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CASE NO.: Appeal (civil)  5345 of 2001

PETITIONER: M/s Pragati Silicons Pvt. Ltd

RESPONDENT: Commissioner of Central Excise, Delhi

DATE OF JUDGMENT: 26/04/2007

BENCH: ASHOK BHAN & Dalveer Bhandari

JUDGMENT: J U D G M E N T

BHAN, J.

       The  assessee-appellant (hereinafter referred to  as

 "the  appellant"),  being aggrieved  by  the  Final  Order

 No.239/2001-B  dated  17-04-2001  passed  by  the  Custom,

 Excise  &  Gold (Control) Appellate Tribunal  (hereinafter

 referred  to  as "the Tribunal") in Appeal No.E/3322/2000-

 B,  has  filed the present appeal under section 35L(b)  of

 the  Central Excise Act, 1944 (hereinafter referred to  as

 "the  Act").   The  Tribunal by  the  impugned  order  has

 rejected  the  appeal filed by the appellant  seeking  the

 classification of "plastic name plates" under  Chapter  87

 as  ‘parts and accessories’ of motor vehicles and  instead

 classified  it  as ‘other plastic products’ under  Chapter

 39.

FACTS

 1.    The  appellant is a small-scale unit,  manufacturing

    plastic name plates for motor vehicles in accordance with

    the specifications and designs supplied by the customers,

    who are the vehicle manufacturers.  The entire production of

    the appellant is sold to the vehicle manufacturers alone.

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 2.   Between 1986 and 1994, the classification lists filed

    by the appellant claimed the classification of name plates

    under headings 87.08 and 87.14 and the same were approved by

    the Department from time to time.  On 02-08-1994, a show

    cause  notice was issued by the Assistant Collector  of

    Central Excise, Ambala proposing to re-classify the name

    plates under heading 39.26 as articles of plastics.  The

    notice was however subsequently dropped and an order-in-

    original  dated 08-11-1994 was passed stating that  the

    appropriate classification of the name plates was under

    Chapter 87.

 3.   Subsequently, the Commissioner of Central Excise, New

    Delhi  exercising powers under section 35E of  the  Act

    reviewed the above order and filed an appeal before the

    Commissioner (Appeals).  The Commissioner (Appeals) by the

    order dated 31-10-2000 allowed the appeal of the Revenue and

    classified the plastic name plates under heading 39.26.

    Aggrieved by the order of the Commissioner (Appeals), the

    appellant filed an appeal before the Tribunal, which was

    rejected by the impugned order.

 4.    The  Tribunal  rejected the appeal of the  appellant

    primarily by recording the following findings:

      a.   It held that "a motor vehicle is a complete vehicle

         without affixation of emblems or name plates" and that "it

         cannot be treated as a part without which the motor vehicle

         is not complete";

      b.   It distinguished the case of Collector of Central

         Excise, Calcutta v. Jay Engineering Works Ltd., Calcutta

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         [1989 Supp (1) SCC 128] stating that it examined name plates

         as inputs and not as parts of the fan;

      c.   The fact that a name plate can be used only in respect

         of the product whose name it carries does not make it a part

         of the motor vehicle;

      d.   That Heading 39.26 specifically covered articles of

         plastics and since it was not in dispute that the impugned

         goods were made of plastics, they were classifiable only

         under heading 39.26.

 5.    Thus,  the essential question for consideration  is:

    Whether these ‘plastic name plates’ are to be classified

    under headings 87.08 and 87.14 as ‘parts and accessories’ of

    motor vehicles or under heading 39.26 as other articles of

    plastics?

 6.    Before  adverting  to the submissions  made  by  the

    opposing Counsels for the parties in respect of the above

    question, it is worthwhile to mention the competing headings

    relevant to the present discussion.

