Clarification clearance of yarn waste

[RAMESH ANANTHAKRISHNAN]

We are engaged in the manufacture of nylon monofilament yarn covers under chapter 54 (man made fibres). We produce various dia meters of yarn. Monofilament upto 1.00mm covers under chapter 54, Monofilament above 1.00mm covers under chapter 39. Our input is Nylon chips which also covers under chapter 39. As you know that any manufacturing there will be a waste generation. In our case the waste also in the monofilament yarn form. It is not possible for us to store the yarn waste as per the thickness of the yarn. Hence we are clearing the yarn waste on payment of appropriate duty under chapter 54 but department insists us to clear the yarn waste under chapter 39 as the rate of duty is more than in chapter 54. Kindly advise whether department view is right.

[Rama Krishana]

I do not agree with the view of the department. When two view are possible, classification is done according to the nature of goods which is more specific. Where two options are available the classification rules says that later is better. As I believe the nature of waste of nylon mono filament yarn would be as wastage of yarn itself. Therefore, if the wastage can not be segregated and separate records can not be kept, classification must be done according to the classification rules, i.e. interpretation rule to the central excise schedule. Moreover the rate of duty is same on or after 7-7-2009 (budget day) as 8% under both the headings.

[RAMESH ANANTHAKRISHNAN]

Thanks for your reply.

AI Summary

Product classification by nature allows yarn waste to be classified with yarn where segregation is impossible, keeping same duty rate. Classification of yarn waste should follow the nature of the goods and the applicable interpretation rule; if waste is in monofilament yarn form and cannot be segregated or separately recorded, it should be classified with the yarn rather than under the raw material heading, and the duty rate parity across the headings removes a revenue basis for reclassification.