2022 (2) TMI 854 - AT - Central Excise

Appeal allowed, impugned order set aside. Appellant entitled to consequential benefits. Expert reports crucial.

M/s. Modipon Ltd. Versus Commissioner of Customs, Central Excise & Service Tax, Ghaziabad, U.P.

The appeal was allowed, setting aside the impugned order. The appellant was entitled to consequential benefits, including the treatment of the deposited ... Classification of intermediate goods - Nylon/Polyester Filament Yarn, partially oriented yarn (POY)) and the final goods manufactured by the appellants - N/N. 178/83-CE dated 01.07.1983 - HELD THAT:- The findings in the impugned order, which are apparently based with reference to the earlier Circular No.YRN/2/80 dated 24.09.1980, which has been subsequently clarified by the aforementioned Circular dated 20.02.1990, clarifying that the partially POY/polyester yarn/nylon filament yarn, are dutiable at the appropriate rate of duty as per Notification No.49/83-CE dated 1.3.83 read with amending notification no.181/83-CE and 261/83-CE. Once the duty is held to be chargeable on the yarn as per classification list no.Yarn(intermediate product)/37/83-84, the duty on the final product viz. Polyester/Nylon textured yarn is nil as provided in notification no.178/83-CE dated 1.7.1983. Further, as per test report with regard to the samples of classification list no.Yarn/37/83-84, it has been reported that the samples are not fully drawn and can be further drawn or stretched. Thus, such yarn has characteristics of POY and accordingly, we find that the findings of the court below is vitiated as they have ignored the test report and have used their personal knowledge, without any cogent materials on record. The amount of ₹ 1.25 Crores, deposited vide challan No.148/1 dated 6.10.1986, pending finalisation of the classification list, shall be treated as duty paid and the appellant shall be entitled to Refund or Credit of the same, as per law - Appeal allowed - decided in favor of appellant. Issues involved:1. Classification of intermediate goods (Nylon/Polyester Filament Yarn, partially oriented yarn (POY)) and the final goods (Textured Nylon/Polyester filament Yarn).2. Provisional approval and subsequent rejection of the appellant's classification list.3. Validity of the test reports and their interpretation by the Adjudicating Authority.4. Compliance with procedural directions given by the Hon’ble Delhi High Court.5. Applicability of the Circulars issued by the Board regarding POY classification.6. Treatment of the amount deposited by the appellant as duty paid.Detailed Analysis:1. Classification of Intermediate Goods and Final Goods:- The appellant was engaged in manufacturing Nylon/Polyester Filament Yarn, POY, and Textured Nylon/Polyester Yarn.- The classification list No.Yarn/37/83-84 dated 22.03.84 was filed for approval of duty rates based on the denierage of the yarn.- The appellant sought approval for different denierages of polyester and nylon filament yarns, which were provisionally approved and tested.- The test reports indicated that the samples were partially oriented yarns (POY), not fully drawn, and not suitable for knitting, weaving, and rope making, similar to POY.2. Provisional Approval and Subsequent Rejection of Classification List:- The classification list No.Yarn/37/83-84 was provisionally approved, and samples were sent for testing.- Based on the test reports, a show cause notice was issued alleging misclassification, leading to the rejection of the classification list and denial of benefits under Notification No.178/83-CE.- The Assistant Collector's order rejecting the appellant's claim was quashed by the Hon’ble Delhi High Court, directing fresh adjudication.3. Validity of Test Reports and Interpretation by Adjudicating Authority:- The Adjudicating Authority, in re-adjudication, confirmed that the products were neither classifiable as Polyester/Nylon Filament Yarn nor POY.- The appellant argued that the test reports clearly indicated the samples were POY, and the Adjudicating Authority erred in technical findings without being an expert.- The appellant relied on the Apex Court ruling in Hindustan Ferodo Ltd. and the Tribunal's ruling in Auto Tools International, emphasizing that the Adjudicating Authority should rely on expert reports.4. Compliance with Procedural Directions by Hon’ble Delhi High Court:- The Hon’ble Delhi High Court had directed fresh adjudication with the opportunity for cross-examination of the Chemical Examiner.- The subsequent orders and appeals indicated procedural compliance, but the appellant contested the technical findings and the interpretation of test reports.5. Applicability of Circulars Issued by the Board:- The Board's Circular dated 20.02.1990 clarified that POY is a fully finished excisable product and duty should be charged based on its denierage at the take-up stage.- The Tribunal found that the impugned order was based on an earlier circular, which was subsequently clarified by the 1990 circular.- The Tribunal concluded that the yarns in question had characteristics of POY and were dutiable as per the classification list No.Yarn/37/83-84.6. Treatment of Amount Deposited by Appellant as Duty Paid:- The Tribunal held that the amount of Rs. 1.25 Crores deposited by the appellant on 06.10.1986 should be treated as duty paid.- The appellant was entitled to a refund or credit of the deposited amount as per law.Conclusion:- The appeal was allowed, setting aside the impugned order.- The appellant was entitled to consequential benefits, including the treatment of the deposited amount as duty paid.- The Tribunal emphasized the importance of relying on expert test reports and adhering to procedural directions and clarifications provided by authoritative circulars.