TaxTMI 
TaxTMI 
1992 (2) TMI 319
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.... the ground that the product manufactured and cleared by them is not Industrial Fabrics as alleged by the Department but they are : (i) Cotton Fabrics not subjected to any process; and (ii) Fabrics of Man-Made Filament Yarn, not subjected to any process; The assessee had filed various classification lists and had got approved during the period from 28-2-86 to 6-5-87, in which they had cleared - "Cotton Fabrics not subjected to any process classifiable under Chapter sub-heading 5205.00 chargeable to Nil rate of duty and Fabrics of Man-Made Filament Yarn not subjected to any process classifiable under Chapter sub-heading 5408.00 chargeable to nil rate of duty. These classification list were got a approved from time to time and clearances were made without payment of duty." 2. The Department got information and based on the said information received by them that the products are Industrial Fabrics and classifiable under Chapter sub-heading 5909.00 only. The scrutiny and verification of their products were conducted. The scrutiny and examination of their records and the products manufactured revealed that the ite....
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....e found to be infructuous and therefore, they are rejected, by taking on record only E/753/91 for our consideration against the impugned order passed by the Collector of Central Excise, Nagpur. The assessee in their letter dated 7-6-89 raised several contentions which has been summarised by the learned Collector in the impugned order which are stated below : (i) Show cause notice has been issued illegally and without jurisdiction, a view of the Collector (Appeals) decision of 23-3-89 holding that the goods manufactured by them are plain, ordinary, Cotton Fabrics classifiable under sub-heading 5205.00; (ii) The charges of mis-declaration and suppression of facts are not substantiated with any proof or evidence or material facts and therefore, the demands raised are barred by time and the proviso to Section 11A of the Act cannot be invoked; (iii) The matter is sub-judiced in the High Court and also as the department had filed an appeal against the classification list approved by the Asstt. Collector and the show cause notice suffers from legal bias and therefore, the Collector had no jurisdiction t....
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.... fabrics and these are suitable for Industrial use and hence they are not classifiable under Heading 5909 and that the product did not have any Industrial use also. 4. The learned Collector after considering their submissions as held that the charge of the Department is that Cotton Fabrics and Man-made fabrics in question manufactured and cleared by them are Industrial Fabrics and therefore, rightly classifiable under Chapter Heading 5909 and not under 5205 or 5408. Therefore, the learned Collector has held that the first argument of the assessee that their fabrics manufactured and cleared or plain Grey Fabrics and not processes is neither relevant in the context of the charges made in the Show Cause notice nor correct. He has further pointed out that even if the fabrics manufactured by them or processed, these would have been classified under respective heading of Chapter 52 or 54, if they are for industrial use. The learned Collector has held that section note 6 of Section XI clearly states along with other things that Chapters 52 to 55 do not apply to goods of Chapter 56 to 59. Therefore, he has held that once the goods are of Chapter 55 to 59, Chapter 52 to 55 will not ....
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....he Asstt. Collector to consider the matter de novo. The assessee had also filed appeal before the Collector (Appeals) Bombay in respect of classification lists No. 4/87-88, 14/87-88, 17/87-88, 20/87-88, 21/87-88 and 25/87-88. The Collector (Appeals) also remanded the matter to the Asstt. Collector for de novo consideration. The assessee had moved against the said order before the Bombay High Court, Nagpur Bench in Writ Petition No. 1896/89 and the Hon'ble Bombay High Court by its order dated 28-7-89 allowed the Writ Petition with the direction to the Asstt. Collector to decide the matter afresh. As a result the Asstt. Collector took up all the classification lists in question and passed the impugned order-in-original dated 2-5-1989 rejecting the assessee's claim for classification under sub-heading 5205.00 and held that the products were classifiable under heading 5909. The Asstt. Collector relied on the test report of the Chemical Examiner, who had indicated in test memo dated 23-5-89 as "Textile Fabric for Industrial use". He has held that the assessee had not challenged the test report and therefore, the test report had become final. The learned Asstt. Collector had also noted t....
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....f CET 1985. He contended that the Belting Cloth is used for screen-printing. However, the cloth manufactured in running length of 300 Mts and is made of 100% Cotton and it is not sold by cutting to size. Therefore, the product in question in the first instance falls under Chapter Heading 52 and only those articles which specifies would be classified under Chapter 59. He contended that the product in question is not used for purposes of filtration of oil and the stamping of the product with words "Industrial use" is not communicative of "Industrial use" of the product. He further contended that the effect of sale for Industrial use is not relevant for the purpose of classification as the product has to be classified on the basis of Chapter notes Section notes and Chapter Heading. He contended that if the assessee had carried on industrial processes on the fabric then they would be classified under Heading 5909. He contended that the product is not a textile product and neither it is an article of a kind suitable for industrial use as a textile fabric. The product is a cotton fabric woven and not subjected to any process and hence it is rightly classifiable under heading 5205. He con....
