Classification of mill neps and yarn containing mill neps upheld under sub-heading 5506.21; contrary excise demand rejected.

Mill neps were treated as artificial staple fibre for classification purposes and were not excluded as textile material under sub-heading 5506.21 of the Central Excise Tariff Act, 1985. The same classification applied to yarn containing mill neps, because the Tribunal followed its earlier decisions on the character of mill neps and rejected the contrary view adopted in the impugned orders. The classification proposed by the department was therefore not sustained, and the disputed product was held classifiable under sub-heading 5506.21, with the orders set aside in favour of the assessee.

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Issues: Whether mill neps and yarn containing mill neps were classifiable under sub-heading 5506.21 of the Central Excise Tariff Act, 1985, and whether the demand confirming a different classification could be sustained.

Analysis: The classification dispute was found to be covered by the Tribunal's earlier decisions holding that mill neps are not to be excluded as textile material for the purpose of sub-heading 5506.21 and continue to remain artificial staple fibre falling under that heading. The same reasoning was applied to the yarn containing mill neps, and the contrary view taken in the impugned orders was not accepted.

Conclusion: The product in dispute was held classifiable under sub-heading 5506.21, and the impugned orders were set aside in favour of the assessee.

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