Important pointRubberised Tyre Cord Fabric would be classifiable under Heading 59.06 of Tariff Heading.

Headnote:(i) Central Excise Act, 1944—Tariff Heading 59.02 and 59.06 of 1985 Act—Dipped Tyre Cord Fabric—Whether was liable to be classified as High Tenacity Yarn in terms of Tariff Heading 59.02—Additional duty of excise demanded on ground that respondent assessee was manufacturing an excisable product—Whether assessee was liable to pay additional duty on Dipped Tyre Cord Fabric which was captively consumed in manufacture of tyres—Commissioner adjudication held that it was an independent product classifiable under Tariff 59.02 and additional duty was payable—Tribunal in appeal held that Dipped Tyre Cord Fabric was classifiable under Tariff Heading 59.06—Appeal—Rubber content of product would be main determinative test to decide—Note 4 of Chapter 59 indicated requisite parameters and Adjudicating Authority had not examined the matter in that light—There was no evidence of marketability of Dipped Tyre Cord Yarn—Basic question to be decided by Adjudicating Authority was whether product was an independent product in terms of manufacture and marketable—Matter remanded for fresh determination.
Held : It is the rubber content of the product, which is the main determinative test to decide whether Dipped Tyre Cord Fabric is classifiable under Chapter Heading 59.02 or 59.05 (now 59.06). To be categorized as Rubberised Tyre Cord Fabric, the product must have pre-dominance of rubber in proportion to fabric. It is for this reason that Note-4 of Chapter 59, quoted above, indicates the requisite parameters. Tariff Heading 59.02 is found in section XI of 1985 Act, which has caption “Textiles and Textile Articles”. The Heading of Chapter 59 refers to lamination and coating of Textile Fabrics. If the parameters mentioned in Note-4 of Chapter 59 are satisfied then the product in question would fall under Chapter Heading 59.06 which uses the expression “Rubberised Textile Fabrics”, failing which the product will fall under Chapter Heading 59.02. Similarly, one has to keep in mind the specifications given under Note-4 to section XI, which defines “High Tenacity Yarn”. If the product in question, namely, Dipped Tyre Cord Fabric comes within the specifications prescribed in Note-4 to section XI, then the product may fall under Chapter Heading 59.02. We may further point out that the classification of Dipped Tyre Cord Fabric was not in issue in any of the earlier judgments, referred to above. The Tribunal was wrong in equating Dipped Tyre Cord Fabric with Rubberised Tyre Cord Fabric. The judgments in Falcon Tyres (supra) and Vikrant Tyres (supra) dealt with classification of Rubberised Tyre Cord Fabric with reference to Chapter Heading 40.05 vis-a-vis Chapter Heading 59.05 (now 59.06). Therefore, the abovementioned prior judgments have no application to the controversy in hand. Lastly, the Tribunal has not examined the scope of HSN Heading 59.02. Moreover, the Adjudicating Authority has not examined the matter in the light of Note-4 to Chapter-59. It has not examined the problem in the context of Note-4 to section XI and there is no evidence of marketability of Dipped Tyre Cord Fabric. Although, the adjudication order is a well reasoned order, we want the Adjudicating Authority to also examine the matter in the light of the above Note-4 to Chapter 59 and Note-4 to section XI. We have also given an opportunity to the department to lead evidence, both on the process as well as on marketability. The basic question which the Adjudicating Authority is required to decide is – whether Dipped Tyre Cord Fabric is an independent product in terms of manufacture and marketability? (Para 12)
(ii) Central Excise Act, 1944—Tariff Heading 59.02 and 59.06—Rubberised Tyre Cord Fabric—Product is classifiable under Heading 59.06. (Para 15)

Judgment

Kapadia, J.—The main question which arises for determination in this set of Civil Appeals is – whether Dipped Nylon Tyre Cord Warp Sheet (hereinafter referred to as the “Dipped Tyre Cord Fabric”) is a High Tenacity Yarn in terms of Tariff Heading 59.02.

2. The facts giving rise to these civil appeals filed by the department under Section 35-L (b) of the Central Excise Act, 1944 are as follows:

M/s. M.R.F. Ltd., Goa are manufacturers of tyres excisable under chapter 40 of the Schedule to the Central Excise Tariff Act, 1985. M/s MRF Ltd. buys Grey Tyre Cord Warp Sheet (hereinafter referred to as the “Grey Tyre Cord Fabric”) which is passed through rollers into a tank containing Dip solution of Latex, which covers the said Grey Tyre Cord Fabric. The Dip solution consists of chemicals. After dipping, the Tyre Cord Fabric is heat stretched and lifted to a height of 15 ft. by small rollers through heat chambers and then brought down for calendering, which is the second stage of the process. Twelve show-cause notices were issued to M/s MRF Ltd. by the Commissioner of Central Excise, Goa under which additional duty of excise was demanded on the ground that the assessee was manufacturing an excisable product, namely, Dipped Tyre Cord Fabric, falling under Tariff Heading 59.02.

3. By common written reply, the assessee contended that they did not manufacture Dipped Tyre Cord Fabric; that they manufacture only tyres; that in the course of manufacture of tyres, they use Grey Tyre Cord Fabric as a reinforcing material and before it is so used, the Grey Tyre Cord Fabric is dipped in a solution of Latex and thereafter rubberised on both sides. It was submitted that no manufacture is involved as the Dipped Tyre Cord Fabric is stricky to touch. It was further submitted that the Dipped Tyre Cord Fabric was not marketable.

4. The main question before the Commissioner (Adjudication) was – whether the assessee was liable to pay additional excise duty on Dipped Tyre Cord Fabric, which was captively consumed in the manufacture of tyres. By order dated 31.10.1997, the Commissioner (Adjudication) found that Dipped Tyre Cord Fabric was neither Grey Tyre Cord Fabric nor a Rubberised Tyre Cord Fabric. According to the Commissioner, Dipped Tyre Cord Fabric was an independent product which came into existence out of a process incidental to the manufacture, namely, dipping. The Commissioner held that Tariff Heading 59.02 refers to Tyre Cord Fabric of High Tenacity Yarn of Nylon whereas Tariff Heading 59.06 refers to Rubberised Textile Fabric. It was observed in the impugned order that in order to be categorized as Rubberised Textile Fabric, the product should have a predominance of rubber in proportion to the fabric. According to the Commissioner, the process of dipping did not bring about a predominance of rubber in the product. According to the Commissioner, dipping was a process ancillary to manufacture. According to the Commissioner, dipping was a stage prior to rubberising. It was a stage prior to coating of compounded rubber on both sides of the tyre cord. Consequently, it was held that Dipped Tyre Cord Fabric was an independent product classifiable under Tariff Heading 59.02, on which additional excise duty was payable by the assessee. It was further held that Dipped Tyre Cord Fabric was capable of being marketed and, therefore, additional excise duty could be levied thereon.

5. Being aggrieved by the order dated 31.10.1997, M/s M.R.F. Ltd. went in appeal to Customs, Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as “the Tribunal”). At this stage, it may be noted that the assessee challenged similar orders passed by the Commissioner (Adjudication), Goa, dated 15.12.1997 and 20.2.1998 along with the above order dated 31.10.1997. The assessee also preferred appeals against the orders passed by the Commissioner of Central Excise (Adjudication), Chennai, on classification of Rubberised Nylon Tyre Cord Warp Sheet (hereinafter re

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