Custom, Excise & Service Tax Tribunal
) Arunachala Gounder Textile Mills (P) ... vs Commissioner Of Central Excise, Salem on 14 December, 2010
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal Nos.E/1064/04, E/1085/04 & E/387/08
[Arising out of Order-in-Appeal No.253/2004-CE (SLM) dt. 14.5.2004, OIA No.271/2004-CE (SLM) dt. 31.5.2004 & OIA No.37/2008-CE (SLM) dt. 12.5.2008 respectively passed by the Commissioner of Central Excise (Appeals), Salem]
For approval and signature:
Honble Ms. JYOTI BALASUNDARAM, Vice-President
Honble Dr. CHITTARANJAN SATAPATHY, Technical Member
1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? :
2. Whether it should be released under Rule 27 of the
CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? :
3. Whether the Members wish to see the fair copy of
the Order? :
4. Whether Order is to be circulated to the Departmental
Authorities? :
1) Arunachala Gounder Textile Mills (P) Ltd.
2) P.K.P.N.Spinning Mills (P) Ltd.
3) Pallipalayam Spinners Private Ltd.
Appellant/s
Versus
Commissioner of Central Excise, Salem
Respondent/s
Appearance :
Ms.L.Maithili, Advocate
Shri T.H.Rao, SDR
For the Appellant/s
For the Respondent/s
CORAM:
Honble Ms. Jyoti Balasundaram, Vice-President
Honble Dr. Chittaranjan Satapathy, Technical Member
Date of hearing : 14.10.2010
Date of pronouncement :14.12.2010
Final Order No.____________
Per Jyoti Balasundaram
These three appeals involve a common issue of classification of cotton lycra core spun yarn manufactured by all three appellants and are hence heard together and disposed of by this common order the claim of the assessees is that the goods fall for classification under CET sub-heading 5205.90 while, according to the Revenue, they fall under CET sub-heading 5205.11/5606.00.
2. E/387/2008 Pallipalayam Spinners Pvt. Ltd. The assessees had claimed classification of the goods under CET sub-heading 5205.11 until Nov2000. With effect from December 2000, they filed a fresh declaration claiming classification under CET sub-heading 5205.90. Two show-cause notices one dt. 1.6.2001 covering the period May 2000 to March 2001 and the other dt. 3.5.2002 covering the period April 2001 to August 2001 were issued. The first notice proposed classification under Chapter Heading 56.06 while the second one proposed classification under CET sub-heading 5205.11. The first notice was adjudicated by the
Asst. Commissioner vide order dt. 30.8.2001, rejecting the proposed classification under chapter heading 56.06 on the ground that covered spandex yarn (goods in question) is not similar to gimped yarn (Heading 56.06 inter alia covers gimped yarn) both in composition and usage and classifying the goods under CET sub heading 5205.11 as single yarn containing 85% or more by weight of cotton in or in relation to manufacture of which any process is ordinarily carried on with the aid of power. The demand for the period Dec 2000 to March 2001 was confirmed and the demand for the period June 2000 to Nov 2000 was dropped as the appellant had already discharged the duty liability applicable under CET sub- heading 5205.11 during this period. The demand for the period April 2001 to August 2001 was confirmed by order dt. 26.7.02 of the Asst. Commissioner, upholding the proposal in the show-cause notice for classification under CET sub-heading 5205.11. Appeals were filed by the assessees before the Commissioner (Appeals), Salem; the appeal covering the period May 2000 to March 2001 was dismissed by the Commissioner (Appeals) vide Order-in-Appeal dt. 12.7.2002 and the appeal for the subsequent period upto August 2001 was also dismissed by the Commissioner (Appeals) vide order dt. 11.5.04. Both the appeals were disposed of by the Tribunal vide Final Order No.695 & 696/05 dt. 13.4.05 by way of remand to the original authority with a direction to adjudicate the case afresh after considering the SITRAs certificate dt. 21.10.03 and any other expert opinion pertaining to the goods in question. The assessees filed written submissions dt. 12.1.06 along with copies of SITRAs opinion dt. 3.3.03, SITRAs opinion dt. 22.1.03 given to the assessees sister concern M/s.PKPN Spinning Mills (P) Ltd. relating to identical goods, certificate dt. 21.1.03 issued to M/s.Sethu Textile Consultancy, Bangalore and invoices to establish that in trade parlance the goods were known as Cotton Spun Yarn and not as Single Yarn. Vide Order-in-Original dt.27.12.06, the Deputy Commissioner accepted the claim of the assessees for classification under CET sub-heading 5205.90; the department challenged the order by filing appeal before the Commissioner (Appeals), seeking classification under chapter heading 56.06 and the Commissioner (Appeals) vide impugned order, allowed the Revenues appeal for classification under CET sub-heading 5606.00.
