Customs, Excise and Gold Tribunal - Delhi
Bengal National Textiles Ltd. vs Collector Of Central Excise on 29 February, 1988
Equivalent citations: 1988(17)ECC12, 1988(17)ECR571(TRI.-DELHI), 1988(35)ELT681(TRI-DEL)
ORDER G. Sankaran, Sr. Vice President 1. The issue which arises for determination in the present appeal is whether dyed acrylic hand knitting yarn manufactured by the appellants from acrylic tops fell under Item No. 18(ii) of the First Schedule to the Central Excises and Salt Act, 1944 (the Schedule is hereinafter referred to as the "CET") as "bulked yarn" or under Item No. 18(i), CET as "other than textured yarn" during the period 1976-77 (it is seen from the show cause notice that the period of dispute is actually from 1.3.1975 to 30.4.1976). The Asstt. Collector of Central Excise held that the goods were to be classified as bulked yarn (textured yarn) under Item No. 18(ii). This finding was essentially based on the report of the Deputy Chief Chemist, Central Revenues Control Laboratory (to whom a sample was sent) that the scouring and dyeing imparted to the yarn a fluffy appearance, a characteristic of bulked yarn. In appeal, the orders were upheld by the Collector (Appeals) by his impugned order dated 10.11.86 which is now under challenge before us. 2. We have heard Shri Hardev Singh and Shri Dushyant Dave, Advocates, for the appellants and Shri K.C. Sachar and Shri Balbir Singh, D.Rs., for the respondent and read the record. 3. Before we discuss the rival contentions, it is expedient to set out the Tariff Entry as it stood during the material period and as substituted by the Finance (No.2) Act, 1977. Item No. 18, CET as substituted for the pre-existing entry by the Finance Act of 1975, read as follows : "18. RAYON AND SYNTHETIC FIBRES AND YARN INCLUDING TEXTURED YARN, IN OR IN RELATION TO THE OF WHICH ANY PROCESS IS ORDINARILY CARRIED ON WITH THE AID OF POWER - (i) Fibres and Yarn, other than Eighty five rupees Textured Yarn per kg. (ii) Textured Yarn produced out of The duty for the base yarn time being leviable on the Base Yarn, if not already paid, plus twenty rupees per kg. (iii) Other Textured Yarn One hundred and five rupees per kilo- gram. Explanation I - "Fibres and Yarn, other than Textured Yarn", shall be deemed to include - (i) man-made fibres; (ii) man-made metalic yarn; (iii) spun (discontinuous) yarn containing not less than ninety per cent by weight of man-made fibres calculated on the total fibre content; and (iv) man-made filament (continuous)yarn that has not been processed to introduce crimps, coils, loops or curls along the length of the filaments, but does not include bulked yarn and stretch yarn. Explanation II - "Textured Yarn" means yarn that has been processed to introduce crimps, coils, loops or curls along the length of the filaments and shall include bulked yarn and stretch yarn. Explanation III - "Base Yarn" means yarn falling under sub-item (i) of this Item from which the Textured Yarn has been produced." The only change to the above entry brought about by the Finance Act, 1976 was to introduce another explanation which read thus - "Explanation IV - This Item does not include mineral fibres and yarn". (This is not relevant for our present purpose) The item was recast by the Finance (No. 2) Act, 1977 and the new entry read thus - "18(1) - Man-made fibres, other than mineral fibres - (Not reproduced as not relevant) (II) - MAN-MADE FILAMENT YARNS - (i) Non-cellulosic - (a) other than textured Eighty-five rupees per kilograms. (b) textured Ninety-five rupees per kilograms. Explanation - "Textured Yarn" means yarn that has been processed to introduce crimps, coils, loops or curls along the length of the filaments and shall include bulked yarn and stretch yarn." (The remaining sub-items of Item No. 18(11), Item No. 18(III) and explanations to Item No. 18 are not reproduced as they are not relevant for the present purposes) 4. At the outset, Shri Hardev Singh, learned counsel for the appellants, fairly stated that the issue raised in the present appeals was covered by the Tribunal's decision in Gokal Chand Rattan Chand Woollen Mills v. Collector of Central Excise, Bombay 1986 (26) ELT 585, wherein it was held that such yarn would fall under Item No. 18(ii), CET. It was held that bulky yarn produced as a result of the steaming and dyeing of acrylic spun yarn would be "bulked yarn" which stood specifically included in Explanation II to Item No. 18, CET, and therefore, fell within the meaning of "Textured Yarn" falling under sub-item (ii) of Item No. 18. However, the learned counsel submitted that the Tribunal's order did not constitute a binding precedent since the tariff entry was clear and no question of interpretation was involved. It was his contention that Explanation I(iv) referred to filament yarn only and not to spun yarn. The phrase "but does not include bulked yarn and Stretch yarn" occurred in Sub-clause(iv) of Explanation I and it was not, therefore, correct to say, as the Tribunal has done in its earlier decision, that the said phrase