Holding

Cement tiles are a form of floor itself, not floor coverings, and are therefore entitled to the exemption under Notification No. 59/90‑CE.

Summary

Indcon Structurals (P) Ltd, a manufacturer of cement tiles, claimed exemption from a 15% ad valorem excise duty under Notification No. 59/90‑CE, which excluded "floor coverings in rolls or in the form of tiles" from the benefit. The Revenue argued that the tiles fell within the excluded category. The adjudicating authority, the first appellate authority and the technical member of CEGAT held that cement tiles are integral floor material, not floor coverings, and allowed the exemption. Two other CEGAT members disagreed, leading to a split decision. The Supreme Court examined the trade‑usage meaning of the phrase and held that cement tiles constitute the floor itself, thereby qualifying for the exemption. Consequently, the Court allowed the appeal and set aside the majority CEGAT order.

Issues considered

Whether cement tiles manufactured by the assessee are covered by the expression "floor coverings in rolls or in the form of tiles" excluded under Notification No. 59/90‑CE.
Whether the phrase "floor coverings" should be interpreted according to trade usage for the purpose of taxing statutes.
Whether the exemption under Notification No. 59/90‑CE is applicable to cement tiles.

Legislation cited

Central Excises and Salt Act, 1944s. 5A(J)
Central Excise Tariff Act, 1985s. sub‑heading 6807.00

Subjects

excise dutyexemption notificationfloor tilesstatutory interpretationtrade usageproduct classificationCentral Excise

Judgment

A
+ MIS INDCON STRUCTURALS (P) LTD.
v.
COMMISSIONER OF CENTRAL EXCISE, CHENNAI

APRIL 17, 2006
B
[ASHOK BHAN AND LOKESHWAR SfNGH PANTA, JJ.]

Central Excises and Salt Act, 1944/Central Excise Tariff Act, 1985-
Section 5A(J)/Tariff sub-heading 6807-00--Notification No. 59190-CE dated
20.3.1990 extending 15% ad valorem duty on all products falling under
c
Heading 68. 07 except floor covering in rolls or in form of tiles--Assessee
manufacturing cement tiles-Entitlement to benefit under the Notification--
Held: Jn the facts of the case, since the tiles in question are not akin to floor
covering material and are covered under the nomenclature of 'floor tiles, ' the
assessee is entitled to the benefits of the Notification. D
Interpretation of Statutes:

Taxing statutes-Interpretation of-Held: Words and expressions in
taxing statutes, unless defined in the statu/e itself. have to be construed in
·1
the sense in which the person dealing with them understand i.e. as per trade E
understanding, commercial and technical practice and usage.

By Notification No. 59/90-CE dated 20.3.90 effective rate of duty of 15%
ad valorem was extended to all products falling under Heading 68.07 of
Central Excise Tariff Act, 1985, but the floor coverings in rolls or in the
form of tiles were excluded. The assessee-company, manufacturer of flooring F
~ cement tiles claimed benefit of the Notification on the ground that the tiles
in question were not floor coverings in rolls or in the form of tiles and the
same was the floor itself.

Adjudicating Authority after considering certificates of Architects,
Engineers, Town Planners, Interior Design Engineers and Consultants, and
G
..
' after on-the-spot inspection of the factory premises, concluded that the goods
in issue were covered under sub-heading 67/807.00 and hence the assessee
was entitled to the Exemption Notification Order of adjudicating authority was
upheld by·appellate authority. In appeal to CEGAT, after difference of opiniun
I II H
12 SUPREME COURT REPORTS (2006] SUPP. I S.C.R.

A on the issue, third member denied the benefit of Exemption Notification to the
assessee. Hence the present appeal.

Allowing the appeal, the Court

HELD: I. In the facts and circumstances of the case, as per the trade
B understanding and usages, cement tiles, the subject-matter of the present case,
is a form of floor itself and, therefore, entitled to the benefit of Exemption
Notification No. 59/1990. I17-E-F]

2. On close examination of the entire material on record, the •
adjudicating authority has come to the definite conclusion that the cement
C tiles manufactured by the assessee-company are in no way akin ~o floor
covering materials and these are covered within the nomenclature of 'floor
tiles' and, therefore, the assessee-Company is entitled to the benefit of
Exemption Notification No. 59/90. (16-0-E(

3. The words and expressions in taxing statutes, unless defined in the
D statute itself, have to be construed in the sense in which the persons dealing
with them understand, i.e., as per the trade understanding, commercial and
technical practice and usage. The expressions "floor coverings in rolls or in
the form of tiles" are not defined in the Central Excises and Salt Act, 1944
or in the Central Excise Tariff Act, 1985 or in the Exemption Notification No.
E 59/90, but it has acquired a definite trade and business understanding.
(15-C-EJ
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1489 of2001.