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....view proceedings had been filed by a competent authority under Section 35E of the Act and hence there is no jurisdiction to recover duty under Section 11A of the Act. He also pointed out that similar products manufactured by Gokal Mills were also being classified under T.I. 52 in 5205 of the CET. He submitted that Chemical Examiner in his report had referred to only to the use of the product which is not negatived of classification and therefore the Test Report was not significant for the purpose of classification the goods in question. He also relied on the following rulings to support his arguments. (i) Randip Shipping & Transport Co. Pvt. Ltd v. Collector of Customs reported in 1989 (41) E.L.T. 392. (ii) Brakes, India - 1987 (31) E.L.T. 1030 On the question of limitation, he has relied on the following rulings. (i) CCE v. Chemphar Drugs & Liniments reported in 1989 (40) E.L.T. 276 (S.C.) (ii) Padmini Products v. CCE reported in 1989 (43) E.L.T. 195. 5.3 On the question of Collector not having jurisdiction to issue show cause notice, he has relied on ....
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....v. CCE reported in 1989 (40) E.L.T. 214 (S.C.). 7. The learned counsel countering the arguments of the learned JDR submitted that the rules of interpretation in the present case cannot apply. He contended that Chapter Heading 59 would apply only if the product did not fall under other Heading. He contended that Chapter heading referred to article of products and Chapter Heading 52 referred to fabrics and the product being a Cotton fabric, the specific Heading Chapter 52 would be attracted in the present case. He contended that the assessee had not admitted at any stage of the product being readily usable for industrial purposes. 8. We have carefully considered the submissions made by both the sides and perused the records. The question that arises for consideration and our reasoning are noted below. 9. Does the product in question declared in classification list as "Grey Unprocessed Loom State Cotton fabrics and fabrics of man-made filament" fall under Tariff Item 52.05 and Tariff Item 54.08 of CET 1985 as claimed by the assessee? 10. The findings given by the Collector in impugned Order-in-Original No. 15/89, dated 18-10-89 in Appeal No. E 753....
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.... or ordinary man-made fabrics manufactured and cleared by them. The samples has been physically verified by me. The verification revealed that the fabrics clearly bears stamp "For Industrial use only and not for local sale." That is why it is very clear that the fabrics in question are being marketed, known and understood in the market as fabrics for industrial use. Therefore, the party's contention that they are not industrial fabrics or not marketed as Industrial fabrics and not known and understood in the market as industrial fabrics and not bought and sold as industrial fabrics is neither correct nor acceptable which is evident from the physically marking of the goods by the party themselves. Further these cotton fabrics and man-made fabrics manufactured by the party are also sold to industrial users engaged in the oil processing or similar filtering processes. The verification done with the Collector, Central Excise, Calcutta-II and Collector, Central Excise, Ahmedabad, reveals that their fabrics in question are used as industrial fabrics for filtration of similar processes. Therefore, all the conditions are fulfilled in the case of their goods in question for classifying unde....
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....specifically covers their product. 11. Their argument that their product was classified under Tariff Item 19(1)(a) in the erstwhile tariff is not at all relevant for classification under Central Excise Tariff Act, 1985 the items manufactured and cleared by them in question has been specifically described in Chapter 59 and these have also been specifically excluded from Chapters 52 and 54. Therefore, their contention in this regard is neither valid nor acceptable. Therefore, it is clear that on their own admission and from the fact that they market the goods by marking them as industrial fabrics and that they are being used as industrial fabrics for filtering or similar other processes, their goods are rightly classifiable under Chapter 59.09 as charged in the show cause notice. It may be further stated that entry under Chapter Heading 59.09 reeds as under : "All other textile products and articles of a kind suitable for industrial use (for example, textile fabrics, contained with one or more layers of rubber, leather or other material, bolting cloth, endless felts of textile fabrics, straining cloth)". From the reading of the above entry, it clearly reveals that all s....
