ORDER
S.L. Peeran, Member (J)
1. These are Revenue appeals against the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), Madras upholding the contention of the assessee that the products indicated below are classifiable only under sub-heading 8546.00 of the CET as they are insulation tapes:
1. Electrical Insulating tapes.
2. Polyester Composite Insulating paper.
3. Alkeyed/phenotic/epoxy treated insulating paper.
4. Varnished cotton cloth for electrical insulation.
5. Varnished glass fabric for electrical insulation.
6. Varnished silk fabric for electrical insulation.
2. The AC by show cause notice issued had intended to classify item No. 1 above under heading 8546.00 while items No. 2 & 3 to be classified under sub-heading 4823.19 and items 4, 5 & 6 under sub-heading 3920.31. There was already approved classification list and the show cause notice was issued to re-open the classification in the manner indicated above. However, no specific reasons were given for the re-classification. The assessee had challenged the proposal for re-classification and had contended that all the items in question have been used for electrical insulation purposes and the classification of the products has to be only under sub-heading 8546.00 and not under various other sub-heading as indicated by the AC. However, the claim of the assessee was rejected on the ground that the items in question are basically “insulating materials” and not insulators and only electrical insulators of any material are covered by sub-heading 8546.00 and not items having property of insulation only. On appeal the Commissioner (Appeals) set aside the AC’s order by holding as under in paras 5 & 6 of his order:
I have carefully considered the application and the submissions of the respondents. The tribunal in their decision cited supra has held that Industrial Laminates are Electrical Laminators having insulating properties. The contention of the respondent here is that all the items under dispute have insulating properties and therefore merit classification under heading 8546.00. I find some force in their contention, the tribunal before arriving at the above decision has taken note of the definitions contained in the “Electro Technical vocabulary fundamental definitions” which defines Insulating material and insulator. From the definitions it could be seen that both words can be used synonymously. The insulating property of the impugned goods has not at all been disputed by the applicant. Therefore, as held by the Tribunal, an article made from materials which have electrically insulating properties can be appropriately described as an insulator. Further, the end use of all these items are the same i.e. as Electrical insulators only in various Industries, which fact has also not been disputed by the applicant. The Tribunal in their above decision has also observed that according to Rule 3(a), “The heading which provides the most specific description shall be preferred to headings providing of a more general description” and even otherwise in a taxing statute where two interpretations are possible, the interpretation which is favourable to the assessee should be taken.
6. In view of the foregoing, I conclude that all the items under dispute should be rightly classifiable under tariff sub-heading 8546.00. I, therefore, reject the application.
3. While setting aside the order the Commissioner has taken into consideration the judgments of the Tribunal rendered in the case of CCE v. Metrowood Engg. Works .
4. The Revenue is aggrieved of the finding of the Commissioner (Appeals) that the assessees have claimed classification of the items in a totally different heading than the ones proposed in the show cause notice and considered by the authorities below. In respect of item No. 1, they contend that the classification under sub-heading 8546.00 depends upon the material used. In respect of items 2 & 3 they contend that it is required to be classified under sub-heading 4831.30, item No. 4 & 5 under sub-heading 5906.11 and 5906.99 respectively as against the Revenue’s claim under sub-heading 5903.19 and 5903.99. In respect of item No. 6, the classification sought by the Revenue is under sub-heading 7014.00. No reasons have been given explicitly as to why classification has to be under the respective heading except stating that the decision in the case of CCE v. Variety Fibres 1998 (37) ELT 422 classifying the impregnated fabrics under chapter heading 5906.90 in preference to heading 8546.00 should have been accepted for classification purpose.
5. We have heard Smt. Aruna N. Gupata, learned DR for the Revenue and Shri AKJ Nambiar, learned Counsel for the assessee.
6. The learned DR stressed the case of the department and relied upon the judgment cited by the Revenue in the grounds of appeal.
