1990 (4) TMI 163 - AT - Central Excise

Summary

Issues Involved:
1. Classification of yarn made from artificial staple fibre and synthetic staple waste.
2. Interpretation of "staple fibre" in the context of textile industry.
3. Validity of chemical analysis for determining yarn classification.
4. Applicability of Central Excise Tariff Headings 55.05 and 55.06.

Issue-wise Detailed Analysis:

1. Classification of Yarn:
The central issue in this appeal is the classification of "yarn (including sewing thread) of artificial staple fibre not containing generated synthetic staple waste in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power and supplied in a form other than plain (straight) reel hank." The respondents manufacture cotton yarn and man-made yarn of various types and proposed to manufacture a new type of man-made yarn in February 1987. They filed classification lists for yarn made from a blend of artificial staple fibre and synthetic staple waste, claiming classification under Heading 55.05. However, the Department, after subjecting the yarn to chemical analysis, issued a show cause notice for assessment under Heading 55.06, asserting that the yarn contained synthetic staple fibre.

2. Interpretation of "Staple Fibre":
The respondents contended that synthetic staple fibre waste and synthetic staple fibre are not the same. They argued that the type of raw material used in manufacturing particular yarn could not be ascertained by simply analyzing the yarn chemically. Instead, only a physical inspection/verification of the raw material could establish its contents. They cited the Chemical Examiner's report from Madras, which indicated that waste fibres were used in the blended yarn. The adjudicating authority held that the presence of synthetic staple fibre waste, which contains synthetic staple fibres, leads to the conclusion that the end product, the yarn, contains synthetic staple fibre. The respondents emphasized that the word "staple" has a definite connotation in the textile industry, governed by denier and length.

3. Validity of Chemical Analysis:
The adjudicating authority stated that the chemical analysis confirmed the presence of synthetic staple fibres in the yarn. The respondents countered that the Chemical Examiner's reports were based on a misconception of the definition of "staple fibre." They argued that the test reports referred to staple fibres of varying lengths, and that the moment there is a variation in length, the fibre can no longer be considered "staple." The Collector (Appeals) supported this view, holding that the presence of synthetic fibre in the form of waste does not classify the yarn under Heading 55.06, as synthetic staple fibres are generally of uniform length, distinguishing them from waste material.

4. Applicability of Central Excise Tariff Headings 55.05 and 55.06:
The Collector (Appeals) reversed the order of the Assistant Collector, classifying the yarn under Heading 55.05. The Collector held that synthetic staple fibre waste does not attract Tariff Heading 55.06, as the words "staple fibre" appearing after "synthetic" cannot be ignored. The Department appealed, arguing that the presence of synthetic staple fibre in any form would exclude the material from classification under Heading 55.05. The Tribunal, after examining the technical literature and test reports, concluded that the yarn is rightly classifiable under Heading 55.05. The Tribunal noted that the Chemical Examiner's reports were unreliable as they were based on a misconception of the definition of "staple fibre." The Tribunal upheld the order of the Collector (Appeals) and dismissed the appeal.

Conclusion:
The Tribunal upheld the order of the Collector (Appeals), classifying the yarn under Heading 55.05. The Tribunal dismissed the Department's appeal and the respondents' cross-objection, noting that the classification was decided in their favor. The Tribunal did not need to address the issue of limitation under Section 11A of the Central Excises & Salt Act, 1944.