Car mattings not classifiable as parts & accessories of motor vehicles. no need to apply common parlance/market test – SC
ABCAUS Case Law Citation:
ABCAUS 3305 (2020) (05) SC
Important case law relied upon by the parties:
CCE vs. Wood Craft Products Ltd. [(1995) 3 SCC 454]
Collector of Central Excise, Bombay-II vs. Sterling India [(2000) 115
Collector of Central Excise vs. Swaraj Mazda [(1993) 68 ELT 258].
Jyoti Carpet Industries vs. Commissioner of Central Excise, Jaipur-I [(2001) 132 ELT458]
Plasmac Machine Manufacturing Co. Pvt. Ltd. vs. Collector of Central Excise [1991 Supp.(1) SCC 57]
Dabur India Ltd. vs. Commissioner of Central Excise, Jamshedpur [(2005) 4 SCC
Commissioner of Central Excise vs. Wockhardt Life Sciences Limited [(2012) 5 SCC 585
In the instant case, the respondent assessee was engaged in the manufacture of textile floor coverings and car matting which the Excise Department referred to interchangeably as car mattings and car carpets.
The respondent, were clearing the goods declaring them to be goods against Heading “carpets and other textile floor coverings”. by paying effective rate of excise duty on goods under that entry. However, according to the Department, the goods was to be classified as “parts and accessories of motor vehicles”.
The respondent was issued show cause notice (SCN) as to why penalty not be imposed in terms of Section 38A of the Central Excise Act, 1944 read with Rule 25.
There were five categories of relevant motor vehicles, namely, (i) tractors (ii) motor vehicles for transport of ten or more persons, including the driver, (iii) motor cars and other motor vehicles principally designed for the transport of persons including station wagons and racing cars (iv)motor vehicles for transport of goods (v) special purpose motor vehicles, other than those principally designed for the transport of persons or goods.
The excise authorities wanted the car mattings to be treated is in the nature of a residuary item, under the heading “parts and accessories of motor vehicles” referred to as “other”.
The assessee explained their manufacturing process and claimed that argument that the heading adopted by them covered carpets and other textile floor coverings and they were manufacturing those items only but the explanation was rejected.
According to the Department, car mattings were suitable for use solely or principally with the vehicle and that were not excluded. Applying the market test, the commissioner concluded that if anybody asked for car matting in the market, the consumer would get a product which could only be used in a car, with fixed length and width.
However, the Tribunal accepted the explanation of the assessee and decided in favour of the assessee.
The matter traveled to Hon’ble Supreme Court.
Car mattings not classifiable as motor vehicles parts & accessories
The Hon’ble Supreme Court stated that “the common parlance test”, “marketability test”, “popular meaning test” are all tools for interpretation to arrive at a decision on proper classification of a tariff entry.
However, these tests are required to be applied if a particular tariff entry is capable of being classified in more than one heads.
The Hon’ble Supreme Court pointed out that in the instant dispute Chapter/Chapter note stipulates that carpets and other floor coverings would mean floor coverings in which textile materials serve as the exposed surface of the Article when in use. This feature of the car mats had not really been rejected by the excise authorities as untrue against the assertion to that effect made by the assessee.
The Revenue’s case was that the goods were manufactured in such a way that these can be used as accessories of cars. The Tribunal had found that though in common parlance the products involved may not be considered as carpets, in view of the wordings of the chapter, section notes, chapter notes and explanatory notes, the goods were classifiable under the heading adopted by the assessee
The Hon’ble Supreme Court concurred with the findings of the Tribunal and pointed out that Central Excise Tariff of India does not contain car mats as an independent tariff entry.
The Court stated that the HSN Explanatory Notes dealing with interpretation of the rules specifically exclude “tufted textile carpets, identifiable for use in motor cars” from the heading and place them under different heading.
The Hon’ble Supreme Court rejected the Revenue’s argument that the Explanatory Notes have persuasive value and stated that the level or quality of such persuasive value is very strong, as observed in its own judgments.
The Hon’ble Supreme Court noted that the main argument of the Revenue was that because the car mats are made specifically for cars and are used also in cars, they should be identified as parts and accessories. But going by that logic, textile carpets could not have been excluded from Parts and Accessories.
Further, the Tribunal on detailed analysis on various entries, Rules and Notes had found they fit the description of goods under chapter heading adopted by the assessee.
Accepting the findings of the Tribunal, the Hon’ble Supreme Court stated that once the goods was found to come within the ambit of that sub-heading, for the sole reason that they are exclusively made for cars and not for “home use”(in broad terms), those goods could not be transplanted to the residual entry.
The Hon’ble Supreme Court held that there was no necessity to import the “common parlance” test or any other similar device of construction for identifying the position of these goods against the relevant tariff entries.
Accordingly, the decision of the Tribunal was sustained and appeals were disposed of.
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