7. On the other hand the learned Advocate Shri AKJ Nambiar. filed detailed written submission and also the case laws to show that the issue is no longer res integra and the matter is covered by the following judgments:
1. CCE v. Bakelite Hylam Ltd. ;
2. CCE v. Johnson & Johnson Ltd., reported in 1998 (1012) ELT 510;
3. CE v Wood Polymers Ltd.. ;
4. Chetna Polycoats (P) Ltd. v. CCE. reported in 1988 (37) 253;
8. The learned Counsel also pointed out that the show cause notice did not give any reason for the re-classification of the items. He pointed out that the Commissioner (Appeals)’ finding that insulating material and insulators can be used synonymously and both are same for classification of the items under chapter sub-heading 8546.00 has not been controverted by any ground in the appeal memo. Further, there is no dispute with regard to the end-use of all the items as electrical insulators. He also pointed out that the entry in the tariff does not comtemplate distinction based on size or form of the insulators. He also relied upon Rule 2(a) of the interpretative rules to state that any reference under heading to goods shall be taken to include reference to those goods incomplete or unfinished provided that the incomplete or unfinished goods have the essential character of the complete or finished goods. It is his submission that the goods have electrical insulating property and also contain the essential character of insulators, besides going by the end-use and functional character of the article which also form the basis for classification. The department does not dispute the end-use of the item as electrical insulators and hence they are rightly classifiable only as electrical insulators. He also submitted that the end-use of an article should also form the basis for classification of the article in terms of the following judgments:
1. Indian Tool Manufacturers v. A.C. .
2. BPL Pharmaceuticals Ltd. v. CCE, .
3. CCE v. KWH Heliplastics Ltd. .
4. CC v. Kumudam Publications (P) Ltd. .
He further submitted that the items are known in the trade as electrical insulators and this is borne out by the literature and the ISI specifications pertaining to the items in question which clearly speak of these items as electrical insulators. He also relied upon the following judgments which lay down that the general use in the trade must form the basis for classification:
1. Atul Glass Industries Ltd. and Anr. v. CCE, ;
2. Matagraphs Pvt. Ltd. v. CCE ;
3. Chemicals and Fibres of India Ltd. v. VOL .
He further submitted that in this appeal, the department cannot seek a different classification than the one they have proposed in the show cause notice and approved earlier and the second proposal is illegal and on this ground he relied upon the following judgments:
1. C.C.E. v. Phonix Overseas (P) Ltd. ;
2. Senior Magnetics Ltd. v. CCE ;
3. Extrusion Process Ltd. v. CCE. .
9. On consideration of the submissions made, we are of the considered opinion that there is no illegality or infirmity in the order passed by the Commissioner (Appeals). The Revenue has not brought out reasons as to why each of the item is required to be classified other than the heading under sub-heading 8546.00 which heading refers to “electrical insulators of any material”. The AC in the Order-in-Original does not dispute the fact that the items are being used as electrical insulators. He however, held that the items are insulating material and not insulators per se. This reasoning has been set aside by the CCE (Appeals) holding that the term “electrical insulators and item having insulating properties are used synonimously in terms of the definition contained in “Electro Technical vocabulary fundamental definitions”. This finding has been arrived at after examining the technical literature. The Revenue has not produced any other evidence to controvert this finding. Further, even in terms of the interpretative Rule 2(a) an item which has acquired the essential characteristics of the final product of a complete or finished goods is required to be classified only under the main heading. In this case the goods are known in the market as electrical insulators and they satisfy the ISI specification. In this view of the matter, the classification of the item sunder heading 8546.00 is totally justified and is required to be confirmed.
10. Further we notice that the plea taken by the assessee that the department cannot again seek change of the classification in this appeal is justified and is required to be upheld in the light of the judgments cited which are noted above. Further we notice that the Tribunal in the case of CCE v. Glass Fibres and Allied Industries has held that glass fabrics impregnated/laminates are classifiable only under heading 85.46 and not under heading 70.14. It also held that Insulating fittings made from glass epoxy laminates are classifiable under heading 85.47 of the CETand not under 70.14. Likewise in the case of CCE v. Johnson and Johnson, , the Tribunal held that electrical insulating tapes made from polyester or glass fabric are classifiable under heading 85.46 of the CET and not under heading39.10 or 70.14. In the case of ChetnaPolycoats (P) Ltd. v. CCE, the Tribunal held that electrical insulation tapes are classifiable under heading 85.46 and not under heading 39.19 as self adhesive tapes. The Hon’ble Supreme Court in the case of CCE v. Wood Polymers Ltd. (supra) has held that paper based insulators are classifiable under heading 85.46 of the CET. In the case of CCE v. Bakelite Hylam Ltd. (supra), the Hon’ble Supreme Court decided the issue pertaining to composite articles made of plastics and synthetic resins combined with other material and held that they cannot be classified under item 15A(2) of the erstwhile CET with description “articles made of plastics, all sorts, but required to be classified under the residuary item 68 as those items were used as electrical insulators. This judgment also dealt with classification under the new tariff and overruled the classification both under chapter heading 48 and 39. In view of the ratio laid down in the judgments cited supra and in view of the finding arrived by us, there is no merit in the appeals and hence the appeals are rejected.
Pronounced in open Court on 5.1.99.