2012 (1) TMI 128 - AT - Central Excise

Appellate Tribunal Upholds Revenue's Yarn Classification Decision

The Appellate Tribunal CESTAT CHENNAI upheld the Revenue's classification of slub yarn of polyester viscose blend and spliced yarn under Heading 5606 ... Classification of goods by tariff heading - Chapter Heading 5606: other special yarns including gimped yarn, slub yarn and chenille yarn - Chapter Heading 5506: normal yarns - manufacturing process determining classification - special mechanical stimulation during manufacture - eligibility for input credit under Rule 57AClassification of goods by tariff heading - Chapter Heading 5606: other special yarns including gimped yarn, slub yarn and chenille yarn - Chapter Heading 5506: normal yarns - manufacturing process determining classification - special mechanical stimulation during manufacture - eligibility for input credit under Rule 57A - Whether the slub yarn and spliced yarn manufactured by the appellant are classifiable under Heading 5506 or under Heading 5606 - HELD THAT: - The Tribunal found on the material on record that the appellant's yarn, produced from polyester and viscose fibres, underwent a spinning process employing a special electronic device which imparted a thick-and-thin (slub) effect. That special mechanical stimulation in manufacture placed the yarn outside the category of normal yarns under Heading 5506 and within the scope of Chapter Heading 5606 which expressly covers slub yarn as a form of 'other special yarns'. The appellant did not produce any evidence to show that the yarn was manufactured without such special treatment or that the device used did not create the slub effect. Given that classification under Heading 5606 was therefore appropriate, the consequence relating to input-credit entitlement under Rule 57A-being linked to classification-follows from that classification.Tribunal upheld classification of the goods under Heading 5606 and dismissed the appeal.Final Conclusion: The Tribunal sustained the Revenue's classification of the appellant's slub yarn as falling under Chapter Heading 5606 (special yarns) on the basis of the special mechanical process used in manufacture; the first appellate order is affirmed and the appeal is dismissed. Issues: Classification of goods under Heading 5506 or 5606In this judgment by the Appellate Tribunal CESTAT CHENNAI, the main issue was the classification of goods, specifically slub yarn of polyester viscose blend and spliced yarn, under Heading 5506 or 5606. The appellants argued that the goods should be classified under Heading 5506 as they were known as slub yarn by nature and process of manufacture. On the other hand, the Revenue contended that the goods should be classified under Heading 5606 due to the special procedure used in their manufacture.Analysis:The appellants claimed that during the relevant period, the goods were recognized as slub yarn and should be classified under Heading 5506. They argued that chenille yarn and gimped yarn, covered under Heading 5606, required special procedures for manufacture, unlike slub yarn. The use of a small device during spinning to create the slub effect did not make the yarn special enough to merit classification under Heading 5606.In response, the Revenue pointed out that the appellants manufactured blended yarn with viscose and polyester fibers, giving the yarn a slub effect using an electronic device. They emphasized that the final product's classification was crucial for input credit eligibility, with Heading 5506 products being eligible while Heading 5606 products were not. The Revenue asserted that all special yarns, including slub yarn, falling outside the normal yarn category of Heading 5506, were covered under Heading 5606 due to the special treatment required during manufacture.After hearing both sides and examining the records, the Tribunal found that the slub yarns manufactured by the appellants, with the special mechanical stimulation by an electronic device creating thick and thin features in the yarns, were not normal yarns. Therefore, the Revenue's classification under Heading 5606 was upheld. The Tribunal concluded that since no evidence was presented to dispute the special manufacturing process, the first appellate order's reasoning was sound, leading to the dismissal of the appeal.In conclusion, the Tribunal determined that the goods in question, due to the special manufacturing process involving the electronic device to create the slub effect, were rightly classified under Heading 5606. The decision to dismiss the appeal was based on the lack of evidence to challenge the classification and the acknowledgment of the special nature of the manufactured yarns.