2003 (12) TMI 419 - AT - Central Excise

Summary

Issues:
1. Classification of processed fabrics under Central Excise levy.
2. Validity of show cause notices for duty demands.
3. Interpretation of Chapter Note 8 to Chapter 58 regarding duty levied on embroidered fabrics.
4. Conflict in tribunal decisions on the applicability of Chapter Note 8 post-March 1995.
5. Referral to Larger Bench for resolving the conflicting interpretations.

Classification of processed fabrics under Central Excise levy:
The appellants processed duty paid embroidered fabrics without discharging any additional duty. The show cause notices issued demanded duty amounts for specific periods based on the value of fabrics plus processing charges. The authority classified the processed fabrics under Heading 5805 and levied duty accordingly. The Commissioner (Appeals) differentiated between Grey embroidered fabric and processed embroidered fabric, noting that Chapter Note 8 of Chapter 58 came into force in March 1995, making demands prior to that date not maintainable.

Validity of show cause notices for duty demands:
The original authority approved the demands in the show cause notices, confirming the duty amounts to be paid. The Commissioner (Appeals) restricted the demands post-March 1995 based on Chapter Note 8 of Chapter 58. However, a different Bench held that embroidery is not fabrics and Chapter Note 8 does not apply to it, creating a conflict in interpretations post-March 1995.

Interpretation of Chapter Note 8 to Chapter 58 regarding duty levied on embroidered fabrics:
The Tribunal referred to the case of Parekh Prints, stating that duty on value addition due to processing on Grey embroidered fabric should be levied post-March 1995. The conflicting decisions in other cases raised doubts on the application of Chapter Note 8. The matter was deemed fit for reference to a Larger Bench for resolving the interpretation of Chapter Note 8 to Chapter 58.

Conflict in tribunal decisions on the applicability of Chapter Note 8 post-March 1995:
The conflicting opinions from different Benches regarding the application of Chapter Note 8 to Chapter 58 post-March 1995 necessitated a resolution by a Larger Bench. The divergence in interpretations regarding the treatment of embroidery on Grey fabrics in relation to duty levy added complexity to the issue at hand.

Referral to Larger Bench for resolving the conflicting interpretations:
Given the differing views on the application of Chapter Note 8 post-March 1995, the matter was referred to a Larger Bench to determine whether the Chapter Note applies to value additions from processing embroidered fabrics. The Registry was instructed to present the case before the Hon'ble President for the constitution of the Larger Bench to address the question raised in the referral.