Customs, Excise and Gold Tribunal - Delhi
Collector Of C. Ex. vs Atlantic Spinning And Weaving Mills ... on 5 February, 1999
Equivalent citations: 1999(65)ECC99, 1999(111)ELT121(TRI-DEL)
ORDER
P.C. Jain, Vice President
1. None is present on behalf of the respondents inspite of notice of hearing sent by registered post on 2-9-1998. We have heard the learned JDR in support of the Revenue's appeal.
2. The respondents herein are engaged in manufacture of various types of yarns. They filed classification list No. 59/91-92 on 16-8-1991. The classification list was filed in respect of yarns of artificial staple fibre (ASF). The Assistant Collector approved the classification of the products listed at SI. Nos. 1 to 12 of the classification list without modification. However, in respect of products figuring at SI. Nos. 13 to 24 he ordered for provisional assessment pending final approval. They were issued a show cause notice as to why the products listed at SI. Nos. 13 to 24 should not be classified under sub-heading 5505.00 and why the rate of duty as at SI. No. 14(b) of Notification 53/91, dated 25-7-1991 should not be made applicable to these products.
2.1 The Assistant Collector approved the classification list with the concessional rate of duty at SI. No. 14(a) of the said Notification 53/91, as claimed by the respondents.
2.2 On application under 35E by the Assistant Collector concerned on the direction of the jurisdictional Collector, the Revenue did not succeed. Hence this appeal by the Revenue.
3. The issue before the Tribunal in this appeal of the Revenue is whether the yarn manufactured out of artificial staple fibre and departmental generated waste can be considered as to contain synthetic textile material so as to consider the yarn for concessional rate of duty as per SI. No. 14(a) or otherwise under Notification No. 53/91, dated 25-7-1991.
4. Before we deal with the applicability of the said notification to the product manufactured by the respondents herein, we set out the process of manufacture as given in the impugned order. The respondents purchased ASF, cotton and synthetic waste from outside. The said fibre undergoes various processes. During the process certain waste of these fibres are generated. When the fibres and waste are subjected to the processes, it is obvious that the waste collected would contain every kind of fibre or elements used in the process.
4.1 Lower appellate authority relying on Tribunal's judgment in the case of CCE v. Priyadarshini Spinning Mills Ltd. as also in the case of CCE v. Vardhan Syntex and Ors. has held that waste is not ASF. The Tribunal in the said judgment relying on an affidavit filed by the Director of Shriram Institute for Industrial Research, Delhi, held as under :-
"That it is essential to have the characteristic of uniform staple length, permanent crimp, uniform diameter strands cannot be classified as fibre.
That in the manufacture of fibre the above given properties are imported in various processes. However, these processes are in a continuous sequence and cannot be carried out individually. During these processes, at various stages because of interruptions like mechanical failures, electrical failures, etc. some material is rejected and removed as process waste. Such material does not possess the requisite properties and characteristics of fibre.
That in man-made textiles, waste which is obtained in the process of manufacture of fibre is different than the waste which is obtained when the fibres are used. It is possible to get the process waste only in man-made fibres whereas in natural fibres it is only the waste which is obtained in the use of such fibres. This is the important distinction between the natural fibres and man-made fibres.
Without the requisite properties of uniform staple length, uniform denier and cross section and permanent crimp, it is not possible to carry out the spinning process like carding, parallelisation of fibres on draw frames and drafting on ring frames. Though waste is incapable of being spun into yarn by itself and does not possess the characteristics of man-made fibre, yet some kinds of waste can still be used along with man-made fibre, in the process of spinning. In such case, it is such fibre which is essentially used and spun into yarn and since such fibre predominates in weight, they retain their spinnable capabilities despite being blended with some such waste.
In other words, it is not the waste which becomes spinnable but that man-made fibres continue to remain spinnable even though blended with some such waste.
That it is not possible to recover fibre from aforesaid process waste by some mechanical process. The only method is to subject the process waste to a chemical process where the polymer is deplomerised and basic raw material is obtained. In such process it is not possible to get the same quantity of raw material equivalent to the quantity of process waste. The recovered raw material is required to be again polymerised and pass through various processes to obtain the characteristics and properties of fibres."
