Full Judgment Text
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CASE NO.:
Appeal (civil) 6980-6983 of 2004
PETITIONER:
M/s O.K. Play (India) Ltd.
RESPONDENT:
Comm.of Central Excise,Delhi-III, Gurgaon
DATE OF JUDGMENT: 03/02/2005
BENCH:
S.N. VARIAVA,Dr. AR. LAKSHMANAN & S.H. KAPADIA
JUDGMENT:
J U D G M E N T
WITH
CIVIL APPEAL Nos.6776-6779 OF 2004
Commissioner of Central Excise,
Delhi-III, Gurgaon \005 Appellant
Versus
M/s O.K. Play (India) Ltd. \005 Respondent
KAPADIA, J.
The short question which arises for determination in
these Civil Appeals filed by the assessee and by the department,
respectively, under Section 35L(b) of the Central Excise Act,
1944, is \026 whether the assessee was right in classifying the
following articles under Chapter Heading 95.03 and clearing
the same without payment of duty. The said articles are
Activity Desks and Chairs, Fun Fliers, Play Table, Play Pool,
Rockers, Slides and Swings.
The assessee is engaged in the manufacture of toys. On
24th April 1987, a team of officers from Anti Evasion Branch of
the Delhi Commissionerate visited the factory premises of the
assessee situate at Gurgaon, Haryana, when they found that the
assessee was manufacturing the above articles with the help of
machines and which were being cleared without payment of
duty.
On 4th November, 1997, a show-cause notice was issued
to the assessee alleging mis-declaration in the classification list
by prefixing and suffixing each of the above items with the
words "baby" and "toys" respectively. Consequently, "Activity
Desks and Chairs" were described as "Baby Chair Toy" and
"Baby Desk Toy"; Rockers were described as "Baby Rocker
Toy"; Slides were described as "Baby Slide Toy". According
to the department, the said prefix and suffix was inserted to
each of the above articles to mislead the department into
believing that each article was a toy. Hence, the department
sought to recover duty for the period from 1.4.1992 to
28.2.1997 by invoking the proviso to section 11A(1) of the
Central Excise Act, 1944 (hereinafter referred to for the sake of
brevity as "the 1944 Act"). According to the department, the
said items were classifiable under Chapter Headings 95.06,
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94.01, 94.03 and 39.22 and, therefore, chargeable to duty.
The basic question which arises for determination in
these Civil Appeals is \026 whether the aforestated seven articles
are "toys" classifiable under Tariff Heading 95.03 as claimed
by the assessee?
For the sake of clarity, since classification of seven
articles is in issue, we have divided this judgment into three
categories.
Before dealing with the issue of classification, certain
points are required to be clarified.
In the case of A. Nagaraju Brothers v. State of Andhra
Pradesh reported in [1994 (72) ELT 801], it has been held by
this Court that no one single universal test can be applied for
correct classification. There cannot be a static parameter for
correct classification.
Further, the scheme of the Central Excise Tariff is based
on Harmonized System of Nomenclature (for short "HSN") and
the explanatory notes thereto. Therefore, HSN along with the
explanatory notes provide a safe guide for interpretation of an
Entry.
Further, equal importance is required to be given to the
Rules of Interpretation of the Excise Tariff. Under rule 3(a), it
is provided that the heading which provides a specific
description shall be preferred to a heading having a more
general description. For example, in the case of "toys" referred
to in the HSN Heading and the Tariff Heading, the description
refers to reduced size model of an Article used by adults. This
test helps us to understand the difference between "toys" and
"furniture".
Lastly, it is important to bear in mind that functional
utility, design, shape and predominant usage have also got to be
taken into account while determining the classification of an
item.
The aforestated aids and assistance are more important
than the names used in the trade or common parlance in the
matter of correct classification.
A) CLASSIFICATION OF PLAY TABLE, TABLES,
ACTIVITY DESKS AND CHAIRS.
The assessee has classified the above articles under Tariff
Heading 95.03, whereas the revenue has classified the same
under Tariff Headings 94.01 and 94.03, which read as follows:-
Heading No.
Description of Goods
Rate of
Duty
94.01
Seats (other than those of heading
No.94.02), whether or not convertible
into beds, and parts thereof.
20%
94.03
Other furniture and parts thereof.
20%
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95.03
Other toys; reduced-size ("scale")
models and similar recreational
models, working or not; puzzles of all
kinds.
