2019 (12) TMI 936 - AT - Central Excise

Classification of services - Synthetic Filament Yarn of a denier of 600 - whether the synthetic filament yarn manufactured by the appellant falls under 5402 of CETA as contended by the department or under 5404 as contended by the appellants and as to whether the test result would be applicable prospectively or retrospectively? - benefit of N/N. 7/2003 CE and 30/2004 CE - Confiscation - imposition of redemption fine and penalty - extended period of limitation. HELD THAT - The appellants classified the impugned goods under 5404. The Heading 5404 refers to synthetic monofilament of 60 d or more and of which, no cross sectional dimensions exceeds 1 mm; strips and like (For Example, artificial straw) of synthetic textile material of an apparent width not exceeding 5 mm. This heading had two single -'. One refers to monofilament yarn and the second others . Chemical Examiner has given a report that it is a multifilament yarn. The moment the yarn is of multifilament nature, it goes out of Heading 5402. Therefore, as far as the tariff entries till 2004-05 are concerned, the assessee s contention of classification under 5404.90 cannot be accepted. From 2005-06 also, the heading remains of synthetic monofilament yarn of 67 decitex or more. Therefore, from 2005-06 the Heading is not applicable to the appellants on the basis of the Chemical Examiners report. The impugned goods cannot be classified under 5404. Coming to the claim of the department that the impugned goods fall under 5402.39 / 540259.10, we find that whereas 5404 has no place for multifilament yarn, 5402 has an inclusive definition. Till 2004-05, 5402 covered synthetic filament yarn (other than sewing thread), including synthetic monofilament yarn of less than 60 d. The Heading has three single dash ( ) i.e., high tenacity yarn of nylon or other polyamides, high tenacity yarn of polyesters and textured yarn. Revenue wishes to classify the impugned goods under 5402.39 till 2005. However, for the goods to fall under 5402.39, they should be textured yarn. However, we find that from 2005-06, the scope of 5402 has been expanded to contain 5 single dash ( ) i.e., high tenacity yarn of nylon or other polyamides, high tenacity of polyesters, textured yarn, other yarn, single, untwisted or with a twist not exceeding 50 turns per meter, other yarn, single with a twist exceeding 50 turns per meter and other yarn, multiple (folded) or cabled. Extended period of limitation - HELD THAT - The appellants have kept the department informed about their intention to claim exemption under the above said Notification vide their letters dated 12.11.2003 and 15.3.2005. The test conducted in 2003 was in favour of the appellants. It was free for the department to get another test conducted in 2005 also. This having not done, extended period cannot be invoked - Suppression of fact cannot be alleged on the basis of statements of dealers to conclude that the goods cleared in the past are also similar to the goods tested. Unless such goods are available and tested, nature of the goods cannot be established on the basis of oral submissions. Therefore, we find that the invocation of extended period is not tenable. Confiscation - redemption fine - HELD THAT - As the department relies upon the test report obtained on 21.9.2006, apparently in favour of the department, we hold that the same cannot be applied retrospectively and to the goods cleared before the test report. Therefore, the confiscation of the goods cannot be upheld, as no mala fide intention of the appellants is evident - confiscation and imposition of fine in lieu of confiscation on the above goods cannot be justified. Penalties - HELD THAT - Department is free to collect the applicable duty on the said goods. As extended period cannot be invoked, penalty under Section 11AC is liable to be set aside - Penalty imposed on M/s. A.R. Trading Company under Rule 25 and penalty imposed on Shri T. C. Vijayan of Usha Traders, Madurai under Rule 26 of Central Excise Rules, 2002, are also liable to be set aside. The appeal is partially allowed by way of remand to the original authority with a direction to restrict the duty demanded to the normal period.

Issues Involved:
1. Classification of synthetic filament yarn: Whether it falls under Chapter Heading 5402 or 5404 of CETA, 1985.
2. Applicability of test results: Whether the test results can be applied retrospectively or only prospectively.
3. Invocation of extended period of limitation.
4. Justification for confiscation and penalties imposed.

Detailed Analysis:

1. Classification of Synthetic Filament Yarn:
The primary issue was whether the synthetic filament yarn manufactured by the appellants falls under Chapter Heading 5402 or 5404 of CETA, 1985. The appellants contended that their product, Polypropylene Monofilament Yarn, with a denierage ranging between 400 to 2000, should be classified under CSH 5404.10, which covers "Synthetic monofilament of 60 deniers or more and of which no cross-sectional dimension exceeds 1mm." They argued that the yarn was correctly classified under this heading and thus eligible for exemptions under Notification No. 7/2003 CE and 30/2004 CE.

The Department, based on the Chemical Examiner's report, argued that the yarn was multifilament and should be classified under CSH 5402, which covers "Synthetic filament yarn (other than sewing thread), including synthetic monofilament of less than 60 deniers." The tribunal concluded that the impugned goods could not be classified under 5404 as the Chemical Examiner's report indicated it was multifilament yarn, which falls under 5402.

2. Applicability of Test Results:
The appellants argued that the test results from the Chemical Examiner dated 29.9.2006 should only be applied prospectively. They cited various judgments supporting the notion that test results cannot be applied retrospectively. The tribunal accepted this contention, noting that the appellants had surrendered their Central Excise registration based on an earlier favorable test report by the Textile Committee. Thus, the test results from 2006 were deemed applicable only from the date they were conducted and not for the earlier period.

3. Invocation of Extended Period of Limitation:
The appellants contended that there was no suppression of facts, fraud, or willful misstatement on their part, and they had been regularly filing returns and keeping the Department informed about their activities. They argued that the extended period of limitation under Section 11A of the CEA, 1944, could not be invoked. The tribunal agreed, stating that the Department was aware of the appellants' activities and had not conducted another test in 2005, despite having the opportunity. Therefore, the invocation of the extended period was not tenable, and the demand for the period prior to 5.2.2006 was barred by limitation.

4. Justification for Confiscation and Penalties Imposed:
The tribunal found that the confiscation of goods and the imposition of fines were not justified as no mala fide intention on the part of the appellants was evident. The penalties under Section 11AC and Rule 25/26 were set aside. The tribunal directed the original authority to restrict the duty demanded to the normal period and allowed the appeal partially by way of remand.

Conclusion:
The tribunal concluded that the impugned goods could not be classified under CSH 5404 and should fall under CSH 5402. The test results from 2006 were applicable only prospectively, and the extended period of limitation could not be invoked. The confiscation and penalties were set aside, and the case was remanded to the original authority for quantification of duty for the normal period.

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