Case Note & Summary
The appeals arose from an order of the Customs, Excise and Gold (Control) Appellate Tribunal dated 14 September 1989 which dismissed the appellants' appeals against classification of PVC impregnated cotton conveyor belting and PVC impregnated flame resistant colliery conveyor belting under Tariff Entries 3920.11 or 3920.12 of the Central Excise Tariff Act, 1985. The appellants, manufacturers of conveyor belting, contended that their products were classifiable under Tariff Heading 39.22.90 as other articles of plastics, while the Excise authorities sought classification under Tariff Entries 3920.11 or 3920.12, depending on whether the belting was rigid or flexible strips. The period in dispute was December 1986 to June 1987, during which Tariff Heading 39.20 covered plates, sheets, film, foil and strip of plastics and Tariff Heading 39.22 covered other articles of plastics. With effect from 10 February 1987, Tariff Heading 39.22 was renumbered as 39.26. The Central Excise Tariff Act contained Rules for Interpretation, and Rule 1 required classification to be determined according to the terms of the headings and any relative Section or Chapter Notes. Chapter Note 11 to Chapter 39 specifically stated that Heading 39.22 applied to transmission, conveyor or elevator belts, endless or cut-to-length and joined end to end, or fitted with fasteners. The Explanatory Note to Heading 39.26 in the Harmonised Coding System also included conveyor belts. The Tribunal had relied on the dictionary meaning of 'strip' and on the Supreme Court decision in Geep Flashlight Industries Ltd. v. Union of India, which held that articles made of plastic meant articles made wholly of plastic. The Tribunal observed from customer orders that the belting ranged from 100 to 400 metres in length, 600 to 1200 millimetres in width and 7 to 9.5 millimetres in thickness, and concluded it was a long narrow piece, thus a strip. The appellants argued before the Supreme Court that Rule 1 and Chapter Note 11 mandated classification under Heading 39.22.90 and later 39.26.90; they also contended that belting dimensions could not be called strip. The Excise authorities initially argued for classification under Tariff Heading 59.08, but the Supreme Court noted that a show cause notice dated 2 September 1986 proposing Heading 59.08 had been challenged in the Madras High Court, which granted stay; subsequently the authorities stated before the High Court that they would classify under Tariff Entries 3920.11 or 3920.12, and the High Court dismissed the writ petition as unnecessary. For the second appellant, the authorities had never sought classification under Heading 59.08. The Supreme Court held that the Excise authorities could not change their stand and argue Heading 59.08. The Court further held that the Tribunal's reliance on Geep Flashlight was misplaced because that case did not require reading the tariff item with Chapter Notes. The Court also rejected the finding that belting was a strip, stating that an article over 100 metres long and only up to 1200 millimetres wide could not be described as a strip. Applying Rule 1 and Chapter Note 11, the Court directed classification under Tariff Heading 39.22.90 for the period December 1986 to 9 February 1987 and under Tariff Heading 39.26.90 for the period 10 February 1987 to June 1987. The appeals were allowed, the impugned order set aside, and costs awarded to the appellants.
Headnote
A) Central Excise Tariff - Classification of Goods - PVC Conveyor Belting - Central Excise Tariff Act, 1985, Tariff Headings 39.20, 39.22, 39.26, Rule 1, Chapter Note 11 - The Tribunal had classified PVC impregnated cotton conveyor belting and flame resistant colliery conveyor belting as 'strip' under Tariff Entries 3920.11 or 3920.12; the Supreme Court held that Chapter Note 11 expressly applied Heading 39.22 to conveyor belts and the Explanatory Note to Heading 39.26 in the Harmonised Coding System included conveyor belts; as belting dimensions excluded 'strip', the correct classification was under Tariff Heading 39.22.90 for December 1986 to 9 February 1987 and 39.26.90 for 10 February 1987 to June 1987 (Paras 1-16). B) Central Excise Tariff - Interpretation of Tariff Schedule - Rule 1 of Rules for Interpretation - Central Excise Tariff Act, 1985, Rule 1, Rule 3, Chapter Note 11 - Legal classification must be determined according to the terms of the headings and any relative Section or Chapter Notes; dictionary meaning of 'strip' could not override specific Chapter Note 11 which included conveyor belts under Heading 39.22; the tariff schedule was based on Harmonised Coding System, so Explanatory Notes were a permissible guide; Held that the Tribunal erred in relying solely on the dictionary meaning and in applying Geep Flashlight Industries Ltd. which did not involve Chapter Notes (Paras 4, 9, 15). C) Central Excise - Estoppel or Concession - Change of Classification Stand - Central Excise Tariff Act, 1985, Tariff Heading 59.08 - Excise authorities had issued a show cause notice proposing classification under Tariff Heading 59.08, which was challenged in the Madras High Court; before the High Court, the authorities stated that they would classify the goods under Tariff Entries 3920.11 or 3920.12 and the High Court dismissed the writ petition as unnecessary; Held that the authorities could not subsequently argue classification under Tariff Heading 59.08 either for the first appellant or for the second appellant before the Supreme Court (Paras 10-13). D) Central Excise Tariff - Meaning of 'Strip' - Tariff Entries 3920.11 and 3920.12 - Central Excise Tariff Act, 1985, Tariff Heading 39.20 - Belting in rolls of 100 to 400 metres length, 600 to 1200 millimetres width and 7 to 9.5 millimetres thickness could not be described as 'strip'; therefore Tariff Entries 3920.11 and 3920.12 were not applicable; Held that classification under those entries was unsustainable (Paras 7, 15). E) Costs - Award of Costs - Supreme Court Rules, 1966, Order XLI - The appeals succeeded and the judgment and order under appeal were set aside; respondents directed to classify the conveyor belts under Tariff Heading 39.22.90 and 39.26.90 for respective periods and to pay costs to the appellants (Paras 16-17).
Issue of Consideration
Whether PVC impregnated cotton conveyor belting and PVC impregnated flame resistant colliery conveyor belting are classifiable under Tariff Heading 39.22.90 and 39.26.90 as other articles of plastics, or under Tariff Entries 3920.11 or 3920.12 as rigid or flexible strips; whether the Excise authorities can argue classification under Tariff Heading 59.08 after conceding before the Madras High Court that classification would be under Tariff Entries 3920.11 or 3920.12
Final Decision
The appeals succeeded. The judgment and order of the Customs, Excise and Gold (Control) Appellate Tribunal was set aside. The respondents were directed to classify the appellants' conveyor belts under Tariff Heading 39.22.90 for the period December 1986 to 9 February 1987 and under Tariff Heading 39.26.90 for the period 10 February 1987 to June 1987. The respondents were also directed to pay costs of the appeals to the appellants.
Law Points
- Classification under Central Excise Tariff Act
- 1985 must be determined according to terms of headings and relative Section or Chapter Notes
- Chapter Note 11 expressly applied Tariff Heading 39.22 to conveyor belts
- for later period Explanatory Note to Tariff Heading 39.26 includes conveyor belts
- an article over 100 metres in length and up to 1200 millimetres in width cannot be described as 'strip'
- concession made before High Court by Excise authorities precludes a different stand
- Geep Flashlight Industries Ltd. case inapplicable because it did not involve Chapter Notes
