Embroidery thread exemption under Notification No. 35/95-CE upheld, with duty demand rejected once the product was classified within the exempted description.

Embroidery thread was treated as distinct from sewing thread and, on that basis, was considered to fall within the yarn description covered by Notification No. 35/95-CE, subject to the stated conditions. A departmental circular was also relied on as supporting application of the exemption to embroidery yarn used for embroidery fabrics. Because the product was found to be embroidery thread on testing, the demand based on denial of the exemption could not be sustained. The separate claim for SSI exemption was not examined further once the principal exemption was accepted.

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Issues: Whether embroidery thread was eligible for exemption under Notification No. 35/95-CE dated 16.03.1995, and whether the demand of duty could survive once the product was held to fall within the exempted description.

Analysis: The product was found on testing to be embroidery thread. The exemption notification covered yarn falling under the specified chapters, excluding sewing thread, subject to the stated conditions. Since embroidery thread was treated as distinct from sewing thread, it fell within the exempted category. The departmental circular also supported extension of the notification to embroidery yarn used for embroidery fabrics. On that basis, the demand based on denial of exemption could not be sustained. The claim relating to SSI exemption was not examined further once the principal exemption was accepted.

Conclusion: The exemption under Notification No. 35/95-CE dated 16.03.1995 was held applicable to the assessee, and the duty demand was set aside.

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