2007 (11) TMI 131 - AT - Central Excise

Blankets of shoddy yarn in which wool predominates Sec. note 2(A) of sec. XI clearly state that a product under Chapters 56 to 63 containing 2 ore more textile material are to be regarded as if consisting wholly of that one textile material which predominates by weight over another - blankets in dispute have to be considered as blankets of wool only Not. 8/96 brought changes regarding ceiling limit only so entitled to exemption under serial 152(a) to not. 4/97 demand set aside

Summary

Issues: Classification of blankets made from shoddy yarn under exemption notification 4/97.

In this case, the issue revolved around the classification of blankets manufactured from shoddy yarn under exemption notification 4/97. The appellant, engaged in blanket manufacturing, claimed exemption under serial No. 152 of the notification. The show cause notice alleged that the blankets made from shoddy yarn did not qualify for the exemption as they were not considered blankets of wool. The dispute primarily centered on whether blankets made from shoddy yarn could be classified as blankets of wool under the notification.

The appellant argued that blankets made from shoddy yarn should be eligible for exemption under serial 152(a) of notification 4/97 as they were essentially blankets of wool. The advocate highlighted previous notifications and budget circulars to support the contention that the intention of the government was to exempt shoddy blankets from duty. The appellant emphasized that the notification did not specify the wool's nature, whether virgin or shoddy, and therefore, the Commissioner's interpretation that blankets of wool should be made entirely of wool was incorrect.

The appellant further contended that the classification of blankets should consider the predominance of wool by weight, as per the Tariff notes. Since the Revenue acknowledged that wool predominated in weight in the shoddy yarn, the blankets made from it should be classified as blankets of wool. The appellant also addressed the interpretation of wool under specific Tariff notes to support their argument that blankets made from shoddy yarn qualified for the exemption under the notification.

The Tribunal analyzed the submissions and found that the crux of the dispute was whether blankets made from shoddy yarn, where wool predominated, could be classified as blankets of wool. Relying on the Tariff notes, the Tribunal concluded that the blankets in question should indeed be considered as blankets of wool. The Tribunal noted the legislative intent to provide complete exemption to blankets made from shoddy yarn, regardless of the source, with the only change being the introduction of a value limit under the notification. Consequently, the Tribunal held that the appellant was entitled to the exemption under serial 152(a) of notification 4/97, overturning the Commissioner's order demanding duty, interest, and penalties.

Overall, the Tribunal allowed the appeals, setting aside the Commissioner's decision and ruling in favor of the appellant's eligibility for exemption under the notification.