2011 (3) TMI 563 - AT - Central Excise

Classification - Board Circular No. 658/49/2002-CX., dated 5 Sep., 2002 - no samples were drawn and no other evidences have been produced by the Revenue to substantiate their claim that the chenille fabric supplied by the suppliers of raw materials was man-made fibers - Held that chenille products manufactured from 100% acrylic yarn is classifiable under Chapter sub-heading 5801.91 Extended period of limitation - Held that - mere failure or negligence on the part of the manufacturer either not to take out a licence or not to pay duty in case where there was scope for doubt, does not attract the extended limitation. - Unless there is evidence that the manufacturer knew that goods were liable to duty or he was required to take out a licence. - Extended period of limitation not to be invoked.

Summary

Issues: Classification of chenille fabrics under Central Excise Tariff Act, 1985; Limitation period for duty payment.

Classification Issue:
The appeal before the Appellate Tribunal CESTAT, Ahmedabad involved the classification of chenille fabrics manufactured from chenille yarn under the Central Excise Tariff Act, 1985. The Revenue contended that the chenille fabrics should be classified under sub-heading 5801.31 of the Tariff heading. However, the adjudicating authority and the Commissioner (Appeals) had previously rejected this claim. The Revenue argued that as per the HSN Notes, chenille fabric can be made from various materials like silk, wool, cotton, and man-made fibers, thus falling under Chapter heading 58. The Tribunal analyzed the Board Circular No. 658/49/2002-CX, which clarified that chenille fabric should be classified based on the predominant material in the chenille yarn. Since no evidence was provided by the Revenue to prove that the chenille fabric was made from man-made fibers, the Tribunal held that chenille products manufactured from 100% acrylic yarn should be classified under Chapter sub-heading 5801.91.

Limitation Issue:
Another issue addressed in the judgment was the limitation period for duty payment. The respondents had started manufacturing their products from April 1999 without informing the Revenue. The Tribunal referred to the decision in the case of Padmini Products v. Collector of Central Excise, emphasizing that the extended limitation period of five years applies only in cases involving fraud, collusion, willful misstatement, suppression of facts, or contravention of provisions. The Tribunal noted that failure to pay duty or obtain a license, without evidence of the manufacturer's knowledge of duty liability, does not warrant the extended limitation period. As the case failed on merits regarding the classification issue, the Tribunal concluded that the limitation issue had little consequence and rejected the appeal filed by the Revenue.

In conclusion, the Appellate Tribunal CESTAT, Ahmedabad, in the judgment delivered by Member (T), clarified the classification of chenille fabrics under the Central Excise Tariff Act, 1985 and addressed the limitation period for duty payment, providing a detailed analysis of the legal provisions and precedents relevant to both issues.