Customs, Excise and Gold Tribunal - Delhi
Simplex Mills Co. vs Collector Of Central Excise on 28 February, 1992
Equivalent citations: 1993(49)ECR147(TRI.-DELHI)
ORDER S.L. Peeran, Member (J)
1. In all these appeals common question of facts and law arises, hence they are taken up together for disposal as per law. The question that arises for our consideration in these appeals is the correct classification of product manufactured by the appellants and declared in the classification list as "Cotton Fabrics-Man-Made Fabrics". The department has on a detailed consideration of the nature of the product and its end-use issued several show cause notices pertaining to several periods and calling upon the assessee to explain as to why their product should not be classified under Chapter sub-heading 59.09 of CET Act, 1985. The assessee had contested these show cause notices on 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;
1A. The assessee had filed various classification lists and had got approved during the period from 28.2.1986 to 6.5.1987, in which they had cleared Cotton Fabrics not subjected to any process classifiable under Chapter sub-heading 5205.00 chargeable to Mill 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 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 items manufactured by them were Grey Cotton, Belting, Duck and Grey Cotton Canvass Cloth 100% cotton used for Industrial purposes. It was further revealed during the investigation that the fabrics manufactured by the assessee from Man-Made Filament Yarn was also Grey Nylon Belting Fabrics specially used for Industrial Purposes. It was further revealed that the goods manufactured by them was specially embossed, stamped with words "for Industrial use only and not for local sale". The Department therefore, presumed that the two items manufactured by the assessee were subjected for Industrial Users and therefore, are appropriately classifiable under Chapter sub-heading 5909.00 as Industrial Fabrics. The Assessee had been alleged with mis-declaring the detailed prescription of the product in the classification list and got approval of their product under sub-heading 5205.00 and 5408.00 of GET, 1985 and cleared them without payment of duty. The assessee was charged with the suppression of the facts and cleared the product by mis-declaration in the classification list filed by the assessee during the period 1985-86, 1986-87 and 1987-88 resulting in the contravention of the Central Excise Rules and Regulations with the intention to evade payment of duty and therefore, larger period under the proviso of Section 11A of the CET Act, 1944 was invoked by the Collector of Central Excise, Nagapur and show cause notice dt. 27.4.1989 was issued for clearance made in respect of (i) Grey Cotton, Belting Duck and Grey Canvass cloth; (ii) Man-Made Grey Nylon Belting Fabrics. The assessee was called upon to explain as to why the penalty should not be imposed under Rule 173Q of the Central Excise Rules, 1944. The assessee filed their written reply on 7.6.1989. The learned Collector after giving the assessees full and fair opportunity of hearing and after careful consideration of the case rejected the pleas of the assessee and confirmed the demand of duty amounting to Rs. 87,35,678.35 and imposed a penalty of Rs. 5 lacs under Rule 173Q of Central Excise Rules, 1944. The assessee being aggrieved with this Order has filed 10 appeals E/753 to 763/91-D.
3. The appellants were required to file a single appeal arising from the impugned order-in-original while they have filed 10 appeals and said appeals El/754 to 763/91-D are also pertaining to the same order-in-original arc found to be infructuous and therefore, they are rejected, by taking on record only E/75.V91 for our consideration against the impugned order passed by the Collector of Central Excise, Nagapur. The assessee in their letter dt. 7.6.1989 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, in view of the Collector(Appeals) decision of 23.3.1989 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 Died 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 to issue show cause notice or to proceed further in the matter.
iv) They are not carrying out any process on the Grey Fabrics manufactured in their factory. Therefore, the Fabrics manufactured by them are not subjected to any process and hence rightly classifiable under Chapter heading 5205.00 so far Cotton Fabrics are concerned which were being earlier classified under TI 19.
v) Their goods are known as unprocessed or Grey Cotton Fabrics and they are bought and sold as such they are rightly classifiable under-heading 5205.00. It was contended that Chapter 52 specifically refers to Cotton Fabrics while Chapter 59 refers to impregnated coated, covered or laminated fabrics i.e. textile fabrics of kind suitable for Industrial use. The Grey Fabrics manufactured by them are neither impregnated, coated nor laminated fabrics. Therefore, they have not removed any textile articles of kind suitable for Industrial use; and that they do not have any machinery for such processing. They contended that as per the correct interpretation their goods are specified in Chapter 52 and therefore, their classification over Chapter 59 prevails. They contended that Chapter heading 5909 generally refers to textile products and articles of a kind suitable for Industrial use. Further chapter note 6 of Chapter 59 clearly states that heading 5909 applies to goods do not fall in any other heading of Section XI. Therefore, their product is correctly classifiable under Chapter 5205 and not under 5909.
vi) They contended that show cause notice is based on a wrong presumption of facts and law that the use of product is of no use or consequence while classifying the commodity under Tariff Item. Therefore, they contended that the classification of the said product on the basis of their use cannot be taken into consideration as there is no such statutory requirements. The specific description of their product is covered by Chapter sub-heading 5205 and therefore, the said product should be preferred over to Chapter heading 5909. They contended that so far as Man-Made Fabrics is concerned Chapter 5408 covers fabrics of Man-Made Filament Yarn which are woven and which are not subjected to any process. They contended that the product Man-Made Fabrics manufactured by them are neither impregnated, coated, covered or laminated textile fabrics and these are suitable for Industrial use and hence they are not classifiable under heading 5909 and that the product did not have 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 Chapters 56 to 59. Therefore, he has held that once the goods are of Chapters 55 to 59, Chapters 52 to 55 will not be relevant. He has held that under the new Tariff the Chapters 52 and 54 exclude the fabric which are of a kind suitable for Industrial use. He has held that Chapter 5909 specifically included Belting cloth, endless felts of textile fabrics and straining cloth. Straining cloth include woven filtered fabric whether or not impregnated of a kind used for oil filteration or for similar filteration process. He has held that the fabrics manufactured by them, that is, Grey Cotton Belting Duck and Grey Canvass and also Man-Made Grey Nylon Belting Fabrics are undoubtedly for industrial use. To arrive at this conclusion the learned Collector has relied on the party embossing on the fabrics manufactured and cleared withwords "For Industrial use only and not for local sale. He has held that he has personally verified the samples and therefore, it is clear that the fabrics in question marketed known and understood in the market as fabrics for industrial use. He has also noted that the products in question are also sold to Industrial users engaged in the oil processing or similar filtering processors as has been verified by Collector of Central Excise, Calcutta-II and Collector of Central Excise, Allahabad. He has held that all the conditions are fulfilled in the case of their goods in question for classifying under Chapter 5909 as Industrial fabrics. The learned Collector has also rejected the other pleas raised by the assessee and also with regard to the plea that the demands are time barred.