could also be read into Clauses (ii) and (iii) of Explanation I. What was excluded from Explanation I(iv), namely, "bulked yarn" and "stretch yarn" was specifically included in the definition of "Textured Yarn" in Explanation II which pertains to filament yarn and this clearly shows that the term "Bulked Yarn" also referred to filament yarn only. Assuming that the subject goods had the appearance of bulked yarn, it was for the department to show that they had been produced out of base yarn and this the department had not done. The goods might at best be said to be bulky yarn but that is not the term used in the Tariff nor was it covered by the term "bulked yarn". The counsel also relied on certain authorities in support of his submission that no tax could be levied without express provision to that effect which brought the subject into its ambit and that where two views were possible, the benefit of the more favourable view should go to the assessee. 5. On his part, Shri Sachar, the learned departmental representative, relied on the Tribunal's decision in the case of Gokal Chand Rattan Chand Woollen Mills (supra). He did not agree that there was any mis-reading of the tariff entry in that decision. 6. When the matter was taken up for dictation of the final order of the Tribunal, it was found that the entry in Explanation I(iv) had not been correctly reproduced in para 9 of the decision in Gokal Chand Rattan Chand Woollen Mills case and that, therefore, in the interest of justice, arguments should be heard with reference to the correct entry. Accordingly, by a miscellaneous order, both parties were called upon to make additional submissions, if any. At the resumed hearing Sh. Dushyant Dave, Advocate, assisted by Shri H.S. Anand, Advocate, represented the appellants and Shri Balbir Singh, Sr. D.R., the respondent. 7. The learned counsel for the appellants stated that, on the merits of the dispute, he had in additional submissions to make. He stated that he could not dispute the earlier interpretation of the entry by the Tribunal. However, he submitted that the classification lists submitted by the appellants had been approved by the Assistant Collector and had not been reviewed the competent authority under Section 35A of the Central Excises and Salt Act, and, therefore, the decision of the lower authorities reclassifying the goods under Item No. 18(ii), CET could be given effect prospectively and not retrospectively and in support of this contention he cited several decisions of this Tribunal. 8. In his reply, Shri Balbir Singh, learned Sr. D.R., relied on the orders of the lower authorities in support of the department's stand that the subject goods were correctly classifiable under Item No. 18(ii) of the CET. 9. We have carefully considered the submissions of both sides. There is no dispute that the subject goods are textured yarn, properly so-called. However, the expression "Textured Yarn" has been defined in Explanation II to Item No. 18, CET (as it stood during the material period) as yarn that has been processed to introduce crimps, coils, loops or curls along the lenjgth. of the filaments and shall include bulked yarn and stretch yarn. Again, it is nobody's case that the subject goods are stretch yarn. The only question to be, therefore, considered is whether they are bulked yarn. 10. Some of the relevant definitions to be found in the standard works of "Textile Terms and Definitions" published by the Manchester Textile Institute, "Fairchild's Dictionary of Textiles" and the Indian Standard published in IS : 1324-1966 "Glossary of Textile Terms Relating to Man Made Fibre and Fabric Industry" which are of help in throwing light on the dispute are extracted below : From "Textile Terms and Definitions" published by the Manchester Textile Institute - Bulked Yarns - Yarns that have been treated physically or chemically so as to have a noticeably greater 'apparent volume' or bulk. Note 1 : Continuous-filament yarns : The increased bulk may be obtained by the introduction of crimps, coils, loops, or other fine distortions along the length of the originally straight and parallel filaments (see textured yarns). Note 2 : Staple yarns : The increased bulk may be obtained by blending together, during yarn spinning, fibres of high and low potential shrinkage, e.g., high-bulk acrylic yarns. During subsequent hot or wet processing, the greater contraction of the high-shrinkage fibres causes the yarn to contract longitudinally, and the low-shrinkage fibres to buckle, thus increasing the bulkiness of the yarns. Bulky Yarn - 1. Yarn in which the apparent density of the filaments is much lower than the real density. Note : Examples are man-made fibres that are hollow along part or all of their length and fibres that have cross-sectional shapes of such gross irregularity that close packing is impossible. 