2017 (1) TMI 489 - AT - Central Excise

Classification of manufactured item - nylon/viscose fabrics - demand - Held that - We see from chapter 54 of the Schedule to the Central Excise Tariff Act, 1985 that headings from 5409 cover various types of fabric made of manmade filament yarn with 5412 specifically for fabric made of polyester filament yarn. 5410 is for fabrics processed without aid of power or steam and 5411 relates to handlooms. Hence, if the impugned product were to be covered by chapter 54, the only plausible heading is 5409. Heading 5508 is for fabric made of staple fibres. As the product of appellant contains nylon, it cannot be classified in the heading that relates to use of staple fibre. It would appear that the two lower authorities have erroneously presumed that the product of the appellant is classified under heading 5508 - appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of manmade fabrics under Central Excise Tariff Act, 1985; Interpretation of notification no. 254/87-CE and subsequent amendments; Applicability of differential duty rates; Validity of requirement for filing a fresh classification list.

Analysis:

1. The appellant, a manufacturer of manmade fabrics, was subject to duty under the Central Excise Tariff Act, 1985. The dispute arose when the Central Excise authorities claimed that the duty leviable on goods covered by a specific heading was enhanced, necessitating the appellant to file a fresh classification list. The authorities held the appellant liable for differential duty amounts for specific periods. However, the appellant contended that their goods had not undergone a change in duty rate and, therefore, they were not obligated to file a revised classification list or pay differential duty.

2. The appellant argued that when two notifications govern the levy of effective duty on a product, the assessee has the privilege of opting for the more beneficial of the two. The appellant had been availing the benefit of notification no. 254/87-CE, which was later amended by subsequent notifications. The crux of the issue lay in the interpretation of these notifications and their applicability to the appellant's manufacturing process and product composition.

3. The Tribunal analyzed the various exemption notifications and the composition of the appellant's product, which consisted of nylon/viscose fabrics. The Tribunal noted that the product did not fall under the heading presumed by the authorities but rather under a different category based on the composition of the fabric. The appellant was found entitled to claim duty at a specific rate per square meter, and the need to file a fresh classification list was deemed unnecessary.

4. Furthermore, the Tribunal scrutinized the relevant chapters and headings under the Central Excise Tariff Act, 1985, to determine the accurate classification of the appellant's product. It was established that the lower authorities had erroneously classified the product under a specific heading, which was incorrect based on the fabric composition containing nylon.

5. Consequently, the Tribunal held that the impugned order failed to sustain and set it aside. The appeals of the appellant were allowed, emphasizing the correct interpretation of the exemption notifications and the classification of the manmade fabrics under the Central Excise Tariff Act, 1985.