2000 (3) TMI 134 - AT - Central Excise

Summary

Issues Involved:
1. Classification of "leno gauze cloth"
2. Applicability of Central Excise duty
3. Interpretation of specific vs. general tariff headings
4. Relevance of test reports and samples
5. Limitation and suppression of facts
6. Imposition of redemption fine

Issue-wise Detailed Analysis:

1. Classification of "leno gauze cloth":
The core issue was whether the "leno gauze cloth" should be classified under Heading No. 58.03 of the Central Excise Tariff (CET) as 'gauze'. The assessee had initially classified it under sub-heading No. 5206.11 CET as bleached cotton fabrics. The Tribunal confirmed that the fabric in dispute was indeed "leno gauze cloth" and not a plain woven fabric, as admitted by the assessee and verified by test reports.

2. Applicability of Central Excise duty:
The Central Excise duty of Rs. 1,29,895.38 was demanded for the period from September 1986 to March 1991. The Collector of Central Excise, Pune, confirmed the classification of the processed leno gauze cloth under Heading No. 58.03 and upheld the demand for duty. Additionally, a redemption fine and penalty were imposed.

3. Interpretation of specific vs. general tariff headings:
The Tribunal emphasized that Heading No. 58.03, which specifically covers gauze, takes precedence over the general entry for cotton fabrics under Heading No. 52.06. This follows the well-established Rule of Interpretation that a specific entry prevails over a general entry. The Tribunal cited several precedents, including the Supreme Court's ruling in the case of Superintendent of Central Excise v. Vac Met Corporation Pvt. Ltd., which supports this principle.

4. Relevance of test reports and samples:
The Tribunal considered test reports from the Textile Institute Echalkaranji and the Central Excise Laboratory, which confirmed that the fabric was gauze. The Tribunal also noted that the sample drawn by the Central Excise Authorities was representative of the goods manufactured during the period in question. The Tribunal rejected the assessee's own test report, which attempted to classify the fabric differently, as it was not conducted under the prescribed procedure and went beyond the purview of the test.

5. Limitation and suppression of facts:
The Tribunal agreed with the adjudicating authority that there was suppression of facts by the assessee, as full particulars of the goods manufactured were not provided to the Department, preventing proper classification. Thus, the extended period for demand was justified.

6. Imposition of redemption fine:
The Tribunal upheld the imposition of redemption fines and penalties, except for the redemption fine of Rs. 10,000/- in lieu of confiscation of land, building, and machinery, which was set aside. The Tribunal referenced the Supreme Court's decision in Weston Components Ltd. v. CC, New Delhi, which held that redemption fines could be imposed even when goods were no longer in the custody of the Department.

Conclusion:
The Tribunal confirmed the classification of "leno gauze cloth" under Heading No. 58.03, upheld the demand for Central Excise duty, and maintained most of the penalties and fines imposed by the Collector of Central Excise, Pune, except for the redemption fine related to land, building, and machinery. The Tribunal found no infirmity in the adjudication order, except for the specific fine that was set aside.