TaxTMI 
TaxTMI 
1998 (1) TMI 209
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....evice) at a different speed. Either it is single end or two ends together into one spindle assembly into magnetic spinner. The yarn is heated into heater before it is going to spinner. This spinner is rotating in between two rollers of spindle assembly. In the spinner yarn is CIMPED. This gives crimp or other special visual effects depending upon the speed of the spinner. This spinner can also develop fancy yarn like slub crimped yarn, when two ends at different speed is feeded in on spinner. This yarn then travels to another shaft which is rotating at constant speed. Then final produce is wound on the paper tube spool." 2. In June, 1987, the jurisdictional officers paid a visit to the appellants' unit. On examination of the process of manufacture, they formed the opinion that the yarn manufactured was classifiable under Heading 5606.00. A sample of the yarn was drawn. The Chemical Examiner, Central Excise, Baroda, under his office letter No. BD/54/Yarn/87-88, dated 19-10-1987 communicated the test result of the sample as under : "The sample is in the form of combination of two polyester filament yarns combined in such a way as to produce uniform slubs along its length by in....
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....ions. 5. Apart from the merits, ld. Advocate submitted that the demand was hit by limitation. He stated that the fact that they were manufacturing fancy yarn and also the process of manufacture had been communicated to the department from time to time. The invocation of Rule 9(2) for raising the demand was, therefore, misplaced. He stated that on the classification of Taspa yarn, the department, itself, was not clear. Whereas in the Board's instructions vide Circular No. 16/Spl. yarn/88 F. No. 56/3/87-CX-I, dated 26-4-1988, it was ruled that Taspa yarn would fall under 5606, in the cited circular of a later date, it was ruled that such yarn would merit classification as per constituent material. In such a situation, the department was wrong in holding the assessee to have the intention to evade revenue. He claimed that both on merits and on point of limitation, the demand is not sustainable. 6. Shri R.S. Sangia, ld. DR arguing for the department, claimed that the issue was fully covered by the judgment of the Tribunal in the case of Garden Silk Mills Ltd. reported in 1995 (78) E.L.T. 580. In this judgment, taspa yarn was held to be a special yarn classifiable under Head....
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.... (13) E.L.T. 1566 (S.C.) = 1976 (2) SCC 241, the Court observed that if an article was classifiable under a specific item, it would be against the very principle of classification to deny it the proper parentage and consign it to the residuary item. We find that the Collector has not discussed how the contested goods attracted the residuary classification. In his order, after discussing the merits of the alternative classifications, under the new Tariff, he has simply held that under the old tariff, these goods were classifiable under T.I. 68. 14. We have to hold that the yarn manufactured by the assessees in the present case prior to 1-3-1986, was classifiable under Item No. 18(ii) and the benefit of the Notification No. 178/83 was available to the goods. The portion of the demand for this period cannot sustain. 15. We now come to the dispute under the new tariff after 1-3-1986. The heading claimed by the appellants reads as under : "5403.00 synthetic filament yarn, including the, synthetic mono-filament of less than of 60 deniers, textured" The department's case is that the following entries attracted namely : "5606.00 - Other special yarn including gimped yarn and....
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....otes. 17. We had earlier referred to the opinion of the Chemical Examiner in his test report. The test report had certified the existence of slubs along the length of the yarn. This "distinction" is as per the description of textured yarn given in HSN. Reading the Chemical Examiner's opinion and the definition in the HSN, it becomes clear that the goods manufactured by the appellants were textured synthetic filament yarn of polyester. 18. Coming to the Chapter 56, we find that during the relevant period, the chapter heading in both the HSN and the CET are identical. The chapter notes are also exactly identical. The Headings 5601 to 5605 are identically worded in both the tariffs and so is the wording of 5607 identical. Heading 5609 in the HSN is identical to Heading 5608 of the CET and goods falling under Heading 5608 of the HSN are adjusted elsewhere. However, the wording of the Heading 5606 is slightly different. Whereas the HSN has limited the scope of the entry to three yarns, namely, gimped, chenille and loopwale, the CET entry has a wider ambit thereby covering under, this sub-heading "other special yarns" and then illustrating the types of special yarn as named i....
