2015 (1) TMI 1084 - AT - Central Excise

Classification of goods - goods were described as Embroidery in strips/motifs manufactured by the appellant with the aid of vertical type automatic shuttle machine with the aid of power - Held that - As per Fairchild s Dictionary of Textiles, Embroidery is defined as an example of the decoration of fabric or leather ground with needle-worked Accessory Stitches made with thread, yarn, or other flexible materials. Although hand embroidery is a widely practiced craft, most commercially produced embroidered textiles are made by machine. Similarly, as per the definition of Textile Terms and Definitions, Eleventh Edition of the Textile Institute, Embroidery is defined as a decorative pattern superimposed on an existing fabric by machine stitching or hand needlework. As per the Explantory Notes, Embroidery can be on visilale ground or without visible ground. In such case, the base fabrics would have been removed either chemically or otherwise. Therefore, Chapter Heading 5805 can cover both embroidery on the visible ground or without the visible ground. - there are two possible views which can be taken. The first view is that if there is dyeing or printing on the fabrics, then it would fall within the scope of Note 8 to Chapter 58. The other equally plausible view is that the embroidery itself cannot be considered as fabrics and, therefore, Note 8 to Chapter 58 would not apply. In view of the two possible views, the appellant has made out a case for grant of stay. - Stay granted.

Summary

Issues:
1. Classification of embroidery work for excise duty liability.
2. Applicability of Note 8 to Chapter 58 on embroidery products.
3. Grant of stay application against duty demand.

Issue 1: Classification of embroidery work for excise duty liability
The case involved a dispute regarding the duty demand of &8377; 15,00,901/- on embroidery processed by the appellant during a specific period. The lower appellate authority confirmed the duty demand, leading to the appellant's appeal. The adjudicating authority concluded that the appellant did not use a specific type of embroidery machine and that embroidery, by itself, is not a fabric. The Revenue argued that the goods were described as manufactured with the aid of a specific machine in a classification declaration. The lower appellate authority allowed the Revenue's appeal, prompting the appellant to approach the Tribunal.

Issue 2: Applicability of Note 8 to Chapter 58 on embroidery products
The appellant's counsel argued that Note 8 to Chapter 58, which applies to fabrics, would not be relevant to certain specific types of fabrics listed under Chapter 58. They contended that the appellant's products fall under Chapter 5805.90, attracting a Nil rate of duty. Additionally, they relied on a Tribunal decision stating that Note 8 to Chapter 58 would not apply to embroidery falling under Chapter 5805. The Revenue, however, maintained that embroidery itself could be considered as fabric, leading to duty liability if processed with specific machinery.

Issue 3: Grant of stay application against duty demand
The Tribunal analyzed various definitions of embroidery from authoritative sources and noted that embroidery could be on visible ground or without visible ground, covering both scenarios under Chapter Heading 5805. A Larger Bench of the Tribunal had previously held that Note 8 to Chapter 58 would apply only to fabrics, and since Chapter Heading 5805 did not mention fabrics, the Note would not apply. The Tribunal acknowledged the differing views on the matter, leading to the appellant's case for a stay being accepted. Consequently, the Tribunal granted a waiver from pre-deposit of the dues adjudged against the appellant and stayed the recovery during the appeal's pendency.