1994 (8) TMI 95 - AT - Central Excise

Issues Involved:
1. Classification of Yarn under Central Excise Tariff.
2. Misdeclaration of Yarn composition.
3. Validity of test reports and expert opinions.
4. Right to cross-examine the Chemical Examiner.
5. Imposition of duty, fine, and penalty.

Detailed Analysis:

1. Classification of Yarn under Central Excise Tariff:
The core issue was whether the Yarn manufactured by M/s Modern Syntex (India) Ltd. should be classified under Tariff Item 18-III(i) or 18-III(ii). The Collector of Central Excise held that the classification should be based on the non-cellulosic and cellulosic fibre content of the Yarn, which cannot be determined by visual or physical examination alone. The Tribunal upheld this view, affirming that the classification of Yarn between Tariff Item 18-III(i) and 18-III(ii) is based on the fibre content and not on the physical state of the raw materials.

2. Misdeclaration of Yarn Composition:
The Department alleged that M/s Modern Syntex misdeclared the composition of the Yarn as NCSW/V (Non-Cellulosic Synthetic Waste/Viscose) in statutory records and lorry receipts. The labels on the cones indicated the composition as P/V (Polyester/Viscose), and the duty charged from customers was applicable to P/V Yarn. The Tribunal found sufficient evidence, including the marking on the cones and the orders received for P/V Yarn, to support the Department's claim of misdeclaration. The Tribunal concluded that the Yarn contained Polyester Fibre and Viscose, making it classifiable under Tariff Item 18-III(ii).

3. Validity of Test Reports and Expert Opinions:
The appellant contended that the Dy. Chief Chemist's report was not conclusive and that the distinction between Polyester Waste and Polyester Fibre could only be made by a textile expert. The Tribunal, however, relied on the test reports which indicated the presence of Polyester Fibre in the Yarn. The Tribunal also referred to technical literature and previous judgments to establish that fibres are different from waste. The Tribunal found that the Dy. Chief Chemist's report was clear and unambiguous, and there was no need for further clarification.

4. Right to Cross-examine the Chemical Examiner:
The appellant argued that they were prevented from making an effective representation because the Collector did not permit the cross-examination of the Chemical Examiner. The Tribunal held that cross-examination was not the only solution and that the appellant had other alternatives, such as collecting fresh samples for testing. The Tribunal found that the disallowing of cross-examination did not vitiate the decision, as the report from the Dy. Chief Chemist was clear and there was no ambiguity that required further clarification.

5. Imposition of Duty, Fine, and Penalty:
The Tribunal upheld the Collector's order demanding duty as per the show cause notice. The Tribunal also confirmed the imposition of a fine of Rs. 5,000 in lieu of confiscation of the seized Yarn and a penalty of Rs. 10,000 under Rule 173Q for contravention of the Rules. The Tribunal found that the misdeclaration was with the intention to evade the payment of duty, and thus, the penalties imposed were justified and reasonable.

Conclusion:
The appeal by M/s Modern Syntex (India) Ltd. was rejected. The Tribunal upheld the classification of the Yarn under Tariff Item 18-III(ii), confirmed the demand for duty, and sustained the penalties imposed by the Collector of Central Excise. The Tribunal found that the evidence on record and the test reports sufficiently proved the misdeclaration and justified the penalties imposed.

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