5.1 A. No. E/2n82/91-D: Appeal No. E/2082/91-D has been filed by the Revenue against the order-in-appeal passed by the Collector (Appeals) Kanpur who has upheld the assessee's contention that the product Grey Cotton Fabrics manufactured by the assessee is classifiable under-heading 5205 and not under 5909 of CET, 1985 as held by the Asstt. Collector of Central Excise in respect of 13 classification lists pertaining to the period 1985-86, 1986-87 and 1987-88. The proceedings had arisen as a result of show cause notice dt. 14.1.1988 issued by the Asstt. Collector of Central Excise, Amravati calling upon the assessee as to why the product in question should not be re-classified under heading 5909. The Asstt Collector had passed an order-in-original dt. 2.5.1989 which was set aside by the Bombay High Court in Writ Petition No. 1896/89 dt. 28.7.1989 with the direction to the 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, Nagapur Bench in Writ Petition No. 1896/89 and the Honble Bombay High Court by its order dt. 28.7.1989 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 dt. 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 dt. 23.5.1989 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 the stamping on the fabric as "for Industrial use" but upheld the Department's classification. The Collector (Appeals) had set aside this order and allowed the assessee's claim on the ground that the heading 5909.00 is a residuary item covering all other textile items which have not been covered under any other heading. He has relied on chapter Note 7 of Chapter 59 which specifies the product which could be other textile product and cover under heading 5909. He has held that the heading itself gives an example of the type of textile products and articles which could be covered under this heading. He has also noted the assessee's contention that they are not carrying out any process in their own factory and the process is probably carried out by the buyer of their product. He has also relied on the order-in-appeal passed by Collector (Appeals) Bombay by his order dt. 23.3.1989 and also has relied on Trade Notice No. 130/88 dt. 6.9.1988. The Revenue in this appeal have contended that Cotton Fabrics manufactured by the assessee are stamped as "Industrial use". In trade notice it is described by the manufacturer as Grey Cotton Belting Duck, Grey Cotton Canvas. It is contended that stamped fabric is commonly used as filter for filteration of oil and this fact has been confirmed by Ahmedabad Collectorate who has sent a sample of fabric which is also identical fabric manufactured by the assessee. It is contended that straining cloth of a king used in oil presses or the kind of textile material or has been specifically mentioned under Chapter note-6 of Chapter 59. It is contended that the Ministry has occasion to examine this issue and they have observed that their being a specific entry for filter cloth under Chapter 59, this heading will prevail over the general description of fabrics under Chapters 52, 54 and 55.
5.2. We have heard Shri. Andhyarvjina, learned Advocate for the assessee and Shri J.N. Nair, JDR for the Department Shri Andhyarvjina look us through the various facts of the case and also the various chapter notes and tariff entries in question. He also pointed out to the several statements and grounds taken up by the assessee before the learned Collector as well as in the Memo of appeal filed before us. He contended that the goods in question were cleared under TI 19 of the erstwhile tariff which corresponds identically with sub-heading 5205 of 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 filteration 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 09. 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 contended that the textile fabrics which has been cut to pieces alone can be brought under 5909 and the said fabric cleared is in running length sub-heading 5909 is not appropriate and not applicable. He explained the reasons as to why the stamping of the words "Industrial Use" is done. He contended that the production of textile under Consumer Protection Regulations Act 1988 for industrial use and therefore any order to avoid the applicability of these regulations they would be getting the words 'Industrial use' stamped on the fabrics. He contended that said regulations exempted fabrics which were not sold readily and which are meant for industrial use and therefore in order to enjoy the benefit of the said regulations the stamping of "industrial use" resorted to. He contended that this by itself is not negatived of the product not being Cotton Fabric falling with the heading 5205. He also relied on the Trade Notice 130/88 dt. 6.9.1988 which had been clarified that Cotton Tyre Cord Fabrics would appropriately be covered by heading 5205. He contended that only after or impregnation the fabric would become an textile article and that it would be classifiable under heading 5909. The assessee were clearing the goods in the form of Cotton Fabrics to buyers who were carrying out the impregnation processes on the goods and were selling it to industrial users. It is his contention that the goods in the form in which it is cleared is the criteria for classification and not the ultimate use to which it is sold by the buyers after carrying out certain processes. He further submitted that the proceedings were barred by time and that there was no suppression in the matter nor there was any mis-declaration. The goods were declared very clearly and the classification list were being approved time and again, and therefore, the question of suppression and mis-declaration would not arise in the present case. He contended that when different interpretations are given then suppression cannot be attributed to the assessee. The goods under the earlier tariff was falling under TI 19 which have now come under TI 52 and therefore, the question of alleging suppression does not arise. He also contended that every invoice clearly showed the correct description and hence there is no suppression in the matter calling for imposing of penalty also. He further contended that when review 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 11-A of the Act. He also pointed out that similar products manufactured by Gokal Mills were also being classified under TI 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 ruling to support his arguments.
i) Randip Shipping & Transport Co. Pvt. Ltd. v. Collector of Customs
ii) Brakes India 1987 (37) ELT 1030 : 1987 (13) ECR 404 (Cegat SB-D).
On the question of limitation, he has relied on the following rulings.
i) CCE v. Chemphar Drugs & Liniments
ii) Padmini Products v. CCE--.
5.3. On the question of Collector not having jurisdiction to issue show cause notice, he has relied on the rulings rendered in the case of Modi Rayon and Silk Mills v. CCE Meerut.
