2007 (9) TMI 84 - AT - Central Excise

Processing of Embroided fabrics classification Embroidery even after processing remains to be classifiable under Heading 5805.90 only Classification under Chapter 52 and 55 is rejectable Demand is unsustainable

Summary

Issues:
Classification of embroided fabrics under Chapter 58 and duty liability.

Analysis:
The case involves the classification of embroided fabrics under Chapter 58 and the consequent duty liability. The Revenue contended that embroided fabrics subjected to certain processes should be classified under chapter heading 5805.19 and attract duty. A show cause notice was issued demanding duty for processed embroided fabrics cleared without payment during a specific period. The Commissioner (Appeals) held that once goods are classified and duty paid under chapter 58.05 as embroidery, further processing does not warrant additional duty payment.

The Revenue appealed, arguing that the Commissioner erred by relying on a Circular predating the relevant amendment. They emphasized that Chapter Note 8 was added to Chapter 58 to supersede previous interpretations. The Revenue cited a specific amendment to support their stance. The Judicial Member noted that a Larger Bench ruling had clarified that Chapter Note 8 does not apply to processing of embroidery on grey fabrics. Previous cases also supported the classification of embroidery under heading 5805.90 only, even after processing.

The Tribunal concurred with the Larger Bench's interpretation, affirming that processing of embroidery does not change its classification under Chapter 58. The argument that Chapter Note 8 applies to embroidery under heading 5805.19 was dismissed. Other issues like valuation and amendment application date were deemed irrelevant once the demand for duty was deemed unsustainable. Consequently, the appeal was rejected, as the Tribunal found no merit in the Revenue's arguments.