Custom, Excise & Service Tax Tribunal
4. Whether Order Is To Be Circulated To ... vs M/S Pioneer Embroidery Ltd., Shri D.R. ... on 29 April, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
COURT:
II
Appeal No.E/2151 to 2156/2008
Arising out of: OIA No.04 & 05/MP/Vapi/2006, dt.19.4.2006
Passed by: Commissioner of Central Excise & Customs, Vapi
For approval and signature:
Mrs. Archana Wadhwa, Honble Member (Judicial)
Dr. P. Babu, Honble Member (Technical)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the Yes
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4. Whether order is to be circulated to the Departmental Yes
authorities?
Appellant:
M/s Pioneer Embroidery Ltd., Shri D.R. Mehta, Shri S.R. Bidye
Respondent:
CCE Vapi Represented by:
Shri W. Christian, Adv. for Assessee.
Shri J.S. Negi, SDR for the Revenue.
CORAM:
MRS. ARCHANA WADHWA, HONBLE MEMBER (JUDICIAL) DR. P. BABU, HONBLE MEMBER (TECHNICAL) Date of Hearing:29.04.11 Date of Decision:
ORDER No. /WZB/AHD/2011, dt._____________ Per: Archana Wadhwa:
All the six appeals are being decided by a common order as issue involved is identical, though they arise out of the two different orders passed by Commissioner in respect of two different units of the same appellant. The details of the appeals are as under :-
Appeal No. E/2152, 2153, 2156 of 2006 Appeals No. E/2151, 2154, 2155 of 2006 OIO No. 04/MP/VAPI/2006 dated 19.04.2006 OIO NO. 05/ MP/VAPI/2006 dated 19.04.2006 Show cause notice dated 14.10.2004 Show cause notice dated 19.10.2004 Period : Nov. 2002 to June 2004 Period : Nov. 2002 to 08.07.2004 Duty : Rs. 25,82,976/-
Penalty : Rs. 10,00,000/- u/R-25 Duty : Rs. 5,26,137/- Penalty : Rs. 2,50,000/- u/R-25 Personal Penalties : Rs. 1,00,000/- on Shri Sharad Bidye, Auth. Signatory u/R-26 Rs. 2,50,000/- on Shri D.R. Mehta, Director, u/R-26 Personal Penalties : Rs. 50,000/- on Shri Sharad Bidye, Auth. Signatory u/R-26 Rs. 1,00,000/- on Shri D.R. Mehta, Director, u/R-26
2. The dispute in the present appeals relates to the product being manufactured by the appellants. Whereas the Revenue has held that the appellants product is Lace falling under Chapter heading 58.04, the appellants contention is that the same is Braids in the piece falling under heading 58.08. The two contending tariff headings are as under:-
58.04 58.08 Tulles and other net fabrics, not including woven, knitted or crocheted fabrics; lace in the piece in strips or in motifs, other than fabrics of heading No. 60.02 In or in relation to the manufacture of which any process is ordinarily carried on with the aid of power or steam.
Braids in the piece; ornamental trimmings in the piece, without embroidery, other than knitted or crocheted; tassels, pompons and similar articles
3. Before we decide on the correct classification of the product in question, we may refer to the developments in the matter. The appellants, vide letter dated 15.05.2002, addressed to their jurisdictional Deputy Commissioner of Central Excise, observed that they are manufacturer and exporter of Braided Lace in the piece; ornamental trimmings in the piece, without embroidery, other than knitted or crocheted; tassels, pompons and similar articles. Their final product till that date was being cleared under various sub headings of 58.04. However, they have recently discussed the classification of their product Braided Lace in piece, with other manufacturers of similar products and came to know that the same is actually classifiably under heading 58.08 and the sub-classification is 5808.10, which attracts nil rate of duty. Accordingly, they have submitted that they would like to clear their final product under Chapter heading 5808.10 from that date onwards. They also furnished a bond and surety for an amount of Rs. 25 Lakhs, equivalent to excise duty payable on clearances of the product for a period of approximately two months. Vide their subsequent letter dated 29.6.2002, addressed to Deputy Commissioner of Central Excise, they referred to the personal discussion and the brochure of HACOBA, which manufactures machines for making the Braids Laces. They submitted that the product shown in the brochure is identical to the product being manufactured by them. They also submitted the sample of the product with a request for classification of the same under Chapter 58.08. In view of the above, Deputy Commissioner called for SASMIRA technical report.
4. The SASMIRA (Synthetic and Art Silk Mills Research Association), Mumbai vide their technical service report dated 29.6.2002, addressed to the Deputy Commissioner, after detailing the technical details etc., opined as under :-
Observations:
In the present case, after examining the manufacturing process followed by the manufacturer, it is observed that the submitted samples are produced on braiding machine as above. It is also pointed out lthat the samples have no embroidery work on them nor are they subjected to any kind of processing apart from the sequence of processes mentioned as above.