3. Appeal Nos.E/1064 & 1085/04 - Arunachala Gounder Textile Mills (P) Ltd. & M/s. P.K.P.N.Spinning Mills (P) Ltd.
In the case of PKPN Spinning Mills, out of five SCNs issued, four notices covering the period September 2000 to 15.10.2001 proposed classification under chapter heading 56.06 and one SCN covering the period 16.10.01 to Feb 2002, proposed classification under CET sub-heading 5205.11/19.
In the case of Arunahcala Gounder Textile Mills, three SCNs were issued; notice dt. 2.1.2002 covering the period December 2000 to June 2001 proposed classification under CET sub-heading 5606.00 while the other two notices dt. 1.8.02 and 31.12.02 covering the period July 2001 to Nov01 and Dec01 to Feb02 respectively proposed classification under CET sub-heading 5205.11/19.
4. The adjudicating authority classified the goods under CET sub-heading 5205.11 and confirmed demands accordingly and the adjudication orders were upheld by the Commissioner (Appeals).
5. We have heard both sides. Lycra Core Spun Yarn/ Spandex is composed of core of lycra/spandex surrounded by staple fibres. The manufacturing process consists of feeding of filament yarn namely Spandex to a spinning frame where it is sheathed by cotton fibres which are fed in the form of rovings of cotton.
6. Heading 56.06 covers Gimped Yarn and strip and the like of heading 54.04 or 54.05 . For a yarn to be considered as gimped yarn, both core yarn and the covering material should be yarns. In the instant case, although core yarn is a filament yarn, covering material is cotton roving/cotton fibre which has not been spun into yarn. Classification under Chapter Heading 56.06 is based on tariff entry that existed prior to its amendment w.e.f. 1.3.95. Prior to amendment, chapter heading specifically included special yarn. With the amendment, the Central Excise Tariff for Chapters 50-63 (except 61 & 62) were broadly aligned with first Schedule to the Customs Tariff Act, 1975 and corresponding changes were also made in the tariff relating to additional excise duty in lieu of sales tax. The relevant extract from the Finance Act, 1995 is reproduced herein below :-
Textiles (Chapters 50 to 63) : Alignment of Tariff with Customs Tariff.-
The Central Excise Tariff for Chapters 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60 and 63 (except 61 and 62) have been broadly aligned with the First Schedule to the Customs Tariff Act, 1975. Corresponding changes have also been made in the tariff relating to Additional Excise Duties in lieu of sales tax. [Fourth and Fifth Schedules to the Finance Bill, 1995]
The existing section Notes 1 and 2 are being fully aligned with the corresponding notes in Customs Tariff Act. One important consequential change will be in the classification of goods containing more than one textile material where no textile material predominates by weight. Now such goods are to be classified as if consisting only of that one textile material which is covered by the heading which occurs last in numerical order among those which equally merit consideration, rather than application of the erstwhile criterion of classification in such cases in the heading having highest amount of duty payable. Existing paragraph D of Section Note 2 has been shifted to Chapter 54 as Note 1. [Fourth and fifth Schedules to the Finance Bill, 1995]
Note 12 is being substituted by a note so as to provide the definition of twine, cordage, ropes and cables. Note 13 is being omitted. Instead, SUB-HEADING Notes have been added on the lines given in the HSN for defining various expressions as well s the rule for classification of the products for Chapters 56 to 63 containing two or more textile materials. [Fourth Schedule to the Finance Bill, 1995].
7. In the post-amendment period, the words other special yarn were deleted from Heading 56.06 and therefore only gimped yarn etc. remained. Simultaneously, a new entry at four digit level namely 5205 was introduced and the tariff became fully aligned with HSN. Since the core yarn is surrounded by staple fibre and not by yarn, the further finding of the Commissioner (Appeals) that core yarn does not undergo twist and therefore the subject goods are akin to gimped yarn under chapter heading 56.06 falls to the ground. It is also pertinent to note that the goods in dispute are used exclusively for manufacture of elastic textiles like socks, swimming materials etc. which is distinct from the use to which core yarn is put. The decision of the Tribunal in Rajasthan Spinning & Weaving Mills [2001 (133) ELT 126] is not applicable to the goods in question as in that case the goods consisted of yarn and not fibre spirally wound around another yarn and further for the reason that relevant tariff headings during the period of dispute in that case were entirely different from those during the period involved in the case of Pallipalayam Spinners Pvt. Ltd.