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....e Commissioner under Textile (Control) Order 1986. The product is described in the GP1 as "Canvas, Belting Duck, Filter cloth, Industrial Fabrics and CTC Fabrics Grey processed". Therefore, the classification of the products have to be considered from the context of these submissions. 12. The corresponding Heading in the HSN explanatory note is 52.08 and the Heading reads as "Woven fabrics of cotton containing 85% or more by weight of cotton, weighing not more than 200 g/m2. The note under this Heading at page 735 states that "This heading covers woven fabrics (as defined in Part I(c) of the General Explanatory note of Section XI) weighing not more than 200 g/m2, containing 8596 or more by weight of cotton. Cotton fabrics are produced in great variety and are used, according to their characteristics for making clothing, household linen, bed spreads, curtains, other furnishing articles etc. The heading does not include (a) Bandages medicated or put up for retail sale (Heading 30.05) (b) Fabrics of Heading 58.01 (c) Terry toweling and similar fabrics (Heading 58.02) (d) &nb....
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....on HSN explanatory notes and Textile (Consumer Protection) Regulations, 1988 is helpful. We have already noted the HSN explanatory notes under woven fabrics of cotton under heading 52.05 and it states that "cotton fabrics are produced in great variety and are used, according to their characteristics, for making clothing, household linen, bed spreads, curtains other furnishing articles etc". The heading does not include (e) woven fabrics for technical uses, of heading 59.11. The definition of "piece of cloth" in the said Regulation is given as follows :- "6(i) "piece all cloth's excludes chindies, rags and fent and includes :- (a) Cloth in any running length, exceeding 90 cm where the width of the fabric is one metre or more, or exceeding 135 centimeters where the width of the fabric is less thon one metre, (b) Dhoties and Sarees, ordinarily sold by pair or piece, the total length of such uncut cloth and (c) Hand-kerchiefs, pillow cases, towels chhaddars, blankets, bedsheets and bed covers. (ii) "Fent" means :- Cut piece of cloth of length 45 centimeters or more but not exc....
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....other furnishing articles generally "woven fabrics" meaning thereby that fabric is more flexible, worn, warfed around and of common daily use as clothing, furnishing bed spreads, for towels, table cloth curtains. Therefore, these goods of 'industrial use' and having special meaning technically as would be noted herein below, do not strictly comes under "cotton fabrics" of Chapter 52.05 of CET, 1985 "woven fabrics of Industrial use" has been shown under Heading 59.11 of HSN explanatory note and not under "cotton fabric" under Chapter 52. The goods described in classification list as "Fabric of man-made filament" by same logic does not fall under Chapter 54.08 of CET, 1985 as it is differently worded in GP 1 and invoices and it being of industrial use as 'Industrial Fabric' is excluded from Chapter 54. 19. The Chapter on 'Industrial fabrics' appear on page 495 of the Encyclopedia of Textiles third edition published by the Editors of American Fabrics and Fashion Magazine 1980 Edition. This encyclopedia has been referred by this Bench in the case of Multiple Fabrics Co. (P) Ltd., Calcutta v. Collector of Central Excise, Calcutta as reported in 1984 (16) E.L.T. 301 (confirmed by....
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....and that the language was wide enough to include the rayon tyre cord fabric manufactured by the appellants in that case. These observations cannot however be stretched to mean that an article which could not be termed as "fabric" as ordinarily understand could be brought within the scope of that item." The above observation should meet the contention of appellants regarding the earlier clearances under T.I. 22 of erstwhile Tariff. Now that the tariff has undergone sea change, it has to be further seen that as to whether the goods still could be considered as "cotton fabric " despite it being "Industrial fabrics". The observations of the bench in terms of the common understanding of fabric is very pertinent to decide this case. 20. The further observations of the bench made in Paras 21 and 22 of the report are reproduced herein below : "21. We now come to the authorities cited by Shri Tayal. It is correct that in "The New Encyclopaedia of Textiles" there is an item "belting" which comes within the Chapter on "Industrial Fabrics". The same publication contains a "Dictionary of Textile terms". The dictionary does not contain any definition of the term "fabrics". It ....
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....nition of impregnated fabrics mentions fabrics whose interstices in the yarn have been filled with chemical compound so as to cover the entire surface. It is also stated that these are commonly used for leather begs, garments, insulation tapes etc. The examples given are all of uses where the fabric retain the characteristics of cloth, namely of being flexible and relatively thin (emphasis supplied by us). Conveyor belting obviously cannot be considered as similar to the examples given and cannot therefore be included by analogy." 21. Let us look into the Chapter "Industrial fabrics" appearing at page 495 of the said Encyclopaedia "Industrial Fabrics". A large and important groups of textiles which includes woven and non woven clothes vital to many industries, ranging from primitive agriculture to get transportation. Industrial fabrics are largely Specification fabrics (underlined by us) since they are produced by specifications set by the large corporations, institutions, or Government agencies which buy them. Such fabrics may be roughly divided into four categories : DIRECT USE : This group includes specification clothes which are used directly for end products, ....
