Prima facie case on sewing thread classification led to waiver of pre-deposit and interim protection pending appeal.

For treatment as sewing thread under Note 3 to Section XI, the yarn had to be dressed for use as sewing thread. The departmental test report did not state that this condition was satisfied, and the deficiency was also noted in the impugned order. On that basis, a strong prima facie case was found for the assessee, and the requirement of pre-deposit of central excise duty and penalty was waived pending the appeal.

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Issues: Whether the applicants had made out a prima facie case for waiver of pre-deposit and interim protection, and whether the product could be treated as sewing thread for the purpose of duty liability.

Analysis: For treatment as sewing thread under Note 3 to Section XI, one of the conditions is that the yarn must be dressed for use as sewing thread. The test report relied upon by the department did not state that the yarn was so dressed, and this deficiency was also noticed in the impugned order. In these circumstances, a strong prima facie case was found in favour of the applicants.

Conclusion: The demand for pre-deposit of central excise duty and penalty was set aside during the pendency of the appeal, in favour of the assessee.

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