Holding

The goods are classifiable under Tariff Heading 94.01, making the differential excise duty payable and excluding them from Tariff Heading 40.08.

Summary

The respondents, manufacturers of vulcanised rubber products cut to the shape of vehicle seats, had classified their goods under Tariff Heading 40.08 and claimed exemption under Notification No. 175/1986. The assessing authority re‑classified the goods under Tariff Heading 94.01, demanded differential excise duty and the matter ultimately reached the Supreme Court on appeal. The Court examined the relevant chapter notes of the Central Excise Tariff Act, interpreting Chapter Note 1(a) of Chapter 94 (which excludes cushions) and Chapter Note 2(e) of Chapter 40 (which excludes articles falling in Chapter 90). It held that the goods are not mere cushions but seats or parts of seats, thereby falling within the specific heading 94.01 and excluded from heading 40.08. Consequently, the Tribunal's decision was set aside and the appeals were allowed, confirming liability for duty under heading 94.01.

Issues considered

Whether vulcanised rubber goods cut to the shape of vehicle seats are to be classified under Tariff Heading 94.01 or 40.08.
Interpretation of Chapter Note 1(a) of Chapter 94 and Chapter Note 2(e) of Chapter 40 concerning cushions and exclusion from other chapters.
Whether the term 'floor or ground' in Chapter Note 2 of Chapter 94 includes the floor of a vehicle.
Effect of Notification No. 175/1986 on the exemption claim of the respondents.
Whether prior Tribunal judgments on similar classifications are binding on the Tribunal.

Legislation cited

Central Excise and Tariff Act, 1985

Subjects

central excisetariff classificationvulcanised rubbervehicle seatsTariff Heading 94.01Tariff Heading 40.08exemption notificationchapter notesgoods classification

Judgment

COLLECTOR OF CENTRAL EXCISE A
v.
M/S. MATADOR FOAM AND ORS.

·JANUARY 5, 2005

[S.N. VARIAVA, DR. AR. LAKSHMANAN AND S.H. KAPADIA, JJ.] B

Central Excise and Tariff Act, 1985; Tariff Headings _40.08 and 94.01
and Notes under Chapters 40 and 94; Notification No.17511986 dated March
1, 1986:
c
Classification-Vulcanized rubber goods used in seats of vehicles-levy
of excise duty under Tariff Headings 40.08 or 94.01-Held: Since the goods
manufactured by the assessee could only be used in seats as cushions ofseats!
parts of seats, the goods appropriately fall under Tariff Heading 94.01-
Hence, the duty leviable under the Tariff Heading 94.01. D
Words and Phrases:

'floor or ground'-Meaning of in the context a/Chapter Notes l(a) and
2 to Chapter 94 of the Central Excise Tariff Act.

Respondent-assessees are the manufacturers of vulcanized rubber
E
goods which are cut to the shape of seats of vehicles. In the classification
list filed by assessees, the product was shown under Tariff Heading 40.08
of the Excise Tariff Act. Assessing authorities claimed that the product
was classifiable under Tariff Heading 94.01 and after serving show-cause
notices to the assessees and hearing them, confirmed demand for F
differential amount of duty, holding that Exemption Notification No.175/
1986 was not applicable to the product in question. The order was affirmed
by the Appellate Authorities, but reversed by the Tribunal. Hence the
present appeals.

Appellant contended that Tariff Item 94.01 is a specific Item, which G
deals with seats and parts thereof; that the goods are cut to the shape of
seats and are only used in seats of buses, motor vehicles and/or two
wheelers and thus the goods in question cannot fall into general entry
covered by Tariff Heading 40.08.
145 H
146 SUPREME COURT REPORTS (2005) I S.C.R.
L.
A Respondent submitted that the goods in question are cushions falling
under Chapter 40 and are thus covered by Tariff Item No.40.08 and
excluded from the purview of Chapter 94.

