V.K. Agrawal, Member (T)
1. In this appeal, filed by M/s. Netlon India, the issue involved is whether the product manufactured by them is ‘Extruded Plastic Meshes/Nets’ classifiable under sub-heading 3926.90 of the Schedule to the Central Excise Tariff Act, as declared by them or the product is ‘Plastic Insect Screen’/Interior Screen and Fencing/Barriers classifiable under sub-headings 3925.30 and 3925.99 of the Tariff respectively.
2. Shri V. Lakshmikumaran, ld. Advocate, submitted that the Appellants manufacture plastic extruded nets/meshes which are commercially known as extruded plastics; that the net is obtained by the process of extrusion, having the perforation referred to as mesh sizes; that the size of the mesh can be increased to any size; that the diameter of the net can also be changed by changing the mandrel; that the extruded nets are mostly in roll form consisting of a length of 25 metres and can be put to various applications, such as a sieve or a screen, for decorative purposes, for covering a gutter hole; that the impugned products are used by Railways, manufacturer of fridges, in road making, in Green House, etc.; that however, for the purpose of fixing it on to window, further additional features are required like wooden frames, fixing and clamping mechanism, etc.; that they are clearing the goods in running length of 25 metres. The ld. Advocate, further, mentioned that the impugned goods were exempted from payment of duty under Tariff Item 15A(2) of the erstwhile Central Excise Tariff; that after introduction of New Tariff, these goods were classified under sub-heading 3922.90 and were exempted under Notification No. 132/86-C.E., dated 1-3-1986; that after amendment of Chapter 39 of the Tariff, the impugned goods were classified under sub-heading 3926.90 with effect from 10-2-1987 and were exempted under Notification Nos. 132/86, 53/86, etc.; that the Collector, Central Excise, under the impugned Order No. 5/94, dated 17-1-1994, has ordered that these products are ‘Insect Screens and Interior Screens’, classifiable under sub-heading 3925.30 and ‘fencing and similar barriers’, classifiable under sub-heading 3925.99 of the Tariff, has confirmed demand of excise duty of Rs. l,01,32,722.37P for the period March 1988 to 1990-91, imposed a penalty of Rs. 40 lakhs and confiscated land, building, etc., with an option to redeem the same on payment of fine of Rs. 10 lakhs.
3. The ld. Counsel submitted that the meshes are basic material out of which different articles can be manufactured depending on the requirements of the Customers; that the basic material cannot be considered as or compared with builders’ ware; that the extruded plastic meshes supplied in running length is subsequently cut into sizes and fabricated into insect screen, bags, etc., that even after such fabrication, it would remain only as a screen and is not part of structural element of Construction to be considered as a builders’ ware; that a curtain is never considered as a builders’ ware and accordingly the extruded plastic meshes either in roll form or after fabrication into insect screen cannot be considered as a shutter or blind. He also mentioned that Heading No. 39.25 of the Tariff read with Note 11 to Chapter 39 demonstrates that Heading No. 39.25 does not cover basic materials which are capable of being converted into any article; that Note 11 to Chapter 39 specifically provides that Heading 39.25 applies only to the ‘articles’; that it means that it does not cover a sheet of plastics or extruded mesh in running length, etc., which can be used to make any of articles listed in Note 11 . The ld. Counsel also submitted that the Collector, by applying Rule 2(a) of the Interpretative Rules, has held that extruded plastic meshes possess the essential characteristics of the article concerned; that Rule 2(a) is applicable only when the goods are unfinished and as extruded plastic meshes are complete and fully finished goods, Rule 2(a) cannot apply; that if such a reasoning is accepted, every raw material which is made into a finished product after necessary adaptation, fabrication, etc. could be classified as the final product itself; that as held in Rajasthan Synthetic Industries Ltd. v. CCE, 1989 (42) E.L.T. 24 (T), if the headings read in the light of the Section or Chapter Notes, are clearly determinative of the classification, the Rules for Interpretation cannot be invoked; that it was held in this case that hollow tubular HDPE fabrics, cut into desired lengths, with no further operation carried out thereon, cannot be equated to make up textile articles’. Reliance was also placed on the decision in Hindustan Packaging Co. Ltd. v. CCE, Vadodara, 1995 (75) E.L.T. 313 (T-LB). He contended that when Heading speaks of Article, Rule 2(a) of the Interpretative Rules cannot be applied; that a basic material which can be put to various uses cannot be classified with reference to anyone of the end uses.
