1998 (8) TMI 238 - AT - Central Excise

Summary

Issues Involved:
1. Classification of man-made fabrics coated with P.U. foam and cotton fabrics coated with P.U. foam.
2. Applicability of Chapter sub-headings 3921.11 versus 5903.29 and 5903.19.
3. Recovery of differential duty.
4. Interpretation of Chapter Notes and HSN Explanatory Notes.
5. Role of the Chemical Examiner in classification.
6. Relevance of Board's Circulars and previous judicial rulings.

Detailed Analysis:

1. Classification of Fabrics:
The primary issue was the classification of man-made and cotton fabrics coated with P.U. foam. The Assistant Collector classified these under Chapter sub-heading 3921.11, while the appellants argued for classification under sub-headings 5903.29 and 5903.19. The Tribunal examined the functional character of the fabrics, noting that the textile fabric was predominant and used for manufacturing shoe uppers, with the P.U. foam acting merely as a cushion. The Tribunal concluded that the items should be classified under Chapter 59, specifically under sub-headings 5903.29 and 5903.19, as they were textile fabrics laminated with plastics.

2. Applicability of Chapter Sub-headings:
The Tribunal referred to Heading 59.03, which covers "textile fabrics impregnated, coated, covered or laminated with plastics." It was noted that the articles in question were used predominantly as textiles, with the plastic component serving a secondary, reinforcing role. The Tribunal emphasized that the classification should be based on the functional character of the product, which in this case, was textile rather than plastic.

3. Recovery of Differential Duty:
The Assistant Collector had ordered the recovery of differential duty based on the classification under Chapter 3921.11. However, with the Tribunal's decision to classify the items under Chapter 59, the order for recovery of differential duty was set aside.

4. Interpretation of Chapter Notes and HSN Explanatory Notes:
The Tribunal extensively referred to Chapter Note 2 of Chapter 59 and the HSN Explanatory Notes. It was highlighted that Heading 59.03 applies to textile fabrics laminated with plastics, regardless of the weight per square meter or the nature of the plastic material. The Tribunal also noted that the exclusion clauses under Chapter 39 did not apply to the items in question, as the textile fabric was not merely for reinforcing purposes but had a primary functional role.

5. Role of the Chemical Examiner:
The Tribunal observed that the Chemical Examiner's role was to provide an expert opinion on the test results, not to suggest the classification of the items. The opinion of the Chemical Examiner regarding the classification under Chapter 39 was not accepted.

6. Relevance of Board's Circulars and Previous Judicial Rulings:
The Tribunal relied on Board's Circular No. 161/72/95-CX, which clarified the classification of PVC leather cloth under Heading 59.03. The circular emphasized that such fabrics, used for upholstery and capable of taking sharp bends without cracking, should be classified under Chapter 59. Additionally, the Tribunal referred to the judgment in the case of Bhor Industries Ltd., which supported the classification of similar products under Chapter 59. The Tribunal concluded that the items in question were similar to those discussed in the circular and the previous judgment, reinforcing the decision to classify them under Chapter 59.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeals, concluding that the items in question were rightly classifiable under Chapter Heading 59.03 and the respective sub-headings 5903.29 and 5903.19. The decision was based on the functional character of the products, the interpretation of relevant Chapter Notes and HSN Explanatory Notes, and the support from Board's Circulars and previous judicial rulings.