1989 (3) TMI 244 - AT - Central Excise

Issues Involved:
1. Classification of Rexine Cloth under Tariff Item 19-III CET.
2. Applicability of Supreme Court judgment in Multiple Fabrics case.
3. Predominance of cotton in the final product.
4. Alternative classification under Tariff Item 22(B) or 68.
5. Limitation and demand for duty.

Detailed Analysis:

1. Classification of Rexine Cloth under Tariff Item 19-III CET:
The primary issue is whether the Rexine cloth manufactured by the respondent company falls under Tariff Item 19-III CET. The original authority classified the product under T.I.19-III based on the definition of cotton fabrics in T.I.19 CET. However, the lower appellate authority disagreed, stating that the product does not fall under T.I.19-III, without suggesting an alternative tariff entry.

The respondent company manufactures Rexine cloth by coating cotton fabric with PVC resin, plasticizers, and other materials. The final composition is 8% cotton fabrics, 24.5% PVC resin, 13% plasticizers, and 54.5% other materials. The lower appellate authority, relying on the Supreme Court judgment in Multiple Fabrics and other decisions, concluded that the Rexine cloth is not cotton fabric as it ceases to be known in the trade as such after coating.

2. Applicability of Supreme Court Judgment in Multiple Fabrics Case:
The lower appellate authority based its decision on the Supreme Court judgment in Multiple Fabrics, which held that when a fabric is coated to the extent that it ceases to be known as a fabric, it cannot be classified under the relevant tariff item for fabrics. The Supreme Court's judgment in Multiple Fabrics was distinguished by the appellant collector, arguing that the manufacturing process in the current case involves pre-existing cotton fabric, unlike in Multiple Fabrics where the fabric and coating were created simultaneously.

3. Predominance of Cotton in the Final Product:
The appellant collector argued that the lower appellate authority erred by focusing on trade parlance instead of the statutory definition of cotton fabric, which requires considering the base fabric's composition. The definition of cotton fabric in T.I.19 includes fabrics impregnated, coated, or laminated with artificial plastic materials, provided cotton predominates in weight in the base fabric. Since the base fabric in the current case is 100% cotton, the coated fabric should fall under T.I.19-III.

4. Alternative Classification under Tariff Item 22(B) or 68:
The appellant collector suggested that if the product does not fall under T.I.19-III, it should be classified under T.I.22(B) for coated textile fabrics or T.I.68 for goods not elsewhere specified. The respondent company argued against T.I.22(B), stating it applies to fabrics other than cotton, and suggested that if classified under T.I.68, the matter should be remanded to determine eligibility for exemptions.

5. Limitation and Demand for Duty:
The respondent company raised the issue of limitation, arguing that no show cause notice was issued, making the demand time-barred. The tribunal did not address this point, stating that the original order only concerned classification, not demand.

Conclusion:
The tribunal majority concluded that the Rexine cloth does not fall under T.I.19-III, agreeing with the lower appellate authority and the respondent's argument that the final product is not known as cotton fabric in trade parlance. They relied on the Supreme Court's judgment in Multiple Fabrics and similar judgments by the Andhra Pradesh and Bombay High Courts. The minority opinion argued that the product should be classified under T.I.19-III based on the statutory definition and the predominance of cotton in the base fabric. The appeals were dismissed, with the majority opinion prevailing.

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