Case: C.C.E., Bhubaneswar-1 Vs. M/S. Champdany Industries Ltd

2. The respondent in these two appeals are manufacturers of carpets by interlacing yarns of three different types, namely, jute, cotton and polypropylene. It is the case of the respondent-company that in the carpets which it manufactures jute always predominates by weight over each of the other single textile material.3. In the case of M/s. Champdany Industries Limited, at an earlier stage of the proceedings an order was passed by the Commissioner (Appeals) on 27.06.1995, whereby the Commissioner (Appeals) remanded the matter to the original adjudicating authority to decide whether the carpets manufactured by M/s. Champdany Industries Limited have separate base fabric. The Commissioner found that the said question is technical in nature and in order to remove any doubt, matter was referred to an expert body like Jute Commissioner Office for its opinion.4. Pursuant to the said remand order, the Department drew samples of the carpets manufactured by the respondent and sent the same to the Jute Commissioners office. The Jute Commissioner got these samples tested by the expert body of the Jute Industry, namely, Indian Jute Industries Research Association and the report of the said association shows that jute predominates by weight over each other single textile material in the said carpets and the said carpets did not have any base fabric.5. In the show-cause notice, which has been issued in this case, these facts are admitted. In the adjudication order passed in this case by Assistant Commissioner of Central Excise and Customs, Bhubaneswar, this fact has also been noted and from the said adjudication it will appear that the jute content in those carpets is 51.45% in B.L. and 52% in S.M. Those B.L. and S.M. are the varieties of carpets manufactured by the respondent- company and in these two Civil Appeals, namely C.A No. 7075-7076 of 2005 we are concerned with those two varieties of carpets.6. Despite the said report, the Revenues case is that the surface of the carpet being entirely of polypropylene, the same cannot be classified as jute carpet.7. Apart from the aforesaid opinion of the expert, the Deputy Commissioner of Central Excise as well as Departments Chemical Examiner also visited the respondents factory and examined its process of manufacture and tested the samples drawn on the spot. The Departments Chemical Examiner also found that those carpets do not have any base fabric and the jute predominates by weight over each other single textile material and the percentage of jute was more than 50%. This also appears from the adjudication order of the Assistant Commissioner of Central Excise and Customs, Bhubaneswar.8. The Revenue even after accepting those reports issued a show-cause notice, inter alia, on the ground that the surface of the jute carpets was entirely of polypropylene and therefore, as per Note 1 of Chapter 57 of the First Schedule to the Central Excise Tariff Act, 1985 those carpets cannot be classified as jute carpets but are classifiable as polypropylene carpets. The said notice related to the period from December 1991 to May 1999.9. Respondent-company, however, disputed the said contention of the Revenue and an adjudication order was passed on 26.11.1999 by the Assistant Commissioner. In the said order, the Assistant Commissioner accepted the reports referred to hereinabove and also accepted the position that in those carpets jute predominates by weight over each other single textile material and those carpets do not have any base fabric. In spite of the aforesaid position, the Assistant Commissioner relying on Chapter Note 1 of Chapter 57 held that those carpets cannot be classified as jute carpets but they are polypropylene carpets.10. Against the said order dated 26.11.1999 the respondent-company filed an appeal before the Commissioner (Appeals) and the Commissioner (Appeals) by an order dated 13.03.2000 allowed the appeal. In the said order, the Commissioner (Appeals) held that the interpretation of the Assistant Commissioner of Chapter Note I of Chapter 57 was not correct and the Commissioner (Appeals) came to a conclusion that as per the Section Notes any product which contains two or more textile materials are to be classified as consisting of that textile material which predominates by weight over similar textile materials. It may be noted that following the classification order dated 26.11.1999 the Assistant Commissioner passed a quantification order dated 30.03.2000, but since the appeal of the respondent-company in respect of the classification order of Assistant Commissioner dated 26.11.1999 was allowed, the appeal against the quantification order was also allowed by the Commissioner (Appeals) on 25.08.2000 by following order dated 13.03.2000 in the classification proceedings.11. Against those orders dated 13.03.2000 and 25.08.2000 the Revenue filed two appeals before the Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as "the Tribunal"). Thereafter, the Tribunal by an order dated 26.09.2000 dismissed both the appeals filed by the Revenue.12. It may be noted in this connection that before the Honble Andhra Pradesh High Court petitions were filed in relation to classification at the stage of show-cause notice. The High Court of Andhra Pradesh interfered in those show-cause proceedings. As the Revenue filed their appeal against those show-cause proceedings, this Honble Court held by a judgment and order dated 05.05.2004 that the High Court ought not to interfere in matters of classification at the show- cause stage. Thus, the judgment of the High Court was set aside and the matter was remanded to the authority for adjudication. Thereafter, the Tribunal heard the matter afresh and dismissed the appeal of the Revenue by an order dated 05.04.2005. Against the said order of the Tribunal this appeal has been filed by the Revenue.The respondent in these two appeals are manufacturers of carpets by interlacing yarns of three different types, namely, jute, cotton and polypropylene. It is the case of the respondent-company that in the carpets which it manufactures jute always predominates by weight over each of the other single textile material.3. In the case of M/s. Champdany Industries Limited, at an earlier stage of the proceedings an order was passed by the Commissioner (Appeals) on 27.06.1995, whereby the Commissioner (Appeals) remanded the matter to the original adjudicating authority to decide whether the carpets manufactured by M/s. Champdany Industries Limited have separate base fabric. The Commissioner found that the said question is technical in nature and in order to remove any doubt, matter was referred to an expert body like Jute Commissioner Office for its opinion.4. Pursuant to the said remand order, the Department drew samples of the carpets manufactured by the respondent and sent the same to the Jute Commissioners office. The Jute Commissioner got these samples tested by the expert body of the Jute Industry, namely, Indian Jute Industries Research Association and the report of the said association shows that jute predominates by weight over each other single textile material in the said carpets and the said carpets did not have any base fabric.5. In the show-cause notice, which has been issued in this case, these facts are admitted. In the adjudication order passed in this case by Assistant Commissioner of Central Excise and Customs, Bhubaneswar, this fact has also been noted and from the said adjudication it will appear that the jute content in those carpets is 51.45% in B.L. and 52% in S.M. Those B.L. and S.M. are the varieties of carpets manufactured by the respondent- company and in these two Civil Appeals, namely C.A No. 7075-7076 of 2005 we are concerned with those two varieties of carpets.6. Despite the said report, the Revenues case is that the surface of the carpet being entirely of polypropylene, the same cannot be classified as jute carpet.7. Apart from the aforesaid opinion of the expert, the Deputy Commissioner of Central Excise as well as Departments Chemical Examiner also visited the respondents factory and examined its process of manufacture and tested the samples drawn on the spot. The Departments Chemical Examiner also found that those carpets do not have any base fabric and the jute predominates by weight over each other single textile material and the percentage of jute was more than 50%. This also appears from the adjudication order of the Assistant Commissioner of Central Excise and Customs, Bhubaneswar.8. The Revenue even after accepting those reports issued a show-cause notice, inter alia, on the ground that the surface of the jute carpets was entirely of polypropylene and therefore, as per Note 1 of Chapter 57 of the First Schedule to the Central Excise Tariff Act, 1985 those carpets cannot be classified as jute carpets but are classifiable as polypropylene carpets. The said notice related to the period from December 1991 to May 1999.9. Respondent-company, however, disputed the said contention of the Revenue and an adjudication order was passed on 26.11.1999 by the Assistant Commissioner. In the said order, the Assistant Commissioner accepted the reports referred to hereinabove and also accepted the position that in those carpets jute predominates by weight over each other single textile material and those carpets do not have any base fabric. In spite of the aforesaid position, the Assistant Commissioner relying on Chapter Note 1 of Chapter 57 held that those carpets cannot be classified as jute carpets but they are polypropylene carpets.10. Against the said order dated 26.11.1999 the respondent-company filed an appeal before the Commissioner (Appeals) and the Commissioner (Appeals) by an order dated 13.03.2000 allowed the appeal. In the said order, the Commissioner (Appeals) held that the interpretation of the Assistant Commissioner of Chapter Note I of Chapter 57 was not correct and the Commissioner (Appeals) came to a conclusion that as per the Section Notes any product which contains two or more textile materials are to be classified as consisting of that textile material which predominates by weight over similar textile materials. It may be noted that following the classification order dated 26.11.1999 the Assistant Commissioner passed a quantification order dated 30.03.2000, but since the appeal of the respondent-company in respect of the classification order of Assistant Commissioner dated 26.11.1999 was allowed, the appeal against the quantification order was also allowed by the Commissioner (Appeals) on 25.08.2000 by following order dated 13.03.2000 in the classification proceedings.11. Against those orders dated 13.03.2000 and 25.08.2000 the Revenue filed two appeals before the Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as "the Tribunal"). Thereafter, the Tribunal by an order dated 26.09.2000 dismissed both the appeals filed by the Revenue.12. It may be noted in this connection that before the Honble Andhra Pradesh High Court petitions were filed in relation to classification at the stage of show-cause notice. The High Court of Andhra Pradesh interfered in those show-cause proceedings. As the Revenue filed their appeal against those show-cause proceedings, this Honble Court held by a judgment and order dated 05.05.2004 that the High Court ought not to interfere in matters of classification at the show- cause stage. Thus, the judgment of the High Court was set aside and the matter was remanded to the authority for adjudication. Thereafter, the Tribunal heard the matter afresh and dismissed the appeal of the Revenue by an order dated 05.04.2005. Against the said order of the Tribunal this appeal has been filed by the

Reasoning:
37. Therefore, the mere fact that the surface of the carpet is polypropylene fiber, it does not cease to become jute carpet. So this Court is constrained to hold that this argument by the Revenue on the basis of surface or essentiality test is erroneous.