2005 (2) TMI 143 - SC - Central Excise

Whether the goods classifiable under Tariff Heading 59.02 were exempted from payment of basic duty by virtue of Notification 63/87, dated 1st March 1987 as amended? Held that - It is not necessary for the Court to determine this issue finally. It is sufficient for our purpose to hold that the goods were not classifiable under Tariff Heading 59.09. The appeal is accordingly allowed and the demand against the assessee quashed. The decision of the Commissioner, as affirmed by the Tribunal, is also set aside. In favour of assessee.

Summary

Issues:
Classification of goods under Tariff Heading 59.09, applicability of Central Excise duty, interpretation of test reports, classification under Tariff Heading 54.08, rectification application.

Classification under Tariff Heading 59.09:
The appellant, a manufacturer of tyre cord fabrics, faced a show cause notice alleging misclassification under Tariff Heading 59.09. The Commissioner upheld the demand, imposing penalties, which was challenged before the Central Excise Gold (Control) Appellate Tribunal (CEGAT). The Tribunal relied on a test report, ignoring appellant's submissions on classification under Tariff Heading 54.08. The appellant argued that the test report was incorrect as it applied standards for non-woven fabrics, while appellant's goods were woven textile fabrics. The appellant also referred to Circulars to support classification under Tariff Heading 54.08. The Court held that unprocessed fabric like appellant's goods would not fall under Tariff Heading 59.09, supporting the appellant's claim.

Applicability of Central Excise Duty:
The appellant contended that the Revenue Department's Circular clarified that unprocessed tyre cord fabric would not be classified under Tariff Heading 59.09. The appellant argued that the appropriate heading should have been 54.08, which prescribed a nil rate of duty. The Court agreed with the appellant's argument, emphasizing that the goods were not classifiable under Tariff Heading 59.09, thus quashing the demand against the assessee.

Interpretation of Test Reports:
The appellant challenged the reliance on a test report by the Commissioner and the Tribunal, highlighting discrepancies in the report's application to woven textile fabrics. The appellant argued that the test report was flawed as it applied standards for non-woven fabrics, misrepresenting the nature of appellant's goods. The Court acknowledged the appellant's argument, emphasizing the incorrect application of the test report in classifying the goods under Tariff Heading 59.09.

Classification under Tariff Heading 54.08:
The appellant also claimed classification under Tariff Heading 54.08 for fabrics of man-made filament yarn not subjected to any process, supported by Circulars. The Court found merit in this argument, indicating that if the tyre cord fabric did not use high tenacity yarn, it could be covered under Tariff Heading 54.08. The Court did not delve into this issue conclusively but held that the goods were not classifiable under Tariff Heading 59.09, thereby allowing the appeal and quashing the demand against the assessee.

Rectification Application:
Regarding the rectification application, the Court deemed it unnecessary to decide on its maintainability since the appeal from the original order was allowed. The rectification appeal was disposed of as infructuous. The Court set aside the decision of the Commissioner and the Tribunal, with no order as to costs, in favor of the appellant.