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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.4462 OF 2003
COMMNR. OF CENTRAL EXCISE, NOIDA .....Appellant.
Versus
M/S. KITPLY INDUSTRIES LTD. .....Respondent
WITH
CIVIL APPEAL NO.9736 OF 2003
J U D G M E N T
ANIL R. DAVE, J.
1. The present appeals arise out of the judgments and orders passed on
23.9.2002 and 6.6.2003 by the Customs, Excise & Gold (Control) Appellate
Tribunal, New Delhi and the Customs, Excise & Service Tax Appellate
Tribunal, dismissing the appeals filed by the appellant- Revenue
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Department. By this judgment, we dispose of Civil Appeal Nos. 4462/2003
and 9736/2003 as they involve similar questions of law.
2. The issue which falls for consideration in the present appeals is
whether laminated panels of particle and medium density fiber board should
be classified under sub- heading no. 4406.90 and 4407.90 or under sub-
heading no. 4408.90. The appellant alleged that the product manufactured
by the respondent herein was classifiable under sub heading 4408.90. For
this purpose the appellant relied on Chapter Note 5 of Chapter 44 of the
Central Excise Tariff Act, 1985 (hereinafter referred to as `the Act') which
reads as under:-
"For the purposes of heading No. 44.08, the expression
"similar laminated wood" includes blockboard, laminboard
and battenboard, in which the core is thick and composed of
blocks, laths or battens of wood glued or otherwise joined
together and surfaced with the outer plies and also panels in
which the wooden core is replaced by other materials such
as a layer or layers of particle board, fiberboard, wood
waste glued or otherwise joined together, asbestos or cork".
For the sake of convenience, the relevant headings are also extracted below:
"44.06 - Particle board and similar board of wood or other ligneous
materials, whether or not agglomerated with resins or other organic
binding substances.
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4406.10- Plain particle boards.
4406.20- Insulation board and hardboard
4406.30- Veneered particle board, not having decorative veneers on any
face
4406.90-Other.
44.07 - Fiber board of wood or other ligneous materials, whether or not
bonded with resins or other organic substances.
4407.10-Insulation board and hardboard
4407.90- Other.
44.08-Pplywood, veneered panels and similar laminated wood.
4408.10 - Marine plywood and aircraft plywood.
4408.30- Decorative plywood
4408.40- Cuttings and trimmings of plywood of width not exceeding 5
centimeters
4408.90 - Other".
3. In order to decide the issue arising in the present case in its proper
perspective, basic facts leading to filing of the present appeals are being
recapitulated hereunder:
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The respondent asessee, who is engaged in the manufacture of wood and
articles of wood falling under Chapter 44, was issued show cause notices
dated 16.2.2000 and 27.12.2000 by the appellant authorities, inter alia,
calling upon it to show cause as to why classification of its products (1)
Laminated Particle Board and (2) Laminated Medium Density Fibre Board
should not be changed to chapter Sub-heading no 4408.90 The respondent
replied to the said notices refuting the allegations on merits as well as on
limitation. The said show cause notices were adjudicated and the demand
proposed therein was dropped by the Commissioner of Central Excise,
Meerut-II vide Orders dated 20.4.2001 and 31.10.2001 respectively. The
Commissioner, ultimately found that the pre requisites of Chapter Note 5 of
Chapter 44 were not satisfied and, therefore, no further action was taken so
far as the aforestated classification was concerned.
4. Aggrieved by the orders, the Revenue filed appeals before the
Tribunal. The Tribunal dismissed the said appeals vide orders dated
23.9.2002 and 6.6.2003, upholding the findings of the Commissioner.
5. Aggrieved by the orders of the Tribunal, the Reveue has filed the
present appeals.
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6. The learned counsel for the appellant submitted that the Tribunal had
erred in not appreciating that the manufacturing process, as stated by the
factory manager clarified that "pre-laminated" meant already laminated and
as a result of the process, the surface of the panels become water resistant as
well as scratch resistant and due to melamine surface, it resisted cigarette
burns and also got an attractive look. In spite of the above facts stated by the
factory manager with regard to the process, the respondent-assessee never
mentioned the word "Panel" in the manufacturing process submitted along
with classification declared under Rule 173 B of the Act.
