2003 (2) TMI 268 - AT - Central Excise

Summary

Issues:
Classification of processed knitted pile fabrics in running length under Central Excise Tariff Act.

Analysis:
The case involved a dispute regarding the classification of processed knitted pile fabrics in running length by the appellants, who were processors of textiles. Initially, both grey and processed fabrics were classified under Heading 60.01 of the Central Excise Tariff Act. However, after a certain date, the Revenue Department issued show cause notices classifying the processed fabrics under Heading 63.07 as "other made-up textile articles." The adjudicating authority confirmed this classification, leading to penalties imposed on the appellants.

The matter was referred to the Larger Bench of the Tribunal to determine whether the processed knitted pile fabric should be classified under Chapter 63 as "made-up article" or under Chapter 60 of the Central Excise Tariff Act as processed fabric. The Larger Bench observed that the issue would depend on whether the Commissioner (Appeals) based the decision on Chapter Note 5(f) or 5(b) of Section XI of the Central Excise Tariff Act.

The appellants argued that the impugned order went beyond the scope of the show cause notice, as the adjudicating authority confirmed the demand based on Section Note 5(f) while the Commissioner (Appeals) relied on Section Note 5(b) of Section XI of the Central Excise Tariff Act. The Revenue contended that the Commissioner (Appeals) considered Section 5(b) as raised by the appellants.

The Tribunal analyzed the provisions of Section Note 5(f) and 5(b) of Section XI of the Central Excise Tariff Act. It was noted that the show cause notices specifically invoked Section Note 5(f) to classify the fabrics as made-up articles. However, the Commissioner (Appeals) based the decision on Section Note 5(b), classifying the goods as made-up articles ready for use. This deviation from the show cause notice was deemed impermissible.

Ultimately, the Tribunal found merit in the appellants' argument that the impugned order exceeded the scope of the show cause notice. Consequently, the impugned orders were set aside, and the appeals of the appellants were allowed.