8. Classification under CET sub heading 5205.90 as claimed by the assessees is ruled out in the light of Tribunals decision in CCE Ahmedabad Vs ARCEE Nettings [1999 (110) ELT 680]. In that case, the respondents manufactured round mesh mosquito nettings which were being classified under CET sub- heading 5804.90. In the 1995 budget, the sub-headings under chapter heading 58.04 were amended. The respondents filed classification list thereafter, continuing to claim classification under CET sub-heading 5804.90. The Asst. Commissioner held that the goods would be classifiable under CET sub-heading 5804.11; this finding was set aside by the Commissioner (Appeals) who accepted the claim of the assessees for classification under CET sub-heading 5804.90; the Tribunal set aside the order of the Commissioner (Appeals). Para 4 & 5 of the above decision are reproduced herein below :-
4. We have carefully considered the submission. The Heading 58.04 as it existed prior to the amendment in 1995 and thereafter is as follows :
Pre-budget :
58.04 Tulles and other net fabrics, not including woven, knitted or
crocheted fabrics; lace in the piece, in strips or in motifs.?
- Lace in or in relation to the manufacture of which any process is
ordinarily carried on with the aid of power or steam:?
5804.11 - - Of cotton 10% 5%
5804.12 - - Of man made textile materials Nil 10% + 2.10 per sq.
5804.19 - - Other 15%
5804.90 - Other 15%
Post-budget :
58.04
Tulles & other net fabrics, not including woven, knitted or crocheted fabrics; lace in the piece, in strips or in motifs.
- in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power or steam :
5804.11
- - of cotton
20%
20%
5804.12
- - of man-made fibres
20%
20%
5804.19
- - of other textile material
15%
5804.90
- other
Nil
According to the General Explanatory Notes to the CETA -
where in column (3) of the Schedule, the description of an article or group of articles under a heading is preceded by - (single dash) the said article of group of articles shall be taken to be a sub-classification of the article or group of articles covered by the said heading, where, however, the description of an article or group of articles is preceded by - - (double dash), the said article or group of articles shall be taken to be a sub-classification of the immediately preceding description of the article or group of articles which has (single dash).
5. Reading the Heading 58.04 prior to its amendment? accordingly, it then follows that when the description lace .... power or steam was preceded by (single dash) and sub-headings 5804.11, 5804.12 and 5804.19 occurring thereafter were preceded by (double dash) it would mean that these three were sub-classification of immediately preceding description, lace. In that context, Tulles and net fabrics would only be covered by the residuary sub-heading 5804.90. But after the amendment the description in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power or steam is preceded by a single dash, and therefore, when the sub-headings 5804.11, 5804.12 and 5804.19 which follow and which are preceded by double dash have to be read as sub-classification of the description in the main Heading 58.04. Hence, the Asstt. Commissioner is right when he held that with the amendment in the Heading 58.04, items other than lace manufactured with the aid of power which were earlier classified under sub-heading 5804.90 will also now fall for classification under sub-heading 5804.11 or 5804.12 or 5804.19 depending on the material of which they are made. In the present case, the round mesh mosquito nets being made of cotton have rightly been classified under sub-heading 5804.11 CETA. The conclusion of the Commissioner (Appeals) that they will continue to be classifiable under the residual sub-heading 5804.90 is unsustainable because that sub-heading after the amendment would cover only Tulles, net fabrics and lace other than those in the manufacture of which power or steam is used, and in respect of the goods in question that admittedly is not the case.
The same is the decision in Venkys Fast Food Vs CCE Pune
[2000 (124) ELT 939]. In that case, the assessees were manufacturers of Chicken Kabab, Chicken Kathi Kabab, Chicken Kofta etc. and filed classification list classifying the goods under CET sub-heading 1601.90 attracting NIL rate of duty whereas the department held that the goods were classifiable under CET sub-heading 1601.19. The Tribunal upheld the finding of the excise authorities, after considering the HSN Explanatory Notes and the arrangement of single dash and the double dash preceding the description of the goods in the sub-headings. Relevant paragraphs of the Tribunals decision are reproduced herein below :-
12. The third contention of the? appellants is that the products in question were classifiable under sub-heading 1601.90 and not under 1601.19 of the CET. Chapter 16 is reproduced below :
Preparations of Meat, of Fish or of Crustaceans, Molluscs or other Aquatic Invertebrates
Heading No.