15%
Mr. S. Ganesh, learned senior counsel appearing on
behalf of the assessee submitted that "Activity Desks and
Chairs" were specifically designed for amusement of small
children. He submitted that the said Desk has a slate with a
removable desk top with twin wells for crayons, toys, books
etc. The children can even draw or learn the basics of writing
on this table. Similarly, the play table is designed for group
play. These articles were aids for the play of small children.
They were bought and sold in the market as toys. They were
exclusively available in toy shops and not in furniture shops. It
was submitted that the usage and commercial parlance show
that the articles were toys classifiable under Tariff Heading
95.03 as toys. In this connection, reliance was placed on the
Certificates obtained from Toys Association of India and from
Sports Goods Export Promotion Council, letters from various
distributors and catalogues of various international
manufacturers and rotational moulding association. It was
submitted that the department has not adduced any evidence to
show that in commercial parlance, these articles are not known
as toys. Reference was also made to Note-1 under Chapter 94
to show that the said chapter did not cover the toy furniture.
According to the assessee, toy furniture has not to be
understood as furniture under Chapter 94 but should be
excluded therefrom as a toy furniture was specifically designed
for play and amusement of children. It was also not
synonymous with doll furniture. These articles, according to
the assessee, were aids for play and, therefore, classifiable
under Heading 95.03. Reliance was also placed on the product
catalogue to show the shape, colour and size of these articles
indicating that they were toys and not furniture.
Per contra, Mr. Rajiv Dutta, learned senior counsel
appearing on behalf of the department submitted that the mere
fact that an article was meant for exclusive use of children
would not place that article in the category of toys. Baby
chairs, desks and tables were used predominantly by children to
sit on and write on. They were smaller versions of tables and
chairs used by adults and, therefore, rightly classified as
furniture under Headings 94.01 and 94.03. He submitted that
what was excluded from Chapter 94 was doll’s furniture. In
this connection, reliance was placed on Note (A)(12) of HSN
Heading 95.03 which refers to Dolls’ houses and furniture
including bedding. It is this type of furniture that can be
treated as toy furniture which is excluded from Chapter 94.
Reliance was also placed on the note to HSN Heading 94.01
which refers to different types of chairs like infant’s chair,
children’s seat etc. Therefore, according to the department, the
aforestated articles were classifiable under Headings 94.01 and
94.03.
We are inclined to agree with the department. The mere
fact that an article is meant for exclusive use of children would
not place it in the category of toys. The word "toys" is not
defined. However, Tariff Heading 95.03 describes "toys" as
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reduced-size models and similar recreational. This tariff
heading is identical to HSN Heading 95.03 which also refers to
"toys" as reduced-size models. Both the headings describe
"toys" as representing animals or non-human objects. They
refer to toy musical instruments, apparatus, appliances etc.
Heading 95.03 is a residuary item. It covers Doll houses and
furniture. Under the explanatory notes to HSN Heading 95.03,
reference is made to toys like sewing machines, musical
instruments etc. distinguishable by their size and limited
capacity from real sewing machine, musical instrument etc.
Similarly, under the explanatory Note (B) to HSN Heading
95.03, reduced-size model includes models of aircraft, trains
etc. which are reproductions of Articles. It is important to note
that Section XX of the Central Excise Tariff Act, 1985
(hereinafter referred to for the sake of brevity as "the 1985
Act") covers Chapters Nos.94, 95 and 96 under the caption
"Miscellaneous Manufactured Articles". Chapter 94 deals with
Furniture. Chapter Note 1(k) excludes toy furniture or toy
lamps from Chapter 94. Chapter Note 2 refers to the articles of
furniture, falling in Chapter 94, subject to the condition that
they are for placing on the floor or ground. Tariff Heading
94.01 refers to Seats. Further, the HSN Heading 94.03, which
is similar to Tariff Heading 94.03, refers to any movable article
which can be placed on the floor and mainly used in dwelling
house, schools, cafes etc. as furniture. It covers desks, chairs
etc. Basically, toys, as indicated by HSN Heading, are
miniature reproduction of the articles used by the adults, like,
furniture, musical instruments etc.
In the light of what is stated above, we are of the view
hat play tables, activity desk etc., enumerated above, are more
akin to furniture under Headings 94.01 and 94.03 than toys
under Heading 95.03.
