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Commissioner Of Central Excise, Hyderabad-I v. Charminar Non-Wovens Limited .
Factual and Procedural Background
The dispute concerns the correct tariff classification of non-woven carpets whose exposed surface is polypropylene but whose weight is predominantly jute. For clearances made between April 1996 and October 1996 the assessee classified the goods under Sub-Heading 5703.20 as “jute carpets” and paid a concessional 5% duty under Notification Nos. 29/95-CE and 16/96-CE. The Department issued a show-cause notice on 6-11-1996 alleging misclassification and violation of various Central Excise Rules.
The Additional Commissioner, after examining product samples and earlier departmental orders, dropped the proceedings on 29-11-2004. The Department’s appeal was rejected by the Commissioner (Appeals), Hyderabad, who upheld classification under 5703.20. The Tribunal likewise dismissed the Department’s further appeal, relying on its earlier decisions. The Revenue then appealed to the Supreme Court under Section 35-L of the Central Excise Act, 1944.
Legal Issues Presented
- Whether non-woven carpets with an exposed polypropylene surface but predominance of jute by weight are classifiable under Sub-Heading 5703.20 as “jute carpets” attracting concessional duty, or under Sub-Heading 5703.90 as “other carpets”.
Arguments of the Parties
Revenue’s Arguments
- The concessional rate under Sub-Heading 5703.20 applies only to carpets whose exposed surface is jute; because the surface here is polypropylene, the goods fall under 5703.90.
- Consequently, the assessee contravened Rules 9(1), 52-A, 173-B, 173-F and 173-G of the Central Excise Rules, 1944 by clearing the goods at 5% duty.
Respondent/Assessee’s Arguments
- The product “Charms Jute Floor Coverings” has predominance of jute by weight as confirmed by the Chemical Examiner’s report.
- The carpets are produced by needle-punching, are neither piled nor looped, and therefore satisfy the criteria adopted in earlier departmental orders classifying similar goods under 5703.20.
- The Collector (Appeals) had decided a similar dispute in the assessee’s favour in 1993 and the Department accepted that order for several years.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Uni Products (I) Ltd. v. CCE, (2006) 200 ELT 278 (Tri.) | Classification of non-woven needle-punched carpets predominated by jute under 5703.20 | Adjudicating authority relied on this decision to drop the show-cause notice. |
| CCE v. Champdany Industries Ltd., (2006) 193 ELT 295 (Tri.) | Similar classification issue in favour of assessee | The Tribunal applied this decision while rejecting the Revenue’s appeal. |
| CCE v. Champdany Industries Ltd., (2009) 9 SCC 466 | Supreme Court affirmation of Tribunal’s view in Champdany Industries | The present Bench followed the “same parity of reason” to reject identical Revenue contentions. |
| Sidharath Pharmaceuticals v. Collector of Central Excise, (2009) 16 SCC 561 / (2003) 157 ELT 502 | Supreme Court will not interfere with concurrent factual findings unless perverse or based on misreading of law | Cited to justify refusal to disturb concurrent findings of classification. |
| Auto Control (P) Ltd. v. Collector, (2009) 16 SCC 529 / (2006) 199 ELT A 127 | Same principle of non-interference with concurrent findings | Reinforced the Court’s stance against reopening factual determinations. |
Court's Reasoning and Analysis
The Supreme Court noted that the adjudicating authority, Commissioner (Appeals) and the Tribunal had all independently examined physical samples and documentary evidence and unanimously classified the goods under 5703.20. Such concurrent findings can be disturbed under Section 35-L only if they are patently perverse or rest on a manifest misreading of the tariff provisions—conditions the Court found absent.
The Court observed that the Tribunal’s earlier ruling in Champdany Industries, subsequently affirmed by the Supreme Court, dealt with an identical issue and rejected the very arguments now raised by the Revenue. Applying the doctrine of consistency, the Court held that the present appeal stood covered by that precedent.
Relying further on Sidharath Pharmaceuticals and Auto Control (P) Ltd., the Court underscored the limited scope of its appellate jurisdiction in classification matters and declined to re-appraise the factual matrix already evaluated at three subordinate levels.
Holding and Implications
APPEAL DISMISSED.
The dismissal affirms the classification of the respondent’s non-woven carpets under Sub-Heading 5703.20 and preserves the concessional 5% duty already extended. The decision reinforces the Supreme Court’s reluctance to interfere with concurrent factual findings in indirect-tax classification cases and does not establish a new legal principle beyond affirming existing precedent.
A.K Ganguly, J.— In this appeal filed by the Revenue, the issue is whether non-woven carpets having exposed surface of polypropylene are classifiable under Sub-Heading 5703.20 as “jute carpet” to justify concessional rate of duty or whether the said non-woven carpets are classifiable under Sub-Heading 5703.90 as “other carpets”.
2. It is not in dispute that the period which is involved in this case is between April 1996 to October 1996.
3. The show-cause notice was issued by the Revenue against the respondent on 6-11-1996 alleging the respondent's a case of misclassification of carpets under Sub-Heading 5703.20 and thereby misutilisation of the benefit of Notification No. 29/95-CE dated 16-3-1995 and Notification No. 16/96-CE dated 23-7-1996 and thus clearing the goods at concessional rate of duty of 5%. The Revenue's case is that such concessional rate of duty is available only for jute exposed surface floor coverings and, therefore, there has been contravention of Rules 9(1), 52-A, 173-B, 173-F and 173-G of the Central Excise Rules, 1944.