Sub-heading No.
Description of goods
Rate of duty
16.01
Preparations of Meat,, of Fish,, or of Crustaceans, Molluscs or other Aquatic Invertebrates, including sausages and similar products, extracts and juices, prepared or preserved fish and caviar and caviar substitutes
-
Put up in unit containers and ordinarily intended for sale :
1601.11 - -
Cooked, peeled and frozen prawns and shrimps Nil 1601.19 - -
Other 15% 1601.90 -
Other Nil The contention of the appellants is that the products in question are other preparations of meat and are not cooked, peeled and frozen. So these are covered under sub-heading 1601.90 of CET.
13. We find that the General? Explanatory Notes to the CET provides that where in Col. 3 of the Schedule, the description of an article or group of articles under a heading is preceded by -, the said article or group of articles shall be taken to be a sub-classification of the article or group of articles covered by the said heading. Where, the description of an article or group of articles is preceded by -, the said article or group of articles shall be taken to be a sub-classification of the immediately preceding description of article or group of articles. As discussed above we find that the products in question are preparation of chicken meat which are fried. From this General Explanatory Note we find that the products in question are rightly classifiable under sub-heading 1601.19 of the tariff as cooked-preparation of meat of Chicken other than prawns and shrimps put up in a unit containers and ordinarily intended for sale.
9. In the case of CCE Bombay Vs Hindustan Metal Processing Works [1998 (97) ELT 516], the Tribunal has held that the condition preceded by single dash is applicable to sub-classification of the heading and not applicable to the other classification preceded by a single dash.
4. We have heard both sides. For the sake of clarity? we reproduce the description of the headings as given in Central Excise Tariff working schedule as on 30-4-1986.
83.12 Containers of base metal
-
Containers ordinarily intended for packaging of goods for sale, including collapsible tubes, casks, drums, cans, boxes, gas cylinders and pressure containers, whether in assembled or unassembled condition and containers known commercially as flattened or folded containers, of base metal :
8312.11 Of aluminium, whether plain, lacquered or printed or lacquered and printed 20% 8312.12 Of base metal other than aluminium, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power 20% 8312.19 Other Nil 8312.90
-
Containers of base metal, other than those covered under sub-heading Nos. 8312.11, 8312.12 and 8312.19 20% We are of the view that the Heading 83.12 is for containers of BASE METAL. The description indicates, under Heading 83.12, that containers ordinarily intended for packaging of the goods for sale is preceded by a single dash. It is, therefore, a sub-classification of the article or group of articles covered by 83.12. 83.12.11, 83.12.12 and 83.12.19 are preceded by two dashes. The articles covered by these sub-headings are therefore sub-classification of the articles or group of articles, which are preceded by a single dash, that is, Containers ordinarily intended for the packaging of goods for sale. The description of goods under Heading 83.12.90 on the other hand is preceded by a single dash which indicates that the goods covered by this heading are sub-classification of the article or group of articles, covered by the Heading 83.12 which refers to Containers of base metal. In other words, 83.12.90 is sub-classification of the 83.12 which covers Containers of the Base Metal. The condition relating to Ordinarily intended for packaging goods for sale would therefore be attracted in the case of goods falling under Headings 83.12.11, 83.12.12, and 83.12.19 only. Since 83.12.90 is by virtue of simple dash sub-classification of containers of base metals without any condition relating to the packaging of goods for sale the impugned goods would be classifiable only under Heading 83.12.90.
10. Having ruled out classification under Chapter Headings 5205.90 and 56.06, we are now required to determine the correct classification. What comes out of the ring / spinning frame is a single yarn with lycra as the core. The said covered filament is sheathed with cotton fibres straight from roving without spinning the roving into yarn. The stage of cotton yarn does not arise in as much as it is not independently spun in the manufacture of impugned goods. The percentage content of lycra / cotton is stated to be 12% / 88%.
11. In terms of Section note 2(A) to section XI of CETA 1985 goods of Chapters 52 to 55 consisting 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. In the present case the covered spandex yarn is a combination of two textile materials viz., cotton fibre and spandex yarn. Admittedly cotton fibre predominates by weight. There is no dispute about the classification of the impugned goods under Heading 52.05. The dispute is only with reference to the sub-heading.
