9911796707
TMI Blog1999 (8) TMI 534X X X X Extracts X X X X X X X X Extracts X X X X ..... r the said period and imposed penalty of Rs. 1,00,000/-. The allegation is that the appellants had manufactured tyre cord fabrics of other than high tenacity yarn, but declared and removed the same as tyre cord of high tenacity yarn by mis-classifying them under Heading 5902 contravening the provisions of Rule 173B of C.E. Rules, 1944 and had wilfully supressed the correct tenacity of the yarn in tyre cord fabrics and removed the tyre cord fabrics of lower tenacity by misdeclaring as Tyre cord fabrics of High Tenacity Yarn with an intention to evade payment of duty. It is further alleged that the textile fibre in the form of cord is the major reinforcing material in tyres. One of the major factors which determine the ultimate tyre performance is the tenacity of the tyre cord. During the running of tyres, cords undergo complex tension and compression. The testing method for the product is always chosen in such a manner that the results and analysis of other test should guide the manufacturer to estimate the performance of the end product. To find out the tenacity of the yarn in the tyre cord in the normal procedure, only dipped cords are taken for testing. The tenacity of the yarn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mality either at twisting stage or at dipping stage. In his further letter dated 8-8-1990, he had stated that the customers stipulate the minimum breaking strength in dipped cord and products are cleared on the basis of actual results being more than the stipulated strength. In respect of certain items having low tenacity, he explained that twisting process for any tyre cord always results in loss in strength and in polyester tyre cord the loss is around 15%, that the grey cord undergoes processing in their dipping unit and the cord is subjected to high temperature with which there is a marginal loss in strength of 3% to 6% in polyester cord. He stated that during the dipping process, the cord absorbs about 4% dip solution. The absolute tenacity after deducting the 4% dip pick up will result in higher tenacity of the cord. On the basis of these material, department had proceeded against the appellants for reclassification and has invoked larger period for confirmation of the demands. 4. The appellants contentions were as follows :- (i) That all the allegations of misdeclaration , suppression, intention to evade payment of duty etc. have culminated out of the misunderstanding o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mis-declaration supression of fact, no mis-declaration on the part of M/s. MCL. 5. They further contended that the department s stand that the tenacity of the yarn taken from the tyre cord should satisfy the conditions specified for high tenacity yarn is a sheer mis-understanding because the specification of tenacity given in Section Note in the Tariff Act is for the input material and since the input undergoes a manufacturing processes, it will not and cannot in the normal circumstances retain the same characteristics viz. tenacity as it had prior to subjecting the same to the process of manufacturing; moreover, neither the Section Notes nor the Chapter Notes specify that the tenacity of the yarn should be 55 CN/tex or more after dipping as contended by the Department; as stated by Shri V. Swaminathan, Synthetic Twisting and Tyre Cord Manager, the customers stipulate the minimum breaking strength in dipped cord and the products are cleared on the basis of actual results being more than the stipulated strength. They have further contended that the customers specifications are only for the final product viz. the dipped tyre cord warpsheet and not for other yarn used in the manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sifiable under sub-heading 5905.20 and on this ground he has confirmed the differential duty amount by invoking larger period. He has justified the classification under sub-heading 5902.20 on the ground that Section Note 9 of Section XI states for the purpose of this Section, the expression impregnated includes dipped . Therefore, he has concluded that impregnated textiles and textiles articles covered under Section XI would include dipped textiles and textiles articles also. He has noted that Chapter 59 of Central Excise Tariff Act, 1985 deals with impregnated coated or laminated textile fabrics other than those of Heading 5902. He has noted that sub-heading 5905.20 covers rubberised textile fabrics of man-made textile materials. Tariff Heading 5905 read with Section Note 9 of Section XI in clear terms include dipped fabrics. He has noted that the tyre cord fabrics of polyester are dipped in solution known as dip solution, which is composed of water, latex and resorcinol, formaldehyde and the percentage of these items being 50% to 55 %, 40 % to 45 % and 5% respectively. He has noted that latex universally accepted as rubber in commercial and industrial parlance and also as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng is not at all suitable or covered for the purpose of the tyre cord fabrics. It is submission that there is a clear finding by the Commissioner that the item is a Tyre Cord Fabric and it is so understood also in the trade. He referred to the letter and certificate given to the appellants by Falcon Tyres Ltd. wherein they have clearly indicated that the item in question continues to remain a tyre cord fabric despite reduction in tenacity which is a common factor and the industry accepts the same as normal as it does not in any way affect the quality of tyres produced. He also points out that the heading under 5902 which refers to tyre cord fabrics of high tenacity yarn of Polyamides, Polyester or Viscose Rayon refers to the tyre cord which has to be manufactured from a High Tenacity Yarn. It is nobody s case that high tenacity yarn was not used or manufactured. It is only during the processing as technological necessity a portion of the yarn would loose its tenacity. He points out that Section Note 4 of Section XI referred to by the Commissioner in no way restricts the classification of the product under Heading 5902. He further contends that the Heading 5905 adopted by the Depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nutrients v. C.C.E. has clearly laid down that the Boards circulars are binding on the adjudicating authority and the same is required to be applied by the authorities adjudicating the matter. (b) We also notice that the department had initiated proceedings for re-classification of the product for subsequent period which has since been now dropped in terms of the findings given by the Commissioner (Appeals), Trichy in Order-in-Appeal No. 129/98 dated 28-9-1998. The Commissioner (Appeals) accepted all the propositions given by the appellants and has noted that it is an admitted fact that Tyre Cord Fabrics at the warp stage contain high tenacity yarn of Polyester and therefore, is classifiable under sub heading 5902.20 and exempted from duty under Notification No. 63/87-C.E. He has noted that if the tenacity of the yarn get reduced during the process of dipping, that is immaterial for the purpose of classification because the tariff heading nowhere lays down about the requirement of High Tenacity Yarn in the dipped tyre cord fabrics also. He has observed that once it is satisfied that tyre cord fabrics was composed of High Tenacity Yarn at the warp stage itself, the requirement of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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