Customs, Excise and Gold Tribunal - Delhi
Maharashtra Fur Fabrics Ltd. vs Collr. Of Central Excise on 29 April, 1994
Equivalent citations: 1994(71)ELT857(TRI-DEL)
ORDER
Harish Chander, President
1. M/s. Maharashtra Fur Fabrics Ltd., Poddar Chambers, 4th Floor, S.N. Brevli Road, Fort, Bombay-1 have filed an appeal being aggrieved from the order passed by the Collector of Central Excise and Customs (Appeals), Bombay. Briefly the facts of the case are that M/s. Maharashtra Fur Fabrics Ltd., M.I.D.C. area, Nahad are holding an L-4 licence for the manufacture of high fur fabrics by sliver knitting process and they have filed classification list No. 1/87 dated 10-3-1987 classifying their products under Heading 6001.90 attracting nil rate of duty and the Superintendent vide his letter dated 17th March, 1987 directed that their product merits classification under Heading 4301.00 attracting central excise duty at the rate of 12% ad valorem. Accordingly, the appellants continued to effect the clearance of the said goods by paying central excise duty at the rate of 12% ad valorem under protest. The appellants filed an appeal before the Collector (Appeals), Bombay against order No. 475/87 dated 17th March, 1987 under which Range Superintendent directed the appellant to classify the goods under Heading 4301.00 of Central Excise Tariff Act, 1985, attracting rate of duty at the rate of 12% ad valorem. The Collector (Appeals) remanded the case to the Assistant Collector for issuing a speaking order after giving the opportunity to the appellants to present their case and in view of the directions issued by the Collector (Appeals) a letter was issued to the appellants as to why the said product should not be classified under Heading 4301.00. The appellants filed a written reply to the show cause notice vide letter dated 23rd July, 1987 wherein it was contended that the fabrics manufactured by them cannot be classified under Heading 4301.00 since the high pile fabrics are manufactured by directly feeding sliver of fabrics (acrylic) along with back yarn into the circular knitting machine. Hence, the fabric is trapped into the loops made of back yarn by knitting and form pile of fur. The process is well known as sliver knitting process and as such, the fabric is knitted fabric and as such classifiable only under Chapter 60. The appellants also stated that Chapter 43 has been included in Section VIII relating to leather articles of leather manufacturers of fur fabrics and articles of fur etc. Chapter 43 shows the description of the goods as manufacture of fur skins and artificial fur. The description does not refer to goods manufactured out of artificial fur as stated in the referred show cause notice and as such, the proposed classification under Chapter 43 is made by the Department by introducing words which are not mentioned in the tariff and there is no mention of knitted fabrics under Chapter 43, whereas knitting is specifically mentioned in Chapter 60.
The fabrics manufactured are specifically mentioned under Chapter 60. The fabrics manufactured by the appellants are knitted fabrics classifiable under Chapter 60. The proposed classification under Chapter 43 is, therefore, improper and without any authority. It was contended by the appellants before the adjudicating authority that the Department had not provided them with full facts on which classification list is going to be finalised. The appellants also asked for a copy of Dy. Chief Chemist's report. The relevant portion of the report was communicated to the appellant. Contrary to the submission made by the appellant, the Department had made its stand clear on classification as well as benefit of Notification No. 109/86 as amended. The appellants also relied on the certificate given by Bombay Textile Research Association that the stentering machine is not being used for stentering process. It was pointed out to the appellant that during the Assistant Collector's visit to the factory on 10th March, 1990, the process of stentering machine was observed in which it was found that the stenter pins were being used to hold the fabrics and stretch the same width-wise. The appellants in reply to the show cause notice explained the manufacturing process directly feeding sliver of fibres (acrylic along with back yarn into circular knitting needle). The fabrics are trapped into loop made of back yarn by knitting and form pile of fur. The fabrics are manufactured in running length of different widths. No artificial fur as such is used in process. Mere use of the word 'fur' in describing the fabrics cannot be in any case said to attract their classification under Chapter 43. The fabrics are manufactured by sliver knitting process as stated above which explains how this fur comes out after piling. It has been clearly mentioned in Note l(c) of Chapter 60 that knitted or crocheted pile fabrics remain classified in this Chapter. The Assistant Collector in his order has observed that the dyed acrylic fabrics are carded and converted into sliver of desired weight. The slivers are fed and circular sliver knitting machine along with back yarn. The fibres are anchored in back yarn during knitting. The grey fabric is passed through stentering machine where back coating chemicals are applied and cured. During stentering the desired width