COMPETING HEADINGS:

 7.    The relevant portions of heading 87.08 and 87.14 are

    reproduced below for reference:

      " 87.08 Parts and accessories of the motor                vehicles of heading Nos.87.01 to 87.05                87.14     Parts and accessories of vehicles of  heading             Nos.87.11 to 87.13"

 8.   The relevant portions of heading 39.26 are reproduced

    below for reference:

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         39.26 Other articles of plastics

ISSUES FOR DETERMINATION

 9.    Having laid out the facts and the relevant headings in

    the present matter, we can now proceed to the legal issues

    that we are required to decide upon.  Based on the arguments

    of the Counsels for the parties, the following issues arise

    for determination:

      a.   Whether ‘plastic name plates’ are classifiable under

         headings 87.08 and 87.14 by falling within the scope of term

         ‘parts and accessories’ of motor vehicles;

      b.   Alternatively, even if they do fall within the scope of

         ‘parts and accessories’ of motor vehicles, whether there is

         any provision in the Explanatory Notes that specifically

         excludes ‘plastic name plates’ from headings 87.08 and

         87.14?

ISSUE NO.1

 10.    The first issue that we are required to examine  is

    whether ‘plastic name plates’ can be considered ‘parts and

    accessories’ of motor vehicles.

 11.    The Tribunal has answered the above question in the

    negative.  Significantly, the Tribunal has only examined

    whether the name plates can be considered ‘parts’ of motor

    vehicles.  It has not at all considered whether these name

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    plates can be considered ‘accessories’ of motor vehicles.

    The relevant portion of the judgment of the Tribunal is

    reproduced below:

         According  to Sarkar’s ‘Words and Phrases  of           Excise  & Customs’, Second Edition,  part  is           "an  element of a sub-assembly, not  normally           useful  by itself and not amenable to further           disassembly  for  maintenance  purpose".   In           common   parlance  parts  are  used  in   the           manufacture of the final product and  without           which  the  final product cannot be conceived           of.   A  motor vehicle is a complete  vehicle           without affixation of emblems or name  plates           and  we  agree  with the submissions  of  the           learned  DR  that it cannot be treated  as  a           part  without which the motor vehicle is  not           complete  ..  A name plate can  certainly  be           used  only  in  respect of the product  whose           name  it  carries but it does not make  it  a           part  of  the  motor vehicle on this  ground.           Heading 39.26 specifically covers articles of           plastics and as it is not in dispute that the           impugned  goods  have been made  of  plastics           they  would  be  classifiable  under  heading           39.26 only.                               [Emphasis supplied]    

 12.  The submissions made by Mr. Radhakrishnan, Counsel for

    the Revenue echo the position taken by the Tribunal above.

 13.  Counsel for the appellant however submits that the test

    to  determine  whether the name plates are  ‘parts  and

    accessories’ of the test according to Note 3 to Section XVII

    of  the  Explanatory Notes in the Harmonized  Commodity

    Description and Coding System [hereinafter referred to as

    "Explanatory Notes"], is the ‘sole and exclusive’  use.

    Counsel for the appellant submits that the name plates are

    solely and exclusively used for motor vehicles, since all

    the name plates are sold to manufacturers of vehicles and

    nothing enters the spare parts market for use elsewhere.  He

    further submits that the name plates are permanently affixed

    to the vehicle from the assembly line itself.  He also drew

    our attention to two circulars of the Department [Chandigarh

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    Collectorate Trade Notice No.94-CE/90 dated 30-0-1990 and

    Calcutta II Collectorate Trade Notice No.10/87 dated 19-02-

    1987] where ‘plastic boxes’ and ‘helmet-locking devices’,

    items  which  are according to him less necessary,  are

    directed to be considered ‘parts and accessories’ of motor

    vehicles.  Finally, he submits that the headings  under

    Chapter 87 should gain primacy as they are more specific

    while the heading under Chapter 39 is residuary and more

    general in nature.  Thus, Counsel for the appellant has

    challenged the decision of the Tribunal.

