2003 (6) TMI 57 - AT - Central Excise

Summary

Issues Involved:
1. Classification of the fabrics manufactured by the appellant.
2. Applicability of Heading 52.07 versus Heading 59.06 for tariff classification.
3. Interpretation of Note 5 to Chapter 59.
4. Relevance of impregnation visibility to the naked eye.
5. Applicability of exemption under Notification No. 48/90.

Issue-wise Detailed Analysis:

1. Classification of the fabrics manufactured by the appellant:
The appellant manufactures cotton grey fabric subjected to a treatment process involving a solution of paraffin wax, ochre, lubricating oil, and aluminium stearate. The primary contention is whether these fabrics should be classified under Heading 52.07 (for cotton fabrics subjected to industrial processes like waterproofing without the aid of steam or power) or Heading 59.06 (for fabrics otherwise impregnated, coated, or covered).

2. Applicability of Heading 52.07 versus Heading 59.06 for tariff classification:
The appellant classified the goods under Heading 52.07, arguing that the process used was intended solely to render the fabrics waterproof. The Assistant Collector, however, classified the goods under Heading 59.06, based on the visibility of the impregnation to the naked eye, and denied the benefit of exemption under Notification No. 48/90. The Tribunal had to determine the correct classification, taking into account the specific processes and the visibility of the impregnation.

3. Interpretation of Note 5 to Chapter 59:
Clause (a) of Note 5 to Chapter 59 specifies that Heading 59.06 does not apply to fabrics where impregnation, coating, or covering cannot be seen with the naked eye. The appellant argued that this clause does not imply that visible impregnation automatically classifies the fabric under Heading 59.06. The Tribunal noted that Heading 59.06 covers fabrics "otherwise impregnated, coated or covered," excluding those falling under Headings 59.01 to 59.05. Therefore, the mere visibility of impregnation does not automatically result in classification under Heading 59.06.

4. Relevance of impregnation visibility to the naked eye:
The Tribunal emphasized that the visibility of impregnation, coating, or covering to the naked eye is not the sole determinant for classification under Heading 59.06. The Tribunal referred to its previous decisions, stating that fabrics coated or impregnated solely to render them waterproof should be classified under Chapter 52, specifically under Headings 52.06 or 52.07, rather than Heading 59.06, even if the impregnation is visible.

5. Applicability of exemption under Notification No. 48/90:
The Assistant Collector's classification under Heading 59.06 resulted in the denial of exemption under Notification No. 48/90. However, the Tribunal concluded that the fabrics, being processed to render them waterproof, should be classified under Heading 52.07. Consequently, the appellant would be entitled to the exemption benefits under Notification No. 48/90.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order. The fabrics manufactured by the appellant, subjected to a waterproofing process, were correctly classifiable under Heading 52.07, not Heading 59.06. The Tribunal emphasized that the visibility of impregnation to the naked eye is not the sole criterion for classification and reaffirmed that fabrics processed solely for waterproofing fall under Chapter 52.