2001 (6) TMI 224 - AT - Central Excise

Summary

Issues:
- Application for waiver of pre-deposit of duty and penalty confirmed by Commissioner (Appeals) for classifying processed fabrics under Heading 63.07 instead of 60.01.
- Interpretation of Note 5(f) to Section XI of the Tariff regarding the definition of 'made up article'.
- Application of Note 5(b) to Section XI in determining classification of processed fabrics.
- Applicability of decisions in previous cases to the current matter.
- Impact of the Supreme Court decision in Elson Machines Pvt. Ltd. v. CCE on the classification list revision by the Department.

Analysis:
1. The appeal before the Appellate Tribunal involved a request for the waiver of pre-deposit of duty and penalty imposed by the Commissioner (Appeals) on M/s. S. Kumars for classifying processed fabrics under Heading 63.07 instead of 60.01. The appellant's advocate argued that the processed fabrics should not be classified under Heading 63.07 as they do not meet the definition of 'made up' under Note 5(f) to Section XI. He contended that the process undertaken by the appellant does not involve knitting to shape, which is a requirement for classification under Note 5(f). Additionally, he cited legal precedents to support the argument that if an item does not satisfy the defined criteria, it cannot be classified under a specific heading or chapter.

2. On the other hand, the respondent's representative opposed the appellant's claim, asserting that the definition of a 'made up article' as per Note 5(f) to Section XI applies to the fabric in question since the appellant cuts the fabrics to the desired length. The respondent emphasized that the presence of narrow strips of unpiled knitting along the fabric's length after specific intervals qualifies the processed fabrics as 'made up articles' under sub-heading 6307.90. Furthermore, reference was made to a Supreme Court decision emphasizing the Department's authority to revise classification lists without being estopped by previous actions.

3. After considering both parties' arguments, the Tribunal noted that the appellant did not shape the fabric to meet the criteria under Note 5(f) and highlighted that the narrow strips were present even in the grey fabric stage. Given the classification of grey fabric under Heading 60.01 and the absence of shaping the fabric into specific articles, the Tribunal found a strong prima facie case for waiving the duty and penalty. Consequently, the Tribunal granted the waiver and stayed the recovery during the appeal process. The appellant's concerns about the impact of the impugned order on their business were acknowledged, leading to the fixing of a hearing date for further proceedings.

4. The judgment delves into the interpretation of tariff provisions, specifically Note 5(f) and Note 5(b) to Section XI, to determine the classification of processed fabrics. Legal principles from prior cases were cited to support both parties' contentions, emphasizing the importance of meeting defined criteria for classification. The Tribunal's decision to grant the waiver was based on the lack of shaping the fabric into specific articles and the presence of unpiled knitting strips, aligning with the classification of grey fabric under a different heading. The impact of the Supreme Court decision on the Department's classification list revision authority was also highlighted in the analysis.