2001 (8) TMI 437 - AT - Central Excise

Issues Involved:
1. Classification of synthetic polyester spun yarn.
2. Requirement of Central Excise license for manufacturing.
3. Determination of whether the yarn is staple fibre yarn.
4. Validity of the Chemical Examiner's test reports.
5. Compliance with Central Excise Law.

Detailed Analysis:

1. Classification of Synthetic Polyester Spun Yarn:
The primary issue in this case was the classification of synthetic polyester spun yarn. The Revenue contended that the yarn was classifiable and dutiable under sub-heading No. 5504.29 of the Central Excise Tariff. The appellate authority, however, vacated the initial order by the Dy. Commissioner of Central Excise, citing that the length of the fibre in the yarn had not been determined, which was crucial for classifying it as staple fibre yarn.

2. Requirement of Central Excise License for Manufacturing:
The respondents, M/s. Asha Jyoti Spinning Mills, were found to have manufactured 100% polyester spun yarn without a Central Excise license. A quantity of 4860 kgs of such yarn was seized, and the Central Excise duty of Rs. 1,52,219.87 was demanded. The partner of M/s. Asha admitted to manufacturing the yarn without a license and agreed to pay the duty.

3. Determination of Whether the Yarn is Staple Fibre Yarn:
The Commissioner of Central Excise (Appeals) emphasized that the length of the fibre and the denier of the yarn should be uniform to classify it as staple fibre yarn. The Chief Chemist's report did not determine the length of the fibres, leading to the conclusion that it could not be said with certainty that the yarn was staple fibre yarn. The appellate authority relied on previous judgments and the Harmonised System of Nomenclature (HSN) explanatory notes, which describe staple fibres as generally of uniform length.

4. Validity of the Chemical Examiner's Test Reports:
The Revenue argued that the classification was determined by tests conducted at various premises, revealing that the yarn was 100% polyester and thus dutiable. The test reports confirmed that the yarn was composed of synthetic staple fibres. The Chief Chemist's cross-examination revealed that there was no prescribed method for determining the length of fibres from the yarn without breaking them. The appellate authority's reliance on the absence of fibre length determination was challenged by the Revenue, which argued that the test reports were clear and unambiguous.

5. Compliance with Central Excise Law:
The Revenue highlighted that the yarn was found in fully manufactured and packed condition, unaccounted for in the excise records. The adjudicating authority initially imposed a redemption fine and penalty, which were later vacated by the Commissioner of Central Excise (Appeals). The Revenue's appeal contended that the yarn was correctly classifiable under sub-heading No. 5504.29 and that the appellate authority's decision was incorrect.

Final Judgment:
The appellate tribunal examined the case in detail and disagreed with the view taken by the Commissioner of Central Excise (Appeals). The tribunal set aside the appellate authority's decision and confirmed the view of the adjudicating authority, the Asstt. Commissioner of Central Excise. However, the tribunal reduced the redemption fine from Rs. 37,000/- to Rs. 10,000/- and the penalty from Rs. 50,000/- to Rs. 15,000/-. The appeal filed by the Revenue was allowed, except for the reduction in the amounts of redemption fine and penalty.

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