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....edia Britannica has described, the term `plastic' is a commercial classification. When this kind of a term in commercial use is used in an excise entry which deals with marketable commodities which are manufactured and which are subject to the levy of excise, we will have to examine that term in the light of how it is understood in the trade. If, however, strictly technical or scientific words are used, the approach for their interpretation may be different." 20. In the light of these guidelines, we would now seek to interpret the word "special yarn". The assessees have called this yarn as fancy yarn. Fancy yarn is also titled as Novelty yarn. A number of text books, refer to fancy yarn. In the book 'Man-Made Fibres' by R.W. Moncrieff some of the textured yarns are termed as fancy yarn. 21. Fairchild's Dictionary of Textiles equates the terms fancy yarn, effect yarn and novelty yarn. The effect yarn is defined thereunder as : "Effect Yarn - 1. A yarn introduced into a fabric to produce an effect or pattern. It may be a different color or a different fibre. 2. A single yarn in ply novelty yarn which produces the effect or pattern such as nots, loops, and numbs. Color, ....
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....the inclusive definition in the CET, the description of loopwale yarn as well as chenille yarn does not apply to the contested goods. This is obvious from the process of manufacture which is not contested. The 3rd variety, namely, gimped yarn, is described as yarn composed of a core around which other yarn is wound spirally. Thus, for a yarn to be classified as gimped yarn, the presence of core yarn is a must. The Chemical Examiner was specifically questioned before the Collector as to whether the sample of the contested goods was cored yarn or not. The entire proceeding is worth reproducing here : "Cross-examination of Shri A.J. Vidhwans, Chemical Examiner Gr-I, by the learned advocate of the Noticee firm. - Q. I say mere presence of slub or loop in the yarn does not make the product a special yarn, classifiable under 56.06. It is true? A. It is true provided the said yarn is not a core yarn. Q. What do you understand by core yarn? A. Core yarn is a combination of yarn where the cover yarn is wound spirally on a yarn which is a core yarn. Q. I take you to your report which was vide your letter No. BD/54/Yarn/87-88/1034, dated 19-10-1987. Whether you ....
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....the difference between the wording of the HSN and the wording in the CET prior to 1995 of Heading 5606. Paragraph 9 of the circular reads as under : "From this extract, it would appear that the Board themselves have accepted parity between two headings." In their conclusion, the Board had ruled that unless yarns satisfied the characteristics of named yarn in Heading 5606, they would continue to fall under the earlier headings. 31. The ld. Advocate relied upon a number of judgments where it was held that the departmental clarifications or instructions, "although not binding on the Tribunal or Courts, were directory in nature for departmental officers. In the judgment in the case of Kores (India) Ltd. reported in 1997 (89) E.L.T. 441, the Supreme Court held that the Revenue could not advance arguments contrary to the terms of the tariff advice or trade notice issued by the Board. This judgment is one of several such judgments. 32. It is, therefore, clear that as per the process of manufacture given in the proceedings and as verified by the Chemical Examiner, contested yarn did not have a core, that the yarn was admittedly not chenille yarn or loopwale yarn and in terms ....
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....he yarn may given an effect of being a special yarn which it would not be. The proceeding in the Garden Silk Mills case (supra) show that this advice was not cited before the Tribunal. If it had been, then, the conclusion may have been otherwise. As regards the submission by the department before the Tribunal, in the cited case, we find that in view of the categorical statement made by the Chemical Examiner as to the absence of core yarn, the finding of the Tribunal in the cited case, cannot apply to the case before us. 36. On the basis of the material available before us and our discussions above, we hold that the contested goods were correctly classifiable under Chapter 54 and not under Chapter 56. 37. We now come to the arguments as to the limitation. The assessees have placed reliance on declarations filed by them to rebut the charge of suppression made in the show cause notice. We have cited earlier the process of manufacture given by the assessees in their declarations for the years 1986, 1987 and 1988. It was claimed that the process would result in the production of fancy yarn. The classification claimed was either under Chapter 54 or 55. The benefit of the noti....
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....ssification lists or that the description given of these items in those lists was misleading. The duty of the assessee is to give full description of excisable goods so as to enable the excise authorities to determine the item number of the First Schedule to the Act under which such goods fall. If according to the petitioners, the goods in question were covered by Item No. 68, their interpretation of Item No. 67 or 68 of the First Schedule to the Act cannot be held to be so unjustified as to raise the inference of fraud or wilful misrepresentation. Item No. 67 refers only to graphite electrodes, all sorts, and it is not the case of the respondents that graphite dust, flakes, etc., the goods in question, were graphite electrodes. The case of the respondents is that Item No. 67 covers all graphite products which serve as conductors of electricity. Whether the interpretation of Item No. 67 by the petitioners or the interpretation of that item by the Excise authorities is correct, is not decisive for raising an inference of fraud or wilful misrepresentation on the part of the petitioners. The interpretation of Item No. 67 by the petitioners is a plausible interpretation. Moreover, thei....