1999 (10) TMI 61 - SC - Central Excise

Supreme Court clarifies classification of textile waste for excise duty, stresses factual assessment

The Supreme Court set aside the decision classifying waste side strips and scrap as damaged or sub-standard laminated textile fabrics for excise duty ... Whether the items in question could answer to the description of 'laminated textile fabrics'? Held that:- The application of the relevant notification and classification of the items under sub-heading 5903.19 or 5903.29 can arise only if the material was 'laminated textile fabric' and the same was found to be 'sub-standard or damaged'. A finding was, therefore, required to be arrived at, on the basis of the evidence/material placed before the authorities below, that the items in question answered to the description of 'laminated textile fabrics'. The question whether such fabrics were sub-standard or damaged could only be considered after it was found as a fact that the material was 'laminated textile fabric' and was being used in the manner observed by the appellate authority and CEGAT. In the absence of any such finding, the authorities below could not have proceeded further to determine proper classification. We refrain from addressing ourselves to find out the nature of the 'strips' or 'scraps' or 'foam patty' or their 'possible' use, as any expression of our opinion can prejudice the case of either party before the departmental authorities. Appeal allowed and set aside the impugned Order and remand that matter to the Assistant Collector for its fresh disposal in accordance with law and in particular to determine whether the items in question answer the description of 'laminated textile fabrics' and if so, the use to which the same were being actually put. Issues:Classification of waste side strips and scrap as excisable items under Central Excise tariff - Proper classification of products as laminated textile fabrics or damaged textile fabrics - Applicability of excise duty on the products.Analysis:1. The appellant filed for approval of 'waste side strips and scrap' as non-excisable items due to the absence of a specific entry in Chapter 59 of the tariff. The Assistant Collector initially classified the items as 'finished final laminated fabric' and later as 'damaged or sub-standard laminated fabric.' The matter escalated to higher authorities through appeals and remands.2. The Appellate Authority upheld the classification of the products as 'damaged or sub-standard textile fabrics laminated with plastic' under specific sub-headings, concurring with the Assistant Collector's decision.3. The challenge before the CEGAT involved the contention that the items were waste strips generated during manufacturing and not PVC laminated fabrics. However, the CEGAT disagreed, emphasizing that the items were indeed damaged and laminated fabrics, thus attracting excise duty. The Tribunal cited practical uses of the items and a test report supporting their classification.4. The Supreme Court analyzed the records and invoices but found no substantial evidence supporting the CEGAT's factual findings. It highlighted the necessity for a specific determination on whether the items qualified as 'laminated textile fabrics' before proceeding with classification based on damage or sub-standard status. The Court refrained from speculating on the nature or potential uses of the items to avoid prejudicing either party.5. Consequently, the Supreme Court set aside the impugned order, remanding the matter to the Assistant Collector for a fresh decision. The Court directed a thorough examination to ascertain if the items met the criteria of 'laminated textile fabrics' and their actual usage, emphasizing the importance of a factual foundation for classification in excise matters.6. The appeal was allowed without costs, emphasizing the need for a diligent assessment of the products' nature and classification under the Central Excise tariff to ensure proper application of excise duty laws.