6. Shri J.N. Nair, learned JDR contended that the heading note does not have statutory force and in this context relied on Rule-1 of the interpretation rule. He contended that chapter heading 5909 need not cover only processed cotton fabrics or Belting Cloth but it include endless felts of textile fabrics. He contended that the goods in question is a filter cloth and that it had industrial use is not disputed by the assessee. Therefore, it need not be impregnated. Even if the fabric did not have coating or impregnation still it would come under Chapter 59. He contended that the term word 'Cotton' in the note-6 of Chapter 59 applies to products which had restricted use. Therefore, the heading 5909 brought within its ambit the product in question. He contended that Chapter note section note of the words have to be read together and when the same is done on the basis of the product being used suitable for industrial use; the classification under chapter 5909 is appropriate. He contended that fabric being in pieces or cut to shape will not apply if suitability criteria for industrial purpose is taken into consideration. The end-use factor is also determined and taken up when there is a specific heading on the basis of the use of the product. He contended that the Cotton Fabric can be for several users and this Cotton Fabric manufactured specifically for industrial use is rightly classifiable under specific heading 5909 of Central Excise Tariff. He also referred to Rule 3 of rules of interpretation which laid down that when two appropriate headings are applicable then the later Tariff Item should be chosen. He also referred to Test Report and contended that the assessee had not composite the Test Report and therefore, the Test Report is binding on the assessee. He contended that in view of the admission of suitability of the product for industrial use the arguments raised pertaining to Textile Control Order 1986 loses its weight. He contended that the assessee had deliberately not given the information clearly in the classification list and therefore, the suppression of facts was quite clear and the larger period was apprehended. He also relied on the rulings rendered by the Supreme Court in the case of jaishree Engineering Co. (P) Ltd. v. CCE--.
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 & 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 fabric 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 dt. 18.10.1989 in Appeal No. E 753/91D in paras 7 to 12 are reproduced herein below:
Para 7. The charge of the Department in the Show Cause Notice is not at all based on the fact that they have processed the grey cotton fabrics after manufacture. The Department's charge is that the grey cotton fabrics and man-made fabrics manufactured by them are industrial fabrics whether they are processed or not processed after manufacture. Therefore, whether they possessed any machinery or equipment far processing after manufacture of the Man-made fabrics and the cotton fabrics in question is not at all relevant because the charges in the Show Cause Notice are not based on this fact at all. 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 first argument of the party that their fabrics manufactured and cleared are plain grey fabrics and not processed is neither relevant in the context of the charges made in the show cause notice nor correct. It may be pointed out here that even if the fabric manufactured by them are processed these would have been classified under respective heading of chapters 52 and 54, if they are not for industrial use. It may be mentioned also that section note 6 of Section XI clearly states along with other things that chapters 50 to 55 do not apply to goods of chapters 56 to 59. Therefore, once the goods are of chapters 56 to 59, the chapters 52 to 55 will not be relevant.
8. Under the new tariff the chapters 52 and 54 excludes the fabrics which are of a kind suitable for industrial use. Chapter heading in 59.09 specifically includes belting cloth, endless felts of textile fabrics and straining cloth. Straining cloth includes woven filter fabrics whether or not impregnated of a kind used for oil Alteration or for similar filteration purposes. The fabrics manufactured by them i.e. grey cotton belting cluck and grey canvas and also Man-made grey nylon belting fabrics are undoubtedly for industrial use because of the following reasons:
(i) The fabrics manufactured/cleared by them are embossed/stamped as "for industrial use only and not for local sale". Therefore, the party themselves are marketing and selling the goods as industrial fabrics and not as ordinary cotton fabrics 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 parry'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 filteration of similar processes. Therefore, all the conditions are fulfilled in the case of their goods in question for classifying under chapter 5909 as industrial fabrics. They manufacture and market the goods as industrial fabrics and they are also being sold to the industrial consumers and they are being used as industrial fabrics for straining pr filtering purposes. Hence the test of marketing of their product as industrial fabrics is clearly established and that they are bought and sold and used and known in the market as industrial fabrics. Hence these are rightly classifiable under chapter heading 59.09 and not under 52.05 cotton fabrics and 54.08 Man-made fabrics in question.
9. It will be relevant to mention here the HSN explanatory note given under corresponding heading 59.11 wherein it has been mentioned that straining cloth include woven filter fabrics whether or not impregnated of a kind used for oil process or similar filtering purposes. There being specific entry for filter cloth under chapter 59 this heading will prevail over the general description of Fabrics under chapters 52, 54 and 55. Further the fabrics in question manufactured and cleared by them are strictly according to the specification required by the industrial users and as such it cannot be said that the party was not aware of its actual uses more so when they themselves are marketing for industrial use only and marking the product accordingly.
10. The party themselves have accepted in their argument that the heading which provides more specific description should be preferred over the other heading resorting to general description. Grey Cotton fabrics and grey Man-made fabrics is a general description and fabrics for industrial use is of a specific description and as such according to the party's contention also the specific description will prevail over the general description. When the fabrics suitable of industrial has a specific entry included in chapter 59, their products in question are classifiable specifically under chapter 59.09, and hence the question of these being classified under chapters 52.02 and 54.08 does not arise at all and, therefore their contention in this regard is neither correct nor acceptable. This is also fully supported by note 6 of Section XI. Therefore, in their own admission and argument, their product which is being marketed as industrial fabrics and used for straining/filtering or similar other processes are rightly classifiable under chapter 59.09, which 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 reads 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 such fabrics which are suitable for industrial use are classifiable under heading 50.09 Therefore, the party's contention that use is not relevant in the context of the classification is neither correct nor valid. It may further be added that chapter note 6 of chapter 59 is not exhaustive for the items to be classified under heading 59.09. The fabrics under reference therefore, merit classification under heading No. 59.09 as Textile products on the ground that the heading title itself does not limit it to the products mentioned in Note 6 to chapter 59 and the relevant note also does not say specifically that the heading covers only the items specified under the note.
12. Collector (Appeals) Central Excise Bombay's order dated 23.3.1989 on which the reliance is placed by the noticee is not relevant in this case as the same is an order in appeal against the order passed by Assistant Collector, Central Excise 'E' Division Bombay, wherein classification of only 3 sorts namely 536-C, 533-C and 929-C has been decided and not for all the types of fabrics manufactured by the assessee in general. However, it is relevant to mention that this present case does not cover any sorts included in the said collector appeals order. It is a fact that the noticee is manufacturing grey cotton fabrics and grey man-made fabrics since several years and they have also submitted classification list but not giving all the relevant material as discussed above. Prior to Central Excise Tariff Act, 1985 effective from 28.2.1986 there was no separate classification provided for "Fabrics of a kind used for industrial use" which are now classified in chapter 59. Therefore, it is established beyond doubt that the goods in question are rightly and correctly classifiable under chapter heading 59.09 under the Central Excise Tariff Act, 1985.
