2010 (9) TMI 386 - AT - Customs

Textiles benefit of Notification No. 36/2003 - Test reports Textured yarn or non-textured yarn contradictory reports - no valid explanation as to why the samples were sent simultaneously to three laboratories - manner in which the second report was issued after suo motu testing by the Textile Committee after discussion with Commissioner of Customs and after exchanging correspondence between Member Secretary of Textile Committee and Chief Commissioner of Customs does not command confidence - CRCL is in favour of the Department, initial report of Textile Committee and the report of GCTL, Kanpur were in favour of the party, the benefit of doubt naturally has to be given to the assessee especially when the test clarified to be subjective - order of the Commissioner, set aside and the appeal allowed with consequential relief, as per law

Issues Involved:
1. Classification of imported fabric.
2. Validity of test reports from different laboratories.
3. Methodology for determining whether the fabric is made of textured or non-textured yarn.
4. Procedural fairness in retesting and report acceptance.
5. Credibility of the second test report from the Textile Committee.

Issue-wise Detailed Analysis:

1. Classification of Imported Fabric:
The primary issue was the classification of the imported fabric. The appellants claimed the fabric as non-textured polyester filament under Heading 5407 61 90. The Department, however, classified it under Heading 5407 52 90, asserting it was made of textured polyester yarn, attracting higher duty rates.

2. Validity of Test Reports from Different Laboratories:
The case involved conflicting test reports from three laboratories: CRCL, Textile Committee, and GCTI. The CRCL report indicated the fabric was made of textured yarn. Conversely, the initial Textile Committee report and the GCTI report supported the appellants, identifying the fabric as non-textured yarn. The Tribunal noted the contradictory nature of these reports and emphasized the need for cross-examination of experts.

3. Methodology for Determining Whether the Fabric is Made of Textured or Non-Textured Yarn:
The Explanatory Notes to HSN were discussed to ascertain the methodology for determining if the yarn was textured. It was highlighted that these notes describe distinguishing features but do not prescribe a specific testing method. The Tribunal found that the test methods were subjective, relying on visual examination or microscopy, and no advanced testing methodology was mandated.

4. Procedural Fairness in Retesting and Report Acceptance:
The Tribunal scrutinized the procedural fairness in retesting by the Textile Committee. The second test report was issued suo motu by the Textile Committee after discussions with the Commissioner of Customs and correspondence with the Chief Commissioner of Customs. The Tribunal found this process questionable and lacking transparency, undermining the credibility of the second report.

5. Credibility of the Second Test Report from the Textile Committee:
The Tribunal critically evaluated the second report from the Textile Committee, which contradicted the initial report. The cross-examination of the experts revealed no new parameters or changes in testing methodology. The Tribunal concluded that the second report appeared influenced and lacked credibility. It emphasized that the first report, which was in favor of the appellants, should not be easily dismissed.

Conclusion:
The Tribunal set aside the Commissioner's order, favoring the appellants. It held that the conflicting reports and the subjective nature of the tests warranted extending the benefit of doubt to the appellants. The appeal was allowed with consequential relief as per law.

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