is adjusted and stability is obtained due to back coat chemicals. After stentering the fabric is passed through shearing and polishing machine to get desired pile height and smooth surface. It is seen that knitted pile fabrics is subject to a process of back coating, shearing and electrifying polished and other process as discussed above. It was further observed that the said fabrics is processed fabric and is classifiable under Heading 6001.12 of Central Excise Tariff, as the fabric is made predominantly of man-made textile material, namely, acrylic staple fibres which constitute 70 to 80% of the fabric weight. The fabric cannot be classified under Heading 6001.19 or 6001.90 as they relate to pile fabrics made of textile material other than cotton or man-made fibres and to those processed without use of power respectively prior to 9th December, 1987 i.e. date of issue of Notification No. 260/87-C.E. The knitted fabrics of Heading No. 6001 were assessed by applying Notification No. 109/86-C.E., dated 27th Fabruary, 1986. For the period from 9th December, 1987 to 18th January, 1988 two notifications, namely, Notification No. 109/86-C.E. and 260/87-C.E. were equally applicable for the said fabrics but Notification No. 260/87-C.E. was specifically issued for fabrics falling under sub-heading No. 6001.12. For the period from 19th January, 1988 there should not be any confusion as the Notification No. 3/88-C.E., dated 19th January, 1988 excludes processed fabrics falling under sub-heading No. 6001.12 from the purview of Notification No. 109/86-C.E. The effective rates of duty for fabrics of sub-heading No. 6001.12 have been specified in Notification No. 2/88, dated 19th January, 1988 issued in suppression of Notification No. 260/87. The disqualifying proviso of Notification No. 3/88 lists out a number of processes and clarifies that if any two of such processes are pertaining in course of manufacture of product classifiable under 6001.12 then the benefit of Notification No. 109/86 was not available. The Assistant Collector was further of the view that shearing is carried out after stentering. Hence pile fur fabric as manufactured by the appellants being processed fabric was not entitled for exemption under Notification No. 109/86 as amended. The Assistant Collector had held that the said product was classifiable under Heading 6001.12 for all provisionally assessed classification lists during the course of their respective efficacy. Benefit of Notification No. 260/87, dated 9th December, 1987 available to the product till 19th January, 1988 when the notification was withdrawn. Benefit of Notification 2/88, dated 19th January, 1988 as amended by Notification No. 87/89, dated 1st March, 1989 was available to the product for the purpose of charging additional central excise duty. He had further held that benefit of Notification No. 109/86, dated 27th February, 1986 was available to the product. However, the appellant had claimed it only in classification list No. 2/87 with effect from 19th October, 1987 under this rate of duty applicable to corresponding classification, namely, 5508, depending on slab value, was to be applied and benefit of notification was withdrawn with effect from 19th January, 1988 as a consequence of amendment by Notification No. 3/88 dated 19th January, 1988.
2. Being aggrieved from the aforesaid order, an appeal was filed before the Collector (Appeals) and the Collector (Appeals) has rejected the appeal with certain observations and being aggrieved from the aforesaid order, the appellant has come in appeal before the Tribunal.
3. Shri Ravinder Narain, the learned advocate has appeared on behalf of the appellants. He has pleaded that the appellant is manufacturer of knitted fabrics commercially known as pile fabric. It can also be called synthetic fur fabric. He pleaded that there is no dispute as to classification under Heading 6001.12 and the man-made textile materials. He referred to Chapter 55 and Heading 55.07 and also referred to Notification No. 109/86-C.E. He pleaded that the benefit of notification is available if it is read with Chapter 55.07, but if it is read with Heading 55.08, then no benefit of notification is available. He argued that there is no finishing process. The appellants' product corresponds to Heading 55.07. He referred to page 1 of the appeal memo para 3. He pleaded that the goods manufactured by the appellants are commercially called pile fabrics or synthetic fur fabrics. The appellants do not manufacture artificial fur. The said product is basically a fabric with a high pile of loose and soft fibres mostly of acrylic fibres that are firmly held in position by the yarn which is introduced in the high pile knitting machine and the manufacturing process is also mentioned in paras 31 to 36 of the appeal memo. Shri Ravinder Narain argued that the appellant is not having any tentering machine. Width does not shrink and after obtaining fabric, no further process is being done. He further stated that this process in America is called tentering, whereas in Britain it is called stentering. He referred to pages 1, 2, 3,4 and 5 of the appeal paper book and argued that there are certificates from the experts. He referred to pages 51 and 53 of the paper book which is a certificate from Primstex Machinery Ltd. and laid