Technical Opinion :
In the light of above observations, it is opined that the submitted samples can be Braded Lace in the piece manufactured without embroidery, which is not subjected to any process and the above product can be classified under Section 58.08 of Central Excise norms.
A small portion of the submitted samples is enclosed herewith in the form of Pattern Card for reference.
Based upon the above, the Deputy Commissioner of Central Excise Vapi, vide his letter dated 31.10.2002 informed the appellant that the Commissioner of Surat has approved the recommendations of that office and has been pleased to accord sanction to classify their product under heading 58.08.10 of Central Excise Tariff Act, 1985. The letter also mentioned that in future, the appellant may classify their final product accordingly and their application stands disposed off.
5. However on prima-facie observation of the manufacturing process of the product in question, the department observed that the Braided Laces, manufactured on the Lace braiding machines were interlaced/ interwoven with the nylon threads along their length to given firmness/ better shape to the edges which were subjected to a further process on Bobbin Lace Separating Machine for slitting & removing of nylon threads from the Laces. Hence, the department was of the opinion that the product in question should have appropriately been classified under CSH No. 5808.90 attracting Central Excise duty at the appropriate rate. In order to ascertain the correct classification, SASMIRA was again approached vide letter F.No. IV/16-HPIU-II/10/03-04 dated 06.10.2003 regarding the view taken by the department about the correct classification of the Braided Laces, subjected to further process. The Deputy Director, SASMIRA vide his letter No. SASMIRA/TPL/873/2003 dated 16.10.2003, further opined that their earlier report was only restricted to classification under Chapter sub-heading No. 58.08 of Central Excise Tariff Act, 1985 and that the opinion was restricted to the samples submitted only. It was requested in the letter that they (SASMIRA) would be in a position to provide further clarifications, only on submission of samples and may require a visit to the manufacturing facility of the firm. As desired, fresh samples of the Braided Lace in the Piece, drawn from the premises of M/s. PEL, Silvassa were again forwarded to SASMIRA, for obtaining their Technical Opinion. The Deputy Director (SASMIRA), in the light of feed back given to him and on visual examination of the samples, opined that, the interlacing of thread was only an optional process carried out to facilitate the main process and did not impart any value addition to the end product. The additional step of removing the Nylon threads was a continuation of the braiding manufacturing and not a process contributing any further involvements in value addition to the end product. It was also stated in the report that SASMIRA was only a technical institute and could not comment on classification and that they showed their inability to comment on whether the cutting and slitting of Nylon threads amount to additional process or not in Central Excise norms.
6. Subsequently, the Assistant Commissioner of Central Excise, Silvassa also visited the appellants factory on 19.11.2003 to study the manufacturing process and observed that Braided Laces manufactured by the appellants were subjected to further processes of heating and removing of Nylon threads on the Bobbin lace separating machine and the product viz. Braided Lace in pieces appeared to be correctly classifiable under sub-heading No. 5808.90.
7. As the Revenue was not satisfied with the above investigation and the sample testing, they sent a representative sample of the product to the chemical examiner of Central Excise and Customs laboratory, Vadodara under a test memo dated 01.4.2004 for examining as to whether :-
(i) The design element was worked on a pre-existing ground or otherwise.
(ii) Was it an open work fabric in which design element formed by inter twisting of threads are joined by meshes.
(iii) The product was Braids or Laces.
The Chemical examiner, Central Excise & Customs Laboratory, Vadodara, sent his test report vide his letter dated 30.4.2004, which reads as under:
Each of the 11 samples are small cut Pieces of While Textile Articles Laces made of Cotton. Each has flat braided structure. The openness and ornamentation is produced by selective inter-twisting of the yarns within the structure. (marked as P-150, P-121, P-169, P-270, P-132A, P-172, P-389, P-474, P-701, P-484), No pre existing ground is present in each case. Design element formed by inter-twisting of treads is not joined by meshes in each case.
8. Further, the samples were sent by the Revenue to one Shri B. Basu, who retired as Additional Commissioner of Customs & Central Excise, who was B.Sc. (Tech.) in Textile Technology. As per the opinion of Shri B. Basu, which has been made by taking into account the various textile books, explanatory notes and literatures, the products were opined to be Laces and not Braids. For better appreciation, conclusive part of the opinion of Shri Basu, as contained in his letter dated 04.06.2004, addressed to the Jt. Commissioner are being reproduced below :-
IV Conclusion:-
On study of the Explanatory Notes, Complete Textile Encyclopedia, Fairchilds Textile Dictionary and the Concise Oxford Dictionary relating to Braid and Lace extracts from which are furnished above, it is clear that the Lace is an open-work ornamental textile fabric without any base fabric whereas the Braid is not an open-work ornamental fabric. The 11 nos. samples as examined are narrow lace fabric, all having open work ornamental design satisfying the definitions and meaning provided in the books mentioned above. The specific queries in the test memo pasted with the envelope are replied as under:-
(i) the design elements are not worked on a pre-existing ground fabric.
