2016 (10) TMI 646 - AT - Central Excise

Demand of CENVAT credit availed - classification of goods - non-woven textile fabrics falling under CETA 56.03 or classified under 39231090 - reliance placed in the decision of case of PORRITTS & SPENCER (ASIA) LTD. Versus STATE OF HARYANA 1978 (9) TMI 72 - SUPREME COURT OF INDIA - Held that - The judgement was given while interpreting classified under Punjab General Sales Tax. While the manner of classification in the Punjab General Sales Tax Act was not the same as the manner of classification adopted in the Central Excise Tariff. The said Central Excise tariff is a very advanced scientific method of classification. The said tariff is backed by the explanatory notes which is explain the scope of each heading. The HSN explanatory notes to Chapter Heading 5603 specifically covers non-woven fabrics. The heading 5602 of the Central Excise Tariff specifically covers felt. The decision in the case of Porritts & Spencer (Asia) Ltd. was given in respect of felt. Felt is clearly classifiable under heading 5602. Thus, the reliance placed on the said decision in the show-cause notice is totally irrelevant. The HSN clearly recognize non-woven textile manufactured by thermal/mechanical bonding of yarn as textile falling under Chapter 56 - demand not justified - appeal allowed - decided in favor of appellant.

Summary

Issues: Classification of products under CETA 56.03 vs. 39231090.

Analysis:
1. Classification Dispute: The appellant, M/s. Tirupathi Nonwoven Pvt. Ltd., was issued a notice demanding duty due to the alleged misclassification of their products as non-woven textile fabrics under CETA 56.03, whereas the correct classification was claimed to be 39231090. The Commissioner confirmed the demand, leading the appellants to approach the Tribunal.

2. Appellant's Argument: The appellant contended that their product, a flexible material manufactured from polypropylene chips, should be classified under heading 56.03 as non-woven fabrics. They explained the manufacturing process involving melting polypropylene chips, passing them through spinnerets to create filament yarn, and then forming the finished goods through thin spreading and heat pressing. They emphasized that the HSN explanatory notes supported their classification, recognizing non-woven textiles produced by thermal/mechanical bonding of yarn as falling under Chapter 56.

3. Revenue's Argument: The Revenue argued that the product should be classified under Chapter 39 due to its predominant plastic content, as it is made from granules of Chapter 39. They relied on the common parlance test, citing a Supreme Court decision, and contended that the product's use as a packing material for goods supported its classification under heading 2923.

4. Tribunal's Decision: The Tribunal referred to the Hon'ble Supreme Court's interpretation of the term "textiles" and concluded that weaving yarn into a fabric constitutes textiles, regardless of the weaving method or material used. They highlighted the advanced scientific classification method of the Central Excise Tariff, supported by explanatory notes. The HSN explanatory notes specifically covered non-woven fabrics under Chapter Heading 5603, while heading 5602 was designated for felt. As the appellant's product aligned with the process outlined for non-woven fabrics, the Tribunal set aside the impugned order, allowing the appeal and disposing of the miscellaneous application.

This detailed analysis of the judgment showcases the classification dispute, the arguments presented by both parties, and the Tribunal's reasoning leading to the final decision in favor of the appellant based on the classification criteria outlined in the Central Excise Tariff and supported by the HSN explanatory notes.