 14.    In  the light of the rival submissions made by  the

    counsel  for the parties before us, we are required  to

    determine whether the Tribunal has correctly held  that

    ‘plastic name plates’ do not fall within the purview of

    headings 87.08 and 87.14.  As far as these two headings are

    concerned, it is possible to include two kinds of goods

    therein - those which are either ‘parts’ of motor vehicles

    or those which are ‘accessories’ of motor vehicles.  While a

    case can be made for the inclusion of name plates in Chapter

    87 as ‘parts’ as well as ‘accessories’ of motor vehicles, we

    are not examining the former category.  Without going into

    the  question  of whether name plates fall  within  the

    definition of ‘parts’ of motor vehicles, for the present

    purpose,  we  are  restricting ourselves  only  to  the

    interpretation of the broader term, ‘accessories’.  Thus,

    regardless of whether name plates can be considered ‘parts’

    of motor vehicles, we are determining whether at the very

    least, name plates can be considered ‘accessories’ of motor

    vehicles.

 15.    The  term ‘accessory’ is defined in The New Collins

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    Concise Dictionary of the English Language (1982) as "a

    supplementary part or object, as of a car, appliance, etc".

    Other  definitions for the accessory are found  in  the

    Advanced Law Lexicon (3rd edition, 2005) and include the

    following:

            "Something   of   secondary  or   subordinate           importance;           .           Something contributing in subordinate  degree           to  a general result or effect; an adjunct or           accompaniment;           .           Accessory  is an article or device that  adds           to  convenience or effectiveness of,  but  is           not essential to, main machinery."    

 16.   This Court has considered and decided as to what the

    meaning of the term ‘accessory’ is in a few earlier cases.

    In  Annapurna Carbon Industries Co. v. State of  Andhra

    Pradesh  [(1976) 2 SCC 273], the Court was required  to

    examine whether "arc carbon" was an ’accessory’ to cinema

    projectors or other cinematographic equipment under item 4

    of Ist Schedule to Andhra Pradesh General Sales Tax Act,

    1957.  Answering in the affirmative, the Court opined that:

         We  find that the term "accessories" is  used           in  the schedule to describe goods which  may           have  been manufactured for use as an aid  or           addition.   A  sense  in  which   the   words           accessory  is  used given in Webster’s  Third           New International Dictionary as follows:                                   "An  object or device that is  not              essential  in itself but that  adds  to              the     beauty,     convenience,     or              effectiveness of some-thing else".                              Other     meanings    given    there     are:           "supplementary or secondary to  something  of           greater or primary importance": "additional":           "any   of  several  mechanical  devices  that           assist  in operating or controlling the  tone           resources of an organ". "Accessories" are not           necessarily  confined to particular  machines           for  which they may serve as aids.  The  same           item  may  be an accessory or more  than  one           kind of instrument. (Para10)                        It will be noticed that the entry we have to           interpret   includes  "parts"  as   well   as

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         "accessories" which are required for  use  in           projectors     or    other    cinematographic           equipment.  We think that the Andhra  Pradesh           High  Court correctly held that the main  use           of  the  arc carbons Under consideration  was           duly  proved  to  be that  of  production  of           powerful light used in projectors in cinemas.           The  fact  that  they can also  be  used  for           search lights, signalling, stage lighting, or           where  powerful  lighting for photography  or           other  purposes  may be required,  could  not           detract from the classification to which  the           carbon  arcs  belong. That is  determined  by           their  ordinary or commonly known purpose  or           user.  This, as already observed  by  us,  is           evident from the fact that they are known  as           cinema  arc  carbons"  in  the  market.  This           finding  was  enough,  in  our  opinion,   to           justify  the view taken by the Andhra Pradesh           High Court that the goods under consideration           are  covered  by the relevant  entry  No.  4.           (Para11)                                   [Emphasis supplied]    

 17.    The  above decision was relied upon in the case  of

    Mehra Bros. v. The Joint Commercial Officer, Madras [(1991)

    1 SCC 514].  The primary issue before the Court in this case

    was whether ‘car seat covers’ could be considered ‘articles

    adapted to use generally as parts and accessories of motor

    vehicles’.  The Court, holding that car seat covers and

    upholstery were in fact accessories to motor  vehicles,

    observed as follows:

