2005 (7) TMI 142 - AT - Central Excise

Summary

Issues: Classification of cotton yarn under CET sub-heading 5204.21 vs. 5204.29, differential duty demand, penalty imposition

In the present case, the issue at hand involves the classification of cotton yarn manufactured by the appellants under the Central Excise Tariff (CET) sub-heading 5204.21. The appellants claimed that the yarn should be classified under this sub-heading, which covers cotton yarn containing cotton and polyester staple fibre with the proportion of polyester staple fibre exceeding 40% by weight of the total fibre content. However, upon testing, the polyester staple fibre content was found to be ranging from 37.4% to 38.3%. Consequently, the department contended that the goods should be classified under CET sub-heading 5204.29, leading to a show cause notice for recovery of a differential duty amount and imposition of a penalty.

Regarding the classification issue, the appellants relied on a previous Tribunal order in their favor, where a tolerance limit of +/- 3% was applied on the test results to determine the polyester content in cotton yarn. By applying this tolerance test in the current case, it was found that the polyester staple fibre content exceeded 40% by weight of the total fibre content, thus meeting the criteria for classification under CET sub-heading 5204.21. Following the precedent set by the earlier order, the Tribunal concluded that the differential duty demand and penalty imposed were not sustainable. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellants.