1989 (6) TMI 172 - AT - Central Excise

Summary

Issues Involved:
1. Classification of the product as "man-made filament yarn" under Tariff Item No. 18II(i)(a) or as "thermoplastic unstretched filament" under Tariff Item No. 68.
2. Validity of the Chemical Examiner's report.
3. Relevance of trade and commercial parlance in determining the classification.
4. Impact of financial difficulties on the manufacturing process.
5. Interpretation of Indian Standard Specification No. IS:1324-1966.
6. Relevance of Board's circulars and tariff advices.
7. Estoppel and reliance on departmental correspondence.
8. Consideration of waste classification and duty demand.

Detailed Analysis:

1. Classification of the Product:
The core issue revolves around whether the appellant's product should be classified as "man-made filament yarn" under Tariff Item No. 18II(i)(a) or as "thermoplastic unstretched filament" under Tariff Item No. 68. The appellant argued that due to financial constraints, they could not install the machinery required for stretching the extruded filaments, making the product "unstretched filament." The Assistant Collector classified the product as "polyester filament yarn," which was upheld by the Collector (Appeals). The Tribunal found that the product did not meet the definition of "filament yarn" as per IS:1324-1966, which requires the filaments to be suitable for plying, knitting, braiding, weaving, or otherwise intertwining to form a textile end-product. The Chemical Examiner's report supported this by stating that the filaments were undrawn and could be further stretched.

2. Validity of the Chemical Examiner's Report:
The Chemical Examiner's report was a significant piece of evidence. It stated that the filaments were undrawn and could be stretched further, thus not qualifying as "filament yarn" under the relevant Indian Standard. The Tribunal noted that while the Chemical Examiner should not opine on tariff classification, his technical findings about the nature of the product were within his jurisdiction and supported the appellant's case.

3. Relevance of Trade and Commercial Parlance:
The Tribunal emphasized the importance of how products are understood in trade and commerce, referencing the Supreme Court's judgment in Union of India v. Delhi Cloth and General Mills and Collector of Central Excise, Kanpur v. Krishna Carbon Paper Co. The Indian Standard Specification IS:1324-1966 was considered a reliable guide for understanding trade terminology. The appellant's product, as described in their invoices and supported by the Chemical Examiner's report, did not meet the trade definition of "filament yarn."

4. Impact of Financial Difficulties:
The appellant's inability to install the necessary machinery due to financial difficulties was a crucial factor. They had informed the department about this situation, and the Tribunal found that the department did not investigate or rebut this claim. The lack of machinery for stretching the filaments was consistent with the product being "unstretched filament."

5. Interpretation of Indian Standard Specification No. IS:1324-1966:
The Indian Standard Specification defined yarn as a continuous strand of filaments suitable for various textile processes. The Tribunal found that the appellant's product did not meet this definition, as it required further processing (stretching) to become suitable for such uses. The IIT Professor's certificate corroborated this interpretation, stating that the unstretched filaments could not be used for weaving, knitting, or other textile processes without stretching.

6. Relevance of Board's Circulars and Tariff Advices:
The Tribunal noted that while Board's circulars and tariff advices are not authoritative for classification, they are indicative of the Board's understanding. The Board had previously concluded that filaments only acquire the essential character of yarn after stretching, aligning with the appellant's argument.

7. Estoppel and Reliance on Departmental Correspondence:
The Tribunal dismissed the argument of estoppel based on departmental correspondence, emphasizing that the Assistant Collector's classification decision is authoritative. However, the correspondence did reflect the department's initial understanding of the product as "unstretched filament."

8. Consideration of Waste Classification and Duty Demand:
Since the primary classification of the product as "unstretched filament" was upheld, the waste arising from its manufacture also did not fall under Tariff Item No. 18II(i)(a). Consequently, the duty demands based on the incorrect classification were set aside.

Conclusion:
The Tribunal concluded that the product manufactured by the appellant was not "polyester filament yarn" under Item No. 18(II)(a) CET but "thermoplastic unstretched filament" under Tariff Item No. 68. The appeals were allowed, and the impugned orders were set aside with consequential relief to the appellants.