         "In Black’s Law Dictionary, Fifth Edition  at           p.   13  ’accessory’  has  been  defined   as           "anything which is joined to another thing as           an ornament, or to render it more perfect, or           which accompanies it, or is connected with it           as  an incident, or as subordinate to it,  or           which  belongs  to  or with  it,  adjunct  or           accompaniment,   a   thing   of   subordinate           importance.   Aiding   or   contributing   in           secondary way of assisting in or contributing           to as a subordinate". (Para 3)           .           In our view the correct test would be whether           the article or articles in question would  be           an adjunct or an accompaniment or an addition           for the convenient use of another part of the           vehicle  or  adds to the beauty, elegance  or           comfort for the use of the motor vehicle or a           supplementary  or secondary to  the  main  or           primary  importance. Whether  an  article  or           part  is an accessory cannot be decided  with           reference  to its necessity to its  effective           use  of  the  vehicle  as  a  whole.  General           adaptability may be relevant but may  not  by

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         itself   be  conclusive.  Take  for  instance           Stereo   or   Air-conditioner  designed   and           manufactured for fitment in a motor  car.  It           would   not   be   absolutely  necessary   or           generally  adapted. But when they are  fitted           to  the  vehicle, undoubtedly  it  would  add           comfort  or  enjoyment  in  the  use  of  the           vehicle.  Another  test  may  be  whether   a           particular article or articles or parts,  can           be  said  to  be  available for  sale  in  an           automobile  market  or  shops  or  places  of           manufacture; if the dealer says it is  to  be           available certainly such an article  or  part           would  be manufactured or kept for sale  only           as  an  accessory for the use  in  the  motor           vehicle.  Of course, this may not also  be  a           conclusive test but it is given only  by  way           of  illustration.  Undoubtedly  some  of  the           parts  like  axle, steering,  tyres,  battery           etc. are absolutely necessary accessories for           the  effective use of the motor  vehicle.  If           the  test that each accessory must add to the           convenience or effectiveness of  the  use  of           the car as a whole is given acceptance many a           part  in the motor car by this process  would           fall outside the ambit of accessories to  the           motor  car. That would not appear to  be  the           intention of the legislature... (Para 5)                                                [Emphasis supplied]

 18.   The view taken regarding the term ‘accessory’ in the

    above two cases has been reiterated in the cases of Union

    Carbide India Ltd. v. State of AP [1995 Supp (2) SCC 267]

    and Commissioner of Central Excise, Delhi v. Allied Air-

    conditioners Corp. (Regd.) [(2006) 7 SCC 735].

 19.   The Court was also faced with similar circumstances in

    the case of Jay Engineering (supra).  In this case, the

    Respondent was the manufacturer of electric  fans,  and

    brought into its factory name plates under tariff item 68 of

    the erstwhile Central Excise Tariff. The name plates were

    affixed to the fans before marketing them.  Here, the Court

    emphasized on the necessity of name plates for the marketing

    of the product.  The Court observed:

         "In  those circumstances, in our opinion, the           Tribunal  was  right  in  arriving   at   the           conclusion that the nameplate was not a piece

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         of  decoration.  Without the  nameplate,  the           electric fans as such, could not be marketed;           and  that  the  dealer was  entitled  to  the           benefit of the notification No. 201/79-CE for           the  purpose  of obtaining pro forma  credit.           Fans  with  name plates, have  certain  value           which  the fans without the name plates,  did           not have. If that be so, then the value added           for  the  accretion of nameplate was entitled           to  pro  forma credit in terms  of  the  said           notification. It is true that an electric fan           may  perform its essential functions  without           affixation of the nameplate, but that is  not           enough.   Electric   fans   do   not   become           marketable  products  without  affixation  of           name plates. (Para 9)                                            [Emphasis supplied]

 20.   It  is evident therefore, that an ‘accessory’ by its

    very definition is something supplementary or subordinate in

    nature and need not be essential for the actual functioning

    of the product.  Applying the test laid down in Mehra Bros.

    case (supra), it cannot be denied that name plates add to

    the convenient use of the motor vehicle.  Name plates serve

    a very useful purpose inasmuch as it gives an identity to

    the vehicle. Each vehicle comes with different brand name

    and  in different models having distinct features.  The

    manufacturers of different type of models of vehicles market

    them  under a name and the vehicles are recognized  and

    referred to by the name plate affixed on them.  Name plates

    convey to the consumers the distinct features it carries.

