Textile fabric embedded in plastics falls outside Chapter 59, and extended limitation fails without proved suppression.

Cotton fabric dipped in phenol formaldehyde resin and dried was treated as completely embedded in plastics, bringing it within the Chapter 59 exclusion and classifiable under Chapter 39 instead of Tariff Heading 59.03. On limitation, the note states that extended time could not be invoked where the department already knew the manufacturing activity and product description, and the record did not establish wilful suppression, misstatement, or collusion. The demand was therefore described as time-barred, and the lower authority's classification and limitation approach were both rejected.

---

---

Issues: (i) whether cotton fabric dipped in phenol formaldehyde resin and dried thereafter was excluded from Chapter 59 and classifiable under Chapter 39 by virtue of Note 2(a)(3); (ii) whether the demand was barred by limitation in the absence of suppression or collusion.

Issue (i): whether cotton fabric dipped in phenol formaldehyde resin and dried thereafter was excluded from Chapter 59 and classifiable under Chapter 39 by virtue of Note 2(a)(3).

Analysis: Note 2(a)(3) of Chapter 59 covers textile fabric that is completely embedded in plastics or entirely coated or covered on both sides with plastics. The process of impregnation was treated as falling within the expression 'embedding'. Since the fabric was dipped in resin and the coating could be seen, the exclusion applied and classification under Chapter 59 was not available.

Conclusion: The goods were classifiable under Chapter 39 and not under Tariff Heading 59.03.

Issue (ii): whether the demand was barred by limitation in the absence of suppression or collusion.

Analysis: The Revenue was already aware of the manufacturing activity and the description of the product. The finding of collusion was unsupported by adequate evidence, the officers were not proceeded against, and the record did not establish wilful misstatement or suppression of facts. In these circumstances, the extended limitation could not be invoked.

Conclusion: The demand was time-barred.

Final Conclusion: The classification adopted by the lower authority and the demand raised on limitation were both rejected, and the appeal succeeded with consequential relief.

Ratio Decidendi: Where textile fabric is completely embedded in plastics by impregnation, it falls within the exclusion from Chapter 59 and is classifiable under Chapter 39, and where the department is aware of the material facts, extended limitation cannot be sustained absent wilful suppression.

---