In other words it was held, in short, that the synthetic waste utilised in the manufacture of ASF cannot be considered to be containing synthetic fibre.
4.2 The lower appellate authority after examining the Test Reports has held that the Chemical Examiner has tested only the samples of yarn in which case it is not possible to testify the character of the waste used in the yarn. Nevertheless, he finds that, no doubt, that the waste contains certain quantity of synthetic fibres of variable lengths but this itself would not make the waste as consisting of synthetic fibres because of non-uniform length and denierage of fibres contained in the waste. The waste is incapable of being spun into yarn. He further holds relying on Tribunal's judgment in Priyadarshini Spinning Mills' case above that to qualify as a stable fibre, the fibre should be of uniform length and denierage. Accordingly, he holds that the synthetic waste used by the respondents herein cannot be regarded as synthetic textile material. For the same reason he further holds that the appellants have manufactured yarn of ASF with the admixture of departmental generated waste or synthetic waste purchased from outside. Such waste would not be regarded to contain synthetic textile material. Hence he has held that such yarn is eligible to concessional rate of duty as per SI. No. 14(a) of Notification 53/91, dated 25-7-1991.
4.3 The lower appellate authority has also observed that the Revenue's appeal would have had some merit for review of the Order-in-Original passed by the Assistant Collector if it was based on firm grounds such as test reports of the samples drawn from the materials used in yarn i.e. before the material was taken for blending with ASF. In the absence of same the waste material either generated during the manufacture of yarn in their mills or procured from outside cannot be regarded to contain synthetic textile material.
5. Hence this appeal of the Revenue before us.
6. Revenue in its appeal has stated that the issue before the Collector of Central Excise (Appeals) was not to decide whether the waste used in the manufacture of yarn falling under Tariff sub-heading 5505.00 can be considered as staple fibre or not. This controversy was laid to rest by the Tribunal's judgment in Priyadarshini Spinning Mills's decision, supra [1990 (50) E.L.T. 145]. The original authority had decided the issue of classification of the yarn and the same has been accepted both by the respondents and the department. What was not accepted by the department was the decision that the yarn falling under Tariff sub-heading 5505.00 manufactured out of a combination of viscose fibre and synthetic (polyester) waste would attract duty as at SI. No. 14(a) of Notification No. 53/91-C.E., dated 25-7-1991. It is, therefore, urged that the lower appellate authority's reliance on Priyadarshini Spinning Mills as also on Tribunal's judgment in the case of CCE v. Vardhan Syntex and Ors. is totally irrelevant. It is also urged that it is not disputed by the respondents about the lack of total absence of synthetic textile material in the yarn being manufactured by the respondents. Finding of the lower authorities that the fibre waste and/or the sub-standard fibre waste used by the respondents cannot be called synthetic textile material for the purpose of determining the eligibility to the concessional rate of duty under the aforesaid notification, is incorrect inasmuch as they have equated the expression 'synthetic textile material' in exclusion clause of SI. No. 14(a) of Notification 53/91-C.E., to synthetic staple fibre. On the basis of meaning assigned to the terms 'synthetic', 'artificial' and 'manmade' in Note 2(d) to Section XI of the Schedule to CETA, 1985, the said Section Note, according to the Revenue only assigns meanings to the terms 'manmade fibre', 'synthetic fibre' and 'artificial fibre'. It also clarifies that the terms 'manmade', 'synthetic' and 'artificial' in relation to the textile material have the same meaning, as assigned to those terms in relation to fibre in Section Note. It is, therefore, erroneous, according to the Revenue for the lower authorities to draw from this Section Note the conclusion that waste cannot be textile material.
6.1. This view of the Revenue is sought to be strengthened by insertion of Explanation to the aforesaid notification on 1-3-1992 vide Notification No. 23/92-C.E., it is urged that the said Explanation inserted on 1-3-1992 is only clarificatory in nature and the Notification 53/91-C.E. should be construed, as urged by the Revenue even for the period prior to 1-3-1992.
6.2 The aforesaid grounds urged in the memo of appeal have been reiterated by the learned JDR, Shri R.S. Sangia in support of the Revenue's appeal.
