CASE NO.: Appeal (civil) 5345 of 2001 PETITIONER: M/s Pragati Silicons Pvt. Ltd RESPONDENT: Commissioner of Central Excise, Delhi DATE OF JUDGMENT: 26/04/2007 BENCH: ASHOK BHAN & Dalveer Bhandari JUDGMENT:
J U D G M E N T
BHAN, J.
The assessee-appellant (hereinafter referred to as
“the appellant”), being aggrieved by the Final Order
No.239/2001-B dated 17-04-2001 passed by the Custom,
Excise & Gold (Control) Appellate Tribunal (hereinafter
referred to as “the Tribunal”) in Appeal No.E/3322/2000-
B, has filed the present appeal under section 35L(b) of
the Central Excise Act, 1944 (hereinafter referred to as
“the Act”). The Tribunal by the impugned order has
rejected the appeal filed by the appellant seeking the
classification of “plastic name plates” under Chapter 87
as `parts and accessories’ of motor vehicles and instead
classified it as `other plastic products’ under Chapter
39.
FACTS
1. The appellant is a small-scale unit, manufacturing
plastic name plates for motor vehicles in accordance with
the specifications and designs supplied by the customers,
who are the vehicle manufacturers. The entire production of
the appellant is sold to the vehicle manufacturers alone.
2. Between 1986 and 1994, the classification lists filed
by the appellant claimed the classification of name plates
under headings 87.08 and 87.14 and the same were approved by
the Department from time to time. On 02-08-1994, a show
cause notice was issued by the Assistant Collector of
Central Excise, Ambala proposing to re-classify the name
plates under heading 39.26 as articles of plastics. The
notice was however subsequently dropped and an order-in-
original dated 08-11-1994 was passed stating that the
appropriate classification of the name plates was under
Chapter 87.
3. Subsequently, the Commissioner of Central Excise, New
Delhi exercising powers under section 35E of the Act
reviewed the above order and filed an appeal before the
Commissioner (Appeals). The Commissioner (Appeals) by the
order dated 31-10-2000 allowed the appeal of the Revenue and
classified the plastic name plates under heading 39.26.
Aggrieved by the order of the Commissioner (Appeals), the
appellant filed an appeal before the Tribunal, which was
rejected by the impugned order.
4. The Tribunal rejected the appeal of the appellant
primarily by recording the following findings:
a. It held that “a motor vehicle is a complete vehicle
without affixation of emblems or name plates” and that “it
cannot be treated as a part without which the motor vehicle
is not complete”;
b. It distinguished the case of Collector of Central
Excise, Calcutta v. Jay Engineering Works Ltd., Calcutta
[1989 Supp (1) SCC 128] stating that it examined name plates
as inputs and not as parts of the fan;
c. The fact that a name plate can be used only in respect
of the product whose name it carries does not make it a part
of the motor vehicle;
d. That Heading 39.26 specifically covered articles of
plastics and since it was not in dispute that the impugned
goods were made of plastics, they were classifiable only
under heading 39.26.
5. Thus, the essential question for consideration is:
Whether these `plastic name plates’ are to be classified
under headings 87.08 and 87.14 as `parts and accessories’ of
motor vehicles or under heading 39.26 as other articles of
plastics?
6. Before adverting to the submissions made by the
opposing Counsels for the parties in respect of the above
question, it is worthwhile to mention the competing headings
relevant to the present discussion.
COMPETING HEADINGS:
7. The relevant portions of heading 87.08 and 87.14 are
reproduced below for reference:
” 87.08 Parts and accessories of the motor
vehicles of heading Nos.87.01 to 87.05
87.14 Parts and accessories of vehicles of heading
Nos.87.11 to 87.13″
8. The relevant portions of heading 39.26 are reproduced
below for reference:
39.26 Other articles of plastics
ISSUES FOR DETERMINATION
9. Having laid out the facts and the relevant headings in
the present matter, we can now proceed to the legal issues
that we are required to decide upon. Based on the arguments
of the Counsels for the parties, the following issues arise
for determination:
a. Whether `plastic name plates’ are classifiable under
headings 87.08 and 87.14 by falling within the scope of term
`parts and accessories’ of motor vehicles;
b. Alternatively, even if they do fall within the scope of
`parts and accessories’ of motor vehicles, whether there is
any provision in the Explanatory Notes that specifically
excludes `plastic name plates’ from headings 87.08 and
87.14?
