Tariff classification of yarn depends on proof of uniform-length staple fibre; failure of proof defeats the higher heading.

Tariff classification of yarn depended on proof that it was made from polyester staple fibre of uniform length; absent satisfactory evidence of that factual basis, the higher classification under Heading 5506 could not be sustained. The record also indicated purchases described as sub-standard fibre and the departmental case was weakened by rejection of a chemical report and later inspection-based material being used for an earlier period. The demand related to the disputed classification therefore failed, while only the conceded duty component remained unaffected. Penalty was reduced in light of the mixed duty result, and confiscation was set aside by way of consequential relief.

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Issues: (i) Whether the yarn manufactured by the assessee was classifiable under Heading 5505 or Heading 5506 of the Central Excise Tariff Act, 1985. (ii) Whether the demand attributable to classification, the penalty, and confiscation were sustainable.

Issue (i): Whether the yarn manufactured by the assessee was classifiable under Heading 5505 or Heading 5506 of the Central Excise Tariff Act, 1985.

Analysis: The classification turned on whether the product was manufactured from polyester staple fibre of uniform length so as to fall within Heading 5506. The evidence relied upon by the department did not satisfactorily establish that the raw material used was uniform-length staple fibre. The record showed purchases described as sub-standard fibre, and the departmental case was weakened by the rejection of the chemical report and reliance on later inspection-based material for an earlier period. In the absence of proof that the assessee used staple fibre of uniform length, the department failed to discharge the burden for classification under Heading 5506.

Conclusion: The classification demand was held not sustainable, and the issue was decided in favour of the assessee.

Issue (ii): Whether the demand attributable to classification, the penalty, and confiscation were sustainable.

Analysis: The demand relating to the conceded portions and the remaining duty was examined separately. Since the assessee accepted part of the duty, that portion could not survive. As to penalty, the adjudicating consequence was moderated in view of the mixed result on the duty demand, and confiscation was set aside by grant of consequential relief.

Conclusion: The demand was sustained only to the extent accepted or not disturbed, the penalty was reduced, and confiscation was remitted.

Final Conclusion: The appeal succeeded on the principal classification dispute, failed in part on the conceded duty component, and resulted in a reduced penalty with remission of confiscation.

Ratio Decidendi: Where tariff classification depends on whether the product is made from staple fibre of uniform length, the department must prove that factual basis, and failure to do so defeats the higher-classification demand.

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