2005 (4) TMI 185 - AT - Central Excise

Tribunal overturns decision on yarn classification under Customs Act, directs re-adjudication

The Tribunal set aside the lower authorities' decisions in the case regarding the classification of 'cotton lycra core spun yarn' or 'covered spandex ... Cotton yarn - Penalty - Classification dispute Issues:Classification of 'cotton lycra core spun yarn' or 'covered spandex yarn' under Customs and Excise Tariff Act, 1975.Analysis:1. The appellant classified the product under SH 5205.11 and SH 5205.19 for a certain period, paying duty. For a subsequent period, they classified it under SH 5205.90, attracting NIL duty. The department disagreed, issuing show cause notices for duty demand and penalty. The original authority classified the product under SH 5205.11, confirming the duty demand. The first appellate authority upheld this decision. Appeal No. E/495/2002 challenged this decision.2. Despite the previous decision, the appellant continued to clear the yarn without duty payment, leading to another show cause notice for duty demand and penalty. The adjudicating authority classified the yarn under SH 5205.11, confirming the duty demand and imposing a penalty. The Commissioner (Appeals) upheld this decision in a separate order, challenged in Appeal No. E/l 063/2004.3. The dispute centered on the classification of 'covered spandex yarn' or 'lycra core spun yarn' under SH 5205.90 or SH 5205.11. The appellant argued for SH 5205.90, while the Revenue insisted on SH 5205.11. Expert opinions from SITRA, Textile Consultant, and Anna University were presented. The appellant's contention was that the product did not fit under SH 5205.11 or SH 5205.19, supported by expert opinions. The Revenue argued that SH 5205.90, covering yarns made without power, was not applicable as the product was manufactured with power.4. The Tribunal found discrepancies in how the original authority relied on test results from other manufacturers. While rejecting some expert opinions, they emphasized the importance of SITRA's certificate, which stated the yarn was of core spun category. The Tribunal directed the original authority to re-adjudicate considering SITRA's certificate and any other relevant expert opinions. No penalty was imposed due to interpretative nature of the case. The orders of lower authorities were set aside, and the appeals were allowed for remand, ensuring fresh adjudication in line with the law and principles of natural justice.