ISSUE NO.1
10. The first issue that we are required to examine is
whether `plastic name plates’ can be considered `parts and
accessories’ of motor vehicles.
11. The Tribunal has answered the above question in the
negative. Significantly, the Tribunal has only examined
whether the name plates can be considered `parts’ of motor
vehicles. It has not at all considered whether these name
plates can be considered `accessories’ of motor vehicles.
The relevant portion of the judgment of the Tribunal is
reproduced below:
According to Sarkar’s `Words and Phrases of
Excise & Customs’, Second Edition, part is
“an element of a sub-assembly, not normally
useful by itself and not amenable to further
disassembly for maintenance purpose”. In
common parlance parts are used in the
manufacture of the final product and without
which the final product cannot be conceived
of. A motor vehicle is a complete vehicle
without affixation of emblems or name plates
and we agree with the submissions of the
learned DR that it cannot be treated as a
part without which the motor vehicle is not
complete .. A name plate can certainly be
used only in respect of the product whose
name it carries but it does not make it a
part of the motor vehicle on this ground.
Heading 39.26 specifically covers articles of
plastics and as it is not in dispute that the
impugned goods have been made of plastics
they would be classifiable under heading
39.26 only.
[Emphasis supplied]
12. The submissions made by Mr. Radhakrishnan, Counsel for
the Revenue echo the position taken by the Tribunal above.
13. Counsel for the appellant however submits that the test
to determine whether the name plates are `parts and
accessories’ of the test according to Note 3 to Section XVII
of the Explanatory Notes in the Harmonized Commodity
Description and Coding System [hereinafter referred to as
“Explanatory Notes”], is the `sole and exclusive’ use.
Counsel for the appellant submits that the name plates are
solely and exclusively used for motor vehicles, since all
the name plates are sold to manufacturers of vehicles and
nothing enters the spare parts market for use elsewhere. He
further submits that the name plates are permanently affixed
to the vehicle from the assembly line itself. He also drew
our attention to two circulars of the Department [Chandigarh
Collectorate Trade Notice No.94-CE/90 dated 30-0-1990 and
Calcutta II Collectorate Trade Notice No.10/87 dated 19-02-
1987] where `plastic boxes’ and `helmet-locking devices’,
items which are according to him less necessary, are
directed to be considered `parts and accessories’ of motor
vehicles. Finally, he submits that the headings under
Chapter 87 should gain primacy as they are more specific
while the heading under Chapter 39 is residuary and more
general in nature. Thus, Counsel for the appellant has
challenged the decision of the Tribunal.
14. In the light of the rival submissions made by the
counsel for the parties before us, we are required to
determine whether the Tribunal has correctly held that
`plastic name plates’ do not fall within the purview of
headings 87.08 and 87.14. As far as these two headings are
concerned, it is possible to include two kinds of goods
therein – those which are either `parts’ of motor vehicles
or those which are `accessories’ of motor vehicles. While a
case can be made for the inclusion of name plates in Chapter
87 as `parts’ as well as `accessories’ of motor vehicles, we
are not examining the former category. Without going into
the question of whether name plates fall within the
definition of `parts’ of motor vehicles, for the present
purpose, we are restricting ourselves only to the
interpretation of the broader term, `accessories’. Thus,
regardless of whether name plates can be considered `parts’
of motor vehicles, we are determining whether at the very
least, name plates can be considered `accessories’ of motor
vehicles.
15. The term `accessory’ is defined in The New Collins
Concise Dictionary of the English Language (1982) as “a
supplementary part or object, as of a car, appliance, etc”.
Other definitions for the accessory are found in the
Advanced Law Lexicon (3rd edition, 2005) and include the
following:
“Something of secondary or subordinate
importance;
.
Something contributing in subordinate degree
to a general result or effect; an adjunct or
accompaniment;
.
Accessory is an article or device that adds
to convenience or effectiveness of, but is
not essential to, main machinery.”
16. This Court has considered and decided as to what the
meaning of the term `accessory’ is in a few earlier cases.
