2014 (9) TMI 682 - AT - Central Excise

Classification of goods - appellants engaged in the manufacture of hook and loop tapes of nylon and polyester yarn - Classification under Heading 5806.10 or under sub-heading 9806.90 - Imposition of penalty - Held that - tapes in question admittedly have selvedges on both the sides, which are discernible from the rest of the fabrics and they prevented any yarn from unravel from other side of the woven fabrics. If according to the observations of the adjudicating authority himself the tapes in question have selvedges, at the unfinished stage and there is no finding that such selvedges were subsequently cut before finishing the fabrics in question, it has to be held that the product was manufactured with selvedges on both the sides. Government of India, who was approached by the units manufacturing hooks and loop tape fasteners for imposition of Anti- Dumping Duty has passed the order 14/24/2003-DGAD, dated 7-6-2005. Vide the said order it stands clearly held that the goods in question fall under Heading 5806.10 and not under Heading 9606.90 - There is clear finding of the fact by the Ministry of Commerce and Industry, while giving its final finding vide order dated 7-6-2005 that hooks and loop tapes are classifiable under 58.06. The said finding stand accepted by the Government of India and carry a lot of weight. It stands observed in the said order that there are 4 producers of domestic like product in India. The application stand filed by M/s. Sky Industries Ltd. and the other producers i.e. Magic Fasteners Pvt. Ltd., Delhi and M/s. Siddharth Filament Yarn Ltd. and M/s. Siddharth Magic Tape Pvt. Ltd. have supported the application. Accordingly, the authorities has recommended the Anti-Dumping Duties to be imposed by the Central Government on all imports of narrow woven fabrics having pile woven made up of man-made fabrics. They are also known as hook and loop tapes fasteners or Velcro tapes or fasteners, tapes falling under Customs Heading 58.06. Proper classification of hook and loop tape fasteners of nylon and polyester yarn being manufactured by woven fabrics would fall under Chapter Heading 58.06 of the Central Excise Tariff and not under Chapter Heading 98.06 as held by the Commissioner. Accordingly, the impugned orders classifying the product under Chapter Heading 98.06 and confirming demands and interest and imposing penalties are liable to be set aside. Decided in favour of assessee.

Summary

Issues Involved:
1. Classification of "hook and loop tapes" under the Central Excise Tariff.
2. Compliance with Chapter Note 6 of Chapter 58 regarding selvedges.
3. Validity of the Chemical Examiner's report.
4. Consistency with other manufacturers' classifications and Anti-Dumping Duty findings.
5. Admissibility of independent laboratory reports.
6. Reference to judicial precedents and decisions.

Detailed Analysis:

1. Classification of "hook and loop tapes" under the Central Excise Tariff:
The appellants classified their product under Heading 5806.10, "narrow woven fabrics other than goods of Heading 58.07," whereas the Commissioner classified it as "snap fasteners" under sub-heading 9806.90. The Tribunal had previously remanded the matter to determine if the goods conformed to the definition of narrow woven fabrics under Chapter Note 6 of Chapter 58, which requires selvedges on both edges.

2. Compliance with Chapter Note 6 of Chapter 58 regarding selvedges:
The Tribunal directed that samples be tested to confirm the presence of selvedges on both edges. The Chemical Examiner's report did not address this specific requirement but instead focused on the classification, which was beyond his jurisdiction. The Tribunal emphasized that the Chemical Examiner should only provide an opinion on the specifications or composition of the product, not its classification.

3. Validity of the Chemical Examiner's report:
The Chemical Examiner's report described the product's characteristics but failed to address the presence of selvedges on both edges. The Tribunal found this omission significant, as the presence of selvedges was crucial for classification under Heading 58.06. The Tribunal cited previous decisions affirming that a Chemical Examiner should not opine on classification.

4. Consistency with other manufacturers' classifications and Anti-Dumping Duty findings:
The Tribunal noted that other manufacturers of identical products classified them under Heading 58.06, and the jurisdictional Central Excise authorities accepted this classification. Additionally, the Ministry of Commerce and Industry, in an Anti-Dumping Duty order, classified similar products under Heading 5806.10. The Tribunal found these consistent classifications persuasive.

5. Admissibility of independent laboratory reports:
The appellants provided reports from Shriram Institute of Industrial Research and the Synthetic and Art Silk Mills Research Associations (SASMIRA), both confirming the presence of selvedges on both edges. The Tribunal deemed these reports credible and adopted their findings over the Chemical Examiner's incomplete report.

6. Reference to judicial precedents and decisions:
The Tribunal referenced the Hon'ble Madras High Court's decision in Sky Industries Ltd. v. CCT, Chennai, which classified similar products under Heading 58.06 for the purposes of the Tamil Nadu General Sales Tax Act. This judicial precedent supported the appellants' classification.

Conclusion:
The Tribunal concluded that the proper classification of the "hook and loop tapes" is under Heading 58.06 of the Central Excise Tariff. The impugned orders classifying the product under Heading 98.06, confirming demands, interest, and imposing penalties, were set aside. The appeals were allowed with consequential relief to the appellants.