Under Sec. 35 L(b) of the Customs, Excise & Gold (Control) Appellate
Tribunal, Chennai in Final Order No. E/1557 /2000 dated 14.11.2000 in Appeal
F No. E/1557/94-D/MD.

V. Lakshniikumaran, Alok Yadav and Karan Talwar (for V. Balachandran)
for the Appellant.

B. Dutta and ASG Rupesh Kumar (for P. Parmeswaran) for the
G Respondent.
The Judgment of the Court was delivered by
•'
LOKESHWAR SINGH PANTA, J. This Statutory Appeal is filed by
M/s lndcon Structurals (P) Limited under Section 35L(b) of the Central Excise -
Act, 1944 (hereinafter referred to as "the Act") against the Final Order No.
H
INDCONSTRUCTURALS(P)LTD. v. C.C.E. [LOKESHWARSINGHPANTA,J.] ]3

1557/2000 dated 14th November, 2000 of the Customs, Excise and Gold (Control) A
Appellate Tribunal (for short "the CEGAT"), Chennai, in appeal No. E/1554/
94-D-MD, setting aside the Order dated 16th May, 1994 recorded by the
Collector of Central Excise (Appeals), Madras.

The appellant-Company is engaged in manufacture of flooring cement
tiles using cement, sand, blue metal and gravel along with pigment. These are B
in the form of tiles used for constructing the floor itsel(or the wall, as the
case may be.
i
The appellant-Company filed classification list claiming the benefit of
1
Notification No. 59/90-CE on the ground that the cement tiles in question are
not floor coverings in rolls or in the form of tiles as per the description against
c
serial No. 4 of sub-heading 6807.00 of the Table annexed with the Notification.
The Superintendent of Central Excise, Range-lXA, Madras, IX Division, issued
a show-cause notice dated 6th November, 1992 to the appellant-Company
(hereinafter referred to as the "assessee-Company") directing it to pay the
excise duty on the cement tiles as the said goods are not eligible to avail the D
benefit of the Exemption Notification No. 59/90-CE. The assessee-Company
~ in its reply submitted that cement tiles manufactured by them are used to
construct the floor itself and it is not floor coverings in terms of the description
of the goods under sub-heading 6807.00. The Assistant Collector of Central
Excise, Madras, IX Division - the adjudicating authority, on careful examination
of the records and the submissions made before it by both the parties and E
after taking into consideration the Section Notes/Chapter Notes of Chapters
39, 57, 59 and 68, felt it necessary to conduct an on-the-spot study since the
issue for adjudication was in regard to the product classification. The
adjudicating authority accordingly visited the factory premises of the assessee-
Company and studied the manufacturing process of cement tiles. Finally, the F
adjudicating authority came to the conclusion that cement tiles manufactured
by the assessee-Company are covered under sub-heading 6807 .00 as such the
benefit of exemption Notification No. 59/90 dated 20th March, 1994 is available
to the Company.

The Revenue preferred an appeal against the said order of the G
adjudicating authority before the Collector (Appeals). The First Appellate
Authority confirmed the order of the adjudicating authority holding that the
cement tiles manufactured by the assessee-Company are not floor coverings
and the benefit of the Notification has been rightly extended to the Company.
r
·- Being aggrieved against the order of the appellate authority, the Revenue H
14 SUPREME COURT REPORTS [2006] SUPP. I S.C:.R.

A filed an appeal before the CEGAT. The Member (Technical) of the CEGA T ha~
found no infirmity or perversity in the said order and dismissed the appeal
of the Revenue, but the second Member (Judicial) has recorded separate
order differing with the order of Member (Technical) and set aside the order
of the appt:llate authority.

