2007 (1) TMI 360 - AT - Central Excise

Summary

Issues Involved:
1. Classification of Cellulosic Spun Yarn under Tariff Heading 18III(i) versus 18III(ii).
2. Validity and relevance of test reports provided by the revenue.
3. Burden of proof in classification disputes.

Detailed Analysis:

1. Classification of Cellulosic Spun Yarn under Tariff Heading 18III(i) versus 18III(ii):

The appellant, a manufacturer of various yarns, sought classification of Cellulosic Spun Yarn under Tariff Heading 18III(i), which was initially approved. The relevant tariff heading defined Cellulosic Spun Yarn as yarn predominantly made from man-made fibre of cellulosic origin, with sub-categories for yarns containing or not containing man-made fibres of non-cellulosic origin. The dispute arose when a Show Cause Notice (SCN) alleged that the yarn should be classified under 18III(ii), attracting a higher duty rate.

2. Validity and relevance of test reports provided by the revenue:

The SCN was based on test reports which the appellant contested. Out of the four test reports provided, the appellant argued that:
- Test report No. 9/85 was irrelevant as the sample was drawn after the disputed period.
- Test report No. 2/85 was irrelevant as it related to polyester fibre.
- Reports 3/85 and 5/85 described samples as fibrous mass, not man-made fibre.

The appellant emphasized that yarn made from fibrous waste should not be classified under 18III(ii), citing the Tribunal's decision in CCE v. Vardhan Syntex, which was upheld by the Supreme Court in Kerala Spinners.

3. Burden of proof in classification disputes:

The appellant argued that the burden of proof for reclassification lies with the revenue, as established in H.P.L. Chemicals Ltd. v. CCE, Chandigarh. The Tribunal noted that the revenue failed to provide adequate evidence that the yarn should be classified under 18III(ii). The Supreme Court's guidelines in UOI v. Garware Nylons Ltd. emphasized the necessity for the revenue to disprove the appellant's classification with substantial evidence, which was not done in this case.

Conclusion:

The Tribunal reviewed the test reports and found them insufficient to justify a change in classification. The reports indicated the samples were fibrous mass, not uniform fibres, aligning with the Tribunal's decision in Vardhan Syntex. The revenue's failure to provide conclusive evidence meant the initial classification under 18III(i) was correct. Consequently, the Tribunal set aside the impugned order, allowing the appeal with consequential relief to the appellant.