2023 (10) TMI 901 - AT - Customs

Classification of imported goods - Cotton Polyester Fabrics - classifiable under Customs Tariff Heading (CTH) 52113190 or classifiable under CTH 52114200 - goods imported having characteristics of Denim fabrics or not - Confiscation - redemption fine - penalty - HELD THAT - There is no procedural error in the drawal of the samples and sending the remnant samples for retest as directed by this Tribunal. Accordingly, this objection raised by the Appellant is not sustainable. No material in the show cause notice to show that there was an assessment done in respect of all the four Bills of Entry - HELD THAT - In the absence of any assessment so made, the question of short levy under section 28 would not arise. It is observed that Notice has been issued by the department proposing reclassification of the goods imported under the said four Bills of Entry. On adjudication, the Commissioner has reclassified the fabrics under the CTH 52114200. The classification dispute is further on appeal before this tribunal - During the course of this process, Notice can be issued for reclassification demanding duty as per the proposed new classification. The demand will be finally confirmed only when the classification dispute attains its finality. Thus, there is no infirmity in the demand issued under Section 28 of the Customs Act, 1962 . Accordingly, the objection raised by the Appellant on this count is not sustainable. Fabrics having the characteristics of Denim fabric cannot be equated with the Denim fabric itself, if it does not otherwise satisfy the requirements of Chapter Note 52 - In the present case, the sample fabric satisfy the requirements of Denim fabrics in the warp yarp yarn, but does not satisfy the requirement in the weft yarn as its composition contains 4% of elastomeric material. Also, the weft yarn does not satisfy the requirement in the chapter note unbleached, bleached or dyed, grey or coloured a lighter shade of the colour of the warp yarns . Thus, the fabric cannot be called ,Denim' fabric as per the Chapter Note 52, as it does not fulfill all the requirements of the chapter Note 52. For classifying the fabrics, it is found from the Test Report that the sample fabrics contains Cotton yarn 79.2% Polyester Yarns - 16,8% and rest 4% being elastomeric material. The CTH 52113190 deals with Cotton Polyester Fabric. As per the Test Report, The fabric contains both Cotton and polyester in the ratio of 79.% and 16.8% respectively. Thus, the fabric is rightly classifiable under the CTH 52113190 as Cotton Polyester fabric. Accordingly, the classification declared by the Appellant in the Bills of entry is upheld and the department's reclassification of the fabric is rejected. Since, the fabric is classifiable under the CTH 52113190, the demand of differential duty of customs in the impugned order, is not sustainable. Since there is no misclassification of the goods imported, the confiscation of the goods is not warranted. Accordingly, the redemption fine imposed is not sustainable. For the same reason, the penalty imposed on the Appellant is also not sustainable. Appeal allowed.

Summary

Issues Involved:
1. Procedural Compliance in Sample Testing
2. Validity of Show Cause Notice under Section 28 of the Customs Act, 1962
3. Classification of Imported Fabrics

Summary:

1. Procedural Compliance in Sample Testing:
The Appellant argued that the samples sent to CRCL Delhi were not representative of all four Bills of Entry and that their representatives were not called to see the samples. The adjudicating authority found that samples were drawn in the presence of the importer's representatives, who did not raise any objections. The Tribunal agreed with the adjudicating authority, stating there was no procedural error in the drawal and testing of samples.

2. Validity of Show Cause Notice under Section 28 of the Customs Act, 1962:
The Appellant contended that there was no assessment done for the four Bills of Entry, making the question of short levy under Section 28 irrelevant. The Tribunal observed that the Notice was issued for reclassification of the goods, and the final demand would be confirmed once the classification dispute attains finality. The Tribunal found no infirmity in the demand issued under Section 28.

3. Classification of Imported Fabrics:
The main issue was whether the imported fabrics were correctly classified. The Appellant declared the goods as Cotton Polyester Fabrics under CTH 52113190, while the department classified them as 'Denim' under CTH 52114200 based on test reports. The Tribunal examined the Chapter Notes to Chapter 52 and the Test Report. It found that the fabric did not fully meet the definition of 'Denim' as per Chapter Note 52 due to the presence of elastomeric yarns and the color of the weft yarn. The Tribunal concluded that the fabric is rightly classifiable under CTH 52113190 as Cotton Polyester Fabric. Consequently, the demand for differential duty, confiscation of goods, redemption fine, and penalty were deemed unsustainable.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal filed by the Appellant, upholding the classification under CTH 52113190 and rejecting the department's reclassification.