2. Spun yarns made from staple fibres having a high degree of resiliency. Note : Such fibres resist the twist imposed upon them during processing and so produce a voluminous yarn, e.g., protein fibres, acrylics. Textured Yarns - Yarns that have been processed to introduce durable crimps, coils, loops, or other fine distortions along the length of the fibres or filaments. Note 1 : The main texturing processes, which are usually applied to continuous-filament yarns made from or containing thermoplastic fibres, are as follows : (a) The yarn is highly twisted, heat-set, and untwisted, either as a continuous process (false-twisting) or as a three-stage process. (b) The yarn is passed through a heated 'stuffer-box' (stuffer-box crimping). (c) The heated yarn is passed over a knife edge (edge-crimping). (d) The heated yarn is passed between a pair of gear wheels or some similar device (gear-crimping). (e) The yarn is knitted into a fabric, heat-set, and unravelled (knit-deknit). (f) Loops are formed in individual filaments by over-feeding into a turbulent air-stress. (g) By the differential shrinkage of bicomponent fibres (q.v.) Note 2 : Processes (a) and (c) give yarns of a generally high stretch character. This stretch character is frequently reduced by reheating the yarn in a state where it is only partly relaxed from the fully extended condition, thus producing a yarn with the bulkiness little reduced but with a much reduced retractive power. Note 3 : Fabrics containing textured yarns have increased bulk, opacity, moisture absorbency and improved thermal insulation properties with a warmer handle; some textured yarns also confer extensible or 'stretch' properties on fabrics made from them. From "Fairchild's Dictionary of Textiles" - Bulky Yarns - Continuous filament synthetic yarns which have greater bulk than the regular yarns of this type because of their cross section, for example a Y-crpss-section. Also see Textured, Lofted, Modified and High Bulk Yarns. High Bulk Yarns - Spun synthetic yarns which owe their bulk to the blending of preshrunk and unshrunk fibres in which the different degree of shrinkage in the fibers in wet finishing produces a bulking out of the yarn. Used in bulky-look sweaters. Textured, Lofted or Modified Yarns - Continuous filament synthetic yarns in which the filaments have been crimped or have had random loops imparted, or are otherwise modified to create a yarn with a different surface texture. Textured Yarns - A general classification for continuous filament man-made fiber yarns which have been treated to give them hand and appearance which is different from the untreated yarn and-/or stretchy. These yarns, in some cases, exhibit spun yarn effects. The yarns may be crimped, curled, coiled, distorted through air-jet process, or given a false twist and then be heat-set. The term is so broad as to include other filament yarns which have been treated to change their texture, such as abraded yarns. From Indian Standard IS : 1324 - 1966 - Bulked Yarns - A yarn that has been prepared in such a way as to have greater covering capacity or 'apparent volume' than that of conventional yarn of equal linear density and of the same basic material with normal twist. Bulky yarns - a) Yarns in which the apparent density of the filament is much lower than the real density, for example, 'hollow filament yarns', the cross-sectional appearance of which is so grossly irregular that close packing is impossible. (b) Spun yarns made from staple fibres having a high degree of resilience, such as protein fibres, acrylic fibres. The appellants have produced before us a booklet titled "Fiber Facts" (1965-1966) published by the American Viscose Division of FMC Corporation. On page 69 of the said booklet, "Bulking Process" has been defined as "Any one of several procedures for crimping, curling or looping the yarn so that it becomes bulked, and occupies a volume greater than that indicated by the specific gravity of the fibers". 11. From the above definitions it may be seen that increased bulk may be obtained from staple yarns by blending together, during yarn spinning, fibres of high and low potential shrinkage. High-bulk acrylic yarn is cited as an example. In the present instance, there is no evidence to show that the subject yarn is a blend of fibres of high and low potential shrinkage. All that is clear from the record is that the subject yarn has a fluffy appearance. This alone may not suffice to bring home the charge that the goods are "bulked yarn". If we go by the definition of High Bulk Yarns in the Fairchild's Dictionary of Textiles, the department has to show that the subject yarn is a blend of preshrunk and unshrunk fibers having different degrees of shrinkage when subjected to the wet finishing process resulting in bulking. Again if we go by the definition of "Bulking Process" given in "Fiber Facts", admittedly, the subject yarns have not undergone any crimping, curling or looping procedures. Therefore, in the state of the evidence available, the case of the department that the subject goods are "bulked yarn" has not been established. It is well to remember in this connection that the Assistant Collector had approved classification lists submitted by the appellants. The