Tariff classification of waste from texturised yarn conversion excludes duty under the man-made fibre waste entry

Waste arising during conversion of duty-paid filament yarn into texturised yarn was held outside Tariff Item 18-IV because that entry covered only wastes arising in or in relation to the manufacture of man-made fibres and man-made filament yarns. Since the waste did not arise from those specified manufacturing processes, it could not be classified under that entry merely by reason of being waste. Classification determined the applicable rate of duty, so the higher duty of Rs. 9 per kg was not attracted. The assessee's position was upheld and the waste remained outside the impugned tariff entry.

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Issues: Whether non-cellulosic waste arising during the conversion of duty-paid filament yarn into texturised yarn is classifiable under Tariff Item 18-IV of the Central Excise Tariff and liable to duty at Rs. 9 per kg.

Analysis: Tariff Item 18-IV covered only wastes arising in or in relation to the manufacture of man-made fibres and man-made filament yarns. The waste in question did not arise in either of those processes, but in the process of converting duty-paid filament yarn into texturised yarn. Since classification is the foundation for the rate of duty, the goods could not be brought within Tariff Item 18-IV merely because they were waste. The rate structure also supported this view, as duty on texturised yarn manufactured from duty-paid base yarn was lower than the duty sought to be levied on the waste.

Conclusion: The waste was not classifiable under Tariff Item 18-IV and was not liable to duty at Rs. 9 per kg. The appeal failed and the order in favour of the assessee was upheld.

Ratio Decidendi: Waste arising in the course of converting duty-paid filament yarn into texturised yarn is not covered by a tariff entry limited to wastes arising in the manufacture of man-made fibres and man-made filament yarns, and cannot be assessed at the higher rate prescribed for that entry.

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