2016 (10) TMI 733 - AT - Central Excise

Classification of goods - reusable Baby Cotton Nappies (diapers) - classified under Chapter Subheading 6101.00 of Central Excise Tariff as undergarments or under Chapter Subheading 4818.10 as napkins, towels etc? - Held that - The Explanatory Notes to this Chapter Heading 61.11 says that in accordance with Note 6(a) to this Chapter the expression babies garments and clothing accessories applies to articles for young children of a body height not exceeding 86 cm. It also covers babies napkins. It is clear that both these classifications are not appropriate for the subject item namely reusable baby nappies/diapers made of cotton. The appellant is insisting classification under Chapter Subheading 4818.10 where toilet paper is covered. The subject item is not toiler paper; it is reusable baby diaper/nappy only. The items in Chapter Heading 48.18 are made of paper pulp, paper, cellulose wadding, etc., only. However the subject item is predominately made of knitted cloth of cotton and relevant classification for this item would, therefore, be Chapter Heading 61.11. The Item description given for Chapter Heading 61.11 clearly covers the subject items viz., baby diaper and baby nappy. Chapter Heading 61.11 covers babies garments and clothing accessories and when these are made up of cotton, they would fall under Chapter Heading 6111.20 only. Consequently the subject item deserves classification under Chapter Heading 61.11 only. The lower Revenue authorities decided classification in Chapter Heading 61.01 but right classification for the subject item is Chapter Heading 6111.20. The duty payable, if any, therefore would be computed by classifying the goods under Chapter Heading 6111.20 of Central Excise Tariff. Period of limitation - Held that - duty of Central Excise, if any, cannot be levied for the period beyond one year from the date of show-cause notice. The matter deserves to be remanded to the original adjudicating authority for computation of duty, if any, for the period of one year prior to the date of show cause notice; it shall be decided by the original adjudicating authority within a period of three months from the receipt of this order by giving opportunity of personal hearing and that of production of necessary documents, if any - matter remanded - appeal disposed off.

Summary

Issues: Classification of goods under Central Excise Tariff

Analysis:
The appeal was filed against the Order-in-Appeal upholding the classification of reusable Baby Cotton Nappies under Chapter Subheading 6101.00 of Central Excise Tariff. The appellant argued for classification under Chapter Subheading 4818.10, contending that the item is not an undergarment under Heading 61.01 and cannot be treated as an article of apparel. The Revenue, however, argued that the baby napkins made by the appellant, being of cotton textile, should be classified under Chapter 61.11 of the HSN corresponding to Chapter 61.01 of the Central Excise Tariff, which deals with Babies Garments and Clothing Accessories. The Tribunal noted the item descriptions for the rival Chapter Headings 48.18 and 61.01, along with Chapter Heading 61.11 for Babies garments and clothing accessories, knitted or crocheted. It concluded that the subject item, being predominately made of knitted cloth of cotton, should be classified under Chapter Heading 61.11, specifically 6111.20, covering baby diapers and napkins. The lower authorities had classified it under Chapter Heading 61.01, but the correct classification was deemed to be under Chapter Heading 6111.20.

The Tribunal also addressed the issue of time-barring the demand for duty beyond one year. The appellant argued that the demand could not be confirmed for a period beyond one year as the matter was known to the Department, with correspondence on the subject issue. The Tribunal agreed, stating that duty cannot be levied for the period beyond one year from the date of the show-cause notice. Consequently, the matter was remanded to the original adjudicating authority for the computation of duty, if any, for the one-year period preceding the show-cause notice. The original authority was directed to decide on this within three months from the receipt of the Tribunal's order, providing an opportunity for a personal hearing and the production of necessary documents.

In conclusion, the appeal was disposed of by way of remand to the original adjudicating authority for the appropriate classification and computation of duty for the specified period, ensuring compliance with the principles of natural justice and time limitations.