Settled tariff classification of tyre cord fabrics under Heading 59.05 prevails, with penalty set aside and duty redetermined.

Rubberised/calendered dipped tyre cord fabrics captively consumed in tyre manufacture were treated as classifiable under Heading 59.05 rather than Heading 59.02, because earlier Tribunal rulings and a consistent Board clarification had already settled that classification. The departmental authorities could not depart from that settled position merely because the assessee had filed earlier classification lists. On that basis, the contrary duty demand could not stand in its existing form, and the penalty was set aside. Only redetermination of duty according to the correct classification was left open in accordance with law.

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Issues: (i) Whether rubberised/calendered dipped tyre cord fabrics captively consumed in the manufacture of tyres were classifiable under Heading 59.05 or Heading 59.02 of the Central Excise Tariff Act, 1985; (ii) whether the consequent duty demand and penalty could be sustained.

Issue (i): Whether rubberised/calendered dipped tyre cord fabrics captively consumed in the manufacture of tyres were classifiable under Heading 59.05 or Heading 59.02 of the Central Excise Tariff Act, 1985.

Analysis: The classification issue had already been settled by earlier Tribunal decisions holding similar calendered or rubberised tyre cord fabrics to fall under Heading 59.05, and the Board had also issued a clarification consistent with that view. The departmental authorities were bound to follow the settled classification position and could not rely merely on the assessee's earlier classification lists to adopt a contrary view. The proper classification of the product, therefore, remained under Heading 59.05.

Conclusion: The product was correctly classifiable under Heading 59.05 of the Central Excise Tariff Act, 1985, and not under Heading 59.02.

Issue (ii): Whether the consequent duty demand and penalty could be sustained.

Analysis: Since the classification adopted by the department was not sustainable, the duty liability had to be reconsidered on the basis of the correct heading. The order imposing penalty also could not survive once the classification foundation of the demand was rejected.

Conclusion: The duty demand was directed to be redetermined according to law on the correct classification, and the penalty was set aside.

Final Conclusion: The appeals succeeded on the classification issue, resulting in relief to the assessee and removal of the penalty, with only consequential redetermination of duty left to be undertaken in accordance with law.

Ratio Decidendi: Where the classification of goods has been settled by binding precedent and departmental clarification, the revenue authorities must follow that settled position and cannot sustain a contrary classification merely on the basis of the assessee's earlier declarations.

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