9911796707
TMI Blog1999 (9) TMI 507X X X X Extracts X X X X X X X X Extracts X X X X ..... erification of the factual position on 11-7-90, it was observed that the respondent's factory in their declaration for the years 1986-87 and 1989-90 filed the declaration under Rule 174A declaring that they were only dyeing the cloth by hand process. It was, therefore, alleged that they had suppressed the fact that they were also engaged in the manufacture of Tarpaulin Cloth, Tarpaulin and dyed processed cloth, impregnated/coated with an intention to evade payment of duty. Detailed investigation were undertaken, statements of persons concerned were recorded, samples were drawn and sent for chemical examination. Chemical examiner in his letter dated 8-8-90 and 13-11-90 had communicated the results that the samples were cotton fabrics impregnated with waxy preparation. Accordingly, a SCN was issued to the respondents asking them to explain as to why Central Excise Duty amounting to Rs. 14,16,043.92 should not be demanded and why penalty should not be imposed. In reply to the SCN, the respondents herein submitted that they were registered SSI Unit engaged in the manufacture of Water-proof cloth; dyed processed cloth and Tarpaulin; that they purchased grey cloth in running length from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to protect something from weather. Tarpaulins were produced out of such fabrics. Ld. DR submitted that the impregnating solution is also made out of such exclusive material as paraffin, wax, natural resin, Gum, Aluminium stearate, double boiled linseed oil, lubricating heavy oil and therefore, in terms of HSN Notes, the product of the respondent was correctly classifiable under Chapter sub-heading 5906.90. He referred to Note of Chapter 59.06 which stipulates that Heading 59.06 does not apply to, fabrics in which the impregnation, coating or covering cannot be seen with the naked eye . Ld. DR submitted that in the instant case the impregnation, coating or covering was seen with the naked eye, therefore, the goods were classifiable under this chapter heading. Ld. DR submitted that Chapter 52 does not cover processed fabrics; that Chapter 59 covers processed fabrics. He submitted that Chapter 59 covers impregnated, coated, covered or laminated textile fabrics. He submitted that material which is basically still a cotton fabrics, would merit classification under Chapter 52 even though it has gone through a process of water proofing. He submitted that even if it was felt that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be a uniform coating visible by the naked eye otherwise than through a change of colour . In para 5 of the circular the Board clarified Moreover the reference to tarpaulin fabrics, under Chapter 59 is only in the Explanatory Notes to HSN and not in the Chapter Notes or Section Notes to CETA. As against this, water proofed fabrics are specially mentioned under Chapter 52 of CETA - unlike the HSN. Hence this entry would prevail over the entry in the Explanatory Notes to HSN . Ld. Counsel also referred to Fairchild's Dictionary of Textiles, 6th Edition and submitted that water-proof means possessing of the ability to prevent penetration by water. Waterproof fabrics are generally rightly woven and coated with rubber, plastic, linseed oil, cellulose esters etc. He submitted that in their case the same process of manufacture was undertaken. He also referred to the Handbook on Glossary of Textile Terms and submitted that waterproof is a process in which the interstices of the fabric as well as the surface of the material are covered with a film or skin in such a manner that the treated material is not only water-repellent, but impermeable to air and moisture. He submitted that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 59.06 is a residuary entry as it speaks otherwise impregnated whereas 52.07 is a specific entry. Ld. Counsel also submitted that the demand is hit by limitation. In view of the fact that the appellants had intimated the process of manufacture to the Department and there was nothing held back or mis-stated. 5. We have heard the rival submissions. We have also perused the case law cited above. We have examined the various Chapter Notes and Section Notes. We note that under Chapter Heading 52.06, there is a specific entry for cotton fabrics subjected to the process of water-proofing. The appellant insisted that their product was cotton fabrics which was subjected to the process of water proofing and therefore it was classifiable under Chapter Heading 52.06 or 52.07. On the other hand, the Department's case is that the goods in question are textile fabrics otherwise impregnated, coated or covered. They have submitted that the Chemical Examiner's report supports their view that the textile fabrics were impregnated. They referred to Note 5(a) under Chapter 59 stating that Heading 59.06 does not apply to fabrics in which the impregnation, coating or covering cannot be seen with the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -proofing. On perusal of the definitions in the Glossary, we note that in the case of impregnated fabric the interstices between the yarn are completely filled with the impregnating compound whereas in waterproofing the interstices of the fabric as well as the surface of the material are covered with a film or skin in such a manner that the treated material is not only water-repellent, but impermeable to air and moisture. Looking at the process of manufacture undertaken by the appellant, we note that for making the product the canvas cloth is passed through a mixture of Wax, Resin, Red Mud, D.B. Oil, colour etc. and then pressed through two rollers. The resultant product was wax coated canvas cloth. Thus, the process undertaken appears to be that of water-proofing in as much as not only the interstices of the fabric are covered but the surface of the material are covered with a film or a skin. We have also perused Encyclopaedia of Chemical Technology of water-proofing which shows that water proofing results from coating a fabric and filling the pores with film forming material etc. We also note that the Central Board of Excise Customs in their Circular dated 18-10-96 also speak t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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