In Corpus Juris Secundum, Volume 37 at page 1412, the
word "furniture" is defined as under:-
"A comprehensive term of very broad
meaning and general application whose meaning
changes so as to take the colour of, or be in accord
with, the subject to which it is applied. It has been
variously defined as meaning anything which
furnishes or equips; a supply of necessary,
convenient or ornamental articles, for any business
or residence, or with which a residence is supplied,
equipment, outfit, supplies, that which fits or
equips for use or action, that which fits or supplies
a house for use or which furnishes or is added to
the interior of a house for use or convenience; that
with which anything is fitted, out, furnished, or
supplied, that with which anything is furnished or
supplied for use, those movables required for use
or ornament in a dwelling, a place of business or of
assembly; those readily movable articles which
would be serviceable generally as household
furniture without any special reference to a
particular building. It is not confined in its
meaning to such things as are necessaries to a
family, but embraces about everything with which
a house or anything else is or can be furnished.
The term ordinarily relates to movables chattel;
personal chattels in the use of a family and applies
to all personal chattels which may contribute to the
use or convenience of the house-holder or the
ornament "of the house". "Furniture" is not
generally included by the term "fittings"."
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According to Concise Oxford Dictionary, "toy" is an
object for a child to play with. It is a model or a miniature of
something.
According to Encyclopedia Americana, a "toy" is a
trifle. It is a thing of little or no value. It is a play thing. It has
no practical use.
According to Oxford Classical Dictionary, a Doll’s
house furniture is a "toy".
According to Random House Dictionary, a "toy" is an
object. It is a small representation of something familiar to the
child such as an animal an object, person etc. It is something
diminutive.
According to Collins Cobuild Dictionary, a "toy" is an
object that the children play with, for example, a doll or a
model car or an air-craft.
In the circumstances, we hold that play table, activity
desks and chairs constitute "furniture" in terms of Tariff
Heading 94.01/94.03.
B) CLASSIFICATION OF "SWINGS, SLIDES, FUN
FLIERS AND ROCKERS".
The next question which arises for determination is \026
whether the above items are "toys" under Tariff Heading 95.03,
as contended by the assessee; or whether they are equipments
for general physical exercise, gymnastics and athletics, as
submitted on behalf of the department.
To decide the above controversy, we quote hereinbelow
Tariff Headings 95.03 and 95.06:
Heading No.
Description of Goods
Rate of
Duty
95.03
Other toys; reduced-size ("scale")
models and similar recreational models,
working or not; puzzles of all kinds.
15%
95.06
Articles and equipment for general
physical exercise, gymnastics, athletics,
other sports (including table-tennis) or
out-door games, not specified or
included elsewhere in this Chapter.
15%
As stated above, Tariff Heading and HSN Heading 95.03
describe "toys" as reduced-size models. Toys are miniature
replica of articles used by adults. Tariff Heading 95.06 is
similar to HSN Heading 95.06. According to explanatory notes
to HSN Heading 95.06, equipments for exercise etc. are parallel
bars, rings, trapeze etc. The said note excludes toys under
Heading 95.03. However, it covers swings, slides etc. used in
the playground. Therefore, on a bare reading of these
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explanatory notes, we find that the articles in question are not
equipments for general physical exercise. They are toys under
Tariff Heading 95.03.
In Black’s Law Dictionary, the word "equipment" is
defined to mean an article or implement used for a specific
purpose or activity.
In Random House Dictionary, an "equipment" is defined
as an article used for gaining skill.
According to Collins Cobuild Dictionary, "equipment" is
a thing which is used for a particular purpose.
Applying the above tests, we hold that the purpose of
reduced size models of slides, swings etc. is amusement and not
physical exercise. The Tribunal was, therefore, right in
classifying these items under Tariff Heading 95.03.
C) CLASSIFICATION OF PLAY POOL
In this case the Adjudicating Authority had classified
"Play Pool" as "Baths" under Tariff Heading 39.22, as against
the claim of the assessee that "Play Pool" was a toy under Tariff
Heading 95.03. The Tribunal, however, held that "Play Pool"
was neither a toy under Heading 95.03 nor did it fall in category
of "Baths" under Heading 39.22. The Tribunal classified it
under Heading 39.22, against which the department has not
come in appeal.
