2017 (3) TMI 232 - AT - Central Excise

Classification of fire retardant fabrics and chenille fabrics - Chenille fabric or Cotton fabric - Notification 43/2001-CE dt. 26.06.2001 - Revenue neutrality - Held that - Clearly, Section Note 2 (A) of the Section XI is not applicable to Tariff Heading 5801. Hence, the argument of Ld. Advocate that it should be classified as unprocessed cotton fabric on the basis of predominance of cotton in chenille fabric is untenable. In a recent judgment in the case of Star Industries Vs. Commissioner of Customs (Imports), 2015 (10) TMI 1288 - SUPREME COURT wherein it was held It is rightly argued by the learned senior counsel for the Revenue that exemption notifications are to be construed strictly and even if there is some doubt, benefit thereof shall not enure to the assessee but would be given to the Revenue - Appeal dismissed.

Summary

Issues: Classification of goods - Chenille fabric or unprocessed cotton fabric under Tariff Headings 5801 and 5208, respectively.

Analysis:
1. Facts of the Case: The appellant, a manufacturer of various fabrics, transferred goods to other units without duty payment. The central excise department alleged that chenille fabric was misclassified as cotton fabric, leading to duty evasion.

2. Show Cause Notice and Appeals: A notice was issued demanding duty payment, interest, and penalties. Appeals to the Adjudicating Authority and Ld. Commissioner were unsuccessful, leading to the appeal before the Tribunal.

3. Appellant's Argument: The appellant claimed the goods were cotton fabric, not chenille, citing composition details and exemption notifications. They argued for classification under Tariff Heading 5208.

4. Revenue's Argument: The Revenue contended that the goods were chenille fabric based on purchase records and descriptions in documents. They highlighted Tariff Heading 5801 and the inapplicability of Section Note 2 (A) to chenille fabrics.

5. Tribunal's Analysis: The Tribunal examined the documentation and found consistent references to chenille fabrics. It rejected the appellant's argument of predominance of cotton material for classification as unprocessed cotton fabric under Section Note 2 (A).

6. Legal Precedent: The Tribunal cited a Supreme Court judgment emphasizing that revenue neutrality cannot justify incorrect classification or exemption claims.

7. Decision: The Tribunal upheld the Ld. Commissioner's order, dismissing the appeals and affirming the classification of goods as chenille fabric under Tariff Heading 5801. The plea of revenue neutrality was deemed unacceptable based on legal precedent.

This detailed analysis highlights the key arguments, evidence, legal interpretations, and the final decision regarding the classification issue in the legal judgment delivered by the Appellate Tribunal CESTAT CHANDIGARH.