    Undoubtedly they add effectiveness and value to the vehicle

    and are at the very least accessories of the vehicle.  Thus,

    even if there was any difficulty in the inclusion of the

    plastic name plates as ‘parts’ of the motor vehicles, they

    would most certainly have been covered by the broader term

    Qaccessory’.  In this view of the matter, we are of the

    opinion that the Tribunal has erroneously come  to  the

    conclusion that ‘plastic name plates’ are not ‘parts and

    accessories’ of motor vehicles for the purposes of headings

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    87.08 and 87.14.

ISSUE NO.2

 21.   The  second  issue before consideration is  whether,

    despite the inclusion of the plastic name plates within the

    scope  of  the  ‘parts and accessories’, certain  other

    provisions operate to remove or exclude plastic name plates

    from Chapter 87.

 22.    This point was neither raised before nor decided by

    the Tribunal although this point had been argued before the

    authority  in  original as well as the Commissioner  of

    appeals.  Both of them decided this point  against  the

    appellant.    Option with us is either to remit the case to

    the Tribunal for a decision on this point or decide the same

    ourselves as this point had been decided by the authorities

    below.  After hearing the Learned Counsel for the parties

    and after applying our mind on this point we have formed the

    opinion that to avoid the unnecessary delay and expense to

    the parties it would be appropriate for us to decide the

    point ourselves.

 23.   In this regard, it has been submitted by Counsel for

    the Revenue that the Explanatory Notes in the Harmonized

    Commodity  Description and Coding  System  [hereinafter

    referred  to as "HSN"] to Section XVII (which  includes

    Chapter 87) make it clear that plastic name plates  are

    excluded from the scope of Chapter 87 and are therefore

    required to be classified under the residuary provision in

    Chapter 39.

 24.   Since the submission of the Revenue is based purely on

    the HSN Explanatory Notes, it is essential to reproduce the

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    relevant parts of the HSN Explanatory Notes.  The notes

    below relevant headings, heading 87.08 and 87.14, state as

    follows:

         "This heading covers parts and accessories of           the  motor  vehicles  of  headings  87.01  to           87.05,  provided  the parts  and  accessories           fulfil both the following conditions:

            (i)  They must be identifiable as being suitable for use                   solely or principally with the above-mentioned vehicles; and                            (ii) They must not be excluded by the provisions of the                   Notes to Section XVII (see the corresponding General                   Explanatory Note)."

                                           [Emphasis supplied]

    An  almost identical explanation exists under the Notes

    to heading 87.14.

 25.    The effect of the above HSN Explanatory Notes is to

    specifically exclude from the scope of these headings what

    is  excluded in the general notes to the entire Section

    (Section XVII), of which Chapter 87 is a part.  The General

    Explanatory Note to Section XVII states as follows:

         Section Notes.           .           2.  - The expressions "parts" and "parts  and           accessories"  do not apply to  the  following           articles,   whether   or   not    they    are           identifiable  as  for  the  goods   of   this           section:-           .           (b)  Parts of general use, as defined in Note           2  to Section XV, of base metal (section XV),           or similar goods of plastics (Chapter 39)                      3.-  References  in  Chapters  86  to  88  to           "parts"  or  "accessories" do  not  apply  to           parts  or  accessories which are not suitable           for   use  solely  or  principally  with  the           articles  of  those  Chapters.   A  part   or           accessory  which answers to a description  in           two or more of the headings of those Chapters           is  to be classified under that heading which           corresponds to the principal use of that part

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         or accessory.                               [Emphasis supplied]

    Further explanation regarding Note 2 reads as follows:

           (A)  Parts and accessories excluded by Note             2 to Section XVII             .                (2)  Parts of general use as defined  in                Note  2  to  Section XV, for example,  .                number plates, nationality plates,  etc.                (such  goods  of  base  metals  fall  in                Chapter   83,  and  similar   goods   of                plastics fall in Chapter 39).