7. We have considered the submissions of the learned JDR. We have also gone through the impugned order and the Order-in-Original both of which are against the Revenue. Lower authorities' orders have held that use of synthetic waste alongwith ASF for the purpose of manufacturing yarn of ASF does not mean that the yarn contains any synthetic material. For arriving at their findings the lower authorities have relied on Tribunal's judgment in the case of Priyadarshini Spinning Mills, supra which was a case of classification of a yarn using non-synthetic waste. It was held that yarn manufactured out of ASF and non-synthetic waste cannot be considered as falling under 55.06 which reads as "yarn, (including sewing thread) of Artificial Staple Fibre containing Synthetic staple fibre". The said yarn was held to fall under 55.05 which reads as "yarn (including sewing thread) of Artificial Staple Fibre, not containing synthetic staple fibre". Simple reasoning and finding of the Tribunal based on plethora of evidence and technical opinion was that use of synthetic waste cannot be equated to use of synthetic staple fibre for the purpose of manufacturing yarn of ASF. Since synthetic waste could not be equated to synthetic staple fibre, therefore, Tariff Heading 55.06 was ruled out and Tariff Heading 55.05 was adopted.
8. In the present case, we are to examine whether in view of the admitted use of synthetic waste (whether internally generated or purchased from outside) would entitle the respondents to the benefit of SI. No. 14(a) of Notification 53/91-C.E., as it stood before 1-3-1992. In order to examine this question, it is appropriate to set out the relevant SI. No. 14 of the said Notification :-
________________________________________________________ SI. Heading/ Description Rate No. Sub- of goods heading ________________________________________________________
14. 55.05 Yarn (including sewing thread) of artificial staple fibre.
(a) not containing any synthetic material
(i) of counts not 1.85 paise per count exceeding 25 per kilogram
(ii) of counts 46.20 paise plus 4.62 exceeding 25 but paise per count per not exceeding 35 kilogram exceeding 25
(iii) of counts 92.40 paise plus 7.39 exceeding 35 paise per count per kilogram exceeding 35
(b) others Rs. 8.00 per kilogram ________________________________________________________ We observe that the expression used in the Notification in the relevant SI. No. 14(a) is "not containing any synthetic textile material". SI. No. 14(a) of the said Notification reads as "yarn (including sewing thread) of artificial staple fibre, (a) not containing any synthetic textile material". Had the entry read as "yarn (including sewing thread) of artificial staple fibre, (a) not containing any synthetic staple fibre", the judgment of the Tribunal in Priyadarshini Spinning Mills could be relied upon because synthetic staple fibre could not be equated to synthetic waste. In the present case, yarn of Artificial Staple Fibre covered by SI. No. 14(a) of the said Notification 53/91-C.E. excludes yarn of ASF which contains any synthetic textile material. It is not disputed by the respondents that the yarn manufactured by them contains non-cellulosic synthetic waste (NCSW) i.e. it is a synthetic material. This meaning of the expression 'synthetic textile material' clearly emerges from Section Note 2(D) of Section XI which is reproduced below :-
"(D) Throughout this Schedule, 'man-made fibres' means staple fibres and filaments of organic polymers produced by manufacturing process, either:
(i) By polymerisation of organic monomers, such as polyamides, polyesters, polyurethanes or polyvinyl derivatives; or
(ii) By chemical transformation of natural organic polymers (for example, cellulose, casein, proteins or algae), such as viscose, rayon, cellulose acetate, cupro or alginates.
The terms 'synthetic' and 'artificial' used in relation to fibres means synthetic fibres as defined at (i); artificial fibres as defined at (ii).
The terms 'man-made', 'synthetic' and 'artificial'; shall have the same meanings when used in relation to 'textile materials."
9. Sum and substance of the aforesaid explanation is that it provides definition of the following different terms:-
(1) man-made fibres, (2) artificial fibre, (3) synthetic fibre, and (4) man-made textile material, (5) artificial textile material, (6) synthetic textile material.
