Differential duty on cut pieces and rags rejected where sub-standard goods were valued differently under a reduced duty notification.

Clearance of ECRU fabrics, fents and rags to the Domestic Tariff Area was examined for differential duty under the basic customs duty rate adopted by the assessees. Cut pieces and waste cloth were treated as distinct from running-length fabrics because they are ordinarily valued by weight, not by length, and sub-standard goods carry a lower value than standard goods. In light of Notification No. 2/95-CE dated 04.01.1995, which reduced the effective duty rate, the assessees' adopted rate did not justify any further demand. The differential duty demand was therefore not sustainable.

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Issues: Whether the assessees were liable to pay differential duty on clearance of ECRU fabrics, fents and rags to the Domestic Tariff Area by applying the rate of basic customs duty adopted by them.

Analysis: Fents are cut pieces arising in the course of manufacture and rags are waste cloth left after garments are cut out. Such goods cannot be equated with running length quality fabrics and are ordinarily valued by weight rather than by length. The accepted principle is that cut pieces or sub-standard goods have a lower value than standard goods. In the light of Notification No. 2/95-CE dated 04.01.1995, which reduced the effective rate of duty, the rate adopted by the assessees did not justify any further demand of duty.

Conclusion: The assessees were not liable to pay differential duty and the demand could not be sustained.

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