1985 (12) TMI 63 - HC - Central Excise

Court directs reclassification of imported waste under residuary tariff item, orders refund of excess duty

RK. SYNTHETICS & FIBRES PVT. LTD. Versus UNION OF INDIA

RK. SYNTHETICS & FIBRES PVT. LTD. Versus UNION OF INDIA - 1990 (46) E.L.T. 214 (Bom.) Issues Involved:1. Classification of synthetic waste under the Central Excise Tariff.2. Levy of countervailing duty on imported synthetic waste.3. Refund of excess countervailing duty paid by the petitioners.Detailed Analysis:1. Classification of Synthetic Waste under Central Excise Tariff:The core issue in the writ petition under Article 226 of the Constitution of India is whether the synthetic waste imported by the petitioners falls under Item No. 18-I(i) of the Central Excise Tariff 1985-86 or under the residuary Item No. 68 for the purpose of levying countervailing duty under Section 3(1) of the Customs Tariff Act, 1975.The petitioners argued that the synthetic waste should be classified under the residuary Item No. 68, as there is no specific provision in the Central Excise Tariff 1985-86 that covers synthetic waste. The petitioners contended that the waste, being non-cellulosic, does not fall under Item No. 18-I(i), which pertains to man-made fibres, non-cellulosic. They emphasized that the synthetic waste comes into existence after the fibre stage and before the yarn stage, making it inapplicable to Item No. 18-I(i).Conversely, the respondents argued that the synthetic waste should be classified under Item No. 18-I(i), as it is a by-product created in the manufacture of fibres, yarns, and fabrics. They cited the definition of 'soft waste' from Fairchild's Dictionary of Textiles, which describes it as a by-product obtained preceding spinning.2. Levy of Countervailing Duty on Imported Synthetic Waste:The petitioners initially furnished a bank guarantee for the full duty on the value of the imported goods, assuming the classification under Item No. 18-IV. However, the Customs authorities rejected this classification, leading to the filing of the writ petition. The court modified the initial order, directing the petitioners to pay the countervailing duty in cash, which was later challenged.The petitioners relied on a judgment by the Customs, Excise, and Gold (Control) Appellate Tribunal, which held that non-cellulosic waste occurring after the fibre/yarn stage could not be classified under Item No. 18-IV and should fall under the residuary Item No. 68. The court found this reasoning persuasive and consistent with the interpretation of the tariff items.3. Refund of Excess Countervailing Duty Paid by the Petitioners:The court concluded that the synthetic waste imported by the petitioners does not fall under Item No. 18-I(i) or Item No. 18-IV but should be classified under the residuary Item No. 68. Consequently, the court directed the respondents to refund the excess countervailing duty amounting to Rs. 7,24,189.27, which was recovered under the incorrect classification.The court ordered the respondents to reclassify the imported synthetic waste under Item No. 68 of the Central Excise Tariff and levy the countervailing duty accordingly. The respondents were instructed to refund the excess amount to the petitioners by January 31, 1986, failing which they would be liable to pay interest at 12% per annum from the date of payment or deposit.Conclusion:The petition was successful, with the court directing the reclassification of the synthetic waste under Item No. 68 and ordering the refund of the excess countervailing duty paid by the petitioners. The court emphasized the importance of interpreting the tariff items based on their plain language and not through inferential inclusion from notifications. The judgment underscores the need for clear legislative provisions when classifying goods for duty purposes.