12. As per HSN (page 780 Vol 2), Single yarn means yarns composed either of:-
a) Staple fibres, usually held together by twist (spun yarns) or of
b) One filament (monofilament) of headings 54.02 to 54.05 or two or more filaments (multifilament) of heading 54.02 or 54.03 held together, with or without twist (continuous yarn) The impugned goods manufactured by the appellant consist of lycra spandex yarn, which is sheathed by cotton fibres. As the said yarn is neither multiple yarn nor cabled yarn but single yarn with reference to HSN and the same rightly falls under sub heading 5205.11.
13. SITRA (South Indian Textile Research Association) has opined that the yarn contains an elasto meric yarn (lycra) as core and sheath of staple fibre (cotton). This type of yarn formation is classified as core spun yarn in textile terms. SITRA further concludes that the sample yarn is of core spun category and cannot be termed as single or double yarn.
14. The original authority considered SITRA report in all cases. In OIO 57/2003 dated 28.03.2003 (page 55 in Appeal No.E/1064/04), the adjudicating authority has discussed the manufacturing process of core spun yarn (covered spandex yarn) in para 11 and concluded that the cotton roving and spandex comes out as single yarn with spandex as core, at the end of spinning process. In para 12 the original authority further concludes that in the core spun yarn, the core filament is getting rotated between the front roller nip and traveler and therefore it also receives same amount of twist. In para 14 of OIO original authority stated that in the process of gimpex yarn the core does not itself under go twisting with the cover threads and therefore he has concluded in para 15 that covered spandex yarn does not merit classification under heading 56.06. Therefore he has classified the core spun yarn (covered spandex yarn) under sub heading 5205.11 as what emerges at the end of spinning process is a single yarn.
15. In all these cases the goods manufactured by the appellants consist of lycra spandex yarn which is sheathed by cotton fibres and finally what comes out from spinning frame is a single yarn and the same is rightly falls under sub heading 5205.11 as per HSN. Further this classification has been confirmed vide CESTAT order in the case of M/s.Micro Stretch Elastomers P Ltd Vs CCE Trichy reported in 2007 (215) ELT 190 Tri Chennai.
16. As per HSN (Page 855 Vol.2) Gimped yarn is composed of core, usually of one or more textile yarn, around which other yarn or yarns, are wound spirally. Most frequently the covering threads completely cover the core, but in some times the turns of the spiral are spaced; in the latter case, the product may have somewhat the appearance of certain multiple (folded), cabled or fancy yarns of Chapters 50 to 55, but may be distinguished from them by the characteristic of gimped yarn that the core does not itself undergo a twisting with the cover threads.
17. The core of the gimped yarn of this heading is usually of cotton, other vegetable fibres or man-made fibres and the covering threads are usually finer and more glossy (eg., silk, mercerized cotton or man-made fibres).
18. Gimped yarns with cores of other materials are not necessarily excluded provided the product has the essential character of a textile article.
19. Gimped yarns are used as a trimming and also very largely for the manufacture of such trimmings. Some, however, are also suitable for other uses, for example, as buttonhole cord, in embroidery or for tying parcels.
20. From the above it could be seen that, for the goods to be gimped yarn both the core yarn and the covered material should be yarns where as in the instant case the subject goods consist of lycra spandex yarn which is sheathed by cotton fibres and finally what comes out from spinning frame is a single yarn. Hence the Lycra spandex yarn manufactured by the appellants does not merit classification under the chapter heading 5606.00 as gimped yarn.
21. The percentage of cotton is more than 85%. As the cotton percentage predominates over the percentage of lycra the disputed goods viz lycra spandex yarn is correctly classifiable under 5205.11 as per HSN, which is to be given precedence over the SITRA reports which is not based on HSN.
22. To sum up, we hold that the item in dispute is single yarn classifiable under CET sub-heading 5205.11.
23. In the result, Appeal No.E/387/08 is disposed of by setting aside classification under CET sub-heading 5606.00 and holding that the correct classification is CET sub-heading 5205.11 and Appeal Nos.1064 & 1085/04 are dismissed.
(Pronounced in open court on 14.12.2010)
(Dr. CHITTARANJAN SATAPATHY) (JYOTI BALASUNDARAM)
TECHNICAL MEMBER VICE-PRESIDENT
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