4. The ld Advocate, further, mentioned that the classification opinion of HSN specifically classifies the extruded nets under sub-heading 3926.90; that this cannot be brushed aside by merely saying that in European Countries, shutters and blinds are used extensively and the use of insect screen may not be in vogue; that Delhi High Court has held in Manisha Pharma Plasto Pvt. Ltd. v. U.O.I., 1999 (112) E.L.T. 22 Pel.) that “the opinion of the Harmonised Systems Committee has lot of weight and should ordinarily be taken as bindings”; that the Ministry of Industry has also recognised the impugned goods as extruded plastic meshes/nets as they were given the licence for extruded plastic meshes only; that internationally also the products in question are known as extruded plastic meshes classifiable under Heading 39.26. He cited the classification in UK, and invoices of Netlon products outside India in support of his contention. He also mentioned that Customs Authorities have classified the product under Heading 39.26 only; that in Tenax Geosynthetics v. CC, New Delhi, 1995 (35) RLT 949, the Tribunal denied the exemption in respect of Extruded & Orientated Plastic nets under Notification No. 15/94-C.E. holding that these are not covered by the description ‘balconies, balustrades, fencing, gates and similar barriers falling under sub-heading 3925.99.’ He also relied upon the decision in Vareli Weaves Pvt. Ltd. v. U.O.I., 1996 (83) E.L.T. 255 (S.C.) wherein it was held that countervailing duty must be levied on goods in the state in which they are when they are imported & there was no warrant for the levy of CVD upon the basis that, subsequent to the process of texturising the Poy that was imported would have the denie-rage mentioned in clause (iii). He further contended that extended period of limitation is not invocable as it is not disputed that they had filed intimation to the Superintendent before commencing production, under their letter dated 21-3-1985; that detailed process of manufacture was also given in that letter; that subsequently they had periodically filed declarations declaring the impugned product as ‘extruded plastic meshes of different sizes’ along with process of manufacture; that these declarations were duly acknowledged by the Superintendent from time to time; that the contention of the Collector that information was given to a very junior officer who was not competent to decide classification is not convincing as the declarations were to be filed with the Superintendent only : that non-giving of end-use applications cannot be a ground to hold that there was suppression or mis-declaration. Finally the ld. Counsel submitted that in terms of Section 4(4)(d)(ii) of the Central Excise Act, the value is to be arrived at after excluding the duty payable from the price; that freight and insurance incurred by them have also to be excluded in arriving at the assessable value & the benefit of Modvat credit is also to be extended to them; that no penalty and redemption fine in lieu of confiscation is imposable as there was no misdeclaration or suppression and they had not acted mala fidely.