Man-made fibre by this definition includes both artificial fibre and synthetic fibre. Man-made textile material will include therefore, both synthetic material and artificial textile material. Synthetic fibre means staple fibres and filaments of organic polymers produced by manufacturing process by polymerisation of organic monomers, such as polyamides, polyesters, polyurethanes or polyvinyl derivatives. Similarly, synthetic textile material will also be textile materials of organic polymers produced by manufacturing process by polymerisation of organic monomers, such as polyamides, polyesters, polyurethanes or polyvinyl derivatives. In similar fashion artificial fibre would be staple fibres and filaments of organic polymers produced by manufacturing process by chemical transformation of natural organic polymers (for example, cellulose, casein, proteins or algae), such as viscose, rayon, cellulose acetate, cupro or alginates. Likewise artificial textile material will mean textile material of organic polymers produced by manufacturing process by chemical transformation of natural organic chemicals (for example cellulose, casein, proteins or algae), such as viscose, rayon, cellulose acetate, cupro or alginates. Non-cellulosic synthetic waste is classifiable under Tariff Heading 55.03. Therefore, non-cellulosic synthetic waste can be considered as a synthetic textile material falling under the said Heading. The said Note 2(D) of Section XI makes a clear distinction between 'textile material' and 'fibres' when used in the context of terms 'man-made', 'artificial' and 'synthetic'.
10. In view of the foregoing discussion, finding of both the lower authorities has gone wrong by equating synthetic staple fibre to synthetic material as given at SI. No. 14(a) of Notification 53/91-C.E. despite the definition of the said expression 'synthetic textile material' in Section Note 2(D) of Section XI of the Schedule to CETA, 1985. We note that the notification has no separate definition of the expression 'synthetic textile material'. Therefore, we have to adopt the definition of that expression in Section Note 2(D) of the Tariff.
10.1 It is not disputed by the respondents that they had been using NCSW, either internally generated or by purchasing from outside, in the manufacture of their yarn of artificial staple fibre. Therefore, the terms of SI. No. 14(a) of Notification 53/91-C.E. are not satisfied so far as the product under consideration is concerned. Consequently, the benefit of lower duty in terms of the said serial number would not be available to the products. Instead, the higher rate as provided in SI. No. 14(b) of the said notification would be applicable to the product under consideration.
11. In the other two appeals of the assessees, Shri K.K. Anand, learned Advocate has appeared. Issue involved in these two appeals is also the same, as mentioned above in the case of Atlantic Spg. & Wvg. Mills whether the benefit of Notification 53/91-C.E. under SI. No. 14(e) [now Notification No. 31/93, SI. No. 47(a) of the Table to the said notification can be granted to the ASF containing NSCW. Learned Advocate has advanced the same arguments as discussed above, namely that synthetic waste cannot be treated as a fibre and therefore, the benefit SI. No. 14(a) of Notification 53/91-C.E. will be available to the product. This contention, as already discussed above, emanates from equating the expression 'synthetic textile material' used in SI. No. 14(a) of the Notification to the expression 'synthetic staple fibre' which is not so in view of the definition of the various terms given in Section Note 2(D) of Section XI of CETA, 1985.
11.1 Yet another argument that has been advanced is that it is contradictory to hold the classification under Tariff Heading 5505 and yet deny the benefit of SI. No. 14(a) of Notification 53/91. In our view there is no contradiction because, as already pointed out, Tariff Heading 5505 does not take within itself classification of "yarn of artificial staple fibre containing any synthetic staple fibre". It is very clear that use of NCSW does not mean use of, or containing synthetic staple fibre, as held by the Tribunal in Priyadarshini Spinning Mills which has since been confirmed by the Apex Court. But the expression used in SI. No. 14(a) is not 'synthetic staple fibre' but it is 'synthetic textile material'. The two expressions are totally different. The expression 'synthetic textile material' cannot be equated to the expression 'synthetic staple fibre' on the basis of the definition given in Section Note 2(D) of Section XI of the Tariff. Further, this distinction has now been made amply clear by inserting the Explanation on 1-3-1992 vide Notification 23/91 in Notification 53/91.
12. No other points has been pressed by the learned Advocate.
13. In view of the foregoing discussion, the appeal of Revenue is allowed and appeals of M/s. Modern Syntex (I) Ltd. and M/s. Modern Thread (India) Ltd. are dismissed.