Customs, Excise and Gold Tribunal - Calcutta
Madura Coats Ltd. vs Commissioner Of Central Excise, ... on 17 April, 2002
Equivalent citations: 2002ECR890(TRI.KOLKATA), 2002(144)ELT321(TRI-KOLKATA)
ORDER V.K. Agrawal, Member (T)
1. The issue involved in this Appeal filed by Madura Coats Ltd., is whether the tyre cord fabric manufactured by them is classifiable under Heading 59.02 of the Schedule to the Central Excise Tariff Act as claimed by them as tyre cord fabric of high tenacity yarn or under Heading 59.09 of the Tariff as decided by the Commissioner of Central Excise under the impugned Order.
2. Shri S.S. Thakur, learned Vice President (Finance) of the Appellant Company, submitted that the Appellants Company manufacture grey tyre cord fabrics for tyre manufacturers on job work basis; that they used to do this job work mainly for Dunlop (I) Ltd. and also for Modi Rubber Ltd.; that the said Customers used to supply high tenacity yarn to them for conversion into grey tyre cord fabrics; that their classification lists claiming classification under Heading 59.02 as 'tyre cord fabrics of high tenacity yarn' were approved by the Department from time to time; that a show cause notice dated 25-2-93 was issued for classifying the impugned product under Heading 59.09 on the basis of a test report from National Test House regarding the tenacity of the fabric and for demanding Central Excise duty for the period from February, 1988 to August, 1992; that the Commissioner under Order dated 29-12-1999 confirmed the demand and levied penalty and interest on the ground that the Appellant did not produce any document to prove that they had received high tenacity yarn from their customers; that on Appeal filed by them, the Appellate Tribunal vide Order No. A-977/CAL/2000, dated 11-1-2000 remanded the matter for de novo adjudication and directed the Commissioner to provide the Appellants with an opportunity to produce the documents which they could not have produced due to closure of the factory of Dunlop (I) Ltd. The learned Vice President, further, submitted that they had produced substantial documents from Dunlop (I) Ltd. and Modi Rubber Ltd. including representative Customs assessed Bills of Entry assessing the relevant yarn as high tenacity yarn under Heading 54.02, a fresh Certificate from Dunlop confirming supply of high tenacity yarn; that they also produced certificates from two independent textile experts to substantative their contention of usage of high tenacity yarn; that the Commissioner, however, passed the impugned Order classifying the impugned product under Heading 59.09, confirming the duty and imposing penalty.
3. The learned Vice President mentioned that impugned Order has been passed in violation of the directions given by the Tribunal in earlier Order; that if the Commissioner was of the opinion that the documents of Dunlop had no evidentiary value he should have challenged the Tribunal's Orders. He referred to the decision in the case of ITC Ltd. v. CCE, Bangalore -1998 (104) E.L.T. 151 (T). He also mentioned that having failed to challenge the said Order, the Adjudicating Authority was duty bound to abide by the directions issued in it; that once they had produced documents like Bills of Entry from their customers in which the Customs Authorities had assessed the yarn as high tenacity yarn, documentary proof of that yarn having been sent to the Appellant for conversion and Certificate from Dunlop that they had supplied the high tenacity yarn, the demand of duty should have been dropped. He also submitted that no reasons have been mentioned in the show cause notice for classifying the impugned product under Heading 59.09 of the Tariff; that it has been held in Titan Industries Ltd. v. CCE, Coimbatore, 2001 (134) E.L.T. 220 (T) = 2001 (42) RLT 791 (CEGAT) that the SCN issued to the notice should have brought out the grounds very clearly, for the noticee to meet the same along with the reasons as to why the classification approved was required to be altered; that a bland statement that the impugned goods are classifiable under Heading 59.09 is insufficient notice and proceedings pursuant to that are bad in law being violative of principles of natural justice. The learned Vice President, further, submitted that the impugned product cannot be classified under Heading 59.09; that Note 6 to Chapter 59 clearly states that Heading 59.09 applies to textile products specified in Clause (a) and textile articles specified in Clause (b) of that Note; that by no stretch of imagination the impugned products which were cleared in lengths of 200 to 500 meters rolls could be termed as textile articles under Clause (b); that this is also clear from the clarification given in CBEC's Circular No. 22/88-CX. I, dated 10-8-1988 which clearly states that only such articles which can directly be used for industrial purposes would be covered under Heading 59.09; that it has been held in Kumar Enterprises v. CCE, Chandigarh, 1999 (105) E.L.T. 498 (T) that the logic given by the Board in the clarificatory Circular would apply to the disputes arising out of the earlier notification also. He, also, relied upon the decision in Batliboi & Co. Ltd. v. CCE, Baroda, 2000 (115) E.L.T. 67 (T). He, further, submitted that the fabric was not rubberized by them and had not undergone any other process after weaving which could make it suitable for use in any industrial purpose; that in fact, the said fabrics were rubberized at the Customers' factories in their Dipping plants before being used for the manufacture of tyres; that their product also does not fall under Clause (a) of Note 6 as it cannot be termed as 'in the piece' or 'cut to length' because 'piece' denotes a length of approximately 73.15 to 91.44 meters and 'cut' denotes a length of approximately 54 meters. He relied upon the decision in the case of Madura Coats Ltd. v. CCE, Madras, 1999 (106) E.L.T. 213 (T). Reliance was also placed on the decision of the Larger Bench of the Tribunal; in the case of Jyoti Overseas Ltd. v. CCE, Indore, 2001 (130) E.L.T. 446 (Tri. - LB) = 2001 (44) RLT 37 (CEGAT) wherein the scope of Heading 59.11 (earlier 59.09) was interpreted by holding that "if the goods manufactured by the Appellants fall in any other Heading of Section XI, it cannot be classified under Chapter Heading 59.11. Further, for a particular product to be classified under Heading 59.11, it must be a textile product falling under Clause (a) ..... or a textile article contemplated by Clause (b) to the Note ".....
The gray cotton fabrics ..... which were cleared in running length, can never be classified as an item falling under Heading 59.11. He relied upon the decision in the case of Fargo Mantle Products Ltd. v. CCE, Mumbai-V [2000 (122) E.L.T. 452 (T) = 2001 (43) RLT 116 (CEGAT)].
4. The learned Vice President also contended that the test report of National Test House, Alipore, mentions 'non woven cord fabric' and as such the product cannot be classified under Chapter 59 which is meant for woven fabrics alone as per Note 1 to Chapter 59; that it has been admitted so in the earlier Adjudication Order No. 11/99, dated 29-12-99; that the test report of a fabric sample made out of one lot of yarn cannot be applied to fabrics made out of lots of yarn received prior to or after the receipt of the said lot and would be restricted in application only to those fabrics made from that particular lot of yarn. He relied upon the decision in the case of Doddaballapur Spinning Mills Ltd. v. Assistant Collector of Central Excise -1992 (61) E.L.T. 539 (Kar.) and CCE, Coimbatore v. Cambodia Mills Ltd. - 2001 (128) E.L.T. 373 (Mad.). Finally it was submitted that the demand is time barred as they were clearing the goods as per the approved classification lists; that as such there is no justification for invocation of extended period of limitation; that their classification under Heading 59.02 was accepted by the Department even after the issuance of the show cause notice.
5. Countering the arguments, Shri Roy Chowdhary, learned Advocate for the Revenue, submitted that Heading 59.02 of the Tariff applies only to "Tyre cord fabric of high tenacity yarn of polyamides, polyesters or viscose rayon"; that the National Test House's Test Report dated 31-5-1994 clearly mentioned that tenacity was 48.6 CN/tex as against 55 CN/tex as per Note 4 to Section XI of the Central Excise Tariff; that the sample was tested by the Test House on lines of IS 4910 (Pt 2) 1968. He, further, submitted that words non-woven is written in the Test Report as the fabric is not technically woven material; that the fabric is like a net and not a woven fabric in general; that the Appellants themselves have claimed the impugned goods to be woven fabrics. He also mentioned that as the Appellants are claiming the benefit of Notification No. 63/87-C.E. the onus of proof is on them to prove that the fabric is of high tenacity yarn which they have not proved; that the Appellants have failed to provide documents to prove high tenacity character of the fabric; that Board's Circular refers to tyre cord fabrics of cotton base only because it requires some processing before use which is not so in respect of other fabrics; that fabrics by itself is a product and it is being directly used for industrial use and accordingly it is classifiable under Heading 59.09 only. The learned Advocate, further, mentioned that impugned fabrics is also not classifiable under Heading 54.08 of the Tariff which applies to fabrics of general purpose; that demand is not time barred as the Appellants deliberately suppressed the information regarding the tenacity of the impugned goods. Reliance has also been placed on the decision in the case of Madras Fertilizers Ltd. v. Assistant Collector of Central Excise, Madras, 1994 (69) E.L.T. 625 (S.C). In reply the learned Vice President mentioned that the test was not conducted as per the letter and no allowance has been given.