4. The case of the respondent is that it is a manufacturer of blankets, carpets and floor coverings falling under Chapters 63 and 57 of the Central Excise Tariff Act, 1985 (hereinafter “the said Act”) and its products known as “Charms Jute Floor Coverings”, are classifiable under Chapter Sub-Heading 5705.00 (before 26-7-1996) and then under Chapter Sub-Heading 5703.20 The respondent contested the aforesaid show-cause proceedings and therein an adjudication order dated 29-11-2004 was passed.
5. In passing the abovesaid adjudication order, the adjudicating authority returned several findings to the effect that in the past the issue involved in this case was decided in favour of the assessee by the Collector of Central Excise (Appeals) vide its order dated 16-7-1993. After the said order, no objection was raised by the Revenue and the assessee continued to discharge its obligation of duty liability in terms of the said order.
6. The adjudicating authority also came to a finding that the surface of the goods manufactured by the assessee is neither piled nor looped with ground fabric, rather the goods are manufactured by needle punching process. The aforesaid findings were arrived at after examining a piece of the sample of floor coverings which were produced in the course of hearing.
7. The adjudicating authority also came to a finding that in the goods manufactured by the assessee, predominance of jute content by weight has not been disputed in the show-cause notice. Rather, the chemical examiner's report dated 28-8-1991 clearly states the predominance of jute by weight in the product. Therefore, the adjudicating authority followed the decision of Cestat in Uni Products (I) Ltd. v. CCE (2006) 200 ELT 278 (Tri) and held that the process of manufacture of non-woven carpets which is followed in the case in hand is exactly the same which was followed in Uni Products (2006) 200 ELT 278 (Tri) and accordingly the show-cause proceedings were dropped against the assessee by an order dated 29-11-2004. Against the said order, an appeal was filed by the Revenue and the said appeal came to be decided by the Commissioner of Customs and Central Excise (Appeals), Hyderabad.
8. In the course of hearing of the appeal, the appellate authority noted why the adjudicating authority decided that the classification of the product in question should be under Sub-Heading 5703.20 The appellate authority also noted that the said carpet was physically examined by the adjudicating authority, and after doing so, the adjudicating authority came to a finding that floor covering was neither piled nor looped, rather the goods were manufactured by needle punching process. The adjudicating authority, therefore, came to a concurrent finding that the goods in question were correctly classified under Chapter Sub-Heading 5703.20 and are not to be classified under “other” under Chapter Sub-Heading 5703.90 The appellate authority also held that the decision of Cestat in Uni Products (2006) 200 ELT 278 (Tri) is applicable to the facts of the case. With the said finding, the appellate authority rejected the appeal of the Revenue.
9. When the Revenue further took the appeal up to the Tribunal, the Tribunal referred to its decision in CCE v. Champdany Industries Ltd. (2006) 193 ELT 295 (Tri) and held that the issue is covered by the decision in Champdany Industries (2006) 193 ELT 295 (Tri). The appeal filed against the same decision rendered in Champdany Industries (2006) 193 ELT 295 (Tri) has been dealt with by this Court in CCE v. Champdany Industries Ltd. (2009) 9 SCC 466 In that judgment, all the issues raised by the Revenue have been discussed in detail. After such detailed discussion, the contentions of the Revenue have been rejected. Following the same parity of reason, contentions of the Revenue, which are identical in this case, are also rejected.
10. Apart from that, it appears that in this matter the Revenue's case has been constantly rejected at all the three levels, namely, in the adjudication order passed by the Additional Commissioner of Central Excise, in the appellate order passed by the Commissioner (Appeals) and in the Tribunal. Such decisions have been rendered on the basis of the relevant materials and after analysing the evidence on record as also the provision of section notes and chapter notes.
11. Such concurrent findings by the lower authorities are interfered with by this Court in exercise of its jurisdiction under Section 35-L of the Central Excises and Salt Act, 1944 only when such findings are patently perverse or are based on manifest misreading of any legal provision. Here none of these situations is present. Reference in this connection may be made to the decision of Sidharath Pharmaceuticals v. CCE (2009) 16 SCC 561, (2003) 157 ELT 502. In that judgment, the learned Judges of this Court held that with the concurrent finding of facts reached by the lower authorities in classification on the basis of evidence and on analysis of relevant legal provision interference is not called for by this Court in exercise of its power under Section 35-L of the Central Excise Act, 1944.
12. Similarly, in Auto Control (P) Ltd. v. Collector (2009) 16 SCC 529, (2006) 199 ELT A 127 this Court held where there is a concurrent finding of fact by the authorities below in support of the respondent's claim for classification, normally this Court does not interfere with such concurrent findings.
13. In view of the aforesaid settled law, this Court does not find any merit in the appeal filed by the Revenue. The Revenue's appeal is thus dismissed. However, there is no order as to costs.
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