In Annapurna Carbon Industries Co. v. State of Andhra
Pradesh [(1976) 2 SCC 273], the Court was required to
examine whether “arc carbon” was an ‘accessory’ to cinema
projectors or other cinematographic equipment under item 4
of Ist Schedule to Andhra Pradesh General Sales Tax Act,
1957. Answering in the affirmative, the Court opined that:
We find that the term “accessories” is used
in the schedule to describe goods which may
have been manufactured for use as an aid or
addition. A sense in which the words
accessory is used given in Webster’s Third
New International Dictionary as follows:
“An object or device that is not
essential in itself but that adds to
the beauty, convenience, or
effectiveness of some-thing else”.
Other meanings given there are:
“supplementary or secondary to something of
greater or primary importance”: “additional”:
“any of several mechanical devices that
assist in operating or controlling the tone
resources of an organ”. “Accessories” are not
necessarily confined to particular machines
for which they may serve as aids. The same
item may be an accessory or more than one
kind of instrument. (Para10)It will be noticed that the entry we have to
interpret includes “parts” as well as
“accessories” which are required for use in
projectors or other cinematographic
equipment. We think that the Andhra Pradesh
High Court correctly held that the main use
of the arc carbons Under consideration was
duly proved to be that of production of
powerful light used in projectors in cinemas.
The fact that they can also be used for
search lights, signalling, stage lighting, or
where powerful lighting for photography or
other purposes may be required, could not
detract from the classification to which the
carbon arcs belong. That is determined by
their ordinary or commonly known purpose or
user. This, as already observed by us, is
evident from the fact that they are known as
cinema arc carbons” in the market. This
finding was enough, in our opinion, to
justify the view taken by the Andhra Pradesh
High Court that the goods under consideration
are covered by the relevant entry No. 4.
(Para11)
[Emphasis supplied]
17. The above decision was relied upon in the case of
Mehra Bros. v. The Joint Commercial Officer, Madras [(1991)
1 SCC 514]. The primary issue before the Court in this case
was whether `car seat covers’ could be considered `articles
adapted to use generally as parts and accessories of motor
vehicles’. The Court, holding that car seat covers and
upholstery were in fact accessories to motor vehicles,
observed as follows:
“In Black’s Law Dictionary, Fifth Edition at
p. 13 ‘accessory’ has been defined as
“anything which is joined to another thing as
an ornament, or to render it more perfect, or
which accompanies it, or is connected with it
as an incident, or as subordinate to it, or
which belongs to or with it, adjunct or
accompaniment, a thing of subordinate
importance. Aiding or contributing in
secondary way of assisting in or contributing
to as a subordinate”. (Para 3)
.
In our view the correct test would be whether
the article or articles in question would be
an adjunct or an accompaniment or an addition
for the convenient use of another part of the
vehicle or adds to the beauty, elegance or
comfort for the use of the motor vehicle or a
supplementary or secondary to the main or
primary importance. Whether an article or
part is an accessory cannot be decided with
reference to its necessity to its effective
use of the vehicle as a whole. General
adaptability may be relevant but may not by
itself be conclusive. Take for instance
Stereo or Air-conditioner designed and
manufactured for fitment in a motor car. It
would not be absolutely necessary or
generally adapted. But when they are fitted
to the vehicle, undoubtedly it would add
comfort or enjoyment in the use of the
vehicle. Another test may be whether a
particular article or articles or parts, can
be said to be available for sale in an
automobile market or shops or places of
manufacture; if the dealer says it is to be
available certainly such an article or part
would be manufactured or kept for sale only
as an accessory for the use in the motor
vehicle. Of course, this may not also be a
conclusive test but it is given only by way
of illustration. Undoubtedly some of the
parts like axle, steering, tyres, battery
etc. are absolutely necessary accessories for
the effective use of the motor vehicle. If
the test that each accessory must add to the
convenience or effectiveness of the use of
the car as a whole is given acceptance many a
part in the motor car by this process would
fall outside the ambit of accessories to the
motor car. That would not appear to be the
intention of the legislature… (Para 5)[Emphasis supplied]
18. The view taken regarding the term `accessory’ in the
above two cases has been reiterated in the cases of Union
Carbide India Ltd. v. State of AP [1995 Supp (2) SCC 267]
and Commissioner of Central Excise, Delhi v. Allied Air-
conditioners Corp. (Regd.) [(2006) 7 SCC 735].