5. Countering the arguments, Shri K. Srivastava, ld. SDR, submitted that the Collector has confirmed the demand of excise duty only in respect of insect screen and barriers and no duty has been charged on goods which were not builders’ ware; that Collector has referred to the description of the impugned goods mentioned by the Appellants in the invoices issued by them; that they had mentioned the description of the goods in question as ‘Insect Screen, Perifencing, VIP mesh, anti-bird net, shading net, CL fencing and duty has been demanded in respect of clearances of such goods. The ld. DR also produced some invoices in support of his contention and submitted that Rule 2(a) of the Interpretative Rules is attracted in the present matter as Chapter Note, description of Heading were not helpful in determining the classification of the impugned goods; that Insect screen/Interior screens and Fencing/ Similar Barriers possess the essential characteristics of the articles; that it is not necessary that screens should be fixed on the windows etc. with the help of Velcro tapes. He mentioned that the ratio in the case of Rajasthan Synthetic Industries, supra, .is not applicable to the facts of the present matter as in that case ‘Made up’ was defined in Note 5 to Section XI; that similarly in Hindustan Packaging Co., supra, the question was regarding classification of aluminium foil backed with Polyethylene and there was a Note in Chapter 76 and in view of the availability of Chapter Notes, it was held in these two cases that classification cannot be determined by invoking Rule 2(a) of the Interpretative Rules; that in present matter Note 11 to Chapter 39 does not provide any definition and clauses (e) and (f) of Note only mention the expressions ‘similar barriers’ and ‘similar articles’, that Note 11 does not specify the coverage of the articles mentioned in clauses (e) and (f) and as such recourse has to be made to Interpretative Rules. The ld. SDR, further, mentioned that mere cutting of running length to specific size and fixing the product on Windows, etc., will not amount to manufacture as these are minor processes, which do not bring into existence a new Commodity. He also contended that test of Common parlance is also satisfied as the Appellants themselves have described the products as Insect screen/Peri meter screen, etc. He relied upon the decision in the case of Atul Glass Industries Ltd. v. CCE, 1986 (25) E.L.T. 473 wherein it was held that the Test Commonality applied is how the product is identified by the people dealing with or using the products. The identity of a product is associated with its primary function. He also relied upon the decision of the Supreme Court in the case of Nat Steel Equipment Pvt. Ltd., v. CCE, 1988 (34) E.L.T. 8 (S.C.) wherein it was held that the expression ‘similar’ “does not mean identical but it means corresponding to or resembling to in many respects; somewhat like; or having a general likeness. The statute does not contemplate that goods classed under the words of ‘similar description’ shall be in all respect the same.” He argued that the Fencing and similar barriers, without accessories, would merit classification under sub-heading 3925.99 of the Tariff. He also relied upon the decision in the case of CCE, Bombay v. K.W.H. Heliplastics Ltd., 1998 (97) E.L.T. 385 (S.C) wherein it was held that ‘the relationship of goods with particular heading depends upon the description, purpose and use of the goods.’ In this case, the Apex Court classified the plastic Chemical tanks and Vats under sub-heading 3925.10 applying Note 11 to Chapter 39 as the tanks were capable of being used for water storage.
6. The Ld. SDR also submitted that the decision in the case of Manisha Pharma Plasto, supra, is not applicable as in that case the Central Board of Excise & Customs itself had referred the matter regarding correct classification of ‘Prickly Heat’ to the Customs Co-operative Council for its opinion and the Department itself was also classifying the said product as medicament; that in the present matter the complete background of the reference made to the Council is neither available nor known. The ld. SDR finally submitted that the demand is not hit by time-limit as the Appellants had never disclosed to the Department as to how the goods were accepted by the Trade or how they were describing the goods in the invoice; that only the process of manufacture was disclosed but how the goods were marketed by them was withheld from the Department and as such provisions of proviso to Section 11A(1) of the Central Excise Act are invocable.
7. In reply the ld. Advocate submitted that the impugned products are not fabricated item whereas Note ll(e) will apply to the fabricated products; that to say that mesh is a fabricated item is doing violence to the language. In support he referred to Heading 73.08, which applies to fabricated items of iron or steel whereas grills, netting and fencing of iron or steel fall under Heading 73.14 of the Tariff. He also mentioned that the same material is used for fabricating all types of goods. He also mentioned that as per HSN Explanatory Notes, Heading 39.25 “applies only to the articles mentioned in Note 11 to this Chapter.”
