2005 (4) TMI 336 - AT - Central Excise

Summary

Issues: Classification of terry towelling cloth under different headings; Interpretation of Section Note 5(b) of Section XI of CETA 1985; Liability to pay duty on further processed goods.

Classification of Terry Towelling Cloth:
The case involved the classification of terry towelling cloth by the Revenue under Heading 58.02, based on the process of bleaching, dyeing, cutting, and stitching. The Revenue argued that the fabric should not be classified under Heading 63.02 before these processes. However, the Commissioner (Appeals) held that the classification under Heading 63.02 remains even after such processes, and no further duty can be charged. The Tribunal examined the issue and found that terry towelling cloth with dividing threads falls under Heading 63.02 as per Section Note 5(b) of Chapter XI of CETA 1985. The samples showed clear dividing lines for separating each towel, supporting the classification under Heading 63.02.

Interpretation of Section Note 5(b) of Section XI of CETA 1985:
The Tribunal considered the interpretation of Section Note 5(b) of Chapter XI of CETA 1985 in classifying terry towelling cloth. It was observed that the fabric in running length with dividing threads is appropriately classified under Heading 63.02 as per the said provision. The Tribunal emphasized that once the classification is decided and duty is paid accordingly, any further process to enhance the product quality without changing the classification does not attract additional duty. The decision was supported by the CEGAT ruling in a similar case involving Binny Mills, reinforcing the correctness of the Commissioner (Appeals) order.

Liability to Pay Duty on Further Processed Goods:
The issue of liability to pay duty on goods subjected to further processes after initial classification and duty payment was deliberated. The Respondents contended that any subsequent processes do not alter the classification under Heading 63.02 and do not warrant additional duty. Citing a Tribunal decision in a related case, it was argued that even hemming the fabric does not change its classification as a made-up article. The Tribunal concurred with the Respondents' position, emphasizing that once the product is classified and duty is paid, subsequent processes for quality enhancement do not attract further duty. Consequently, the appeals of the Revenue were dismissed based on the correctness of the Commissioner (Appeals) order.

In conclusion, the judgment by the Appellate Tribunal CESTAT, CHENNAI addressed the classification of terry towelling cloth, the interpretation of relevant provisions of CETA 1985, and the liability to pay duty on goods undergoing further processing. The decision established that terry towelling cloth with dividing threads is appropriately classified under Heading 63.02, and subsequent processes do not alter the classification or necessitate additional duty payment, in line with the principles outlined in Section Note 5(b) of Chapter XI of CETA 1985 and supported by legal precedents.