Chapter 63 classification for terry towels with minor finishing work supports exemption under Central Excise notifications.

Terry towels cut to size with dividing threads and hem stitching remained classifiable as made-up articles under Chapter 63 because the processing did not change their essential character as ready-for-use towels. The Tribunal applied the earlier classification principle that separation by dividing threads and minor finishing work do not take such goods outside Chapter 63, and treated the prior decision as directly applicable to the facts. On that basis, the assessee's claim to exemption under the relevant Central Excise notifications was accepted.

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Issues: Whether terry towels cut to size and finished with dividing threads and hem stitching were classifiable as made-up articles under Chapter 63 and eligible for exemption under the relevant Central Excise notifications.

Analysis: The Tribunal applied the earlier classification principle that goods separated by dividing threads and intended for use as towels remain within the ambit of made-up articles under Chapter 63. It held that the presence of a cross-border, cutting by dividing threads, and stitching on the hems did not take the product out of Chapter 63, because the towels were ready for use as towels even without such sewing. On that basis, the ratio of the earlier decision was held applicable to the present facts, and no infirmity was found in the assessee's claim to exemption for terry towels.

Conclusion: The terry towels were held to be classifiable as made-up articles under Chapter 63 and eligible for the exemption claimed, in favour of the assessee.

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