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....meled fabrics for automobile tops, book bindings, fabrics impregnated with adhesive and dielectric compounds for applications in the electrical industry. (3) fabrics incorporated directly in a finished product. The last group includes sails, tarpaulins, tents, awnings, specialty belts for agricultural machinery, airplanes, conveyors. The term mechanical fabrics sometimes has been applied to certain industrial fabrics." 22. The hand book on Glossary of Textile terms issued by Bureau of Indian Standards New Delhi defines the term "Industrial Fabric" at page 134 as follows : "Industrial fabrics : A variety of fabrics used for non-apparel purposes in industry." The definition of this term as appearing in the Modern Textile and apparel Dictionary Fourth Revised Enlarged Edition by George Elinton Ph. D. TexScD published by Textile Book Service, at page 297 is as follows :- "INDUSTRIAL FABRICS. A wide variety of fabrics, chiefly cotton, used in various mechanical processes or which, in turn, are processed or treated in order to become part of another product. Some fabrics of this type include print cloth, cheese cloth, tobacco cloth, duck ....
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....n some industrial uses, milden and rot resistance are vital in hot and humid conditions, especially where belting stands idle for long intervals. Polyester is the most important man-made fibre in this area, with some nylon being used and a considerable amount of Nomex, wherever heat-resistance is imperative. In the manufacture of paper and corrugated board, special belting fabrics are used which serve to carry the paper or board over heat and which must be porous enough to permit the ready escape of moisture during drying. In extreme explications belting may be faced with asbestos to protect the fibres of the belting." 23. At pages 504-505 appears 'Filter media' which states as follows : "Industrial filtration of gases and liquids is an important application of textile fibres and fabrics. It is particularly important where strength and non corrosibility are required. In this area, acrylic, nylon and polyester are the important man-made fibres Acetate tow is major man-made fibre used to make cigarette filters. Woven fabrics, non-woven fabrics and random fibres are all used in filtering. Practically every industry employs filtration in some form, either to cleanse li....
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....c, white jute and jute-cotton union canvas are of double warp structure - Ind Part II, P29, 1951. Canvases find use in making water proofed tarpaulins. Tarpaulin is water-proofed cloth, esp of tarred canvas. Duck has many similar uses as canvas, e.g. for kit bags, light water proof covers, tent components. Duck, according to COD, is 'Strong untwilled cotton or linen (flax) fabric for small sails and outer clothing." Canvas : "The (cotton) fabrics must have at least two folds (ply) yarn within the warp as also in the weft with plain or double and plain weave and weighing not less than 6 ounces per-sq-yard. (The weight is of the fabric at the loom stage i.e. without sizing) CBEC circular dated 6-6-1969 [Computer Textiles Ltd. v. U.O.I.- 1978 (2) E.L.T. (J484) (All.)]" The term 'canvas' and 'canvas cloth' as appearing in the Fair Child's Dictionary of Textiles' at page 101 is - "Canvas : A general classification of strong, firm, closely woven fabrics usually made with cotton, originally made of hemp or unbleached flax. It is produced in many grades and qualities and may be softly finished or highly sized. The term canvas and duck are usually interchangeably, but "canvas" g....
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....ugh more recent types employ high tenacity rayon cords. Belting ducks are made in a wide range of constructions and widths, to the specifications of the belt manufacturer. They are woven with the strength predominantly in the direction of the warp." The term "Transmission Belting" appears at page 599 of the said dictionary "Transmission Belting" - A heavy fabric which is usually made in V form or flat; V belts are less or complete units, generally a series of small belts which run between short centers normally anywhere from two to four feet. They run on grooved pulleys; the grooves are in the shape of "V," and the belt in turn is in the shape of a "V". Two or three to six belts run in parallel grooves to convey power between the individual motor and the machine which is being driven. Flat belts can be made in roll form or endless. They are used generally for longer drives, when the distance between the motor and the power unit is from five to six feet and up See Belting. The term 'Duck' as appearing at page 539 of the above stated Encyclopedia of Textiles is as fallows : Duck : The name duck covers a wide range of fabrics. It is the most durable fabric made. A closely ....
