goods were only 'surface-worked' and not "further worked" and could, therefore, be classified under sub-heading No. 4008.21. 23.We may notice that as per Rule 3(a) of the Interpretation Rules to Central Excise Tariff Act, 1985,"The heading which provides the most specific description shall be preferred to headings providing a more general description". 24. Accordingly, the Heading No. 40.08 provides more specific description to the impugned goods than Heading No. 40.16 and hence, the specific entry should overrule general entry. Moreover, the manufacturing process involved 'surface working' of the types described above and does not include 'further working'. This is evident from the interpretation of Note 9 of Chapter 40, that further working would envisage an activity other than those mentioned therein. Hence, on the basis of the aforesaid discussion, the impugned goods would be classified under sub-heading 4008.21 and not under sub-heading 4016.99 as claimed by the Department. 25. Thus, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we have noticed Note (11) under HSN Heading 40.16, which says that this heading includes "Plates, sheets and strip merely cut to non-rectangular shapes, and articles excluded from heading 40.08 because they have been milled, turned, assembled by glueing or sewing or otherwise worked." From this note, it is clear that milling, turning etc. are illustrations of further working, which, if done on a sheet of vulcanised rubber (other than hard rubber), would take the sheet out of Heading 40.08 and place it under Heading 40.16. The vulcanised rubber sole sheets under classification did not undergo any of such processes and, therefore, cannot be considered to have been "further worked" in terms of Chapter Note 9. 7. In the case of Anand Motors (supra) cited by SDR, certain articles of vulcanised rubber were classified under SH 4016.19 merely on the basis of Chemical Examiner's report (that "each sample is vulcanised rubber other than hard rubber") without applying Chapter Note 9. In Aryan Exporters' case, the Tribunal was simply following an earlier decision rendered in another party's case and did not state any ratio decidendi. In Raj Rubber Industries (supra), the precured tread rubbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained. The assessee has claimed classification of Strap sheet under SH 6401.92, which entry can be had from the following extract from the Tariff Schedule: Heading Sub Description of goods No. heading No. 64.01 &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; passing over the in-step but not even round the ankle) commercially known as hawai chappals, of materials other then leather. 6401.19 -- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or failing to be classified as complete or finished by virtue of this rule), presented unassembled or disassembled." According to the first part of the above Rule, where an incomplete or unfinished article has the essential character of the complete or finished article, it can be classified under the Tariff Heading covering the latter. In the present case, for classification of the plap as strap under 6401.92, it must be shown that it has the essential character of a strap. Even according to the appellants, by cutting/trimming activity, a plap would yield numerous individual straps. Therefore it will be erroneous to hold that a Strap sheet (Plap) has the essential character of a strap, complete and finished. A Strap sheet cannot be classified as individual straps on the "essential character" test. The factual position in the case of Bharat Enterprises (supra) was different. In that case, the question considered by the Tribunal was whether a semi-finished die had the essential character of a finished die. Learned Counsel s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not open to the department to invoke the larger period of limitation for demanding duty. M/s. PFP were aware of the fact that only cutting and trimming operations on a Strap sheet would yield individual straps to be used as parts of Hawai chappals and that the sheet as such was not usuable as a part of Hawai chappal. A plap as such being used as strap for Hawai chappal was not even in their dreams of legendary humans with mammoth feet! There was no room for doubt regarding the classification of this item. There was no question of this item being classified under SH 6401.92 as part of Hawai chappal. On the other hand, it was easily classifiable under SH 4008.29 as a sheet of vulcanised rubber (other than hard rubber), of non-cellular structure, used in the manufacture of straps. But, as it is on record, M/s. PEP chose to classify the product in discordance with the clear terms of the specific Tariff entry (SH 4008.29) and engaged themselves in the manufacture and clearance of the goods clandestinely without taking Central Excise registration or following other formalities under the Central Excise Act/Rules. Had they had a different inter pretation of the Tariff provisions under any ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