B The matter came to be referred to the third Member for solving the
difference of opinion between the Members of the Bench. The third Member
(Technical) agreed with the views expressed by Member (Judicial) and
accordingly the appeal filed by the Revenue was accepted and the benefit of
concession of the excise duty was denied to the assessee-Company. Hence,
C the assessee-Company has filed this appeal before this Court challenging the
correctness and validity of the order of the CEGA T.

We have heard the learned counsel for the parties on either side. Mr.
V. Lakshmikumaran, the learned counsel for the assessee-Company, submitted
that the assessee-Company is the manufacturer of the cement tiles, which are
D used as flooring in the form of floor itself and these are not floor coverings
as projected by the Revenue.

Per contra, Mr. B. Dutta, the learned Additional Solicitor General
appearing on behalf of the Revenue, submitted that it is not in dispute that
the product of the assessee is in the form of tiles, but these tiles are used
E for floor coverings and as such the majority members of the CEGAT have
rightly denied the benefit of exemption to the assessee-Company.

Thus, the core question involved in the present appeal is whether the
cement tiles, manufactured by the assessee-Company, are used for floor
coverings in the form of tiles for the purpose of assessment of the rate of
F excise duty under Notification No. 59190 or the goods are exempted from
payment of such duty as claimed by the assessee-Company. Notification No.
59/90-CE dated 20th March, 1990 has been issued by the Central Government
in exercise of the powers conferred under sub-section (I) of Section 5A of
the Central Excises and Salt Act, 1944 (I of 1944), exempting certain goods
G specified in column (3) of the Table annexed thereto and under Sub-heading
No. (3) of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986)
specified in column (2) of the said Table, from so much of that portion of the
duty of excise leviable thereon which is specified in the said Schedule as is
in excess of the amount calculated at the rate specified in the corresponding
entry in column (4) of the said Table. Table of the Notification, relevant for
H the purpose of deciding the present appeal, reads as under:-
INDCON STRUCTURALS (P) LTD. v. C.C.E. [LOKESHWAR SINGH PANTA, J.] 15

TABLE A
SI. Sub Description of goods Rate of Duty
No. Heading No.
l. xxx xxxx xxx
2. xxx xxxx xxx
3. XA'X xxxx xxx B
4. 6807.00 All goods excluding the
following, namely:-
(i) Floor coverings in rolls 15% ad valorem
or in the form of tiles
(ii)XXXX c
It is by now well-settled that the words and expressions in taxing
Statutes, unless defined in the Statute itself, have to be construed in the
sense in which the persons dealing with them understand, i.e., as per the trade
understanding, commercial and technical practice and usage. We find that the
expressions "floor coverings in rolls or in the form of tiles" are not defined D
in the Central Excis~.s and Salt Act, 1944 or in the Central Excise Tariff Act
or in the Exemption Notification No. 59190, but it has acquired a definite trade
and business understanding. The record shows that the adjudicating authority
in its order has recorded categorical finding that in support of the claim, the
assessee-Company has produced on record certificates of the well-known E
Architects or Engineers and Town Planners, Interior Design Engineers and
Consultants and users to the effect that the cement tiles manufactured by the
assessee-Company are totally different from floor coverings. Some samples
pertaining to floor coverings and other products, including cement tiles, were
produced by the assessee-Company as material evidence for comparative
analysis before the adjudicating authority at the time of inspection of the F
factory premises. The adjudicating authority on such inspection had studied
the process of manufacture of cemetJt tiles and found that cement, sand, blue
metal, gravel were mixed in pre-determined proposition along with pigments
and then the mixture was poured into moulds, compacted and allowed to set
automatically through vibration table. The adjudicating authority further noticed G
that the cement tiles were demoulded, cured, surface treated and are marketed
in the brand name of Eurocon tiles. These tiles are capable of using for wall
application of both external/internal wall tiling, which form an integral part of
the wall on which they are cemented. The adjudicating authority also studied

-·
the product in question with reference to its characteristics, temperature
H
16 SUPREME COURT REPORTS [20061 SUPP. I S.C.R.

