Cotton garment exemption upheld where polyester yarn was used only as adornment, supporting interim waiver of duty pre-deposit.

Cotton knitted garments under Chapter 61 were treated as eligible for the benefit of Sl. No. 41 of Notification No. 7/2003-CE where 3% polyester yarn was used only as adornment by way of stripes. The explanation to the notification was applied to the effect that cotton apparel is not excluded merely because it contains other materials used for stitching, fastening, holding or adornment. On the admitted facts, the lower authority's objection based only on polyester content was held insufficient at the interim stage, so the assessee was found prima facie entitled to clear the goods at 8% and waiver of pre-deposit with stay of recovery was granted.

---

---

Issues: Whether garments declared as 100% cotton and falling under Chapter 61 were entitled to the benefit of Sl. No. 41 of Notification No. 7/2003-CE despite the presence of 3% polyester yarn used for adornment, and whether pre-deposit and recovery of the demanded differential duty and penalty were liable to be waived.

Analysis: The goods were found to be garments of cotton, with polyester yarn used only to adorn them by way of stripes. The explanation appended to Sl. No. 41 of the notification clarified that cotton knitted or crocheted apparel would not be excluded merely because they contained sewing threads, cords, labels, elastic tapes, zip fasteners, or similar items of other materials used for stitching, fastening, holding, or adornment. The objection of the lower authority proceeded only on the presence of polyester content, without giving due weight to the purpose for which it was used. On the admitted facts, the notification benefit was prima facie available.

Conclusion: The assessee was prima facie entitled to clear the goods at 8% under Sl. No. 41, and the demand for differential duty was not sustainable at the interim stage. Waiver of pre-deposit and stay of recovery were granted.

---