Allowing the appeals, the Court

B HELD: I.I. Chapter Note l(a) of Chapter 94 of Central Excise Tariff
Act, 1985 excludes cushions falling in Chapter 40. At the same time,
Chapter Note 2(e) of Chapter 40 excludes articles which would fall in
Chapter 90 of the Act. If the goods were mere cushions they may get
covered by Chapter 40 and would then be excluded from Chapter 90.
However, if the goods are a seat or a part thereof they get specifically
C covered by Tariff Heading 94.01. In such cases, by virtue of Chapter Note
2(e) to Chapter 40, these goods get excluded from Chapter 40. Between
Tariff Headings 94.01 and 40.08, Tariff Heading 94.01 is a more specific
Heading dealing with seats and parts thereof. It is an admitted position
that the goods manufactured by the assessees are cut in the shape of seats
D and are used only in seats. They are thus cushions of seats and are parts
of seats. They then fall under Tariff Heading 94.01 and Tariff Heading
40.08 thus get excluded. This view is also supported by H.S.N. Explanatory
Note. Hence, the goods in question would fall under Tariff Heading 94.01
of the Act. [150-B-C-D; 151-EJ

E J.K. Foam Products v. C.C.E., Kanpur, (1997) 94 ELT 497 and C.C.E.,
Coimbatore v. Ajay Rubber, (1998) 100 ELT 478, approved.

C.C.E., Madras v. MM Rubber Co. Ltd., Madras, (1984) 15 ELT 198,
held inapplicable.

F 1.2. The term 'floor or ground' would also include floor of the car
or vehicle. Seats made for vehicles are placed on the floor of the car or
vehicle. Therefore, Chapter Note 2 to Chapter 94 of the Act would not
exclude seats of vehicles. [150-H; 151-AI

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3832-3837 of
G 1999.
From the Judgment and Order dated 22. I .1999 of the Central Excise
Customs and Gold (Control) Appellate Tribunal, New Delhi in A. Nos. E./
3450/91-0, 2793-2794-92-D and E/4593-4595/92-D in F.0. Nos. 78-83 of
H 1999-D.
C.C.E. v. MATADOR FOAM [VARIAVA. J.) 147
R. Venkataramani, G. Umapathy, P. Parrmeswaran, Ashok Panigrahi, A
S. Gowthaman and B. Krishna Prasad for the Appellant.

A.K. Jain, Rajesh Kumar, Rajesh Jain and Ms. Rajni for the Respondent.

The Judgment of the Court was delivered by
B
S.N. VARIA VA, J. These Appeals are against the Judgment dated
22nd of January 1999 of the Customs, Excise and Gold (Control) Appellate
~ Tribunal [CEGA T].

Briefly stated the facts are as follows.

The question involved is whether the goods manufactured by the
c
Respondents fall under Tariff Item 94.01 or Tariff Item 40.08. It is an admitted
position that the Respondents manufactured goods made out of vulcanised
rubber, other than hardened rubber, and their goods are cut to the shape of
seats of motor vehicles or two wheelers. The Respondents had filed a
classification list showing the products under Tariff Heading 40.08. This had D
been approved. However, a show-cause notice dated 17th May 1990 was
issued by the Assistant Commissioner raising a demand for the differential
duty on the ground that the products should correctly be classified under
Tariff Item 94.0 I. After giving a personal hearing, the Assistant Commissioner
confirmed the demand. Thereafter, three further show-cause notices dated E
31st May 1990, I st May 1990 and 31st May 1990 respectively were issued
to the Respondents calling upon them to show-cause as to why the benefit
wrongly availed of them under Notification No. 175 of 1986 dated I st March
1986 be not cancelled. The Respondents were called upon to pay duty. After
hearing the Respondents, by 0rders dated 13th March 1991, it was held that
the Respondents were not entitled to exemption. They were called upon to F
pay duty.