19. The Court was also faced with similar circumstances in
the case of Jay Engineering (supra). In this case, the
Respondent was the manufacturer of electric fans, and
brought into its factory name plates under tariff item 68 of
the erstwhile Central Excise Tariff. The name plates were
affixed to the fans before marketing them. Here, the Court
emphasized on the necessity of name plates for the marketing
of the product. The Court observed:
“In those circumstances, in our opinion, the
Tribunal was right in arriving at the
conclusion that the nameplate was not a piece
of decoration. Without the nameplate, the
electric fans as such, could not be marketed;
and that the dealer was entitled to the
benefit of the notification No. 201/79-CE for
the purpose of obtaining pro forma credit.
Fans with name plates, have certain value
which the fans without the name plates, did
not have. If that be so, then the value added
for the accretion of nameplate was entitled
to pro forma credit in terms of the said
notification. It is true that an electric fan
may perform its essential functions without
affixation of the nameplate, but that is not
enough. Electric fans do not become
marketable products without affixation of
name plates. (Para 9)[Emphasis supplied]
20. It is evident therefore, that an `accessory’ by its
very definition is something supplementary or subordinate in
nature and need not be essential for the actual functioning
of the product. Applying the test laid down in Mehra Bros.
case (supra), it cannot be denied that name plates add to
the convenient use of the motor vehicle. Name plates serve
a very useful purpose inasmuch as it gives an identity to
the vehicle. Each vehicle comes with different brand name
and in different models having distinct features. The
manufacturers of different type of models of vehicles market
them under a name and the vehicles are recognized and
referred to by the name plate affixed on them. Name plates
convey to the consumers the distinct features it carries.
Undoubtedly they add effectiveness and value to the vehicle
and are at the very least accessories of the vehicle. Thus,
even if there was any difficulty in the inclusion of the
plastic name plates as `parts’ of the motor vehicles, they
would most certainly have been covered by the broader term
Qaccessory’. In this view of the matter, we are of the
opinion that the Tribunal has erroneously come to the
conclusion that `plastic name plates’ are not `parts and
accessories’ of motor vehicles for the purposes of headings
87.08 and 87.14.
ISSUE NO.2
21. The second issue before consideration is whether,
despite the inclusion of the plastic name plates within the
scope of the `parts and accessories’, certain other
provisions operate to remove or exclude plastic name plates
from Chapter 87.
22. This point was neither raised before nor decided by
the Tribunal although this point had been argued before the
authority in original as well as the Commissioner of
appeals. Both of them decided this point against the
appellant. Option with us is either to remit the case to
the Tribunal for a decision on this point or decide the same
ourselves as this point had been decided by the authorities
below. After hearing the Learned Counsel for the parties
and after applying our mind on this point we have formed the
opinion that to avoid the unnecessary delay and expense to
the parties it would be appropriate for us to decide the
point ourselves.
23. In this regard, it has been submitted by Counsel for
the Revenue that the Explanatory Notes in the Harmonized
Commodity Description and Coding System [hereinafter
referred to as “HSN”] to Section XVII (which includes
Chapter 87) make it clear that plastic name plates are
excluded from the scope of Chapter 87 and are therefore
required to be classified under the residuary provision in
Chapter 39.
24. Since the submission of the Revenue is based purely on
the HSN Explanatory Notes, it is essential to reproduce the
relevant parts of the HSN Explanatory Notes. The notes
below relevant headings, heading 87.08 and 87.14, state as
follows:
“This heading covers parts and accessories of
the motor vehicles of headings 87.01 to
87.05, provided the parts and accessories
fulfil both the following conditions:
(i) They must be identifiable as being suitable for use
solely or principally with the above-mentioned vehicles; and
(ii) They must not be excluded by the provisions of the
Notes to Section XVII (see the corresponding General
Explanatory Note).”
[Emphasis supplied]
An almost identical explanation exists under the Notes
to heading 87.14.
25. The effect of the above HSN Explanatory Notes is to
specifically exclude from the scope of these headings what
is excluded in the general notes to the entire Section
(Section XVII), of which Chapter 87 is a part. The General
Explanatory Note to Section XVII states as follows:
Section Notes.
.
2. – The expressions “parts” and “parts and
accessories” do not apply to the following
articles, whether or not they are
identifiable as for the goods of this
section:-
.
(b) Parts of general use, as defined in Note
2 to Section XV, of base metal (section XV),
or similar goods of plastics (Chapter 39)
3.- References in Chapters 86 to 88 to
“parts” or “accessories” do not apply to
parts or accessories which are not suitable
for use solely or principally with the
articles of those Chapters. A part or
accessory which answers to a description in
two or more of the headings of those Chapters
is to be classified under that heading which
corresponds to the principal use of that part
or accessory.