(ii) The open work fabric having design elements formed by inter-twisting, interlacement & sometimes by knotting, are joined by meshes between the designs in the same precuts.
(iii) The products are laces and not braids.
The 11 Nos. samples on the paper board are placed in the same envelope, one side of which the test memo is pasted, are duly sealed with paper seal bearing my signature. Each page of the report is signed, being sent by courier under cover of an outer envelop.
9. In the above background, the Commissioner has upheld the Revenues claim for classification of disputed product under heading 58.04 by relying upon the Chemical Examiners report as also on the technical opinion of Shri B. Basu. Learned adjudicating authority has also taken into consideration the HSN Explanatory notes as also the fact that appellants have themselves described the goods in their invoices as Laces. Accordingly, the demand of duty stands confirmed along with imposition of penalty as detailed in the opening paragraph. However, it may be stated that the demand beyond the period of limitation stands dropped by the Commissioner and the said part of the order is not appealed against by the Revenue.
The said order of the Commissioner are the subject matter of the present appeals.
10. Ld.Advocate appearing for the appellant has raised the following grounds in their defence.
a) Braids under HSN Explanatory Notes under Heading 58.08 are described as products obtained by interlacing diagonally yarns, or the monofilament strips. In braids, half of the threads run in one direction and half in other and interlaced accordingly to fixed pattern which is usually quite simple. In some braids, extra threads may be interlaced to give firmness to the edge or in any sequence to produce pattern effects.
b) From the above, it is seen that the braids have a definite structure resulting from diagonal interlacing of threads. This definition is clearly applicable to the disputed product in the light of the Chief Chemical Examiners categorical opinion that the products had a flat braided structure.
c) The above opinion is further reinforced by the fact that the disputed product is obtained on HAKOBA LACE BRAIDING MACHINE SKZ-8 which are bobbin lace machine, employing the braiding principle. In other words, the products obtained from these machines were products having a braided structure i.e. the formation of braids.
d) In view of the afore said submission, no credibility can be attached to the opinion given by Shri B. Basu, as he being an officer retired from the Department does not appear to have formed an independent expert opinion.
e) Since doubts had been expressed about the classification of the disputed product, the appellant had sent representative samples of the disputed product for test to the Bombay Textile Research Association, which is a premier institution for conducting research and test on textile products. The test report received from them vide their letter dt.7.1.05, was also filed with Department. In the said test report, it has been opined that the products, obtained on Hakoba lace braiding machine SKZ 8 Model with electronic pattern control are produced on braided principle and termed as braided lace or fancy braids (Frills).
f) In order to further confirm the classification of the disputed product, the appellant had vide their letter dt.10.1.05, requested SASMIRA to test the sealed samples lying with the appellant, that had been drawn by Superintendent (Preventive), HPCL-II, Central Excise, Vapi in order to have their opinion on the basis of parameters given in the test memo prepared by the Superintendent. After testing those samples and on referring to the definition given to braids and laces in Fairchilds Dictionary of Textiles, the said institute has given a categorical opinion vide their letter dt.19.1.05 (copy also filed with the Department) that the products tested could be termed as Flat Braid as the threads run diagonally from the corner to the other in a Zig Zag or more complex fashion.
g) It will, thus, be seen that the disputed products are made on braiding principle and therefore are correctly termed as braids. Merely because they appear to be laces to a common man, it cannot be a ground for terming them as laces. Since they have been obtained on said braiding principle, they are correctly described as braided laces which are appropriately classifiable under Heading No.58.08.
h) It is further submitted that Rule 3(a) of the Rules applicable for interpretation of tariff provides that where goods prima facie are classifiable under two or more headings, the classification of the product shall be under the heading which provides the most specific description. Since in the present case, it is not in dispute that the disputed products are braided lace, manufactured on a Braiding Machine and obtained on braiding principle, they are appropriately classifiable under Heading No.58.08 as braids and not as laces of Heading No.58.04.
i) Further, even if Rule 3(a) is not considered to be applicable, then recourse can be made under Rule 3(c), [the intervening Rule 3(b) is not applicable since issue does not involve any matter concerning the composition of materials of the final product], which provides that when goods cannot be classified by reference to (a) or (b), they shall be classified under the Heading which occurs last in the numerical order among those which equally merit consideration. As in this case, the Heading 58.08 is the last in sequence, it will be the appropriate heading for classification of the disputed product.
j) That the ld.Commissioner has failed to appreciate that even if there is possibility of taking two views on the classification, the one in favour of the appellant/assessee should be given preference. Consequently, the impugned order is liable to be set aside.
