2017 (12) TMI 325 - AT - Central Excise

Clandestine removal - classification of goods - Flock printing of fabric - case of appellant is that the fabric partly covered with flock for design purpose is clearly excluded from heading 5907 therefore demand raised considering classification under 5907 is not sustainable - Held that - As per tariff entry though after the main heading with one dash description is given as fabric covered partly or fully with textile flock or with preparation contained textile flock, however as per chapter note 5(c) the fabric partly covered with flock and bears designs resulting from this treatment is excluded from heading 5907. From the combined reading of Tariff entry and chapter note 5(c)., it is found that flock print on the fabric which resulted into design, the said flock printed fabric is excluded from heading 5907 and if the fabric is though printed with flock but it does not result into design, the said fabric will be classifiable under 5907 - In this fact of the present case there is no dispute that flock printing was done for the purpose of design, therefore we are of the clear view that flock printed fabric with design is not classifiable under 5907. After rejection of the proposal of the department regarding classification of subject goods under 5907, correct classification under 52,54,55 must be arrived at. This aspect has not been considered by the adjudicating authority - There is also a dispute that if the flock printing is done without aid power then product may not be dutiable, however this also the matter of facts which require a relook - issue of limitation is also kept open - appeal allowed by way of remand.

Summary

Issues:
Classification of fabric for flock printing under CSH No. 5907.12 of Central Excise Tariff Act, 1985; Suppression of facts leading to the invocation of the extended period for demand; Correct classification of goods and duty liability; Relevance of Chapter note 5(c) of Chapter 59 in determining classification.

Classification of Fabric Issue:
The case involved the classification of fabric for flock printing under CSH No. 5907.12 of the Central Excise Tariff Act, 1985. The Tribunal observed that the fabric covered with flock for design purposes is excluded from heading 5907 as per Chapter note 5(c) of Chapter 59. It was established that flock printing done by the appellant on the fabric was in the form of design, leading to the conclusion that flock printed fabric with design is not classifiable under 5907. The product was deemed classifiable under 52, 54, or 55 based on the composition of the material used.

Suppression of Facts Issue:
The appellant argued that there was no suppression of facts regarding the flock printing activity, citing a letter dated 24-8-1999 issued by Meghana Creations to the Superintendent of Central Excise. The appellant contended that the show cause notice issued invoking the extended period was time-barred. The Tribunal referred to judgments to support the appellant's claim that in cases of disputes related to the classification of goods, suppression cannot be alleged.

Correct Classification and Duty Liability Issue:
The Tribunal considered the issue of correct classification and duty liability. It was highlighted that even if the correct classification was not raised in the show cause notice, the correct classification could still be decided. Various judgments were cited to support this stance. The Tribunal emphasized the need for the adjudicating authority to determine the correct classification under Chapter 52, 54, or 55, depending on the composition of the material used, and ascertain the dutiability based on whether flock printing was carried out with or without the aid of power.

Relevance of Chapter Note 5(c) of Chapter 59 Issue:
Chapter note 5(c) of Chapter 59 played a crucial role in determining the classification of the fabric for flock printing. The Tribunal analyzed the combined reading of the tariff entry and chapter note 5(c) to establish that fabric partly covered with flock and bearing designs resulting from this treatment is excluded from heading 5907. The judgment emphasized the importance of considering chapter notes in arriving at the correct classification of goods.

In conclusion, the Tribunal remanded the matter to the adjudicating authority for a fresh order, directing the correct classification under Chapter 52, 54, or 55, and further examination of the dutiability based on the method of flock printing. The issue of limitation was also left open for consideration.