11. The nature of the Product is such that it is not being put to consumer use, which a cotton fabric is put to use by general populace. The assessee does not dispute this fact. It is admitted by them that the products are used for "Industrial purpose" but they contend that it could be done only after it undergoes process of impregnation or lamination and not until then. They contend that they directly sell the goods to buyers, who carry out the processes and sell it to "Industrial users". In this context they have taken exemption from the textile commissioner under Textile (Control) Order 1986. The product is described in the GP. 1 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 85% or more by weight of cotton. Cotton fabrics are produced in great variety and are used, according to their characteristics for making clothing, house hold 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 towelling and similar fabrics (heading 58.02)
(d) Gauze (heading 58.03)
(e) Woven fabrics for technical uses, of heading 59.11 (underlined by us)
13. The heading 52.09 in HSN explanatory note has a heading with description "Woven fabrics of cotton, containing 85% or more by weight of cotton, weighing more than 200g/m2." The note clearly lay down that this heading docs not include the categories (a) to (e) as shown in above, under heading 52.08 of HSN explanatory note.
14. The tariff heading 5408.00 of CET 1985 reads:
Fabrics of man-made filament yarn (including fabrics obtained from materials of heading Nos. 54.06 and 54.07).
(a) Woven, and
(b) not subjected to any process.
15. The product in question, as contended by the appellant, is not multiple yarn or weft but only of multifold yarn.
16. Now, it has to be seen as to how the products are understood in trade and treated so in the commercial parlance. The Textile (Consumer Protection) Regulation 1988 issued under the Textile (Control) Order 1986, ISI glossary of terms and even technical terms appearing in "Fair Child's dictionary of Textiles" & "Encyclopedia of Textiles Third Edn." is a good guide for understanding the commercial usage of the products. This regulation has been issued by the Expert Textile Committee under Ministry of' Textiles. This regulation has been issued to protect the consumer interest also and therefore it can be relied for commercial understanding also. The assessee themselves are relying on this Regulation to show that the stamping of "Industrial Use" is done under this Regulation to seek exemption from the application of the 'Textile (Control) Order 1986, as the product is not being traded and consumed directly through retail channel by general populace. However, they contend that mere stamping of words 'Industrial use' is not indicative of commercial usage of the product. But what has to be seen here is as to how a "cotton fabric" under the heading 52.05 is understood in the trade and in the commercial parlance. In the event of Trade and Commercial understanding of cotton fabric is to exclude the products of the like in question, which is meant for 'Industrial use' used either directly or by processes of impregnation on it, then the products in question, has to be excluded under the heading 52.05 of CET 1985. In this context the reliance on HSN explanatory notes and Textile (Consumer Protection) Regulation 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 of cloth" excludes chindies, rags and fend 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 centimetres where the width of the fabric is less than one metre,
(b) Dhoties and Sarees, ordinarily sold by pair or piece, the total length of such uncut cloth and
(c) Handkerchiefs, pillow cases, towels, chhaddars, blankets, bedsheets and bed covers.
(ii) "Fent" means-
Cut piece of cloth of length 45 centimetres or more but not exceeding 90 centimetres where the width of the fabric is one metre or more and of length of 65 centimetres or more but not exceeding 135 centimetres where the width of the fabric is less than one metre.
The above reading of the definitions of 'piece of cloth' and 'Fent' as appearing in the Said Regulation, and the fact of assessee taking exemption from the application of the Regulation, is a clear indication that the use of the product is not as of a 'Cotton fabric' as is understood in the trade parlance and commercial usage.
17. There is another piece of evidence which has not been controverted by the assessee and mat is the report of the chemical examiner. The full report of the chemical examiner is not placed oh record but the Assistant Collector in the impugned order in original in the Revenue appeal, has given some details of it. The learned Assistant Collector has referred to the test memo dt. 23.5.1989 which states that the sample is "Textile fabric for Industrial use".
18. In view of this clear position, the department has clearly shown that the product cannot be understood as "cotton fabrics". The assessee on the other hand has not rebutted it by producing any evidence on commercial understanding of the product being a "cotton fabrics" and therefore in the face of their own assertion that the product is put to "Industrial Use" by further processes, therefore the product cannot be considered as "cotton fabric". it is for the assessee to have adduced the rebuttal evidence that in Trade parlance the product is understood as 'cotton fabric' and used as fabric by in common populace also, despite its end use being industrial. They have described in the G.P. 1 and invoices as Canvas, Belting, Duck, Filter cloth, Industrial fabrics and C.T.C. fabrics Grey processed". The learned Advocate contended that it is done as per customer's desire and manufactured as such. They have not produced the contract with their Industrial Consumer/Customer giving the specifications for its manufacture. The fact that industries are purchasing the products itself makes it of industrial use. Therefore, the cotton fabric has been understood in Trade as indicated in Textile Regulations. The HSN explanatory note has persuasive value and it has given the meaning of cotton fabric to mean those which are for making clothing, house hold linen, bed spreads, curtains 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 come 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 some logic does not fall under chapter 54.08 of CET1985 as it is differently worded in GP1 & 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 Edn". 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 (confirmed by the Honble Supreme Court of India). The Bench has also considered the ISI specification No. 2364-1979 on the definitions of the terms "Impregnated fabrics" and 'Industrial fabrics', which had defined these terms as follows:
Industrial FabricsFabrics whose interstices in the Yarn have been filled with chemical compound so as to cover the entire surface. Commonly used for leather bags, garments, insulation tapes etc.". Industrial Fabrics Fabrics made from man-made or natural Yarn which are commonly used on machine such as belting duck, filter cloth, sizing flannel etc. The bench also referred to the definition of "Fabric" as appearing in chambers Twentieth Dictionary, Revised Edition of 1976, which among other meanings also gave the meaning as "manufacture cloth". The bench examining the trade parlance and commercial understanding observed in para 20 of the report that the general and usual understanding of fabric is a relatively thin and flexible material, usually capable of being draped or wound around the person or spead out or hung and ordinarily used for clothing, hangings or curtain material, table cloths, and so on. The bench felt that the meaning can be extended to similar material which is used for different purposes such as the type cord fabric, which is used in industry for the manufacture of tyres and further held that "Even then the goods should still have the generally accepted characteristics of a fabric, as referred to above. It is noteworthy that in both the judgments which were relied upon by the learned Departmental Representative, the goods were actually known as "fabric". In the case of Saifuddin Ibrahim the goods were "rubberised cotton fabrics". In the Delhi Cloth and General Mills case the goods were "tyre cord fabric". The Supreme Court in the Delhi Cloth and General Mills case had no doubt held that tyre cord fabric, should be regarded as a textile fabric. But that judgment itself shows that the goods had the characteristics of a fabric as ordinarily understood. As mentioned in the Supreme Court judgment it is woven fabric in which the intermediate process of weaving the weft thread across the warp cord is an integral stage of manufacture.
