2017 (3) TMI 364 - AT - Central Excise

Classification of waste - acrylic fibre - whether the waste generated in second part of the unit where the appellant is manufacturing 100% cotton dyed yarn and cotton blended yarn, the waste generated therefrom is to be classifiable under chapter 52 or chapter 55 of the Central Excise Tariff Act or not? Held that - the waste of acrylic fibre is mixture of two or more textile materials, the same is to be classified if consisting wholly of that one textile material which predominates by weight over any other single textile material as per section note 2(A) of section 9 of the Tariff Act, cotton waste is predominates by weight over acrylic fibre in the facts and circumstances of the case, therefore, the same is to be classified under chapter 52 of the Central Excise Tariff Act, 1985 which exempts from payment of duty - the duty cannot be demanded - appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of waste generated in the manufacturing process of cotton blended yarn under chapter 55 of the Central Excise Tariff Act.

Analysis:
The appellant, a 100% EOU engaged in yarn manufacturing, faced allegations regarding the classification and payment of duty on waste generated during the manufacturing process. The Revenue claimed that waste generated in the manufacturing of cotton blended yarn under chapter 55 should be cleared separately and duty paid, as opposed to waste from cotton yarn under chapter 52. The appellant argued that waste from the second part of the unit, where cotton dyed yarn and cotton blended yarn were manufactured, could not be separated due to the process used. The waste was predominantly cotton, exempt from duty as per section note 9 of section 11 of the Central Excise Tariff Act. The appellant also cited Standard Input-Output Norms to support their claim that the waste was primarily cotton, thus not subject to duty.

The dispute centered on whether the waste generated in the second part of the unit should be classified under chapter 52 or chapter 55 of the Central Excise Tariff Act. The appellant contended that the waste was predominantly cotton and should be exempt from duty, relying on a Tribunal decision affirmed by the Apex Court. The Revenue argued that the waste from cotton blended yarn, falling under chapter 55, should be stored separately and duty paid, as the appellant allegedly mixed it with cotton waste to avoid payment.

After considering the submissions, the Tribunal found that the waste generated was mixed and not separated by the appellant. However, the predominant factor was cotton waste, as per section note 2 of the Tariff Act, which mandates classification based on the material predominating by weight. As cotton waste predominated over other materials in the waste generated, it was classified under chapter 52, exempt from duty. Therefore, the Tribunal held that the appellants were not liable to pay duty, setting aside the impugned orders and allowing the appeals with any consequential relief.

In conclusion, the judgment clarified the classification of waste generated in the manufacturing process of cotton blended yarn, emphasizing the predominance of cotton waste in determining the duty liability. The decision provided a detailed analysis based on legal provisions and factual circumstances, ultimately ruling in favor of the appellants.