show cause notice dated 24.6.1976 does not lay any satisfactory basis for alleging that, on the basis of certain additional material that had come to light, the goods were re-classifiable as "bulked yarn" under Item No. 18(ii) of the CET. All that it says is that acrylic hand knitting yarn which is dyed/bleached/scoured and subjected to any treatment with steam or hot water will be classifiable under the said Item No. 18(ii). This seems tobe more in the nature of an ipsi dixit and does not disclose any basis for it. 12. The matter can be examined from another angle also. Item No. 18, CET, as it stood during the material time, has been reproduced earlier in this order. "Textured Yarn" has been defined as yarn that has been processed to introduce crimps, coils, loops or curls along the length of the filaments (so far, there is no problem and no cause for dispute) and shall include bulked yarn and stretch yarn. It is the case of the appellants that bulked yarn is produced only out of filament (continuous) yarn and not out of spun (discontinuous) yarn. This contention cannot be accepted in the light of the definitions which we have noted earlier. However, the question remains whether from the point of view of the tariff entry, the term "Textured Yarn" covers bulked yarn made out of filament yarn only or it covers bulked yarn made out of spun yarn also. From the extracts of the Finance Act, 1975, as reproduced earlier, it may be seen that the reproduction on page 589 of the report in 1986 (26) ELT 585 (the case of Gokal Chand Rattan Chand Woollen Mills) is not quite correct. Even so, the phrase "but does not include bulked yarn and stretch yarn" qualifies Clauses (ii), (iii) and (iv) of Explanation I to Item No. 18, CET. However,, it appears to me that Explanation II covers only products of processing of filament yarns and not of spun yarns. The basis for this view is the entry as recast by the Finance Act, 1977 (extracted earlier). It is no doubt true that a later entry cannot be cited as an authority to interpret an earlier entry. But in the present instance having regard to the definition of the term "Textured Yarn" in the entry as in force during the relevant period and as substituted by the Finance Act, 1977, reading exactly the same, that is to say "Textured Yarn" means yarn that has been processed to introduce crimps, coils, loops or curls along the length of the filaments and shall include bulked yarn and stretch yarn, I am of the view that the later entry can be looked into for ascertaining the exact meaning of the expression in the earlier entry also. In this connection, it is to be noted that in the entry as substituted by the Finance Act, 1977, textured yarn figures clearly and only under the main heading "Man-Made Filament Yarns"; This, to my mind, is a clear indication of the position that the term "Textured Yarn" was meant to cover only processed filament yarn. The definition of "Textured Yarn" in the preceding, entry in force during the material period being exactly the same, I would conclude that during the material period also bulked yarn produced out of filament yarn alone was covered by the expression "Textured Yarn". In this view of the matter, the correct classification of the subject bulked or bulky yarn was under Item No. 18(i),i CET, as it stood at the relevant time. 13. There is no dispute that the goods are acrylic hand knitting yarn. As pointed out by the counsel for the appellants, hand knitting yarn spun out of acrylic fibre is specified at SI. No. 3 of Central Excise Notification No. 27/75 dated 1.3.1975 and is shown as falling under Item No. 18(i) of the CET. Though notifications issued under Rule 8(1) of the Central Excise Rules cannot be taken to be decisive of the classification of goods under the First Schedule to the Central Excises and Salt Act, this notifi- cation can be taken as an index of the understanding of the highest autho- rity, namely, the Central Government concerned with the administration of the Central Excise Act, of the classification of acrylic hand knitting yarn. The fact that the subject hand knitting yarn has been subjected to the process of dyeing and steaming resulting in a fluffy appearance does not, in my opinion, detract in any way from the position that it still remains acrylic hand knitting yarn which correctly fell under Item No. 18(i) of the CET during the relevant period. 14. For the reasons set out by me, I am, with respect, unable to agree with the conclusion of the Tribunal in the case of Gokal Chand Rattan Chand Woollen Mills (supra) classifying similar yarn under Item No. 18(ii) of the CET. 15. In this view of the matter, the appeals deserve to succeed with consequential relief to the appellants. V.T. Ragnavachari, Member (J)
16. I have carefully perused the order prepared by the Senior Vice President. While I am in agreement. " conclusion as to the disposal these appeals i have come to that conclusion for reasons different from the reasons stated in his order and that is why this separate order is being recorded by me.