We quote hereinbelow the aforestated Tariff Headings
39.22, 39.26 and 95.03:
Heading No.
Description of Goods
39.22
Baths, shower-baths, wash-basins, bidets,
lavatory pans, seats and covers, flushing
cisterns and similar sanitary-ware, of plastics
39.26
Other articles of plastics and articles of other
materials of heading Nos.39.01 to 39.14
95.03
Other toys; reduced-size ("scale") models and
similar recreational models, working or not;
puzzles of all kinds.
In the present case the evidence on record indicates that
the "Play Pool" has a diameter of 5 ft.; it has a depth of 2.5 ft.;
it has steps to go down; it has a seat and a slide. Its water
carrying capacity is 1000 to 1500 litres. During summer,
children can take a cool dip in it. During winter, it can be used
as a play-pen. Adults can also sit in it.
In view of the above specifications, "Play Pool" cannot
be said to be a toy under Tariff Heading 95.03. Further, in the
explanatory notes to HSN Heading 39.22, it is clarified that
"Baths" in the said heading would cover baby baths and
camping toilets. Therefore, in our view, the department was
right in classifying "Play Pool" as "Baths" under Heading
39.22.
We would have remanded the matter to the Tribunal, if
there was any ambiguity about the classification of "Play Pool"
under Tariff Heading 39.22. However, we are not inclined to
remit the matter as the item stands fully covered by the
explanatory notes to HSN Heading 39.22. Moreover, at the
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stage of show-cause, full opportunity was given to the assessee
to disprove that it was not falling under Heading 39.22. On the
facts and circumstances of this case and without going into the
question as to what course the department should follow when
the Tribunal classifies the item in a different category, we hold
that the Adjudicating Authority was right in classifying "Play
Pool" under Tariff Heading 39.22.
On the question of limitation, it may be stated that one of
the show-cause notices is dated 4.11.1997 claiming duty from
the assessee for the period commencing from 1992-93 to
28.2.1997. By the impugned judgment, the Tribunal came to
the conclusion that the assessee had filed its classification list
giving exact description of the goods; that all the relevant
features of the products manufactured were available with the
department; that it was for the officers of the department to
conduct further examination to see whether the classification
given by the assessee was correct or not and, therefore, the
department was not entitled to invoke larger period of
limitation. Consequently, the Tribunal directed the department
to drop the proceedings pursuant to show-cause notice dated
4.11.1997.
Being aggrieved, the department has come to this Court
by way of Civil Appeal Nos.6776-6779 of 2004. We do not
find any infirmity in the decision of the Tribunal. The
classification list was filed as far back as on 22nd October, 1992.
Under the said list, the goods were declared as "Baby Slide
Toy", "Baby Chair Toy", "Baby Rocker Toy" etc. The said list
was approved without enquiry by the department on the
description of the product. The department did not call for the
product catalogue during the aforestated period till February,
1997. According to the impugned show-cause notice dated
4.11.1997, the product catalogue described the above items as
"Rockers, Slides, Swings" and not as "Baby Rocker Toy, Baby
Slide Toy" etc. According to the department, on reading of the
product catalogue with the classification list, it becomes clear
that the word "Baby" has been deliberately prefixed and the
word "toy" has been wilfully suffixed to the "Rockers, Slides,
Swings" etc. in order to mislead the department into believing
that the said products were toys.
We do not find any merit in these arguments. Nothing
prevented the department from calling upon the assessee over
the years to produce their catalogues. The classification lists
were duly approved by the department from time to time. All
the facts were known to the department, whose officers had
visited the factory of the assessee on at least 12 occasions. In
the circumstances, we do not find any infirmity in the reasoning
given by the Tribunal in coming to the conclusion that there
was no wilful suppression on the part of the assessee enabling
the department to invoke the extended period of limitation
under the proviso to section 11A(1) of the 1944 Act. However,
we may clarify that the show-cause notices dated 24.6.1997,
27.5.1998, 15.10.1998, 31.3.1998 and 30.9.1999 are in time as
held by the Tribunal.
Subject to what is stated hereinabove regarding
classification of "Play Pool" under Tariff Heading 39.22, we do
not find any infirmity in the impugned judgment of the
Tribunal. Hence, the Civil Appeals filed by the assessee and
the cross-appeals filed by the department are dismissed.
However, in the facts and circumstances of this case, there will
be no order as to costs.
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