Important pointNo one single universal test can be applied for correct classification and there cannot be a static parameter for correct classification in the scheme of the Central Excise Tariff.

Headnote:(i) Central Excise, Act, 1944—Section 11A(1)—Central Excise Tariff Act, 1985—Chapter Headings 95.06, 94.01, 94.03, 39.22, 95.03—Toys—Seven articles, Activity Desks and Chairs, Fun Fliers, Play Table, Play Pool, Rockers, Slides and Swings—Classification of—Assessee is engaged in manufacture of toys—On 24.4.1987, a team of officers from Anti Evasion Branch visited the factory premises of assessee situated at Gurgaon—It was found that the assessee was manufacturing the above articles with the help of machines and which were being cleared without payment of duty—Show cause notice was issued alleging misdeclaration in the classification list by prefixing and suffixing each of the above items with the words ‘baby’ and ‘toys’ respectively—According to the department, the said prefix and suffix was inserted to each of the above articles to mislead the department into believing that each article was a toy—Department sought to recover duty for the period from 1.4.1992 to 28.2.1997 by invoking the proviso to Section 11A(1) of the 1944 Act—According to the department, the said items were classifiable under Chapter Headings 95.06, 94.01, 94.03 and 39.22, therefore, chargeable to duty—Whether the aforestated seven articles are ‘toys’ classifiable under Tariff Heading 95.03 as claimed by the assessee—(No)—The articles are more akin to furniture under Headings 94.01 and 94.03 than toys under Heading 95.03.
       Held : It has been held by this Court that no one single universal test can be applied for correct classification. There cannot be a static parameter for correct classification. Further, the scheme of the Central Excise Tariff is based on Harmonized System of Nomenclature (for short “HSN”) and the explanatory notes thereto. Therefore, HSN along with the explanatory notes provide a safe guide for interpretation of an Entry. Further, equal importance is required to be given to the Rules of Interpretation of the Excise Tariff. Under rule 3(a), it is provided that the heading which provides a specific description shall be preferred to a heading having a more general description. For example, in the case of “toys” referred to in the HSN Heading and the Tariff Heading, the description refers to reduced size model of an Article used by adults. This test helps us to understand the difference between “toys” and “furniture”. Lastly, it is important to bear in mind that functional utility, design, shape and predominant usage have also got to be taken into account while determining the classification of an item. The aforestated aids and assistance are more important than the names used in the trade or common parlance in the matter of correct classification. (Paras 7 to 11)
       The mere fact that an article is meant for exclusive use of children would not place it in the category of toys. The word “toys” is not defined. However, Tariff Heading 95.03 describes “toys” as reduced-size models and similar recreational. This tariff heading is identical to HSN Heading 95.03 which also refers to “toys” as reduced-size models. Both the headings describe “toys” as representing animals or non-human objects. They refer to toy musical instruments, apparatus, appliances etc. Heading 95.03 is a residuary item. It covers Doll houses and furniture. Under the explanatory notes to HSN Heading 95.03, reference is made to toys like sewing machines, musical instruments etc. distinguishable by their size and limited capacity from real sewing machine, musical instrument etc. Similarly, under the explanatory Note (B) to HSN Heading 95.03, reduced-size model includes models of aircraft, trains etc. which are reproductions of Articles. It is important to note that Section XX of the Central Excise Tariff Act, 1985 (hereinafter referred to for the sake of brevity as “the 1985 Act”) covers Chapters Nos. 94, 95 and 96 under the caption “Miscellaneous Manufactured Articles”. Chapter 94 deals with Furniture. Chapter Note 1(k) excludes toy furniture or toy lamps from Chapter 94. Chapter Note 2 refers to the articles of furniture, falling in Chapter 94, subject to the condition that they are for placing on the floor or ground. Tariff Heading 94.01 refers to Seats. Further, the HSN Heading 94.03, which is similar to Tariff Heading 94.03, refers to any movable article which can be placed on the floor and mainly used in dwelling house, schools, cafes etc. as furniture. It covers desks, chairs etc. Basically, toys, as indicated by HSN Heading, are miniature reproduction of the articles used by the adults, like, furniture, musical instruments etc. (Para 15)
       In the light of what is stated above, we are of the view hat play tables, activity desk etc., enumerated above, are more akin to furniture under Headings 94.01 and 94.03 than toys under Heading 95.03. (Para 16)
       Tariff Heading and HSN Heading 95.03 describe “toys” as reduced-size models. Toys are miniature replica of articles used by adults. Tariff Heading 95.06 is similar to HSN Heading 95.06. According to explanatory notes to HSN Heading 95.06, equipments for exercise etc. are parallel bars, rings, trapeze etc. The said note excludes toys under Heading 95.03. However, it covers swings, slides etc. used in the playground. Therefore, on a bare reading of these explanatory notes, we find that the articles in question are not equipments for general physical exercise. They are toys under Tariff Heading 95.03. (Para 26)
       Applying the above tests, we hold that the purpose of reduced size models of slides, swings etc. is amusement and not physical exercise. The Tribunal was, therefore, right in classifying these items under Tariff Heading 95.03. (Para 30)
       “Play Pool” cannot be said to be a toy under Tariff Heading 95.03. Further, in the explanatory notes to HSN Heading 39.22, it is clarified that “Baths” in the said heading would cover baby baths and camping toilets. Therefore, in our view, the department was right in classifying “Play Pool” as “Baths” under Heading 39.22. (Para 34)
       (ii) Central Excise Act, 1944—Section 11A(1)—Claim of duty—Exercise of extended period of limitation under Section 11A(1)—Show cause notice dated 4.11.1997 claiming duty from the assessee for the period commencing from 1992-93 to 28.2.1997—Tribunal holding that the assessee had filed its classification list giving exact description of goods, directed the department to drop proceedings—Classification list was filed as far back as on 22.10.1992—Said list was approved without enquiry by the department on the description of the product—Department did not call for the product catalogue during the aforestated period till February, 1997—There was no wilful suppression on part of assessee enabling the department to invoke extended period of limitation under the proviso to Section 11A(1) of the 1944 Act—Show cause notices dated 24.6.1997, 27.5.1998, 15.10.1998, 31.3.1998 and 30.9.1999 are in time as held by the Tribunal. (Paras 36 to 38)
       (iii) Words and Phrases—Words ‘toys’ and ‘equipments’—Meanings—Central Excise Tariff Act, 1985.
       Held : According to Concise Oxford Dictionary, “toy” is an object for a child to play with. It is a model or a miniature of something. According to Encyclopedia Americana, a “toy” is a trifle. It is a thing of little or no value. It is a play thing. It has no practical use. According to Oxford Classical Dictionary, a Doll’s house furniture is a “toy”. According to Random House Dictionary, a “toy” is an object. It is a small representation of something familiar to the child such as an animal an object, person etc. It is something diminutive. According to Collins Cobuild Dictionary, a “toy” is an object that the children play with, for example, a doll or a model car or an air-craft. (Paras 18 to 22)
       In Black’s Law Dictionary, the word “equipment” is defined to mean an article or implement used for a specific purpose or activity. In Random House Dictionary, an “equipment” is defined as an article used for gaining skill. According to Collins Cobuild Dictionary, “equipment” is a thing which is used for a particular purpose. (Paras 27 to 29)