special emphasis on the last para where they have mentioned that the machine fabricated by their company on the basis of the plans provided to them by the principals of Maharashtra Fur Fabrics Ltd. from Austria, cannot be considered as a stenter or tenter but a special type of machine wherein back side of the base fabric of the sliver knitted fabric is coated with acrylic emulsion in the stretched condition and the same is then passed through hot air chamber where the water from the emulsion is evaporated. He also referred to pages 54 and 55 of the paper book. Shri Ravinder Narain, the learned advocate argued that the fabric comes into existence whatever processes are being carried out are only for making of fabric when it comes into existence, then it is not subjected to any process. He argued that drying of emulsion on the back side cannot be equated with tentering. Tentering is done after obtaining the woven fabric. He refers to Collector (Appeals)'s order on pages 35 and 36 which are the observations of the Collector (Appeals). He argued that even Collector (Appeals) himself on page 36 had observed that knitted pile fabrics are not subjected to any of the processes mentioned in Chapter Note 2 of Chapter 55 or in Heading 55.08. He argued that the Collector (Appeals) himself observed that the appellants' knitted pile fabric is basically a fabric with a high pile of loose and soft fibres mostly of acrylic fibres that are firmly held in position by the yarn which is introduced in the high pile knitting machine. The loose fibre i.e. acrylic in this case in sliver form is fed into the machine together with the base yarn which in the case of the appellants is cotton yarn/polyester textured yarn. The various colour patterns and designs are set with the help of jacquard arrangements. The knitted high pile fabrics consist of desired length of fibre staples which protude out. It was further mentioned that during the manufacture the compressed raw fibres are loosened, then opened up and dyed on the steam vessel in required shades and the dyed fibres are again opened up. The blown fibre is brushed in a parallel manner to bring about sliver on the carding machine. The fibre in sliver form is then fed into the sliver knitting machine. The fabric consists of a plain jersey bucking yarn interlaced with carded fibre mostly acrylic in the ratio of 20 to 30% yarn, 80 to 70% sliver. The staple fibre is combed into the machine to create directional pile. The pile is then locked into the construction by the looping action of the backing yarn over the knitting needle. The knitted fabric is then subjected to a process of back coating and shearing. In this process of back coating, the backing yarn is given a light coating of acrylic emulsion to fasten the fibre held in the yarn loop. The acrylic emulsion is water based and hence the fabric is to be dried for which it is passed through hot air. After drying the excess heat the loop is cut by the shearing machine and finally lustre is given by electrifying polish. Thus the knitted fabric is subjected to a process of back coating, shearing and electrifying polish and other processes discussed above and accordingly, he had held that it is a processed fabric. Shri Ravinder Narain reads Note 2 of Chapter 55 and Note 2 reads that; "In relation to products of Heading Nos. 55.08 to 55.12, bleaching, dyeing, printing, shrink-proofing, tentering, heat-setting, creaseresistant processing or any other process or any one or more of these processes shall amount to 'manufacture'." Shri Ravinder Narain argued that since no stentering is done and as such, the benefit of the notification is applicable. He referred to the notifications too. He pleaded for the acceptance of the appeal.
4. Shri M.K. Jain, the learned SDR is present on behalf of the respon- dent. He fairly stated that there is no dispute to the classification under Heading 6001.12. He reads Note 2 to Chapter 55. He pleaded that Heading 55.07 pertains to fabrics of man-made staple fibres - (a) woven, and (b) not subjected to any process and Heading 55.08 pertains to fabrics of man-made staple fibres (excluding fabrics covered under Heading Nos. 55.11 and 55.12 - (a) woven on looms other than handlooms, and (b) subjected to the process of bleaching, dyeing, printing, shrink-proofing, tentering, heat-setting, crease resistant processing or any other process or any two or more of these processes with the aid of power or steam. Shri Jain has also referred to para 5 of the order passed by the Collector (Appeals). He also reads proviso to Notification No. 3/88 dated 19th January, 1988 where it is mentioned that "Provided that nothing contained in this notification shall apply to knitted or crocheted fabrics of man-made textile materials falling under sub-heading No. 6001.12 of the said Schedule and subjected to the process of bleaching, dyeing, printing, shrink-proofing, tentering, heat-setting, crease resistant processing or any other process or any two or more of these processes." He also reads internal page 4 of Collector (Appeals)'s order and last 12 lines on page 5, and argued that amended Notification No. 109/88 came into effect with effect from 19th- January, 1988. He pleaded that the benefit of the notification is not available and pleaded for the rejection of the appeal.
