1998 (5) TMI 380 - AT - Central Excise

Summary

Issues:
Classification of goods under Heading 58.02 or Heading 6301 of the Central Excise Tariff Act.

Detailed Analysis:

1. Issue of Classification:
- The main issue in this appeal before the Appellate Tribunal CEGAT, New Delhi was whether the respondent company was manufacturing terry towelling fabrics classified under Heading 58.02 or only terry towels classified under Heading 6301 of the Central Excise Tariff Act.

2. Arguments by the Appellant:
- The Appellant argued that the respondent was manufacturing towelling fabrics by cutting towels and hemming them, which, according to the Explanatory Notes of HSN, constituted a process of manufacture. They emphasized that the specific attention should be paid to the word "cutting" and that the product should be classified as terry towelling under Heading 58.02. Reference was made to Note 5 to Section XI of the Tariff in support of this argument.

3. Arguments by the Respondent:
- The Respondent contended that they were manufacturing towels in rolls, not towelling cloth or fabrics. They classified their product as a made-up article falling under Chapter 63 of the Tariff. They argued that the product, with a predetermined thread for cutting into towels, fell outside the purview of Heading 58.02. Various evidence, including samples and expert opinions, were presented to support the contention that the product was not towelling fabrics but made-up articles under Chapter 63.

4. Tribunal's Analysis and Decision:
- The Tribunal carefully considered the arguments from both sides and observed that the product in question had a dividing thread, creating a predetermined towel of a specific size and shape. It was noted that the product could only be used as towels and had distinct characteristics of a made-up article. The Tribunal referred to Note 5 to Section XI, which stated that products separated by cutting or dividing threads would fall under made-up articles in Chapter 63. The Tribunal rejected the Appellant's argument that the dividing thread was continuous fabric, emphasizing that cutting the thread made the towel ready for use, even without hemming. Therefore, the Tribunal concluded that the product should be classified as a made-up article under Chapter 63 and dismissed the appeal filed by the Department.

In conclusion, the Appellate Tribunal CEGAT, New Delhi ruled in favor of the Respondent, holding that the product in question should be classified as a made-up article under Chapter 63 of the Central Excise Tariff Act, rejecting the Department's appeal regarding the classification under Heading 58.02. The decision was based on the presence of a dividing thread in the product, making it a distinct article suitable only for use as towels, in line with the provisions of Note 5 to Section XI of the Tariff.