Judgment

Kapadia, J.—The short question which arises for determination in these Civil Appeals filed by the assessee and by the department, respectively, under Section 35L(b) of the Central Excise Act, 1944, is - whether the assessee was right in classifying the following articles under Chapter Heading 95.03 and clearing the same without payment of duty. The said articles are Activity Desks and Chairs, Fun Fliers, Play Table, Play Pool, Rockers, Slides and Swings.

2. The assessee is engaged in the manufacture of toys. On 24th April, 1987, a team of officers from Anti Evasion Branch of the Delhi Commissionerate visited the factory premises of the assessee situate at Gurgaon, Haryana, when they found that the assessee was manufacturing the above articles with the help of machines and which were being cleared without payment of duty.

3. On 4th November, 1997, a show-cause notice was issued to the assessee alleging mis-declaration in the classification list by prefixing and suffixing each of the above items with the words “baby” and “toys” respectively. Consequently, “Activity Desks and Chairs” were described as “Baby Chair Toy” and “Baby Desk Toy”; Rockers were described as “Baby Rocker Toy”; Slides were described as “Baby Slide Toy”. According to the department, the said prefix and suffix was inserted to each of the above articles to mislead the department into believing that each article was a toy. Hence, the department sought to recover duty for the period from 1.4.1992 to 28.2.1997 by invoking the proviso to section 11A(1) of the Central Excise Act, 1944 (hereinafter referred to for the sake of brevity as “the 1944 Act”). According to the department, the said items were classifiable under Chapter Headings 95.06, 94.01, 94.03 and 39.22 and, therefore, chargeable to duty.

4. The basic question which arises for determination in these Civil Appeals is - whether the aforestated seven articles are “toys” classifiable under Tariff Heading 95.03 as claimed by the assessee?

5. For the sake of clarity, since classification of seven articles is in issue, we have divided this judgment into three categories.

6. Before dealing with the issue of classification, certain points are required to be clarified.

7. In the case of A. Nagaraju Brothers v. State of Andhra Pradesh reported in [1994 (72) ELT 801], it has been held by this Court that no one single universal test can be applied for correct classification. There cannot be a static parameter for correct classification.

8. Further, the scheme of the Central Excise Tariff is based on Harmonized System of Nomenclature (for short “HSN”) and the explanatory notes thereto. Therefore, HSN along with the explanatory notes provide a safe guide for interpretation of an Entry.

9. Further, equal importance is required to be given to the Rules of Interpretation of the Excise Tariff. Under rule 3(a), it is provided that the heading which provides a specific description shall be preferred to a heading having a more general description. For example, in the case of “toys” referred to in the HSN Heading and the Tariff Heading, the description refers to reduced size model of an Article used by adults. This test helps us to understand the difference between “toys” and “furniture”.

10. Lastly, it is important to bear in mind that functional utility, design, shape and predominant usage have also got to be taken into account while determining the classification of an item.

11. The aforestated aids and assistance are more important than the names used in the trade or common parlance in the matter of correct classification.

A) Classification Of Play Table, Tables, Activity Desks And Chairs.

12. The assessee has classified the above articles under Tariff Heading 95.03, whereas the revenue has classified the same under Tariff Headings 94.01 and 94.03, which read as follows:-

Heading Description of Goods Rate of No. Duty

94.01 Seats (other than those 20%

Click Here to Read the rest of this document

2005 Supreme(SC) 189

Important pointNo one single universal test can be ­applied for correct classification and there cannot be a static parameter for correct classification in the scheme of the Central ­Excise Tariff.

Important pointNo one single universal test can be applied for correct classification and there cannot be a static parameter for correct classification in the scheme of the Central Excise Tariff.