5. Shri Ravinder Narain, the learned advocate in reply has again pleaded for the acceptance of the appeal and has referred to a judgment of the Tribunal in the case of Oswal Industries (P) Ltd. v. Collector of Central Excise reported in 1990 (49) E.L.T. 305 (Tribunal) wherein it was held that "Process of shearing or cropping carried out on knitted acrylic fabrics not being manufacture, eligible for exemption under Notification No. 109/86-C.E., dated 27-2- 1986 read with Notification No. 297/79-C.E., dated 24-11-1979." He pleaded for the acceptance of the appeal.
6. We have heared both the sides and have gone through the facts and circumstances of the case. Both the sides have filed written arguments and the same have also been duly considered. The appellants in the appeal memo in para No. 3 have mentioned the process of manufacture. Para No. 3 from the appeal memo on page 1 of the paper book is reproduced below :
* * * * * * * Notification No. 109/86-C.E., dated 27th Fabruary, 1986 which appears on page 61 of the paper book is reproduced below :-
* * * * * * * A perusal of the same shows that knitted fabrics falling under Heading 58.01 or 60.01 of the Central Excise Tariff are exempt from so much of the duty of excise and the additional duty of excise leviable thereon under the Central Excises and Salt Act, 1944 and the additional duty of excise leviable under the aforesaid two Acts on the corresponding woven fabrics falling under Chapter 51, 52, 54 or 55 of the said Schedule of the Central Excise Tariff. A perusal of the explanation to Notification No. 109/86-C.E. makes it clear that 'corresponding woven fabric' would be determined with reference to 3 criteria mentioned therein in the alternative. The first criterion refers to the "process carried out". The other two criteria being the value of the fabric per square metre or the textile material contained therein. With effect from 19th January, 1988 Notification No. 109/86 was amended by addition of a proviso thereto vide Notification No. 3/88 which has been extracted with the appeal paper book on page 82. The same is reproduced below :-
* * * * * * * For the proper appreciation of the legal position Headings 60.01, 55.07 and 55.08 are reproduced below :-
* * * * * * * Heading 60.01 corresponds to the woven fabric falling under Chapter Heading 55.07 which covers fabrics of man-made staple fibre woven and 'not subjected to any process'. The appellants' contention is that the knitted fabric is also not subjected to any process. The woven fabric falling under Heading 55.07 is the only woven fabric to which the appellants' knitted fabric corresponds to, within the meaning of the Explanation to Notification 109/86, whereas the revenue's contention is that the appellants' knitted fabric would correspond to the woven fabric falling under Heading 55.08 of CETA which cover fabrics of man-made staple fibres woven on looms other than handlooms and subjected to the process of bleaching, dyeing, printing, shrink-proofing, tentering, heat- setting, crease-resistant processing or any other process or any two or more of these processes with the aid of the power or steam. With reference to the scheme of Chapter 55 covers fibre yarn and fabric made of man-made staple fibre and tow. Chapter Headings 55.04 to 55.06 cover 'yarn' made of man-made staple fibres. Chapter Heading 55.07 covers woven 'grey fabric' This fabric is a complete and identifiable product at this stage and is marketable woven fabric known as 'grey fabric'. This complete product known as 'grey fabric' may be subjected to further process which may also be described as finishing process and the appellants have mentioned in the written arguments at the stage when 'grey fabric is obtained, it is marketable woven fabric and is not subjected to any process. By itself it is a marketable commodity. It has also been mentioned that in order to obtain grey fabric, various processes are carried out, but when these processes are completed and grey fabric falls under Heading 55.07. Grey fabric is dutiable as such, without any further processing. It is woven fabric, which has not been subjected to any process. When further processing is carried out, the fabric falls under the subsequent headings. Headings 55.08 to 55.12 cover fabrics which have been further subjected to processes known as finishing process like bleaching, dyeing, etc. Thus, the scheme of the entire Chapter is very clear that the initial headings in the Chapter classify the products fibre and yarn, then the woven fabric which is not subjected to any process known as grey fabric (55.07) and thereafter different varieties of fabrics which have been subjected to finishing processes. The process of manufacture as mentioned in the appeal memo has already been reproduced above. The appellants have relied on Fair Child's Dictionary of Textiles edited by Stephen S. Marks which defines grey goods as under :-
"Grey Goods : A term applied to all woven or knitted goods which have received no bleaching, dyeing or finishing treatment."