7. Learned counsel for the appellant further argued that Chapter Note
44.08 specifically speaks of plywood, veneered panels and `similar
laminated wood'. He pointed out that in the instant case, it is an admitted
fact that the goods in question, which are `wood products' are laminated
and they are covered under chapter heading 44.08 and not under chapter
heading 44.06 as there is no mention of lamination in the latter chapter sub
heading.
8. The learned counsel for the appellant also submitted that the Tribunal
failed to appreciate that if a product is capable of being classified under two
chapter headings, then Rule 3 (c) of the Rules for interpretation of the Act
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envisages that classification under the heading, which occurs last in the
numerical order. Therefore, chapter sub-heading 4408.90 would be the
appropriate sub heading for classification of the products in question.
9. To substantiate his claim, he relied on the cases of CCE, SHILLONG
v. WOOD CRAFT PRODUCTS LTD. 1995 (77) ELT 23, M/S
SAUSASHTRA CHEMICALS v. COLLECTOR OF CUSTOMS,
BOMBAY 1986 (23) ELT 283, DECORATIVE LAMINATED (INDIA)
PVT LTD v. COLLR. OF C. EX., BANGALORE 1996 (86) ELT 186
(S.C.).
10. On the other hand, the learned counsel for the respondent submitted
that for Chapter Note 5 of Chapter 44 to apply, an essential pre-requisite is
that the similar laminated wood must be surfaced with outer piles, which is
conspicuously absent in the present case and hence the said chapter note
would not apply. He also submitted that the impregnation is only an
additional process, which is done on the particle board to increase its
strength and, therefore, the goods would still continue to fall under heading
4406.
11. The learned counsel also submitted that the decision in the case of
Wood Craft Products Ltd. (supra) would not be applicable to the instant
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case as it was with respect to classification of block board. The respondent
relied on the case of CCE, INDORE v. BOMBAY BURMAH TRADING
CORPN. LTD. 2000(39) RLT 184 to substantiate its claim that pre-
laminated particle board is classifiable under heading 44.06 and not under
heading 44.08.
12. We have heard the learned counsel for the parties and perused the
records.
13. It is not in dispute that the product before the lamination is not
classifiable under tariff heading 44.08. However, it is the case of the
appellant that after the lamination, the panels so obtained become a distinct
product falling outside the purview of 44.06. Hence, what needs to be
determined by us is whether even after the lamination, the products falls
under sub-heading 4406.90 and 4407.90 or would it fall under sub- heading
4408.90.
14. For this purpose, it is important to refer to the statement of the factory
manager Shri B.V Rao, who stated that in the process of manufacture of the
panels, plain panels of the mother boards (plain particle/MDF fiber) are
used. Papers are passed through the impregnating unit wherein the resin and
other required chemicals are spread on the paper and the paper gets
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impregnated. The impregnated paper is further dried and cut into required
length. These paper sheets are assembled with the mother boards in such a
way that the impregnated paper is placed on the upper side and one layer of
impregnated design paper is placed over one layer of impregnated tissue
paper. This assembly is put for pressing under the required heat and
pressure. The above assembly is taken out as pre-laminated boards and is
ready for dispatch.
15. From the above process, it is clear that the products are pre-laminated
wood, most aptly falling under chapter heading 44.08 as the said chapter
heading specifically speaks of plywood, veneered panels and similar
laminated wood. The word "similar" discussed in the above para has been
discussed by this court in the case of CCE, Shilling v M/S Wood Craft
Products Ltd. (supra) wherein a similar issue with regard to "Block board"
had arisen. For sound reasons recorded, this Court held that `Block board'
should be classified under heading No. 44.08. The logic applied in the case
of `Block board' can very well be applied in the instant case. In the said
judgment, this Court observed as under in paras 5 and 6
"5. It is significant that Heading No. 44.12 of the
HSN is the same as Heading No. 44.08 of the Indian
tariff and reads "Plywood, veneered panels and
similar laminated wood." The explanatory notes on
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the HSN indicate the meaning of the expression
"similar laminated wood" as under:-
"similar laminated wood. This group can be divided
into two categories:
Block board, lamin board and batten board, in which
the core is thick and composed of blocks, laths or
battens of wood glued together and surfaced with the
outer plies. Panels of this kind are very rigid and
strong and can be used without framing or backing."