A resistance, structural properties and durability. The authority has also perused
Section Notes/Chapter Notes of Chapters 39, 57, 59 and 68 dealing with the
goods floor coverings and flooring materials. On going through the expressions
given for the products, floor coverings/wall coverings under Chapter Headings
39, 57 and 59, which are made out of plastics, coir/textiles, the adjudicating
B authority has observed that floor coverings have got a distinct identity from
the floor materials as the floor covering materials are totally different products
which are commonly used as an additional coverage to an existing floor/wall,
only for the purpose of beautification and decoration. The authority also
observed that floor coverings are quite replaceable in nature since they are
mechanically placed on the floor and could be reusable also, whereas the tiles
C such as mosaic/granite/cement tiles which are basically embedded to the floor
is normally on lifetime basis and further that such tiles once laid on the floor
are almost impossible to remove without breaking or causing damage to the
floor itself. The major differences that exist between the floor materials and
floor covering materials along with specifications maintained by ISi No. 1237/
1980 for cement tiles and \SI No. 11206/1984 and ISi No. 809/92 for other floor
D covering materials would go to show that basically the specifications so
maintained by IS! for cement tiles and for other floor covering materials are
not akin in nature. On close examination of the entire material on record, the
adjudicating authority has come to the definite conclusion that the cement
tiles manufactured by the assessee-company are in no way akin to floor
E covering materials and these are covered within the nomenclature of 'floor
tiles' and, therefore, the assessee-Company is entitled to the benefit of
Exemption Notification No. 59/90.

The appellate authority as noticed earlier has confirmed the order of the
adjudicating authority and held that the cement tiles in question are not 'floor
F coverings' and the benefit of the notification has been rightly extended to the
assessee-Company. The Member (Technical) of the CEGAT has also come to
the conclusion that the cement tiles in question are flooring materials and
become constituent part of the floor or wall or stairways. These tiles cannot
be termed as ·floor coverings'. In support of his findings, the Member
G (Technical) has taken into consideration notes of the IS specifications and
various certificates issued by the qualified Architects, Engineers, Valuers and
Interior-Designers dealing in the said goods. The other two Members of the
CEGAT, in our view, have failed to consider the nomenclature of the words
and expressions "floor coverings in rolls or in the form of tiles" as used under
sub-headings 6807 .00 in the description of goods specified in Table annexed
H with the Exemption Notification. The majority Members in recording different
!NOCON STRUCTURALS (P) LTD. v. C.C.E. [LOKESHW AR SINGH PANTA, J.) J7

view than the one taken by the adjudicating authority, the first appellate A
authority and the Member (Technical), CEGAT, have only observed that no
restricted meaning could be given to the expression "floor coverings" as to
include only those items which could be just separate or placed on the floor
and to put the items that are affixed to the floor to cover the same out of its
purview. The second Member (Technical) in his separate order, supporting
the order of the Member (Judicial), has mainly relied upon an earlier decision B
in Niraj Cement Structura/s v. Collector of Central Excise, Mumbai, ((1998)
(IOI) E.L.T. 284 (Tribunal)]. We have gone through the said decision of the
Tribunal but, in our considered view, the same is of no assistance or help to
the Revenue in peculiar facts and circumstances of the present case. In that
case, the assessee was manufacturer of tiles covered by the same Notification C
No'. 59/90-CE and description of the goods were also under the same sub-
heading. In that case the product manufactured by the Company was used
as 'floor coverings' inasmuch as the tiles were placed on the floor covering
the cable running underneath the floor. Thus, the findings of the Tribunal in
the Niraj Cement case (supra) cannot be uniformly applied to the products
in question manufactured by the assessee-Company. D
In the facts and circumstances narrated hereinabove, the noted
contentions of the learned Additional Solicitor General do not inerit acceptance.
The objection of the Revenue that the cement tiles manufactured by the
assessee-Company are covered under the expression "floor coverings in rolls E
or in the form of tiles" is misconceived.

We, therefore, hold that as per the trade understanding and usages,
cement tiles, the subject-matter of the present case, is a form of floor itself
and, therefor~, entitled to the benefit of Exemption Notification No. 59/1990.

Accordingly, we allow this appeal and set aside the orders of the
F
majority Members of the CEGAT; Consequently, the order of the Member (T)
maintaining the order of appellate authority which, in turn, bas confirmed the
order of the adjudicating authority are all held as reasonable and sustainable.
The parties are left to bear their own costs.
G
KKT. Appeal allowed .

..