The Supreme Court went on the point out that item 22 of the Central Excise Tariff speaks of "all varieties of fabrics", 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 "fabric11 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 TI 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:
Para 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 does contain a definition of the term "Industrial fabrics" which reads as follows:
INDUSTRIAL FABRICS: As differentiated from consumer textiles products which are commonly used in the various manufacturing industries for factory purposes. Prominent in this group are such textile products as machine belting, straps, pads and similar types of fabrics or yarns, both man-made and natural.
It has been argued that since this "Encyclopaedia is published by the Editors of American Fabrics and Fashions Magazine, it can rightly be regarded as conveying the understanding of trade and industry.
22. While this argument is not without force, it appears to us that the Encyclopaedia, which runs to over 600 pages exclusive of the index and costs about 50 US dollars, is also in a sense a technical work, in that it includes a very wide range of meanings which might not correspond to ordinary usages. This is apparent when we look at some of the other articles listed in the section on "Industrial fabrics". Thus, the section also covers "fishing nets and twine", "hose" and even "ropes'. Under the last heading there is reference to polyester, nylon and polypropylene ropes. Whatever might be said in regard to some of the other items listed, it would hardly be argued that "ropes" can be classed as "man made fabrics" on the strength of their inclusion under the heading "Industrial fabrics" in the Encyclopaedia. It is therefore, apparent that the expression "industrial fabrics" as used in this work has a very extended meaning and it would not be sound to make this a ground for classifying the goods under consideration as "Fabrics" when the general and usual understanding whether of trade and industry or of the common man is not in accordance with such use. It has been argued by the appellants that the Indian Standard Institution has published a standard (No. IS-2364-1979), dealing with conveyor beltings, and that this shows that they are recognised as a specific commodity in trade. We consider that there is substance in this argument. For the respondent, reliance has been placed on the definitions of "impregnated fabrics" and "industrial fabrics" contained in this standard. Industrial fabrics as defined therein plainly do not cover the belting in question. Since this term in the ISI apparently refers to fabrics which have not yet been coated, impregnated etc. The definition 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 bags, 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, such as boat sails baggings, coverings, tentings, belting, webbing, book binding, etc. Also included are rugs, upholstery and drapery fabrics produced to specification for automobiles, airplanes, rail road cards, buses and institutions.
Indirect Uses: These includes textiles which go into the composition of other products: shoe linings, tire fabric, typewriter ribbons, coated materials, plastics.
Production Uses: A wide variety of specially constructed textiles are used by industry during the course of production or processing for such purposes as buffing, insulating, filtering, ventilating, laundering.
Work Clothing: Fabric used for work clothing is also classified as an industrial material special types of cloth are used for industrial uniforms worn by gas station attendants, bottling plant employees, delivery men, hotel and hospital personnel, soldiers, policemen, firemen, as well as protective clothing used by workers in various industries.
Then the "scope of Industrial" lists out the various types of Industrial fabric used in a vast and various field of textile production. 'Belting duct' is shown in the heading "For the Mechanical Rubber Trade' and under the heading' For the Use of Filtering Media'. 'Tent and Awning Trade' "For speciality manufactures' and also in the heading 'For Dry Goods Jobbers and chain stores'.
21A. The definition of the term "Industrial fabric" as appearing at page 307-308 of "Fairchilds' Dictionary of Textiles" sixth Edition by Dr Isabel B. Wingate published by Fairchild publications New York and by Universal Publication Corporation, states as follows Industrial Fabrics: A broad term for fabrics of any fiber(s) and used for non-apparel or non-decorative uses. They either are used by themselves or treated for use in industrial products, as the base for other materials, or for marine uses. Out door fabrics, such as awning, fabrics for use with plastics, tire cord, are a few. They fall into several classes:
(1) a broad group including fabrics employed in industrial processes, e.g. filtering, polishing absorption;
(2) fabrics combined with other materials to produce a new type of product, e.g. rubberised fabric for hose, belting tires, fabric combined with synthetic resins to be used for timing gears, electrical machinery parts, coated or enameled fabrics for automobile tops, book bindings, fabrics impregnated with adhesive and di-electric compounds for applications in the electrical industry;
(3) fabrics incorporated directly in a finished product. The last group includes sails, tarpaulins, tents, awnings, speciality 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 of all types, sheeting osnaburg filter twill, chain cloth, press cloth, jean, drill, twill and broken twill cotton fabric, sateen, moleskin, multiple fabric, leno or donp-woven fabric, terry, airplane cloth, balloon fabric, typewriter ribbon fabric.
Let us look into the term 'Belting' as appearing in Encyclopaedia of Textiles Third Edn. (by the Editors of American Fabrics and Fashion Magazine) at page 502-503 under the chapterIndustrial fabrics.
Beltings: Belting are of two typesFlat belting, both rubberized and non-rubberized, and V-beltings. Such belts are used for power transmissions and for handling and conveying materials.
The Original belting was made of cotton then succeeded by rayon, which in turn has been superseded by nylon and polyester, with Nomex nylon becoming a large factor in V-belts (Underlined by us).
Flat Belting: Flat belting may either be built up from two or more plies of plain duck stitched together, and combined with plies of wrapper fabric where desired, or it may be woven directly. In this case the fabric may be of special construction, having from one to twelve sets of warp yams, held together by a complex system of filling threads. Stitched belting is usually made from 33 to 3902. Cotton duck pr from an equivalent lighter fabric of man-made fibre. Both types are generally impregnated with oil or wax, bituminous material or latex, or other material in order to give improved durability and serve-ability, under conditions which produce heating abrasion, or where chemicals are present (underlined by us).
Where flat belting is used for direct power transmission the resistance or sensitiveness of the fabric to strains imposed at the fastening point of the metallic belt fasteners, generally used to join belts, is important. Here man-made fibres are formed to perform better than cotton, (underlined by us).
Where flat belting is used for conveying materials such as ore and coal in mining or heavy items in factories, the qualities of impact resistance, the troughability, long flex life and resistance to edge wear are the prime considerations employing appropriate man-made fibers either in the filling alone, or in both warp and filling, are being used increasingly in handling and conveying applications.
Heat resistance is important in such fields as foundary work, and resistance to chemical degradation in 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 fiber 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 porons enough to permit the ready escape of moisture during drying.
In extreme applications belting may be faced with asbestos to protect the fibers of the belting.