Definition of grey goods in Textile Terms and Definitions 8th revised edition published by the Textile Institute is as under :-
"Grey goods - Woven or knitted fabrics as they leave the loom or knitting machine i.e. before any bleaching, dyeing or finishing treatment has been given to them. Some of these fabrics, however, may contain dyed or finished yarns.
Note : In some countries, particularly in the North American Continent, the term greige is used. For woven goods, the term loomstate is frequently used as an alternative. In the linen and lace trades, the term brown goods is used."
The learned Departmental Representative in his oral and written submissions has all along laid emphasis on Heading 55.08 covers fabrics of man-made staple fibres (excluding fabrics covered under Heading Nos. 55.11 and 55.12). The Department has heavily relied on the order passed by the Collector (Appeals) and also argued that the appellants are not entitled to the benefit of Notification No. 109/86-C.E. amended by Notification Nos. 1/88 and 2/88 and since further processing has been done, the appropriate classification for levy of duty would be Heading 55.08 and not 55.07. For the proper appreciation we have to look into whether the machine used by the appellants performs the function of tentering/stentering or not. The appellants have filed a certificate from the manufacturer of the machine to manufacture a special type of machine which they wanted to utilise for removal of water from the base fabrics coated with acrylic emulsion, and in the certificate the whole function of the machine for drying and stentering has been explained. Para No. 5 from the said certificate which appears on internal page 3 on page 53 of the paper book is reproduced below :-
"5. In the special machine designed for MFF Ltd. the fabric is put on the pin in the stretch condition to a specific width and is subsequently coated with acrylic emulsion on the based side of the fabric and then passed through hot air to remove the excess water from the acrylic emulsion In view of the above-mentioned observations, we are of the opinion that the machine fabricated by our company on the basis of the plans provided to us by the principals of Maharashtra Fur Fabrics Ltd. from Austria, cannot be considered as a stenter or tenter but a special type of machine wherein back side of the base fabric of the sliver knitted fabric is coated with acrylic emulsion in the stretched condition and the same is then passed through hot air chamber where the water from the emulsion is evaporated."
The process of tentering as understood in the textile industry is reflected in the following Dictionaries of Textile terms given hereunder :-
1. TEXTILES - Fourth Edition - By Norma Hollen p. 221 "Tentering :
* * * * * * * The learned Departmental Representative in his written arguments has also referred to technical literature from the book 'Textile' 5th edition Norma Hollen Jane Saddler. Relevant extract from the same is reproduced below :-
* * * * * * * He has also referred to Encyclopedia of Chemical Technology, third edition, Volume 11 by Kirk Othmer which deals with the methods of manufacture. Relevant extract from the same is reproduced below :-
* * * * * * * We have already reproduced above the certificate from the manufacturer of the machine which appears on pages 51 to 53 of the paper book. Function of the machine and the other evidence shows that no process of stentering/tentering is being carried out. The Tribunal had the occasion to deal in the case of Oswal Industries case reported in 1990 (49) E.L.T. 305 whether process of shearing or cropping carried out on knitted acrylic fabrics amounts to manufacture or not for ascertaining the eligibility of exemption under Notification No. 109/86- C.E., dated 27th February, 1986 read with Notification No. 297/79-C.E., dated 24th November, 1979. Paras No. 7 and 10 from the said judgment are reproduced below :-
* * * * * * * The Tribunal had relied on an earlier decision of the Hon'ble Supreme Court in the case of Mafatlal Fine Spinning and Mfg. Co. Ltd v. Collector of Central Excise, reported in 1989 (40) E.L.T. 218 (S.C.). Para Nos. 10 and 12 from the said judgment are reproduced below :-
7. On consideration of all the facts, evidences and definitions from various dictionaries and going through the written submissions of both the sides as well as oral submissions, we are of the opinion that the present appellants do not carry out any processes after the fabric is manufactured. The processes carried out by the appellants, namely, dyeing, coating, knitting, back coating, shearing, polishing etc. are integral processes for the manufacture of knitted fabrics. Chapter Heading 55.07 covers woven grey fabrics i.e. the fabrics which are complete and marketable and the fabric is saleable as it is. We have discussed above the scheme of Chapter 55. Initial headings of the Chapter relate to the products fibre and yarn which is not subjected to any processes. Grey fabric is subjected to further process which is subjected to finishing processes. Accordingly, we are of the view that the knitted fabrics obtained by the appellants are not subjected to any processes and hence are classifiable under Heading 55.07 and are eligible to the benefit of Notification No. 109/86- C.E., dated 27th February, 1986 as amended by Notification No. 3/88-C.E., dated 19th January, 1988. Accordingly, the appeal is allowed.