 26.   Referring to Note 2 of Chapter XV,

      Section Notes.        .        2.-  Throughout the Nomenclature, the expression        "parts of general use" means:        .           (c) Articles of headings.83.10..

    Finally,  Heading 83.10 is entitled "SIGN PLATES,  NAME

    PLATES,  ADDRESS  PLATES AND SIMILAR PLATES.,  OF  BASE

    METAL."  and includes various kinds of name  plates  in

    further sub-headings.

 27.   Based  on  the submissions made by Counsel  for  the

    Revenue, the central question before us is:  whether the

    abovementioned Section Note 2(b) excludes plastic  name

    plates  from the scope of Section XVII?  Thus,  we  are

    required to looking into the meaning and interpretation of

    Section Note 2(b).  The Counsel for the Revenue contends

    that since Note 2 to Section XV defines "parts of general

    use" as including name plates, sign plates, number plates,

    etc., their plastic equivalents [by virtue of Note 2(b)]

    will also get excluded from the scope of Chapter 87.  Thus,

    he submits that they ought to be classified under Chapter

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    39.

 28.   We however find it difficult to accept this submission

    in the light of the language used in Note 2(b).  Note 2(b)

    excludes from the scope of Section XVII "Parts of general

    use,  as defined in Note 2 to Section XV, of base metal

    (section XV), or similar goods of plastics (Chapter 39)".

    What we have to examine is the scope of the last part of the

    Note.  Admittedly, there are two ways of interpreting this

    phrase.  The interpretation suggested by the Revenue is to

    read  the exclusion of "similar goods of plastics",  in

    synchrony with the exclusion that applies to the goods of

    base metal.  In this respect, he drew our attention to the

    further explanation that is provided on Note 2(b), where

    number plates are given as an example and it is further

    provided that "such goods of base metals fall in Chapter 83,

    and  similar  goods of plastics fall  in  Chapter  39".

    According to the Revenue, this makes it amply clear that the

    "parts of general use" includes name plates of both, base

    metal and plastic and therefore fall out of the scope of

    Section XVII.

 29.   We are not impressed with this submission.  It is true

    that on first blush, it appears that if the base metal name

    plates  are excluded, so must similar plastic goods  be

    excluded.  However, we do not think that this is the correct

    position, primarily because of the reference made in Note

    2(b) to Chapter 39.  Undoubtedly, name plates of base metal

    stand excluded from the scope of Section XVII by virtue of

    being "parts of general use" as defined and specifically

    mentioned in Chapter XV.  Now, with respect to plastic name

    plates, if the reference to Chapter 39 had not been made,

    then there would be no controversy at all. In such a case,

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    all plastic products similar to those defined in Chapter XV

    would be excluded, regardless of an omission to specifically

    mention them within Chapter 39.  In other words, without any

    reference to Chapter 39 in Note 2(b), the only control on

    the meaning of "similar goods of plastics" would be the

    description of goods included within Chapter XV.

 30.   However, the minute a reference is made to Chapter 39,

    it is the provisions in Chapter 39 that control the scope of

    "similar goods of plastics".  Thus, when Note 2(b) refers to

    similar goods of plastics as in Chapter 39, it must  be

    interpreted to mean similarly defined goods in Chapter 39.

    And since no definition or reference exists in Chapter 39

    regarding name plates, etc., we cannot find any exclusion

    with respect to these goods from Chapter 87.  For example,

    when the exclusion regarding base metal name plates is made,

    it is so because there exist specific and detailed headings

    in  that  Chapter.  But in the absence of such specific

    headings  in  Chapter 39, we are unable to  accept  the

    exclusion of the plastic name plates from Chapter 87 and

    include it within a residuary provision in Chapter 39.

 31.   Thus, we are of the opinion that the language in Note

    2(b) cannot be interpreted to exclude plastic name plates

    from the scope of Section XVII.

CONCLUSION

 32.    In conclusion, since plastic name plates are ‘parts

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    and accessories’ of motor vehicles and since they are not

    excluded   from  the  Section  XVII,  the   appropriate

    classification is under headings 87.08 and 87.14.

 33.   For the reasons stated above, the appeal is allowed.

    There shall be no order as to costs.