6. It is clear that if the expression "similar
laminated wood" in the Indian Tariff is understood as
it meant under the HSN on which pattern the Central
Excise Tariff Act is based, then block boards of all
kinds would fall within the expressionn "similar
laminated wood". This is how the amended Chapter
Note reads expressly. The question is whether it can
be so read even for the earlier periods particularly the
first period before amendment of Chapter Note 5 to
expressly include block board in the expression
"similar laminated wood".
16. Heading 44.08 in the instant case covers "plywood", "veneered
panels" together with all kinds of "similar laminated wood". In other words,
it is treating "plywood" or "veneered panels" as "laminated wood".
Therefore, it covers all kinds of laminated wood bearing any resemblance to
"plywood" or "veneered panels". The word used is "similar" and not "same".
Thus, some resemblance to "plywood" or "veneered panels" is enough,
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provided the article can be treated as "laminated wood". The sweep of the
heading is, therefore, quite wide.
17. Therefore, for the product to be classified under the above heading, it
is enough if it is similar to laminated wood, which in the instant case is
proved beyond reasonable doubt. Even factory manager, Shri B.V. Rao
admitted the facts with regard to lamination. At this point we may again
refer to the case of M/s. Wood Craft Products Ltd. (supra). It has been
mentioned therein that "The meaning of the significant words and
description of the wood products as intermediate materials meant for
manufacture of final products clearly indicate that "laminated wood" means
a wood product prepared by placing layer on layer and "block board" is a
plywood board with a core of wood. Any plywood board with a core of
wood in which there are layers, one above the other is, therefore, laminated
wood similar to plywood or, veneered panels. It is "similar laminated wood"
included in the heading "Plywood, veneered panels and similar laminated
wood". Similarity with, and not identity with plywood or veneered panels is
required".
18. From the above, it is clear that the product is similar to plywood and
veneered panels and hence tariff heading 44.08 is squarely applicable.
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Further, in the instant case, the core layer is made up of the particle board or
MDF board (referred to as "mother boards" in the process mentioned above)
and joined together with the help of resins and then laminated with
plasticised paper (paper impregnated with melamine formaldehyde resin).
Hence it is also clearly seen that the laminated panels manufactured by the
respondent are covered under Chapter Note 5 to Chapter 44 of the schedule
to the Act. The product need not be same as plywood or veneered panels but
mere similarity with them is enough for chapter note 5 to apply.
19. The Tribunal has erred in holding that as "particle board" is
specifically covered under heading 44.06, laminated particle board will
come under the scope of "similar board of wood" under the said heading. It
is clear that the product after the lamination is a distinct marketable
commodity different from the original one. This conclusion is further
substantiated by the fact that Shri B.V. Rao said in his statement that the
panels after lamination, become water resistant and look attractive due to
printed paper and brings about a change in the name, usage etc. Therefore,
the Tribunal's conclusion that the laminated board is similar to `particle
board' is incorrect and cannot be accepted.
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20. The respondent has placed reliance on the pari materia heading in the
HSN 44.10 to contend that the product is classifiable under chapter heading
44.06. We cannot accept this argument. In the proviso to the said heading, it
has been mentioned that if the manufacturing process gives the product the
essential character of articles of another heading, then chapter heading
44.12 will not apply. In the instant case, going by the statement of the
respondent's own officer, the product after lamination assumes a distinct
marketability and brings about a change in the product. This change, after
lamination makes the product fall outside the purview of chapter heading
44.06 and that would place the product under chapter heading 44.08 as the
word used under chapter heading 44.08 is "similar laminated wood"
(emphasis supplied). Further recourse may also be taken to rule 3 (c) of the
Rules for interpretation of the Act which envisages that if the products are
capable of classification under two chapter headings, then as per the said
rule, the classification must be under the heading which occurs last in the
numerical order. Therefore, heading 4408.90 would be the appropriate sub
heading for classification of the product in question.
21. In terms of the above conclusions arrived at and on appreciation of the
materials on record, we are of the view that the findings arrived at by the
Tribunal are unjustified and cannot be accepted. The impugned judgments
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and orders passed by the Tribunal in both the appeals are, therefore, set aside
and it would be open to the appellant to assess the respondent as per the
above findings. Accordingly, the appeals are allowed but leaving the parties
to bear their own costs.
...............
...................................J.
(Dr. MUKUNDAKAM SHARMA)
.....................................................J.
(ANIL R. DAVE)
New Delhi
September 7, 2011.
