Intermediate coated fabric classification fails where manufacturing does not produce a distinct identifiable textile product, defeating related cess levy.

An intermediate coated fabric was found not to arise in the manufacture of coated abrasives when duty-paid cotton fabrics were treated with gum, starch and amylaceous substances, because the process did not produce a separately identifiable and classifiable product under Heading 59.01. On that basis, the tariff classification proposed by the department failed. Cess under the Textile Committee Act, 1963 also could not be levied, since the levy depended on the existence of such a textile intermediate product and that foundation was absent. The result was that the assessee obtained relief and the impugned orders were set aside.

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Issues: (i) Whether an intermediate product described as coated fabric arose in the manufacture of coated abrasives and was classifiable under Chapter Heading 5901.10 of the Central Excise Tariff Act, 1985. (ii) Whether cess was leviable under the Textile Committee Act, 1963 on the alleged intermediate coated fabric.

Issue (i): Whether an intermediate product described as coated fabric arose in the manufacture of coated abrasives and was classifiable under Chapter Heading 5901.10 of the Central Excise Tariff Act, 1985.

Analysis: The earlier decision in the assessee's own case had already held that the process of applying gum, starch and amylaceous substances to duty-paid cotton fabrics did not bring into existence a distinct intermediate product capable of classification as coated fabric under Heading 59.01. The reasoning proceeded on the absence of a separately identifiable and classifiable product and on the view that the material did not satisfy the criteria of the tariff heading invoked by the department.

Conclusion: The alleged intermediate coated fabric did not arise and the demand based on its classification was unsustainable.

Issue (ii): Whether cess was leviable under the Textile Committee Act, 1963 on the alleged intermediate coated fabric.

Analysis: Once it was held that coated fabric did not emerge in the course of manufacture of coated abrasives, the foundation for levy of cess under the Textile Committee Act, 1963 disappeared. The levy depended on the existence of a textile product as an intermediate product, and in the absence of such product no cess could be charged.

Conclusion: Cess under the Textile Committee Act, 1963 was not leviable.

Final Conclusion: The appeals succeeded, the impugned orders were set aside, and the assessee obtained consequential relief.

Ratio Decidendi: Where the manufacturing process does not result in the emergence of a distinct and classifiable intermediate product, neither tariff classification based on that alleged product nor a consequential statutory levy predicated on its existence can be sustained.

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