2016 (10) TMI 514 - AT - Central Excise

Tribunal rules in favor of appellant on waste classification dispute

Bhor Industries Ltd. Versus Commissioner of Central Excise, Mumbai

The Tribunal found in favor of the appellant in a case concerning the classification of side trimmings of laminated fabrics as waste. The lower ... Classification of the side trimmings of laminated, impregnated and coated fabrics - under heading 59.03 or otherwise - clearance by the appellant as waste describing them as foam patti - damaged or sub-standard textile fabrics. - Held that:- We find that the first appellate authority has relied upon the Deputy Chief Chemist s report to hold that these items are classifiable under chapter 59.03. We find that the Chemical Examiner s report is totally inconclusive and in fact in any way supports the contentions of the appellant inasmuch, the Chemical Examiner has held that the sample is in the form of strips of non-uniform width (ranging from 6 mm to 1 cm). If this is the description of the sample sent to the Chemical Examiner, then it is very clear that these products cannot be classified as laminated textile fabrics. In view of the foregoing, we hold that the demands confirmed by the lower authorities in the case in hand are unsustainable and liable to be set aside and we do so. Issues:Classification of side trimmings of laminated, impregnated, and coated fabrics as waste - Allegation of foam patti being chindies - Compliance with remand directions from the apex court - Interpretation of show cause notices - Reliance on Chemical Examiner's report for classification under chapter 59.03.Analysis:1. The issue at hand pertains to the classification of side trimmings of laminated, impregnated, and coated fabrics, described as foam patti, by the appellant as waste. The appellant manufactures fabrics coated with PVC used in furniture manufacturing, where side strips emerge during the lamination and foaming processes. The Revenue contends that foam patti is classifiable under Heading 5903, akin to damaged or sub-standard textile fabrics, necessitating duty payment. The matter was remanded by the apex court to determine if foam patti qualifies as laminated textile fabrics. The lower authorities confirmed demands without addressing this crucial aspect, leading to the current appeal.2. The appellant argues that the lower authorities exceeded the show cause notice's scope by categorizing foam patti as chindies, contrary to the department's initial case. Citing judicial precedents, the appellant emphasizes the need to strictly adhere to remand directions, which were not followed. The appellant asserts that foam patti, described as waste in the classification list, cannot be deemed damaged or sub-standard fabrics. The reliance on notifications for duty imposition is challenged, as foam patti's nature as waste and scrap precludes its classification as laminated fabrics under Heading 59.03.3. The departmental representative highlights the tariff entry under Chapter 59, asserting that products arising during manufacturing fall under Heading 59.03. Referring to a Tribunal decision, the representative argues that side trimmings of coated fabrics are classified as damaged or sub-standard textile fabrics. However, the Tribunal's decision is contested by the appellant, emphasizing the unique nature of foam patti as waste and scrap. The Tribunal's analysis focuses on the misinterpretation by lower authorities, non-compliance with remand directions, and incorrect reliance on the Chemical Examiner's inconclusive report for classification under Chapter 59.03.4. Ultimately, the Tribunal concludes that the demands confirmed by the lower authorities are unsustainable. The impugned orders are set aside, and the appeal is allowed. The Tribunal's decision underscores the importance of adhering to remand directions, maintaining consistency with show cause notices, and ensuring accurate classification based on the nature of the product in question. The judgment clarifies the distinct categorization of foam patti as waste, distinct from damaged or sub-standard fabrics, warranting a favorable ruling for the appellant.