Applicability of Chapter Note 8 to embroidered fabrics referred to a Larger Bench amid conflicting Tribunal views.

Divergent Tribunal views existed on whether Chapter Note 8 to Chapter 58 of the Central Excise Tariff Act, 1985 applies to value addition arising from processing grey embroidered fabrics. One line of authority held that duty was payable on the enhanced value after 15/16 March 1995, while another co-ordinate Bench held that embroidery is not fabrics and that Chapter Note 8 does not apply. Because the same legal issue had produced conflicting interpretations, the matter was referred to a Larger Bench for determination.

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Issues: Whether Chapter Note 8 to Chapter 58 of the Central Excise Tariff Act, 1985 applies to value addition arising from processing of embroidered fabrics, in view of differing Tribunal views, and whether the question should be referred to a Larger Bench.

Analysis: One line of Tribunal authority had held that duty would be payable on the value addition arising from processing of grey embroidered fabrics after 15/16 March 1995 under Chapter Note 8 to Chapter 58, while another co-ordinate Bench had taken the view that embroidery is not fabrics and that Chapter Note 8 is inapplicable. In the presence of this divergence on the same legal issue, the matter required resolution by a Larger Bench.

Conclusion: The question on the applicability of Chapter Note 8 to Chapter 58 was referred to a Larger Bench for decision.

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