2011 (6) TMI 338 - AT - Central Excise

Classification - Lace falling under Chapter heading 58.04 or Braids falling under heading 58.08 - Held that - As decided in Poulose & Mathen Vs. Collr.C.E. 1997 (2) TMI 98 - SUPREME COURT OF INDIA 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 (9) TMI 133 - SUPREME COURT OF INDIA) 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 (4) TMI 406 - CESTAT CHENNAI) 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 (5) TMI 172 - CESTAT CHENNAI) 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 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 Association s reports are clearly in favour of the assessee no reason to take a stand different from their opinion. Thus correct classification of the product is falling under 58.08 as braids - Decided in favour of assessee.

Issues Involved:
1. Classification of the product: whether it falls under Chapter heading 58.04 as "Lace" or under heading 58.08 as "Braids in the piece".
2. Validity of expert opinions and technical reports.
3. Interpretation of tariff headings and application of classification rules.
4. Reliance on common parlance for classification.
5. Applicability of the principle of giving the benefit of doubt to the assessee.

Issue-wise Detailed Analysis:

1. Classification of the Product:
The primary dispute revolves around the correct classification of the product manufactured by the appellants. The Revenue contends that the product is "Lace" falling under Chapter heading 58.04, while the appellant argues that it is "Braids in the piece" falling under heading 58.08. The two tariff headings are defined as follows:
- 58.04: 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.
- 58.08: Braids in the piece; ornamental trimmings in the piece, without embroidery, other than knitted or crocheted; tassels, pompons, and similar articles.

2. Validity of Expert Opinions and Technical Reports:
The appellants initially classified their product under heading 58.08 based on a technical report from SASMIRA, which concluded that the product could be classified as "Braided Lace in the piece" without embroidery. This classification was initially accepted by the Deputy Commissioner. However, upon further investigation, the Revenue sought additional opinions, including from the Chemical Examiner of Central Excise and Customs Laboratory, Vadodara, and Shri B. Basu, a retired Additional Commissioner of Customs & Central Excise. The Chemical Examiner's report indicated that the product had a flat braided structure, while Shri Basu opined that the product was "Lace" based on various textile dictionaries and explanatory notes.

3. Interpretation of Tariff Headings and Application of Classification Rules:
The appellants argued that the product should be classified under heading 58.08 as it is produced on a braiding machine and has a braided structure. They cited Rule 3(a) of the Rules for Interpretation of Tariff, which states that goods should be classified under the heading that provides the most specific description. They also referenced Rule 3(c), which suggests that when goods cannot be classified by reference to (a) or (b), they should be classified under the heading that occurs last in numerical order. The appellants contended that heading 58.08 is more specific and occurs last in numerical order, thus should be the appropriate classification.

4. Reliance on Common Parlance for Classification:
The Revenue argued that the product should be classified as "Lace" under heading 58.04 since it is known as lace in the common parlance. They relied on the Supreme Court judgment in the case of Kedia Agglomerated Marbles Ltd. Vs. Collr.C.E., which emphasized that tariff headings should be understood in their popular sense. The Revenue contended that since the product is commercially known as lace, it should be classified as such.

5. Applicability of the Principle of Giving the Benefit of Doubt to the Assessee:
The Tribunal noted that when two opinions are possible regarding the classification of a product, the benefit of doubt should be given to the assessee. This principle was upheld by the Supreme Court in the cases of Poulose & Mathen Vs. Collr.C.E. and Collr. of Customs, Madras Vs. Lotus Inks. The Tribunal also referenced the case of CC Trichy Vs. Transmedia (India) Ltd., which held that when there are different test reports, the one in favor of the assessee should be adopted.

Conclusion:
After carefully considering the submissions and expert opinions, the Tribunal concluded that the product should be classified under heading 58.08 as "Braids." The Tribunal found the opinions of SASMIRA and the Bombay Textile Research Association to be more credible and in favor of the assessee. The opinion of Shri Basu was not given significant weight as it was considered biased due to his former position in the Customs & Central Excise department. Consequently, the Tribunal set aside the impugned order, confirming the demand of duty and imposing penalties upon the appellants, and allowed the appeals with consequential relief.

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