Made-up textile classification for finished blankets prevailed over non-woven treatment, securing exemption eligibility.

Blankets produced in finished form and ready for use were treated as made-up textile articles under Heading 63.01, because Note 5(b) to Section XI specifically includes blankets and border stitching did not alter their character. Classification under Heading 56.03 as non-wovens was rejected in favour of the specific tariff entry for blankets. Once classified under Heading 63.01, the goods fell within the coverage of Notification No. 175/86-C.E., so the exemption could not be denied on the basis of the rejected classification. The revenue's classification was set aside and the assessee's exemption claim succeeded.

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Issues: (i) Whether the blankets manufactured by the assessee were classifiable under Heading 63.01 as made-up textile articles or under Heading 56.03 as non-wovens; (ii) Whether the assessee was entitled to the benefit of Notification No. 175/86-C.E. if the goods were classified under Heading 63.01.

Issue (i): Whether the blankets manufactured by the assessee were classifiable under Heading 63.01 as made-up textile articles or under Heading 56.03 as non-wovens.

Analysis: The blankets were produced in a finished state and were ready for use. Note 5(b) to Section XI of the Central Excise Tariff Act, 1985 treats blankets as an example of made-up textile articles. The fact that the blankets were cut to size and stitched on the borders did not take them out of the scope of made-ups, since the stitching was only on the borders and the goods themselves were not subjected to sewing or other working in a manner that altered their character. In view of the specific coverage of blankets under Heading 63.01, the classification adopted by the revenue under Heading 56.03 was not accepted.

Conclusion: The blankets were classifiable under Heading 63.01 and not under Heading 56.03.

Issue (ii): Whether the assessee was entitled to the benefit of Notification No. 175/86-C.E. if the goods were classified under Heading 63.01.

Analysis: The only basis for denying the exemption was the revenue's classification of the goods under Heading 56.03. Once the goods were held to fall under Heading 63.01, they became goods covered by the specified heading in the notification and the exclusion no longer applied.

Conclusion: The assessee was entitled to the benefit of Notification No. 175/86-C.E.

Final Conclusion: The classification adopted by the revenue was set aside, the assessee's classification was accepted, and the exemption claim followed as a consequence, resulting in relief to the assessee.

Ratio Decidendi: A textile article that is produced in finished form and ready for use remains a made-up notwithstanding border stitching, and must be classified according to the specific tariff entry covering that article rather than as a general non-woven product.

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