2014 (2) TMI 640 - AT - Customs

Denial of drawback claim - Classification of goods - Classification under Heading 610602 or under 610607 - Misdeclaration of goods - original authority held that there was a misdeclaration of the goods inasmuch as the blending was not at the yarn stage - Confiscation of goods - Imposition of redemption fine - Held that - no reason to conclude that blending of the material should be done before the spinning of yarn for claiming drawback as per item 610601. This interpretation is canvassed by reading extra words into the relevant entry of the Drawback Schedule. While interpreting such entries extra words cannot be read into any such entry - Decided in favour of assessee.

Summary

Issues: Classification of exported goods under the Drawback Schedule and eligibility for drawback claim.

Classification of Goods:
The appellant exported a blended ladies blouse and claimed drawback under Heading 610602 of the Drawback Schedule. The Revenue contended that the blending of cotton and man-made fiber should occur at the yarn stage for classification under 610602. The original authority found a misdeclaration and confiscated the goods under the Customs Act, imposing fines and penalties. The appellant challenged this classification issue on the grounds that the relevant entry does not specify blending at the yarn stage.

Interpretation of "Blending":
The appellant argued that the requirement of blending at the spinning stage is not explicitly stated in the relevant entry. They emphasized that drawback is meant to refund duties on raw materials used, focusing on the material percentage rather than the blending stage. In contrast, the Revenue argued that blending should occur before spinning, not at the weaving stage. The appellant cited the Textile Encyclopaedia to support their interpretation of blending as enhancing fabric qualities through different components, regardless of the blending stage.

Judgment and Analysis:
The Tribunal analyzed both arguments and found no basis to require blending before spinning for claiming drawback under item 610601. They emphasized that additional words cannot be inserted into the Drawback Schedule entry during interpretation. Consequently, the appellant's appeal was allowed, overturning the original authority's decision and granting consequential relief.

This detailed analysis covers the classification dispute, differing interpretations of blending requirements, and the Tribunal's judgment favoring the appellant's position based on the absence of explicit pre-spinning blending criteria in the relevant entry.