1984 (7) TMI 77 - HC - Central Excise

Court reclassifies nylon fishnets as fabrics exempt from excise duty, grants relief to petitioners

SAINET PRIVATE LTD. AND ANOTHER Versus UNION OF INDIA AND ANOTHER

The High Court allowed the petition, setting aside the Assistant Collector's classification of nylon fishnets under Tariff Item No. 68. The Court held ... Fishing nets - Fabrics - 'Man-made fibber or yarn' - Interpretation of - Words and Phrases - Classification of goods - Writ jurisdiction Issues Involved:1. Classification of nylon fishnets under Central Excise Tariff.2. Jurisdiction of the High Court under Article 226 despite available statutory remedies.3. Interpretation of the term 'fabric' within Tariff Item No. 22.4. Validity of the Assistant Collector's classification under Tariff Item No. 68.Issue-wise Detailed Analysis:1. Classification of Nylon Fishnets under Central Excise Tariff:The petitioners, a factory manufacturing nylon fishnets, sought classification of their product under Tariff Item No. 22 of the First Schedule of the Central Excises and Salt Act, 1944, which pertains to 'Man-made Fabrics.' They argued that their fishnets, made from nylon yarn, should be classified as knitted fabrics and thus exempt from excise duty under Notification No. 80/69. The Assistant Collector of Central Excise, Goa, however, classified the fishnets under Tariff Item No. 68 (residuary entry) on the grounds that the product was not finished by the knotting process, was not known as a 'fabric' in common trade parlance, and did not involve knitting or weaving processes.2. Jurisdiction of the High Court under Article 226 Despite Available Statutory Remedies:The petitioners bypassed available statutory remedies and directly invoked the extraordinary jurisdiction of the High Court under Article 226. The respondents argued that the petitioners should have followed the remedies available under the Act. However, the Court held that the grounds given by the petitioners in paras 19 and 20 of their petition were sufficient to grant them relief. The Court emphasized that in matters involving fiscal statutes and taxing liabilities, it would not deny relief on technical grounds if the grounds for not adopting statutory remedies were satisfactory.3. Interpretation of the Term 'Fabric' within Tariff Item No. 22:The core issue was whether the term 'fabric' as used in Tariff Item No. 22 included nylon fishnets. The Court examined various definitions and standard nomenclatures, including the Brussels Trade Nomenclature, which classified fishing nets under textile articles. The Court noted that the term 'fabric' generally includes materials made by weaving, knitting, or knotting. The Court referred to the Supreme Court judgment in Porritts and Spencer (Asia) Ltd. v. State of Haryana, which held that the method of weaving or the use of the product was immaterial in determining its classification as a textile. The Court concluded that nylon fishnets, being made from man-made fibers or yarn, fall within the definition of 'fabric' under Tariff Item No. 22.4. Validity of the Assistant Collector's Classification under Tariff Item No. 68:The Court found several infirmities in the Assistant Collector's reasoning. The Assistant Collector erroneously concluded that fishnets were not fabrics based on their manufacturing process and trade parlance. The Court held that the method of production (knotting) and the end-use of the product were irrelevant to its classification as a fabric. The Court emphasized that the term 'fabric' inherently involves a material put together by weaving, knitting, or knotting. Consequently, the Court set aside the Assistant Collector's classification under Tariff Item No. 68 and declared that the fishnets produced by the petitioners are fabrics within the meaning of Tariff Item No. 22.Conclusion:The High Court allowed the petition, set aside the Assistant Collector's order dated June 21, 1982, and held that the fishnets produced by the petitioners are fabrics within the meaning of Tariff Item No. 22 of the Central Excises and Salt Act, 1944. The petitioners were granted relief, and the rule was made absolute with no order as to costs. The Court refused the respondents' request for leave to appeal to the Supreme Court, citing adherence to the Supreme Court's judgment.