23. At pages 504-505 appears 'Filter media' which states as follows:
Industrial nitration of gases and liquids is an important application of textile fibers 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 fibers. Acetate tow is the major man-made fiber used to make cigarette filters.
Woven fabrics, non-woven fabrics and random fibers are all used in filtering. Practically every industry employs filteration in some form, either to cleanse liquids or gases, or else for recovery of valuable wastes in dusts or sediment. Among the industries which employ filter media most extensively are: Petroleum, chemicals, dyes, pigments, soap, plastics, food beverage, metals, rubber, coal products.
Man-made fibers are used exclusively in the applications where heat or chemicals are involved for exemple, in filteration of hot concentrated acids which would not be possible with any natural fiber except perhaps asbestos. Glass fibers are extensively used in air filteration for domestic purposes, their freedom from organic contamination being an asset. In instances where factorial rotting in a consideration, for example in sewage filteration, man-made fibers are found to give approximately five times longer service than wool fibers.
The type of textile used in a particular fiber varies with the type of filteration required. For dust filteration fabrics may be woven of spun yarn or, if woven from filament yarns, they may be napped to give higher dust retention. For recovery of solids in liquid filteration, a fabric woven from filament yarns without any nap offers easier cake release, where filtrate is the aim, spun yarn fabrics offer advantage.
In cases where elevated temperatures are employed, correct finishing of the fabric is of importance, to avoid shrinkage in position resulting in loss of efficiency. This special finishing consists in relaxation of the fibers under suitable conditions to encourage shrinking of the fabric and tightening of the weave before installation.
24. The term 'canvas' appears at page 525 which states as follows:
CANVAS: Also known as numbered Duck, this plain-weave cloth is rugged and heavy. The ply yams used give much strength and body to the fabric. From 2-ply to 14 ply yarns are used to make the goods. It is manufactured in the grey state or natural condition, but is also dyed olive drab or khaki for the armed services.
The term 'Canvas' is also appearing at page 116 of the 'SB Sarkar's words & phrases of Central Excise and Customs' published by Centex Publications (P) Ltd., New Delhi 110003, which is as follows:
CanvasThe term canvas is applied to heavy fabrics manufactured from flax, cotton or jute or from mixture of cotton and jute, The fabrics are generally water proofed and used for tents, sails, etc. Cotton canvas is a single warp cotton fabric, white jute and jute-cotton union canvas are of double warp structurInd 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 weighting 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. UOI .
The term 'canvas' & 'canvas cloth' as appearing in the 'Fairchild'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" generally relates to the lighter constructions. See Duck"
Canvas cloth: 1. Plain, open weave woollen dress fabric made with plied yams. Three-ply yarns are generally used.
2. A British term for a plain weave cotton fabric made with hard spurn yarn.
25. The term 'Duck' appears at page 198 of the said dictionary and it is defined as.
Duck. A broad term for a wide range of strong, firm, plain weave fabrics, including the heaviest, strongest, single woven fabric made; duck is usually made of cotton, although sometimes linen is used. Different types of Duck include : 1. Duck in which both warp and filling yarns are single. 2. Duck in which the warp yarns are single and the filling yarns plied; 3. Duck in which both warp and filling yarns are plied. The most important ducks are numbered duck, army type duck and flat duck. Numbered and army type duck are woven with medium or heavy plied yarns, army type ducks are the lighter weight. Flat ducks always have single warp yarns woven in pairs and single or plied fillings yarns. Most ducks are firm and closely woven but some are soft and pliable. The fabric has a variety of uses, and is used in the gray for belting, bags, sails and other industrial purposes. It is also used for tents, awnings, tarpaulins, washable utility clothing etc. These are numerous specific types of ducks including enameling duck, harvester duck, hose duck, shoe duck etc. The terms canvas and duck are used interchangeably, but "canvas" often is used to refer to the heavier constructions. The term "duck had its origin before the middle of the nineteenth century when all canvas for sails was imported. The light flax sail fabrics imported mostly from England and Scotland bore the trade mark stencil of a raven while the heavier weights bore the trade mark picturing a duck. The word "duck" became associated with a heavy fabric and was applied to cotton canvas when it was first manufactured in the United States.
The term "Belting Duck" appears at page 56 of the said Dictionary and is defined as Belting Duck A term for the fabrics employed in the manufacture of belts used for the transmission of power or for conveying materials such as coal, iron ore, etc The fabric is usually a belting duck a heavy, plied yam fabric, free from sizing impregnated with rubber componds, balate synthetic gums for special applications, although 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 endless or complete units, generally a series of small belts which run between short centres normally anywhere from two to four feet. They run on grooved pulleys; the grooves are in the shape of a "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 S39 of the above stated Encyclopedia of Textiles is as follows:
Duck: The name duck covers a wide range of fabrics. It is the most durable fabric made. A closely-woven heavy material. The most important fabrics in this group are known as number duck, army duck, and flat or ounce duck. Number and army ducks are always of plain weave with medium or heavy ply yams; army ducks are the lighter. Ounce ducks always have single-warp yams woven in pairs and single or ply filling yams.
26. The term "Filter cloth" and "Filter Duck" appears at page 229 of the Pair Childs Dictionary of Textiles' and they are reproduced below:
Filter Cloth: A general term for a number of different fabrics used for filtering purposes, ranging from fine flour filter fabric (bolting cloth) made of silk or synthetic fibers, to very coarse cotton or man-made fiber filter fabric. The cloth vary in weave, weight, fiber, size of yams and all other features. Man-made fibers such as nylon, acrylic, vinyl, polyethylene and others as well as glass fibers are very useful as industrial filtering cloths because of their resistance to the action of many chemicals.
Filter Duck: A variety of special ducks made in plain weave of single or plied yams. Uses; Filtration purposes.
The term 'Filter cloth' as appearing in the Encyclopaedia of Textiles at page 545 is Filter Cloth: A warp effect, twill weave fabric which various much in weave yarn count, texturem and weight, finds much use in industry in the food, candy, paint, chemical, petroleum, and similar industries.
