Knitted pile fabric classification turns on proof of post-manufacture finishing for tariff exemption

Knitted pile fabrics produced as knitted grey fabric, without proof of stentering or other post-manufacture finishing, remain classifiable under Heading 55.07 rather than Heading 55.08. The material on record, including the machine certificate and technical evidence, indicated that the alleged stentering was not established, and the processes of dyeing, coating, back coating, shearing and polishing were treated as part of manufacture of the knitted fabric itself. On that basis, the fabrics continued to correspond to woven grey fabrics under Heading 55.07 and stayed within the exemption granted by Notification No. 109/86-C.E. as amended.

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Issues: Whether the knitted pile fabrics manufactured by the assessee were classifiable under Heading 55.07 of the Central Excise Tariff Act, 1985 and entitled to the benefit of Notification No. 109/86-C.E. dated 27.02.1986 as amended, or whether they fell under Heading 55.08 and were excluded from exemption because of further processing.

Analysis: The essential question was whether the manufacturing activity stopped at the stage of a finished knitted fabric or whether post-manufacture processes such as tentering/stentering and other finishing operations were carried out. On the evidence, including the machine certificate and the technical material relied upon, the fabric was found to be produced as knitted grey fabric and the alleged stentering process was not established. The processes of dyeing, coating, back coating, shearing and polishing were treated as integral to the manufacture of the knitted fabric itself and not as separate post-manufacture finishing that would move the goods to Heading 55.08. The tariff scheme and the notification were read to mean that knitted fabrics corresponding to woven grey fabrics under Heading 55.07 remained eligible for exemption.

Conclusion: The goods were held classifiable under Heading 55.07 and eligible for the benefit of Notification No. 109/86-C.E. as amended; the Revenue's classification under Heading 55.08 was not accepted.

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