It must be mentioned that the Board issued a clarification that the
goods of the kind manufactured by the Respondents were classifiable under
Tariff Heading 94.0 I if they were meant for seats of motor vehicles and
Tariff Heading 87 .14 if they were meant for seats of two wheelers. G
The Respondents filed the Appeals, which were dismissed by the
Commissioner (Appeals). The Respondents then filed further Appeals to
CEGA T. Earlier decisions of CEGA T, holding that such goods fell under
Tariff Heading 94.0 I were cited. In spite of that CEGAT concluded, in the H
148 SUPREME COURT REPORTS (2005] I S.C.R.

A impugned Judgment, that such goods should fall under Tariff Heading 40.08.
In so doing, CEGAT relied upon another Judgment of the Tribunal which
had dealt with earlier Tariff Headings 16A and 34A. It must be mentioned.
that those Tariff Headings were completely different from the Tariff Headings
now under consideration.

B Tariff Headings 94.0 I and 40.08 read as follows:

"94.01: Seats (other than those of heading No.40.0 I), whether
or not convertible into beds, and parts thereof.
40.08: Plates, blocks, sheets, strikes, rods and profile shapes
c of vulcanized rubber other than hardened rubber of
cellular rubber."

It is also necessary to consider certain Chapter Notes which have
been relied upon by the parties. In Chapter 94, Notes I (a) and 2 read
as follows:
D "!. This Chapter does not cover:

(a) Pneumatic or water mattresses, pillows or cushions, of Chapter
39,40 or 63;

E
2. The articles (other than parts) referred to in heading Nos.94.01 to
94.03 are to be classified in those headings only if they are designed
for placing on the floor or ground.

p The following are, however, to be classified in the above-
mentioned headings even if they are designed to be hung, to be fixed
to the wall or to stand one on the other:
(a) Cupboards, bookcases, other shelved furniture and unit furniture;
(b) Seats and beds."
G
In Chapter 40, Notes 2 (e) and 9 read as follows:

"2. This Chapter does not cover:

(a) ··················································
H (b)
C.C.E. v. MATADOR FOAM [VARIAVA. J.] 149
(c) ................................................. . A
(d) ··················································
(e) Articies of Chapter 90, 92, 94 or 96;
(f)
B

9. In heading Nos.40.01, 40.02, 40.03, 40.05 md 40.08, except as
otherwise provided, the expressions 'plates', 'sheets' and "strips' apply
only to plates, sheets and strip and to blocks of regular geometric
shape, uncut or simply cut to rectangular (including square) shape, C
whether or not having the character of articles and whether or not
printed or otherwise surface-worked, but not otherwise cut to shape
or further worked.

In heading No.40.08, the expressions 'rods' and 'profile shapes'
apply only to such products, whether or not cut to length or surface- D
worked but not otherwise worked.

Sub-heading No.4008.21 shall also apply to "plates", "sheets"
and "strips", whether or not cut to shape and surface-worked or further
worked so as to render them fit for resoling or repairing or re-treading
of rubber-tyres." E
Mr. Jain, learned counsel for the Respondents, has strongly relied upon
Chapter Note I (a) of Chapter 94 and submitted that pneumatic or water
mattresses, pillows or cushions of Chapter 39, 40 and 63 are excluded from
Chapter 94. He submitted that Respondents' goods are cushions falling under
Chapter 40 and are thus covered by Tariff Item 40.08. They submitted that F
they are thus excluded from the purview of Chapter 94. He submitted that,
therefore, Tariff Heading 94.01 cannot cover goods of the Respondents.

On the other hand, Mr. Venkataramani submitted that Tariff Item 94.01
is a specific Item, which deals with seats and parts thereof. He pointed out
that it is an admitted position that the Respondents goods are cut to the shape G
of seats and are only used in seats of buses, motor vehicles and/or two
wheelers. He submitted that there being a specific Entry covering seats and
parts thereof, these goods cannot fall into general entry covered by Tariff
Heading 40.08. In support of his submissions, Mr. Venkataramani relied
upon Chapter Note 2(e) of Chapter 40 and submitted that any goods which H
150 SUPREME COURT REPORTS [2005] I S.C.R.