The term 'man-made fibers' appear at page 355 of the 'Fairchild's Dictionary of Textiles' which is reproduced below:
Man-made Fibers: The over-all generic term employed in the United States and elsewhere to include all chemically made textiles. This includes (1) filaments that have a base of plant cellulose (natural) such as rayon which see, and (2) acetate which see. These fibers are derived from acetates of cellulose (two thirds cellulose and one third acetyle). Acetate fibers are not pure cellulose but are cellulose plus a chemical acetyle, whereas rayon is all vegetable. Therefore, rayon and acetate are separate generic classification under the T.F.P.I.A. Triacetate is considered a fiber different from acetate by T.F.P.I.A. definition See Triacetate fiber. Also (3) regenerated proteins and (4) the truely synthetic fibers (nylon, acrylic, polyester and glass fibers derived from chemical bases); this group encompasses continuous filament yarns, monofilaments, staple, textured, stretch, aritifical straw and hair. See Regenerated Cellulose and Regenerated Protein Fibers.
This term is also defined at page 593 of 'Encyclopaedia of Textiles' as Man Made Fibers : An inclusive term for all textile fibers 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 CET1985 is applicable to the product and the heading 59.09 is appropriate one.
28A. Section XI of the CET 1985 pertains to "Textile and Textile Articles". It is necessary to section 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 material which predominates by weight over any other single textile material.
28B. Note 6 Chapter 50 to 55 and, except where the contract otherwise requires, chapters 56 to 60 do not apply to goods made up within the meaning of note 5 above, chapters 50 to 55 do not apply to goods of chapters 56 to 59. (Underlined by us) 28C. This note 6 of Section XI clearly indicates chapters 50 to 55 and, except where the context otherwise requires, and chapters 56 to 60 do not apply to goods made of within the meaning of Note 5 above. Thus the product in question not being good within the context of note 5, hence it still remains within the chapters 50 to 35, & 56 to 60. But chapters 50 to 55 do not apply to goods of chapters 56 to 59.
29. Therefore, it has to be seen as to whether the products in question falls within chapters 56 to 59 & in more particular context chapter 55 which the revenue is seeking to classify. As we have seen chapter 52 is excluded for the products in question. We have to only see whether it fits in chapter 59. The note 1 of chapter 59 reads as follows:
Except where the context otherwise requires, for the purposes of this chapter the expression 'textile fabrics' apply only to woven fabrics of chapter 50 to 55 and gauze (heading No. 58.03), narrow woven fabrics (heading No. 58,06) braids and ornamental trimmings in the piece, and the knitted or crocheted fabrics of chapter 60.
Note 6 of chapter 59.09 reads as follows:
6. Heading No. 59.09 applies to the following goods, which do not fall in any other heading of Section XI:
(a) Textile products in the piece, cut to length or simply cut to rectangular (including square) shape (other than those having the character of the products of heading Nos. 59.07 and 59.08), the following only:
(i) Textile fabrics, felt and felt-lined woven fabrics, coated, covered or laminated with rubber, leather or other material, of a kind used for card clothing and similar fabrics of a kind used for other technical purposes.
(ii) Bolting cloth;
(iii) Straining cloth of a kind used in oil presses or the like, of textile material or of human hair;
(iv) Flat woven textile fabric with multiple warp or weft, whether or not felted inpregnated or coated, of a kind used in machinery or for other technical purposes;
(v) Textile fabrics 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 chapters 50 to 55. The product in question is undoubtedly woven fabrics of multifold yarn.
29A. The assessee 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.
29B. The corresponding note 6 of chapter 59 is HSN explanatory note is note 7 and that of 59.09 of CET1985 is note 59.11. The heading of 59.11 of HSN explanatory notes reads:
Textile products and Articles, for Technical uses, specified in Note 7 of this chapter.
The various headings and the accompanying notes under heading 59.11 of explanatory note reads as follows:
59.11 TEXTILE PRODUCTS AND ARTICLES, FOR TECHNICAL USES, SPECIFIED IN NOTE 7 TO THIS CHAPTER.
5911.10 - Textile fabrics, felt and felt-lined woven fabrics, coated,
covered or laminated with rubber, leather or other material,
of a kind used for card clothing, and similar fabrics of a
kind used for other technical purposes.
5911.20 - Bolting cloth, whether or not made up -Textile fabrics and
felts, endless or filled with linking devices, of a kind used in
paper making or similar machine (for example, for pulp or
asbestos-cement):
5911.31 - - Weighing less than 650 g/m2.
5911.32 - - Weighing 650 g/m2 or more.
5911.40 - Straining cloth of a kind used in oil process or the like,
including that of human hair.
5911.90 - Other
The textile products and articles of this heading present particular characteristics which identify them as being for use in various types of machinery, apparatus, equipment or instruments or as tools or part of tools. The heading includes, in particular, those textile articles which are excluded from other headings and directed to heading 59.11 by any specific provision of the Nomenclature [for example Note 1 (e) to Section XVI].
It should be noted however, that certain textile parts and accessories of the goods of Section XVII, such as safety seat belts, shaped motor car body linings and insulating panels (heading 87.08) and carpets for motor cars (chapter 57), are not classified in this heading.
(A) TEXTILE FABRICS AND OTHER TEXTILE PRODUCTS, FOR TECHNICAL USES? IN THE PIECE? CUT TO LENGTH OR SIMPLY CUT TO RECTANGULAR (INCLUDING SQUARE) SHAPE Provided they do not have the character of the products of heading 59.08 to 59.10, these products are classified here (and not in any other heading of Section XI), whether in the piece, cut to length or simply cut to rectangular (including square) shape.
This group covers only the textile fabrics and others textile products as defined in Note 7(a) to the chapter and listed at (1) to (6) below.
(1) Textile fabrics, felt and 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 pf 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) pf 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 undischarged 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 brewaries) 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) thinner than the foregoing but of a close weave and having a characteristic rigidity. It also includes similar straining cloth of human hair.
(4) Flat woven textile fabrics with multiple warp or weft, whether or not felted, impregnated or coated, of a kind used in machinery or for other technical purposes.
(5) Textile fabrics, reinforced with metal, of a kind used for technical purposes, the metal thread (bare metal, wiretwisted or gimped with textile yarn, etc.) may, for example, be incorporated during weaving (in particular, as warp) or introduced between plies of the material. Felt reinforced with metal is, however excluded (heading 56.02).
(6) Cords, braids and the like of a kind used in industry as packing or lubricating materials, these are usually of square section, coated or impregnated with grease, graphite, talc etc, and sometimes reinforce with metal. Cords, etc, not coated or impregnated, remain classified here provided they are clearly recognisable as products used in industry as packing or lubricating materials.