8. We have considered the submissions of both the sides. The Appellants are manufacturing extruded plastic meshes, which is cleared by them in running length of 25 metres. The Revenue has considered the impugned product as Builders’ Ware by invoking Rule 2(a) of the Interpretative Rules. The Revenue has also relied upon the invoices issued by the Appellants in which the products have been described as Insect Screen, VIP Mesh, Shopping Bag Mesh, etc. No evidence has, however, been adduced by the Department that the Appellants had not cleared the impugned products in running length and also to prove that the product was in the form of ‘Insect Screen’ for a particular window or door or for specific fencing/similar barriers. The Appellants have always contended that the extruded mesh has to be further cut into sizes and fabricated for ultimate intended use. The products as cleared by the Appellants is a final product by itself and is recognised in the market as separate article in the trade. It cannot be said that the extruded mesh in running length has acquired the essential character of the complete or finished goods as the same can be used for variety of purposes. The Appellate Tribunal in Shivaji Works Ltd. v. CCE, Aurangabad, 1994 (69) E.L.T. 674 (T) has held that “Rule 2(a) does not permit us to conclude that when an article squarely falls under a particular Tariff heading it can be made to fall under another heading by invoking the concept of essential character. This is against the plain reading of Rule 2(a).” As the extruded plastic mesh in running length is by itself a finished product and it is not falling within any of the clauses of Note 11 to Chapter 39, it cannot be made to fall under sub-heading 3925.90 of the Tariff by invoking Rule 2(a) as the product can be put to various uses after cutting in different lengths etc. Further Rule 1 of Interpretative Rules clearly lays down that for legal purposes classification shall be determined according to the terms of the heading and any relative Section or Chapter Notes. Only in case heading or Notes do not otherwise require, classification shall be determined according to the provisions in the said Interpretative Rules. Thus Rules for Interpretation are applicable only when the classification of the product cannot be determined in accordance with Headings or Chapter/Section Notes. This was the view expressed by the Tribunal in Rajasthan Synthetic Industries Ltd., as well as Hindustan Packaging Co. cases. No doubt in both the cases Section/Chapter Notes were there to help in determining the classification. In this case also the extended Plastic mesh is classifiable under sub-heading 3926.90. The facts in K.W.H. Heliplastics Ltd., relied upon by ld. DR are completely different from the facts in present matter as the issue in the said case was about classification of tanks/vats which are specifically mentioned in sub-heading 3925.10 which are recognised as builders’ ware as was evident from Respondents admission that they were selling tanks/vats to the Govt. Department etc. for purpose of Water Storage and supply. We also find substance in the contention of the ld. Advocate for the Appellants that duty has to be levied on goods in the stage in which they are cleared and not on the basis of subsequent use. We, therefore, hold that the impugned products are appropriately classifiable under sub-heading 3926.90 of CETA. This view is also strengthened by the classification opinion given by the HSN. According to this opinion, extruded nets of plastics, tubular or flat is classifiable under Heading 3926.90. This opinion cannot be discarded by merely saying that the background of the reference made to HSN is not available. As observed by the Delhi High Court in Manisha Pharma Plasto case, supra, the opinion and recommendation of the Harmonised system Committee cannot be brushed aside. Harmonised System Committees is the high powered body to ascertain International practice of classification of a particular product and recommends to the member-nations the most appropriate classification of the product under HSN. Simply because the matter in Manisha Pharma case was referred by the CBEC to Harmonised System Committee, the opinion given in other cases by the Committee cannot be said to be not applicable in India especially when the Central Excise Tariff has been structured on HSN itself.
8. The show cause notice was issued on 5-1-1993 for demanding duty for the period from 1-3-1989 to 31-3-1991. The entire demand is also hit by time-limit specified in Section 11A(1) of the Central Excise Act. It is not disputed by the Revenue that the Appellants had intimated the process of manufacture to the Range Superintendent in March 1985 and filed subsequently the declarations. These declarations and intimation cannot be discarded by merely saying that Superintendent is a junior functionary. The Range is the basic formation of the Central Excise Department to deal with the Assessee and the declarations were to be filed with the Range only. The Appellants were not required to intimate to the Department about various uses to which their product can be put to. Accordingly we allow the appeal both on merit and time-limit