[Emphasis supplied]
Further explanation regarding Note 2 reads as follows:
(A) Parts and accessories excluded by Note
2 to Section XVII
.
(2) Parts of general use as defined in
Note 2 to Section XV, for example, .
number plates, nationality plates, etc.
(such goods of base metals fall in
Chapter 83, and similar goods of
plastics fall in Chapter 39).
26. Referring to Note 2 of Chapter XV,
Section Notes.
.
2.- Throughout the Nomenclature, the expression
“parts of general use” means:
.
(c) Articles of headings.83.10..
Finally, Heading 83.10 is entitled “SIGN PLATES, NAME
PLATES, ADDRESS PLATES AND SIMILAR PLATES., OF BASE
METAL.” and includes various kinds of name plates in
further sub-headings.
27. Based on the submissions made by Counsel for the
Revenue, the central question before us is: whether the
abovementioned Section Note 2(b) excludes plastic name
plates from the scope of Section XVII? Thus, we are
required to looking into the meaning and interpretation of
Section Note 2(b). The Counsel for the Revenue contends
that since Note 2 to Section XV defines “parts of general
use” as including name plates, sign plates, number plates,
etc., their plastic equivalents [by virtue of Note 2(b)]
will also get excluded from the scope of Chapter 87. Thus,
he submits that they ought to be classified under Chapter
39.
28. We however find it difficult to accept this submission
in the light of the language used in Note 2(b). Note 2(b)
excludes from the scope of Section XVII “Parts of general
use, as defined in Note 2 to Section XV, of base metal
(section XV), or similar goods of plastics (Chapter 39)”.
What we have to examine is the scope of the last part of the
Note. Admittedly, there are two ways of interpreting this
phrase. The interpretation suggested by the Revenue is to
read the exclusion of “similar goods of plastics”, in
synchrony with the exclusion that applies to the goods of
base metal. In this respect, he drew our attention to the
further explanation that is provided on Note 2(b), where
number plates are given as an example and it is further
provided that “such goods of base metals fall in Chapter 83,
and similar goods of plastics fall in Chapter 39”.
According to the Revenue, this makes it amply clear that the
“parts of general use” includes name plates of both, base
metal and plastic and therefore fall out of the scope of
Section XVII.
29. We are not impressed with this submission. It is true
that on first blush, it appears that if the base metal name
plates are excluded, so must similar plastic goods be
excluded. However, we do not think that this is the correct
position, primarily because of the reference made in Note
2(b) to Chapter 39. Undoubtedly, name plates of base metal
stand excluded from the scope of Section XVII by virtue of
being “parts of general use” as defined and specifically
mentioned in Chapter XV. Now, with respect to plastic name
plates, if the reference to Chapter 39 had not been made,
then there would be no controversy at all. In such a case,
all plastic products similar to those defined in Chapter XV
would be excluded, regardless of an omission to specifically
mention them within Chapter 39. In other words, without any
reference to Chapter 39 in Note 2(b), the only control on
the meaning of “similar goods of plastics” would be the
description of goods included within Chapter XV.
30. However, the minute a reference is made to Chapter 39,
it is the provisions in Chapter 39 that control the scope of
“similar goods of plastics”. Thus, when Note 2(b) refers to
similar goods of plastics as in Chapter 39, it must be
interpreted to mean similarly defined goods in Chapter 39.
And since no definition or reference exists in Chapter 39
regarding name plates, etc., we cannot find any exclusion
with respect to these goods from Chapter 87. For example,
when the exclusion regarding base metal name plates is made,
it is so because there exist specific and detailed headings
in that Chapter. But in the absence of such specific
headings in Chapter 39, we are unable to accept the
exclusion of the plastic name plates from Chapter 87 and
include it within a residuary provision in Chapter 39.
31. Thus, we are of the opinion that the language in Note
2(b) cannot be interpreted to exclude plastic name plates
from the scope of Section XVII.
CONCLUSION
32. In conclusion, since plastic name plates are `parts
and accessories’ of motor vehicles and since they are not
excluded from the Section XVII, the appropriate
classification is under headings 87.08 and 87.14.
33. For the reasons stated above, the appeal is allowed.
There shall be no order as to costs.