17. It is unnecessary to state the facts or the submissions of both sides in detail since they have been fully set out in the order recorded by the Senior Vice President. As mentioned by him Shri Dave conceded that on the merits of the issue regarding classification the same is covered by the earlier decision of this Tribunal reported in 1986 (26) ELT 585. I am of opinion that the yarn in question in the present appeals was also classifiable under Item 18(ii) CET as it stood at the relevant time and not under Item 18(i) CET. It is true that no actual evidence, by way of Chemical Analyst's reports etc., has been made available to show that the subject yarn was a blend of different types of fibre having different shrinkage potential. But it may be seen that in their appeal before us the appellants themselves in the "statement of facts" have mentioned (in paragraph 2) that the acrylic yarn produced by the appellants was being spun on worsted system out of acrylic fibres of different compositions varying in lengths from 3 inches to 5 inches, without introducing coils, crimps or loops alongside, the filaments. This would make it clear that the yarn was not being spun of fibres of uniform quality. There is no dispute that the bulked character was being imparted to the yarn by scouring and dyeing. It appears to me that when all these facts are taken into consideration the bulked character was the result of the shrinkage at different levels of the constitutent fibres that had gone into the making of the yarn.
18. The entry regarding Item 18 as it stood at the relevant time has been extracted in paragraph 3 of the order of the Senior Vice President. On a reading of the same there can be no dispute that in Explanation I thereof the words "but does not included bulked yarn and stretched yarn" qualify not merely Item iv of that explanation but all of the Items i to iv. Therefore, Explanation II of that item would refer not merely to filament yarn but all types of bulked yarn and stretched yarn. It appears to me that when the language of the entry is thus clear it would not be permissible to look into the entry as it stood in a subsequent year (after amendment) in order to read into the entry a meaning which would not be strictly in accordance with the words in the entry. We cannot enlarge the meaning, seeking support therefor with reference to the entry in the subsequent year after amendment.
19. I am, therefore, of opinion that the classification under Item 18(ii) CET as ordered by the lower authorities was correct.
20. But, as pointed out by the appellants, the demand refers to a period during which the clearances were effected in pursuance of approved classification lists. It is open to the Department to change the approval on the classification list in the circumstances mentioned by the Delhi High Court in J.K. Synthetics Limited v. Union of India and Ors (1981 ELT 328). Admittedly none of the circumstances mentioned in the said Judgements were available to the Department for changing the earlier decision on the question of classification. The present appears to be a case where on a rethinking the Department came to the conclusion that the earlier classification under Item 18(i) CET was not correct and the proper classification was under Item 18(ii) CET. The Tribunal had to deal with a similar situation in the case of Brakes India Ltd., and Ors v. Collector of Central Excise (1987 Vol. 31 ELT 1030). In the said decision the Tribunal referred to its earlier decisions in the case of Steel Authority of India Ltd. (1985 Vo. 22 ELT 487) and M/s. Inarco Ltd. (1984 ECR-2164) as well as the decision of the' Delhi High Court in 1981 ELT 328. The Tribunal observed "in the light of the foregoing discussion, we are of the opinion that while it was open to the Assistant Collector to go into the question of classification of hose assemblies, chough it had been previously settled, on the facts and in the circumstances of the present case, the revised classification cannot be made retrospectively applicable, that is, the demand for duty in terms of the revised classification can be enforced only from the date of the show cause notice and not for any earlier period".
21. As earlier mentioned, in the present matters also the change in classification was not as a result of the circumstances set out in the guidelines given in 1981 ELT 328 but as a result of rethinking on the facts already available. I am, therefore, of opinion that in the present matters also the demand for duty could be enforced only from the date of the show cause notice. The demand was for the period 1.3.1975 to 30.4.1976 while the show cause notice had been issued on 24.6.1976. That would mean that the demand cannot be upheld.
22. I, therefore, agree that the appeals are to be allowed. Accordingly, I agree with the order proposed by the Senior Vice President that the appeals deserved to succeed with consequential relief to the appellants.
K. Prakash Anand, Member (T)
23. For the reasons given in the judgment itself, I see no reason to depart from my findings, on the issue in the present matter, recorded by me in the case of Gokal Chand Rattan Chand Woollen Mills v. . Collector of Central Excise, Bombay (supra).
24. I, therefore, hold that the yarn in question in the present appeals is classifiable under Item 18(ii) CET as it stood at the relevant time and not under Item 18(0 CET.
25. I agree with brother Raghavachari that the demand for duty could be enforced only from the date of the Show Cause Notice. In other words, the demand in the instant case cannot be upheld.
Appeals partly allowed.
In view of the majority opinion, the yarn in question in the present appeals is classifiable under Item 18(ii) CET as it stood at the relevant time. However, the demand for duty cannot be upheld and is not enforceable. The appeals are, in the result, disposed of in the above terms.