2011 (3) TMI 624 - AT - Central Excise

Classification of goods - Since, the flock printed fabrics manufactured in this case bears a design - If that be so, then the product will not merit classification under Heading 5907 at all as per Chapter Note 5(c) to Chapter 59 - Since this point has not been taken up for consideration either before the adjudicating authority or before the first appellate authority and has been raised for the first time before this Tribunal, held that the matter needs to be remitted back to the adjudicating authority for fresh consideration of the point now raised - As pointed out by the respondent assessee, this Tribunal in the case of Polycone Paper Ltd. v. CC, (1993 -TMI - 82922 - CEGAT, NEW DELHI) had held that if the appeal involved the question of correct classification of goods on which a ruling would have to be given, it would not in the interest of justice or conducive to a proper disposal, if the appellants are prevented from raising the new ground - Thus the case is disposed of by way of remand.

Summary

Issues:
Classification of flock printed fabrics under specific headings of the Central Excise Tariff Act, 1985; Whether the process of removing excess textile flocks from flock printed fabrics amounts to manufacture with the aid of power; Time limitation for duty demand.

Analysis:

Issue 1: Classification of flock printed fabrics
The case involved the classification of flock printed fabrics under specific headings of the Central Excise Tariff Act, 1985. The department contended that the fabrics should be classified under Heading No. 5907.12, attracting a duty of 16% ad valorem, while the assessee argued for classification under Heading No. 5907.30, attracting nil rate of duty. The department relied on legal precedents to support their contention that the process should be treated as manufacture with the aid of power. However, the Tribunal remanded the matter back to the adjudicating authority for fresh consideration regarding the classification, as the issue of the fabrics bearing a design was raised for the first time before the Tribunal.

Issue 2: Manufacture with the aid of power
The core issue was whether the process of removing excess textile flocks from flock printed fabrics amounted to manufacture with the aid of power. The lower authorities had concluded that this process did not constitute manufacture with the aid of power, as it was considered an ancillary process. However, the Tribunal disagreed, citing the definition of manufacture under the Central Excise Act, 1944, and legal precedents. The Tribunal held that the use of electric power to remove the flocks was essential to complete the manufacturing process, making it a manufacturing process with the aid of power. Therefore, the findings of the lower authorities were deemed not in accordance with the law and legal precedents.

Issue 3: Time limitation for duty demand
The assessee raised a plea regarding the time limitation for duty demand, arguing that the demand was barred by limitation of time. They contended that since the lower authorities had concluded that the flock printed fabrics were manufactured without the aid of power, the demand was also time-barred. The Tribunal noted that this plea was a new submission made before them and decided to remand the matter back to the adjudicating authority for fresh consideration, taking into account the time limitation issue along with the classification matter.

In conclusion, the Tribunal remanded the case back to the adjudicating authority for a fresh examination of the classification of flock printed fabrics and consideration of the time limitation issue, ensuring the principles of natural justice are followed in the process.