(B TEXTILE ARTICLES OF A KIND USED FOR TECHNICAL PURPOSES All textile articles of a kind used for technical purposes (other than those of heading 59.08 to 59.10) are classified in this heading and not elsewhere in Section XI (See Note 7(b) to the chapter); for example:
(1) Any of the fabrics of (A) above which have been made up (cut to shape, assembled by sewing, etc.), for example, straining cloths for oil presses made by assembly of several pieces of fabric, bolting cloth cut to shape and trimmed with tapes or furnished with metal eyelets or cloth mounted on a frame for use in screen printing.
(2) 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) (excluding machinery belts of heading 59.10).
(3) Articles, formed or linked monofilament yarn spirals and having similar uses to the textile fabrics and felts of a kind used in paper making or similar machines reffered to in (2) above.
(4) Gaskets and diaphragms for pumps, motors, etc. and washers (excluding those of heading 84.84).
(5) Discs, sleeves and pads for shoe polishing and other machines.
(6) Textile bags far 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 Alteration 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.
Subheading 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 subheading and not in subheading 5911.31 or 5911.32.
29C. 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 filled fitted with linking devices, of a kind used in paper making or similar machines (for example, for pulp or asbestos-cement), gaskets, washers, polishing discs and other machinery parts).
29D. This note 6(b) of chapter 59 CET 1985 does not refer to cut pieces or to process or impregnated ones.
29E. The chapter heading 59.09 reads:
59.09 5909.00 All other textile products and articles of a kind suitable for industrial use (for example, textile fabrics, combined with one or more layers of rubber, leather or other material, bolting cloth, endless felts of textile fabrics, straining cloth).
30. The example of "articles of a kind suitable for industrial use given are textile fabrics, combined with one or more layers of rubber, leather or other material," and that there is "bolting cloth, endless felts of textile fabrics, straining cloth". There is comma(,) after textile fabric and also after the words' other material,' and after each item 'bolting cloth' and preceding 'straining cloth'. Therefore, it cannot be presumed that these items 'textile fabric', 'bolting cloth', 'straining cloth1 should be in 'cut piece' and be in only 'coated.' A clear reading indicates that 'Industrial fabric' of various types like 'bolting', 'filter cloth,' 'Duck', 'Canvas', 'Straining cloth' are all varieties of Industrial fabrics and hence even if they are not coated or cut as articles, they fall under heading 59.09 of CET 1985. If is interesting to note that "Transmission or conveyor belts or belting, of textile material, whether or not reinforced with metal or other material come specifically under heading 59.08 with 30% duty. As we have seen 'belting' is always in running length and even it can be without reinforcement or impregnation or coating. This heading appears to have escaped the notice of the adjudicating authorities. As the department has not raised demands under this heading, we are not expressing any opinion on it. However, heading 59.09 has textile fabrics of 'Industrial use' also mentioned therein, therefore, the classification of the impugned goods under Tariff heading 59.09 of CET1985 is well founded and maintainable.
30A. The products in question are not 'cotton fabrics' or 'man made fabrics' but they are admittedly special woven fabrics. Special woven fabrics fall under chapter heading 58 and more specifically under sub-heading 58.06 but as the goods are having 'industrial use' the classification under heading 59.09 is appropriate.
31. The Collector (Appeals) Bombay in the impugned revenue appeal has not examined the case in the light of note 6(b) of Chapter 59 CET 1985 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 1985 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 the products are having specific use as belting or as a filter cloth. Therefore, the assessee's contention that the goods is put to industrial use only after the process of impregnation is not substantiated and not tenable.
33. The next question raised is with regard to the demands being time barred. There is substance in the appellant's contention. It is seen that the GP-1 and the invoices had carried a clear description as noted above. In case the appellant had not shown these descriptions on the GP-1 and invoices, than certainly the demands for larger period would have been sustainable on the ground of suppression. The fact of nature of the goods has been clearly indicated in the GP-1 and invocies, of which knowledge the department were having, and therefore, the charge of suppression fails. However, the demands would be maintainable for six months as held by the Hon'ble Supreme Court in the case of TISCO v. CCE , Plasma Machine Manufacturing Co. v. CCE 1991 (31) ECC 221 : 1991 (32) ECR 1 (SC) ECR C 1679 SC, Elson Machines v. CCE 1989 (19) ECC 80 : 1988 (19) ECR 449 (SC) - ECR C 1311
34. The learned advocate contended that the Collector cannot exercise his jurisdiction for larger period under proviso to Section 11 A, as the Collector had filed review petition against the orders of the Assistant Collector. The learned advocate relied on the ruling of the tribunal rendered in the case of Modi Rayon & Silk Mills (supra). But this ruling has not been approved by the Honble Calcutta High Court in the case of ITC Ltd. v. Union of India . The court has held that if the view of the tribunal is accepted than it would result in disastrous effect and that would make the provisions of Section 11(B)(1) complete nugatory and unworkable. The court further held that if the view of the tribunal is accepted than it would produce a wholly unreasonable results and that the view taken by the tribunal is erroneous. Therefore, in view of this Hon'ble Calcutta High Court's ruling, we are not inclined to accept the ruling of the tribunal in Modi Rayon's case. As stated earlier, the Collector has powers to reopen approved classification under the proviso of Section 11 A, if it comes to the knowledge of the department about party's failure to inform or declare the correct particulars of the goods. In this case there were grounds available for this initial presumption and therefore the Collector has rightly exercised the jurisdiction under the proviso to section HA of the CE &S Act 1944. However, as we have held that the department cannot deny the knowledge of the nature of goods, the confirmation of demand for larger period is not maintainable and the same is set aside.
35. The learned Advocate contended that the classification had always been under TI19 and TI 22 of the erstwhile first schedule of CE & S Act 1944 and in view of the trade notices also, the classification under chapter 52 of CET 1985 should be maintained. It has to be observed in this context that there is a total restructuring of the tariff Act. The goods are to be classified on the basis of section notes, chapter notes and chapter headings. The previous TI 19 & 22 of erstwhile tariff Act had a broad heading encompassing all kinds of textile, textile-fabric, and it also included industrial textile fabrics, as had also been noted in the case of Multiple Fabrics (supra). Further, it has to be observed that tariff advices and departmental instructions are not binding on quasi judicial authorities exercising their functions under a statute as held by Honble Supreme Court in several rulings. Therefore, there is no merit in this contention of the learned advocate and the same is rejected.
36. In the result the revenue appeal in E. 2082/91-D is allowed; assessee's appeal E. 753/91-D is partly allowed, only to the extent of the demands of larger period beyond six months is held as time barred. Appeals E. 754 to E. 763/91-D are infructuous and that they are also rejected as not maintainable.