11. Countering the arguments, ld.SDR has supported the reasoning adopted by Commissioner and has submitted that since the appellants themselves classified the product as lace prior to the period in question, as in the common parlance, the product is known as lace, the same has to be held as lace. Ld.SDR, for the above proposition, relied upon the Hon'ble Supreme Court judgment in the case of Kedia Agglomerated Marbles Ltd. Vs. Collr.C.E. 2003 (152) ELT 22 (SC), laying down that if the goods are commercially known as Mosaic tiles, they would be entitled to the benefit of Notification No.59/90-CE. It further stand held by Hon'ble Supreme Court that the headings or sub-headings in Central Excise Tariff should be understood not in strict scientific and technical sense but in their popular sense i.e. the meaning assigned to them by those trading in and using the product. As such, he submits that since the product in question is known as lace in market, the same will be held as lace falling under Heading 58.04. Ld.SDR further submits that reliance by adjudicating authority on the opinion of Shri Basu was appropriate, inasmuch as Shri Basu being an expert, his views can be considered to be expert opinion.
12. After carefully considering the submissions made by both sides, we find that the two contending entries described the goods as lace, falling under Chapter 58.04 and braids falling under Chapter 58.08. If the Revenues contention that since the products are also known as lace in the common parlance, heading 58.04 should be adopted, as is accepted, the same will amounts to rendering heading 58.08, taking into its ambit all products as otiose & infructuous. As such, the classification of the product has to be finalised keeping in view the descriptions given under two headings and in the light of the experts opinion.
13. We may here mention that we are not expert in Textile industry. The dispute has to be resolved based upon the experts opinion in the field. Undisputedly, the reports of SASMIRA as also Mumbai Textile Association are in favour of the assessee. Further, the Assistant Commissioner who visited the appellants factory and examined the manufacturing process, has observed in their favour. As regards the chemical examiners opinion, the same is to the effect that the goods in question are produced by selective inter-twisting of the yarn within the structure. No pre-existing ground is present in each case. The design element formed by inter twining of thread are not joined by meshes in each case. As against above, the opinion of Shri Basu is to the effect that the two different design elements for the same product are joined by meshes. As such submits the ld.Advocate that the opinion of Shri Basu is contrary to the opinion of chemical examiner. Further, we find that Shri Basu is B.Sc. (Technical) in Textile Technology and was former Additional Commissioner of Customs & Central Excise and his opinion has been relied by treating him as an expert. We are afraid to observe that merely because he as B.Sc. in Textile Technology, by itself, will not elevate his opinion to an experts opinion. Further, as rightly contended by ld.Advocate, he being a former Additional Commissioner of Customs & Central Excise, his opinion cannot be held to be unbiased. In any case, we find that the opinion of SASMIRA being in favour of the assessee as also the opinion of Dy.Commissioner, conveyed during the visit to the factory and subsequently conveyed holding the goods to be braids being in favour of the assessee, have to be taken into consideration and cannot be rejected on the ground that Shri Basus opinion is against the appellant.
14. Hon'ble Supreme Court in the case of Poulose & Mathen Vs. Collr.C.E.1997 (90) ELT 263 (SC), has held that where in matters of classification dispute, when two opinions are possible, assessee should be given benefit of doubt and the opinion favourable to him should be given effect to. Similarly, in the case of Collr. of Customs, Madras Vs. Lotus Inks 1996 (87)ELT 580 (SC), it stand held that when two views are possible, one in favour of the assessee, would guide the classification. The Tribunal, in the case of CC Trichy Vs. Transmedia (India) Ltd. 2007 (80) RLT 319 (CESTAT-Che), has held that when there are different test reports, the one in favour of the assessee has to be adopted. In the case of Anish Kumar Spinning Mills Vs. CC 2004 (172) ELT 394 (T), it has been held that one expert opinion cannot be rejected by another unless sufficient independent reasons exist to reject the former. In the light of the law declared in above decisions, we find that the Commissioner has held the product to be lace by heavily relying upon the opinion of Shri Basu, former Additional Commissioner of Customs & Central Excise. Inasmuch as the SASMIRA and Bombay Textile Research Associations reports are clearly in favour of the assessee, we find no reason to take a stand different from their opinion. As such, by following the same, we hold that the correct classification of the product is falling under 58.08 as braids.
15. We, accordingly, set aside the impugned order, confirming the demand of duty and imposing penalties upon the appellants.
16. All appeals are, thus, allowed with consequential relief.
(Pronounced in Court on ______________________)
(Dr.P. Babu) (Archana Wadhwa)
Member (Technical) Member (Judicial)
cbb
14