2001 (4) TMI 114 - AT - Central Excise

Tribunal Overturns Adjudication, Grants Relief to Manufacturers under Heading 52.07

The Tribunal set aside the adjudication orders, classifying the goods under Heading 52.07, relieving the manufacturers of all liabilities and penalties. ... Cotton fabric - Valuation (Central Excise) Issues Involved:1. Classification of the goods manufactured by the appellants.2. Applicability of Chapter Heading 59.09 or 59.11 versus Chapter 52 of the Central Excise Tariff Act.3. Correctness of the adjudicating authority's decision based on the subsequent use of the goods.4. Imposition of duty and penalties on the appellants.Summary:Issue 1: Classification of the GoodsThe appellants, engaged in the manufacture of cotton fabrics, cleared their goods without paying duty, believing they fell under Chapter 52 of the Central Excise Tariff Act. The Department contended that the goods should be classified under Heading 59.09 or 59.11, leading to the issuance of show cause notices demanding differential duty and penalties.Issue 2: Applicability of Chapter Heading 59.09 or 59.11 versus Chapter 52The adjudicating authority classified the goods under Heading 59.09, stating that fabrics used for technical purposes, irrespective of processing, should fall under this heading. However, the Tribunal examined Note 6(a) and 6(b) to Section XI and concluded that goods falling under Chapters 50 to 55 and 60 cannot be classified under Chapters 56 to 59 unless they are 'made up' as defined in Note 5. The Tribunal found that the cotton fabrics in question were not 'made up' and thus should fall under Chapter 52.Issue 3: Correctness of the Adjudicating Authority's Decision Based on Subsequent UseThe Tribunal noted that the goods were cleared as grey fabrics in running length without any processing. The subsequent use of the fabrics by dealers for making tarpaulin, tents, jeep covers, etc., was deemed irrelevant for classification purposes. The Tribunal emphasized that the nature of the goods at the time of removal from the factory is what matters for classification and valuation.Issue 4: Imposition of Duty and PenaltiesThe Tribunal criticized the adjudicating authority for directing the appellants to pay the entire duty and claim a rebate, especially when a significant portion of the goods was exported. This approach was termed oppressive and an attempt to cause undue hardship to the industry.Conclusion:The Tribunal set aside the adjudication orders, classifying the goods under Heading 52.07, which were not liable to any duty. The manufacturers were relieved of all liabilities and penalties, and any consequential reliefs due to the appellants were to be extended.