Terry towelling fabric classification dispute turns on cutting threads versus stitching, with only partial pre-deposit waiver granted.

In a classification dispute over terry towelling fabrics, the issue was whether the goods were made-up articles under Heading 63.02 or fell under Heading 58.02, with Note 5 to Section XI turning on whether towels could be formed merely by cutting dividing threads or required further stitching. On the material placed, there was no adequate basis to establish a strong prima facie case on merits or limitation for complete waiver of pre-deposit. Partial relief was therefore granted: pre-deposit was ordered subject to deposit of Rs. 3 lakhs, and recovery of the balance duty and penalty was stayed.

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Issues: Whether the applicant made out a prima facie case for complete waiver of pre-deposit in a classification dispute concerning terry towelling fabrics, and whether recovery of duty and penalty should be stayed in full.

Analysis: The goods were examined with reference to Heading 58.02 and Heading 63.02 of the tariff, together with Note 5 to Section XI. The deciding factor was whether the fabrics could be converted into towels merely by cutting the dividing threads, in which case they would be treated as made-up articles under Heading 63.02, or whether further work such as stitching was required, in which case Heading 58.02 would apply. On the material placed, there was no adequate foundation to conclude that the applicant had a strong prima facie case on merits or limitation, but the dispute was considered sufficient to justify partial relief.

Outcome: Partial waiver of pre-deposit was granted on condition of deposit of Rs. 3 lakhs, and recovery of the balance duty and penalty was stayed.

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