2019 (4) TMI 724 - AT - Central Excise

Classification of goods - Nylon monofilaments yarn - whether classifiable under Chapter hearing 5404.10 of Central Excise Tariff Act, 1985 or otherwise? - benefit of N/N. 5/98-CE dated 2.6.1998 - Held that - The learned Commissioner accepted the test report relating to the goods seized and dropped the show-cause notices proposing confiscation of the goods. However, the learned Commissioner has not applied the test result for the clearance from 16.8.1998 to 5.11.1998 for which different formula was applied by him in calculating the denierage of the product. Assailing the said approach of the learned Commissioner, it has been submitted by the appellant that for the said period i.e 16.8.1998 to 5.11.1998, neither samples were drawn nor any test had been conducted. Therefore, the confirmation of demand denying the benefit of exemption notification 5/98-CE is incorrect. When samples were tested by the Department, and the result indicated that the denierage declared by the appellant in clearing the goods more or less in confirmity with the test report, hence, in absence of any contra test report for the period prior to 5.11.1998 indicating different denierage of the nylon monofilaments yarn cleared, it is incorrect to arrive at the conclusion that the said yarns were of different denierage on the basis of a theoretical formula. Consequently, the denial of benefit of exemption notification cannot be sustained. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of nylon monofilament under Central Excise Tariff Act, 1985; Eligibility for benefit of exemption notification No. 5/98-CE dated 2.6.1998.

Classification Issue:
The appeal was filed against an Order-in-Original passed by the Commissioner of Central Excise, Thane, regarding the classification of nylon monofilaments manufactured by the appellants under Chapter heading 5404.10 of the Central Excise Tariff Act, 1985. Central Excise officers seized finished goods from the appellant's factory, alleging violation of Central Excise Act provisions. Two show-cause notices were issued, proposing confiscation, duty recovery, and penalties. The Tribunal partly allowed the appeal, classifying the goods as nylon monofilaments yarn. The issue of exemption under Notification No. 5/98-CE was remanded for further adjudication.

Eligibility for Exemption Issue:
The main contention revolved around the eligibility of the appellants for the benefit of exemption under Notification No. 5/98-CE dated 2.6.1998. The Department calculated denierage using a formula based on specific gravity, which the appellant contested as incorrect. The appellant argued that the Department's method was flawed, and samples tested by the Dy. Chief Chemist confirmed the denierage claimed by the appellant. The Department, however, alleged that the appellants incorrectly availed the exemption by not measuring the actual denierage as prescribed. The Tribunal noted that samples tested were in conformity with the claimed denierage, and without evidence of different denierage for prior periods, the denial of exemption was deemed incorrect. Consequently, the confirmation of demand and penalties under the second show-cause notice was set aside, and the appeal was allowed.

Conclusion:
The Tribunal found that the Department's reliance on a theoretical formula for denierage calculation was unfounded when actual test results confirmed the claimed denierage. As no contradictory test reports existed for the period in question, the denial of the exemption was deemed unjustified. Therefore, the demand and penalties confirmed by the Commissioner were set aside, and the appeal was allowed in favor of the appellants.