6. We have considered the submissions of both the sides. The Tribunal, vide Final Order No. A-977/CAL/2000, dated 11-1-2000 observed that "a claim has been made before us by the Appellants that they are in a position to produce the relevant documents showing use of high tenacity yarn in the manufacture of fabrics which could not be produced by them earlier on account of closure of Dunlop (I) Ltd. factory". The Tribunal, therefore with a view to provide an opportunity to produce the documents before the Adjudicating Authority, remanded the matter to the Adjudicating Authority. The Appellants produced before the Adjudicating Authority representative Bills of Entry assessing the yarn as high tenacity yarn, a Certificate from Dunlop (I) Ltd, confirming supply of high tenacity yarn and details of material supplied and received by them during the relevant period. They also produced certificates from the textile experts to substantiate their claim. The Adjudicating Authority has given his findings in respect of these documents in the impugned Order. According to him, the Appellants had produced Bills of Entry only in respect of 2,13,141 kgs of Yarn whereas they manufactured and removed 55,87,654 kgs. of fabrics and the quantity of yarn imported was only around 4%. The Adjudicating Authority has, therefore, not accepted those Bills of Entry as document proving the high tenacity of the yarn used. We do not find any infirmity in the findings of the Commissioner. The claim of the Appellants before the Tribunal was that as Dunlop was not working, documents like B/E, invoices of foreign supplies etc, showing the importation of yarn could not be placed before the Department The Tribunal had remanded the matter only for this purpose. The Appellants have thus failed to produce the necessary documents as promised by them. National Test House, Alipore, on retest has reported the tenacity in CN/tex 48.6 only which is less than the tenacity specified in Note 4 to Section XI of the Tariff. The Certificate given by Dunlop India Ltd. cannot be over and above the test report given by the National Test House. The letter dated 12-6-2000 from College of Textile Technology is only comment on raw material of Nylon Tyre Cord produced by the Appellants. It is not clear at all whether the College conducted any test at all. Similarly Vardya & Associates, Textile Consultant, have given a general opinion without carrying out any test. Accordingly we are of the view that a Test Report given after conducting test by National Test House cannot be discarded on the basis of general opinion tendered by a Textile Consultant and College. The Appellants have thus not succeeded in establishing their claim that the impugned product is fabric of high tenacity yarn. On the other hand the Revenue has established by producing Test Report that the fabric in question is not of high tenacity yarn.
Accordingly the benefit of Notification claimed by them is not available to them. The ratio of the decision in the case of Doddaballapur Spinning Mills and Combodia Mills is not applicable as the burden is on the Appellants to prove that they fall within the ambit of the Notification.
7. We also find no infirmity in the classification of the impugned product under Heading No. 59.09 at the relevant time. The fabrics woven by the Appellants is used for industrial use only. The Adjudicating Authority has given his findings that Note 1 to Chapter 59, the condition of woven fabrics is not applicable "where the context otherwise requires". Heading 59.09 is a residuary Heading which applies to "all other textile products and articles of a kind suitable for industrial use". The extended period of limitation is invocable in the present matter as the Appellants never disclosed that the fabrics in question was not of high tenacity yarn. The approval of classification lists by the Department will not absolve the Appellants of mis-declaring the characteristics of the fabrics in question. It has been held by the Appellate Tribunal in the case of Step Cosmetics v. CCE, 1996 (89) E.L.T. 734 (T) that "the Revenue acts on the basis of the declaration filed by the assessee. In the nature of the things, the declaration had to be correct and all relevant facts had to be correctly stated therein. By filing incomplete/incorrect declaration, and by withholding vital facts which are only within the knowledge of the assessee it could never be a valid defence that the Revenue should have unearthed the full and correct facts which the assessee had sought to suppress". There is no force in the submissions of the Appellants that the whole exercise is revenue neutral as the duty paid at their end is modvatable at Customer's end. The Larger Bench of the Tribunal has held in the case of Jay Yushin Ltd. v. CCE, New Delhi, 2000 (119) E.L.T. 718 that with particular reference to Modvat Scheme it has to be shown that the Revenue neutral situation comes about in relation to the credit available to the assessee himself "and not by way of availability of credit to the buyer of the assessee's manufactured goods". However, we feel that the penalty imposed is on the higher side. We, therefore, reduce the same to Rs. 9 Lakhs.
8. The Appeal is thus disposed in these terms.