- (1.) 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:- 2.1. 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 M. R. F. 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 M. R. F. 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. 02.2. 2. 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 sticky to touch. It was further submitted that the dipped Tyre Cord Fabric was not marketable. 2.3. 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 not 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. 2.4. 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. 5.1998 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 (here inafter referred to as Rubberised Tyre Cord fabric) , which will be dealt with separately by us. 2.5. By impugned judgment dated 20. 7.1998, the Tribunal held that Dipped tyre Cord Fabric was classifiable under tariff Heading 59. 05 (now 59. 06). The Tribunal equated Rubberised Tyre Cord Fabric with Dipped Tyre Cord Fabric and placing reliance on the judgments in Falcon tyres Limited v. Collector of Central excise, Bangalore and Vikrant Tyres limited v. Collector of Central Excise, bangalore, allowed the assessee's appeals, holding Rubberised Dipped Tyre cord Fabric as a product falling under Tariff heading 59. 05 (now 59. 06). 2.6. Being aggrieved, the department has come to this Court against the three orders passed by the Commissioner, Goa dated 20. 2.1998, 31.10. 1997 and 15.12.1997.
(3.) Mr. R. Mohan, learned Additional Solicitor general submitted that Grey Tyre Cord fabric (base fabric) after dipping was clas sifiable under Tariff Heading 59. 02 as processed Tyre Fabric. He further submitted that in terms of Tariff Heading 59. 06, Rubberised Textile Fabric other than those falling under Tariff Heading 59. 02 alone would fall under Heading 59. 06. He submitted that because of this exclusion, Dipped Tyre Cord Fabric would fall under Tariff Heading 59. 02 which referred to Tyre Cord Fabrics of High Tenacity yarn. In this connection, learned counsel for the department placed reliance on the description of the product under hsn Heading 59. 02 read with the Note appended thereto, which specifies that hsn Heading 59. 02 covered Tyre Cord fabrics, whether or not dipped in rubber or plastics. He further submitted that as per rule (1) of the Interpretation Rules appended to the Schedule to the Central excise Tariff Act, 1985, classification of the product has to be decided according to the terms of the Heading. According to the learned counsel, the Heading 59. 02 covered Tyre Cord Fabric of High Tenacity yarn and, therefore, Dipped Tyre Cord fabric was rightly classified by the department under Tariff Heading 59. 02. Learned counsel for the department further submitted that in the present case, the Tribunal has not examined the "process of dipping" and it has merely followed the previous judgments which do not have any application to Dipped Tyre Cord Fabrics.;