1991 (6) TMI 147 - AT - Central Excise

Summary

Issues Involved:
1. Classification of cellulosic spun yarn.
2. Definition and distinction between "staple fibre" and "waste".
3. Validity of test reports and their relevance to classification.
4. Department's contention on the nature of non-cellulosic waste and its processing.

Issue-Wise Detailed Analysis:

1. Classification of Cellulosic Spun Yarn:
The primary issue in this appeal revolves around the classification of cellulosic spun yarn manufactured by blending viscose fibre of cellulosic origin (predominant in weight) with non-cellulosic waste. The appellants claimed classification under TI 18-III(1) of the Schedule to the erstwhile Central Excise Tariff, which reads as "Cellulosic spun yarn - yarn in which man-made fibre of cellulosic origin predominates in weight and ....... not containing any man-made fibres of non-cellulosic origin." The Department, however, classified the yarn under TI 18-III(ii) as "containing man-made fibres of non-cellulosic origin."

2. Definition and Distinction Between "Staple Fibre" and "Waste":
The appellants argued that the impugned yarn is made by blending man-made fibre of cellulosic origin, which predominates in weight, with non-cellulosic waste under 18(IV). They emphasized that the non-cellulosic synthetic waste used is classified under tariff item 18(IV) by the Bombay Customs Authorities. The Tribunal in the Priyadarshini Mills case and Vardhan Syntex case made a clear distinction between waste and staple fibres, holding that waste is characterized by varying lengths and lack of homogeneity, whereas staple fibres are of uniform length.

3. Validity of Test Reports and Their Relevance to Classification:
The appellants contested the test reports provided by the Department, arguing that the reports did not consider the relevant parameters such as the percentage of spinnable fibre, entangled fibre, chips, and neps. The Assistant Collector's reliance on these test reports was challenged, and it was noted that the reports were based on a misconception of the definition of "staple fibre." The Tribunal in previous cases had ruled that test reports alone, without considering the nature of the material used (waste versus fibre), are not a reliable basis for classification.

4. Department's Contention on the Nature of Non-Cellulosic Waste and Its Processing:
The Department contended that the use of non-cellulosic waste for blending with man-made cellulosic fibre is disputed, arguing that the identity between the material imported at Bombay and the material used by the factory had not been established. The Assistant Collector's order dated 21-3-1988 stated that "the definition of TI 18(III)(ii) is not linked to the nature of the material from which the process started; if in the spun stage the yarn contains non-cellulosic fibre, the yarn can be classified only under TI 18(III)(ii)." However, the Tribunal rejected this reasoning, emphasizing that waste and fibre are distinct categories and that the legislative intent clearly treats them differently.

Conclusion:
Following the precedents set in the Priyadarshini Spinning Mills and Vardhan Syntex cases, the Tribunal held that the yarn manufactured by the appellants is classifiable under TI 18-III(i) of the Schedule to the erstwhile Central Excise Tariff. The appeal was allowed, and the impugned order was set aside, providing consequential relief to the appellants.