Functional classification of imported filter cloth as machinery component defeats countervailing duty liability.

Polypropylene multifilament filter cloth imported in cut-to-shape form for a rotary drum filter was treated as a machinery component, not as man-made fabric. Its commercial and functional identity, rather than its textile character in the abstract, determined classification. Because component parts of machinery were exempt from central excise duty at the relevant time, the goods could not be subjected to countervailing duty on the basis of a contrary fabric classification. The result was that the assessee's classification as a machinery part was accepted and countervailing duty was held not leviable.

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Issues: Whether polypropylene multifilament filter cloth imported as a spare part for a rotary drum filter was correctly classifiable as man-made fabric under Tariff Item 22 of the Central Excise Tariff, or as a component part of machinery so as to be exempt from countervailing duty.

Analysis: The goods were imported cut to specific shape and size for use in the filter machinery and were not shown to be intended for ordinary textile use. The nature of the article and its functional use supported classification as a machinery component. Once so classified, and where component parts of machinery were exempt from central excise duty at the material time, the goods could not attract countervailing duty on the basis adopted by the lower authorities.

Conclusion: The goods were classifiable as component parts of machinery and not as man-made fabrics, and they were not liable to countervailing duty. The decision is in favour of the assessee.

Ratio Decidendi: For countervailing duty purposes, an imported article must be classified according to its true commercial and functional identity; where the article is a machinery component and such components are exempt from excise duty, countervailing duty cannot be levied on a contrary fabric classification.

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