2018 (6) TMI 866 - AT - Central Excise

Classification of goods - Wrap Knit Fabric - Revenue was of the view that the Warp Knit Fabric will be rightly classifiable not under CETH 6005, but under CETH 39269099 as an article of plastic - Benefit of N/N. 30/2004 dated 09.07.2004 (Sl. No. 15) - Held that - After perusal of the Section Note I(g) and (h) of Section Xl as well as the complementary note in Chapter 39, it can be concluded that the width of the tapes will determine the classification of the goods made out of such tapes. If the width of the tape made out of HDPE, LDPE, LLDPE, etc., is less than 5mm, the fabrics made out of such tapes will merit classification under Chapter 60 as a textile material, whereas, if the strips are of the width more than 5mm, such goods will go out of the purview of the Textile Section and will be considered as an article of plastic falling under Chapter 39 - Since the strips in the present case are of width less than 5mm, the classification of Warp Knit Fabrics made therefrom will be under CETH 6005 and not under CETH 3926 - goods rightly classified under CETH 6005. Once the goods are classified under CETH 6005, they become entitled to the benefits of the Notification No. 30/2004 dated 09.07.2004 (Sl. No. 15) subject of the conditions prescribed therein. Main conditionality is that the Appellant should not have availed CENVAT Credit on inputs. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Classification of Warp Knit Fabric.
2. Entitlement to exemption under Notification No. 30/2004.
3. Validity of the reversal of CENVAT Credit under Rule 6(3).

Issue-wise Detailed Analysis:

1. Classification of Warp Knit Fabric:
The primary dispute revolves around the proper classification of the Warp Knit Fabric manufactured by the appellant. The appellant classified the product under CETH 6005, claiming it falls under the textile category, while the Revenue argued it should be classified under CETH 39269099 as an article of plastic. The appellant's argument was based on the width of the tapes (less than 5mm) used in manufacturing the Warp Knit Fabric, referencing Section Note 1(g) and (h) of Section XI and Chapter Note 2(p) of Chapter 39. The Tribunal agreed with the appellant, noting that if the width of the tape is less than 5mm, the product should be classified under Chapter 60 as a textile material, not under Chapter 39 as plastic. The Tribunal cited recent decisions distinguishing the Raj Packwell case, emphasizing the amendments in Chapter 54 and the specific classification under CETH 6005 for Warp Knit Fabric.

2. Entitlement to Exemption under Notification No. 30/2004:
Once the classification under CETH 6005 was established, the Tribunal addressed the appellant's entitlement to the exemption under Notification No. 30/2004, which grants full exemption to goods falling under Chapter 60, provided no CENVAT Credit has been availed on the inputs. The Tribunal concluded that since the goods are classified under CETH 6005, they are entitled to the exemption, subject to the condition that no CENVAT Credit has been availed.

3. Validity of the Reversal of CENVAT Credit under Rule 6(3):
The appellant argued that they had reversed an amount equal to 6% of the value of the exempted Warp Knit Fabric in compliance with Rule 6(3)(1) of the CENVAT Credit Rules, which should entitle them to the exemption. The Tribunal noted that the reversal under Rule 6(3) was not in dispute and accepted the appellant's claim. Consequently, the Tribunal set aside the impugned order, allowing the appeal and confirming the classification of the goods under CETH 6005 with the benefits of the exemption notification.

Conclusion:
The Tribunal ordered the classification of the Warp Knit Fabric under CETH 6005 and granted the appellant the benefits of Notification No. 30/2004, subject to the condition of non-availment of CENVAT Credit. The impugned order was set aside, and the appeal was allowed. The decision was dictated in open court on 22.05.2018.

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