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.... textured, stretch, artificial straw and hair. See Regenerated Cellulose and Regenerated Protein Fibres." This term is also defined at page 563 of 'Encyclopedia of Textiles' as "Man Made Fibres : An inclusive term for all textile fibres not provided by nature." 27. Therefore, from the reading of the entire technical literature, HSN explanatory notes, and the interpretation given by us for the heading "cotton fabrics" of Chapter 52 and "man-made fabrics" of Chapter 54 and examining the goods in question as detailed above, the goods are therefore excluded from the said Chapter. 28. Now it has to be seen as to whether the Chapter 59 of the CET 1985 is applicable to the product and the heading 59.09 is appropriate one. Section XI of the CET 1985 pertains to Textile and Textile Articles. It is necessary to see some of the notes in this Section, Note 2(A) reads Articles classifiable in Chapter 50 to 55 or in Heading No. 58.06 or 59.02 and of a mixture of two or more textile materials are to be classified as if consisting wholly of that one textile materiel which predominates by weight over any other single textile material. Note 6 Chapter 50 to 55 and, except whe....
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....s reinforced with metal, of a kind used for technical purposes; (vi) Cords, braids and the like, whether or not coated, impregnated or reinforced with metal, of a kind used in industry as packing or lubricating materials; (b) Textile articles (other than those of heading Nos. 59.07 and 59.08) of a kind used for technical purposes (For example, textile fabrics and felts, endless or filled with linking devices, of a kind used in paper making or similar machines (for example, for pulp or asbestos cement), gaskets, wablers, polishing discs and other machinery parts)." The term 'textile fabric' is clarified in this Chapter to mean only to woven fabrics of Chapter 50 to 55. The product in question is undoubtedly woven fabrics of multifold yarn. The assessees contention is that Chapter 59 does not apply to running length of cotton fabrics but applies only to textile products in the piece, cut to length or simply cut to rectangular (including square) and of shapes. They also contend that only textile fabrics which is processed, impregnated fall within Chapter 59. The corresponding note 6 of Chapter 59 is HSN explanatory note is....
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....felt-lined woven fabrics, coated, covered or laminated with rubber, leather or other material (e.g. plastics), of a kind used for card clothing and similar fabrics of a kind used for other technical purposes. (2) Bolting Cloths: These are porons fabric (for example, with a gauze, leno or plain weave), geometrically accurate as to size and shape (usually square) of the meshes, which must not be deformed by us. They are mainly used for (e.g. flour, abrasive powders, pro powdered plastics, cattle food), filtering or for screen-printing. Bolting cloths are generally made of hard twisted undercharged silk yarn or of synthetic filament yarn (underlined by us). (3) Straining cloth (e.g. woven filter fabrics an needled filter fabrics), whether or not impregnated, of a kind used in oil presses or for similar filtering purposes (e.g. in sugar refineries or breweries) and for gas cleaning or similar technical applications in industrial dust collecting systems. The heading includes oil filtering cloth, certain thick heavy fabrics of wool or of other animal hair, and certain unbleached fabrics of synthetic fibres (e.g. nylon) thi....
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....nbsp; Discs, sleeves and pads for shoe polishing and other machines. (6) Textile bags for oil presses. (7) Cords cut to length, with knots, loops or metal or glass eyelets, for use on Jacquard or other looms. (8) Loom pickers. (9) Bags for vacuum cleaners, filter bags for air filtration plant, oil filters for engines etc. The textile articles of this heading may incorporate accessories in other material provided the article remain essentially articles of textile. Sub-heading Explanatory Note. "Sub-heading 5911.90 Articles formed of linked monofilament yarn spirals and having similar uses to the textile fabrics and felts of a kind used in paper-making or similar machines fall in this sub-heading and not in sub-heading 5911.31 or 5911.32." Note 6(b) of Chapter 59 of CET 1985 is also indicative of "Textile articles of a kind used for technical purposes (for example, textile fabrics and felts, endless or fitted with linking devices, of a kind used in paper making or similar machines (for example, for pulp or asbestos-cement....
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....Collector (Appeals) Bombay in the impugned revenue appeal has not examined the case in the light of Note 6(b) of Chapter 59 CET 85 and also with the corresponding HSN explanatory notes. The Collector (Appeals) has held the goods to be classifiable under the Chapter 52.05, which is not sustainable. 32. The learned advocate has contended that the determinative end use of the product is not a factor in classification matters. In this context, it has to be pointed out that Section Note 6(a) & (b) of Chapter 59 of CET 85 is based on the nature of the product. There is no doubt of the goods being put to industrial use, whether prior to processing or impregnation, or thereafter. The HSN explanatory notes clearly indicate that textile fabrics and felts, endless or fitted or processed are used for technical purposes. The products in question not being a 'cotton fabrics' as understood in general trade sense and in common usage and that the commercial understanding is that it is meant for industrial use, therefore, the classification under Chapter heading 59.09 cannot be ruled out. The learned Assistant Collector in the order in original, annexed in assessees appeals, has noted that t....