A falls within any of the Tariff Items in Chapter 90 gets excluded from Chapter
40.
'
We find substance in the submission of Mr. Venkataramani Chapter
Note l(a) of Chapter 94 excludes cushions falling in Chapter 40. At the same
time, Chapter Note 2( e) of Chapter 40 excludes articles which would fall in
B Chapter 90. Thus, one would have to see which of the Tariff Headings, in
these two Chapters, specifically deals with goods of the type manufactured
by Respondents. If the goods were mere cushions they may get covered by
Chapter 40 and would then be excluded from Chapter 90. However, if the
goods are a seat or a part thereof they get specifically covered by Tariff
C Heading 94.0 I. In such cases, by virtue of Chapter Note 2(e) to Chapter 40,
these goods get excluded from Chapter 40. Between Tariff Headings 94.01
and 40.08, Tariff Item 94.0 I is a more specific heading dealing with seats
and parts thereof. It is an admitted position that the goods manufactured by
the Respondents are cut in the shape of seats and are used only in seats. They
are thus cushions of seats and are parts of seats. They then fall under Tariff
D Heading 94.01 and Tariff Heading 40.08 thus get excluded. This view is also
supported by H.S.N. Explanatory Note, which states that Tariff Entry 94.01
would cover all seats including seats of vehicles. l..

It must, however, be stated that seats of two wheelers get excluded
from Chapter 94 by virtue of Chapter Note l(h), which reads as follows:
E
"l. Th is Chapter does not cover:

F
(h) Articles of heading No.87.14."

Chapter Note 87 .04 specifically deals with parts of two wheelers.
Therefore, seats of two wheelers would fall under Tariff Heading 87.14.

G Mr. Jain next relied upon Chapter Note 2 to Chapter 94 (which has
been set out hereinabove). He submitted that Tariff Heading 94.0 I would
only cover seats which have been designed for placing on the floor or on the
ground or which could be hung or fixed on the wall or designed to stand one
on the other. He submitted that seats of cars are not designed to be placed
on the floor or ground and therefore they would not be covered under Tariff
H Heading 94.01. We are unable to accept.this submission. The term 'floor or
C.C.E. v. MATADOR FOAM [VARIAVA . .I.] 151

ground' would also include floor of the car or vehicle. Seats made for vehicles A
' l. are placed on the floor of the car or vehicle. Therefore, Chapter Note 2 would
not exclude seats of vehicles. This also finds support from H.S.N. Explanatory
' Notes.

Reliance was also sought to be placed, by Mr. Jain, on Chapter Note
9 of Chapter 40 which has been reproduced hereinabove. In our view, this B
Chapter Note does not in any way assist the Respondents.

In the above view, it will have to be held that the impugned Judgment
cannot be sustained.

Before we part one other aspect must be mentioned. As stated above, c
earlier Judgments of the Tribunal in the case of J.K. Foam Products v. C.C.E,
Kanpur, reported in (1997) 94 ELT 497 and C.C.£, Coimbatore v. Ajay
Rubber, reported in (1998) 100 EL T 478, were cited. These Judgments are
directly on the point. It has been held that such goods are classifiable under

- Tariff Heading 94.0 I. These being Judgments of coor4inate Benches were
binding on the Tribunal. Judicial discipline required that the Tribunal follow
those Judgments. If the Tribunal felt that those Judgments were not correct,
D

A
it should have referred the case to a larger Bench. The Judgment in the case
of C.C.E., Madras v. MM Rubber Co. Ltd., Madras, reported in (1984) 15
EL T 198, was based on the then Tariff Items I 6A and 34A. Those Tariff
ltem5 were completely different. That Judgment has no relevance to the E
question under consideration.

In the above view, the impugned Judgment is set aside. It is held that
the goods of the Respondents would fall under Tariff Heading 94.01.

The Appeals are accordingly allowed. There will, however, be no order F
as to costs .
..\
S.K.S. Appeals allowed.