TMI Blog1995 (1) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... ny. M/s. Starlight Silk Mills and was engaged in the business of processing the manmade filament yarn. The company was amalgamated with M/s. Vareli Exports Pvt. Ltd. under an order dated 7-8-1986 passed by the Gujarat High Court. The name of M/s. Vareli Exports Pvt. Ltd. was changed to M/s. Vareli Textile Industries Ltd. This company became a deemed Public Ltd. company and was amalgamated with the appellant company namely M/s. Garden Silk Mills Ltd. under the order passed by the Hon ble High Court of Gujarat with effect from 1-4-1988; that it was by reason of the aforesaid sequence of events that though originally it was the Starlight Silk Mills Pvt. Ltd. which was concerned in the present proceedings, the appeal is filed by the present company. 3. Briefly stated the facts of the case are that the appellants are engaged in the processing of man-made filament yarn. The dispute before us is whether the product called Taspa Yarn is classifiable under Central Excise Tariff Chapter Heading 56.06 as held by the department or under Chapter Heading 5403.20 as claimed by the appellants and whether the demand beyond six months is barred by limitation. 4. Shri K.S. Nanavati, the ld. Advoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 25-11-1988 issued by the CCE, Vadodra clarified that single, doubled yarn, multiple (folded) and cabled yarns would be classifiable in Chapters 50-55 of the new Central Excise Tariff depending upon the pre-dominance of textile material; that there did not appear to be any dispute in classification of Taspa yarn under Chapter Heading 5403.20 of the new Central Excise Tariff; that the dispute arose only when Trade Notice No. 23/89, dated 14-2-1989 was issued by CCE, Vadodra clarifying that taspa yarn (which consists of a core yarn) is a special yarn which would be classifiable under Heading 56.06; that it was presumed that the concept of core yarn came from the HSN notes under the nomenclature Entry No. 56.06; that the appellants immediately adduced certificates from MANTRA and SASMIRA, two reputed research institutions showing that taspa yarn was not consisting of core yarn; that in addition affidavits of S/Shri S.Z. Naik, J.V. Shah, K. Gupta and R.S. Gandhi experts in the line of textiles technology were filed; that in these certificates and affidavits it was clearly brought out that taspa yarn was only a textured yarn and did not have a core; that the test results on the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... known in the market as special/fancy yarn. 11. On the question of cross-examination dated 23-11-1990, of the Chemical Examiner who had given the test report on the sample of Taspa yarn which was communicated to M/s Varelli Textile Industries (now Garden Silk Mills) on 27-7-1987 by the Superintendent of Central Excise stating Sample is in the form of white two-ply twisted polyster textured yarn having knops at regular intervals along its length produced by feeding two yarns (components) at different speeds. The sample has the characteristic of fancy yarn (special yarn) as described in the technical literature in view of the deliberately produced irregularities in its construction. The ld. counsel submitted that though the Chemical Examiner had given a report that taspa yarn was a fancy yarn or a special yarn, he has not cited any technical literature on the basis of which he formed this opinion and thus the test report is a bald statement only. 12. The ld. counsel submitted that in reply to a question on core yarn, the chemical examiner during cross-examination, had replied that there was no core yarn in taspa yarn. 13. Referring to Fairchild s Dictionary of Textile Terms, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... followed. In support of this contention, the ld. counsel relied on the report in 1983 (13) E.L.T. 1238 (Tri.) 17. Referring to the ratio of the judgment in the case of Elgi Polytex Ltd. v. CCE reported in 1988 (34) E.L.T. 404 the ld. counsel submitted that the Tribunal had held that Harmonised Commodity Description and Coding System-the explanatory notes have the persuasive value though not statutory force in deciding classification of goods under the Central Excise Tariff. In this view of the matter, the ld. counsel submitted that taspa yarn did not have a core and therefore even according to the HSN Notes, taspa yarn manufactured by them will not be classifiable under Central Excise Tariff Chapter Heading 56.06. 18. It was also argued by the ld. counsel that other special yarns are covered under Chapter Headings 56.04 and 56.05 and that the yarns classifiable under 56.06 which is a residuary entry will only cover yarn not elsewhere specified; that the product manufactured by the appellants is covered by the specific description in Chapter Heading 54.03 and therefore the same product cannot be classified under a residuary heading i.e., Central Excise Tariff Chapter Heading 56 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld. counsel therefore submitted that the yarn manufactured by them was textured yarn known as such in the market and specified in the Tariff and therefore should be classified as textured yarn. 20. The ld. counsel also argued that the burden of proof that the goods fall under a particular item of Tariff is on the department. In support of this contention, the ld. counsel cited and relied upon the ratio of the decision of the Hon ble Bombay High Court in the case of Navin Chimanlal Sutaria v. UOI reported in 1981 (8) E.L.T. 913; that the department had not discharged its burden and therefore no case for classification of taspa yarn under C.E. Tariff Chapter Heading 56.06 has been made out by the department. 21. On the question of submission of a fresh classification list, the ld. counsel submitted that Trade Notice No. 148/79 dated 18-7-1979 issued by the Collectorate clearly provided that if there has been no structural change in the product and there is no change in the Tariff Entry, it was not necessary to file a classification list. The ld. counsel therefore submitted that with the coming into force of the new Central Excise Tariff from 1-3-1986 it was not necessary for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported in 1983 (13) E.L.T. 1546 had held : Since the penalty of confiscation is a penalty in rem which is enforced against the goods and the second kind of penalty is one in personam which is enforced against the person concerned in the smuggling of goods, therefore, in the case of the former, it is not necessary for the customs authorities to prove that any particular person is concerned with their illicit importation or exportation. It is enough if the department furnishes prima facie proof of the goods being smuggled goods. In the case of the latter penalty, the department has to prove further that the person proceeded against was concerned in the smuggling. 24. The ld. counsel also argued that the appellants had not withheld any information from the beginning and that there was no evidence to prove that the appellants had suppressed any facts from the department. The ld. counsel, therefore, pleaded that no penalty was imposable on the appellants. In support of this contention, the ld. counsel relied upon the ratio of the decision of the Tribunal in the case of Vischem Corporation v. CC, Bombay reported in 1985 (19) E.L.T. 251. 25. It was also argued on behalf of the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case there is a change in the Tariff description of the goods, new classification list shall be necessary; that responsible officers of the appellant company confirmed manufacture of taspa yarn even after 28-2-1986; that the chemical report dated 3-7-1987 clearly shows that the Chemical Examiner had given the opinion that The sample appears to satisfy the requirement of the definition of fancy yarn (special yarn) as given in the Standard Technical Literature ; that the technical literature relied upon by the Chemical Examiner while giving the test report appears to be Textile-Terms and Definitions compiled by Larolyn A. Farnfield which defines fancy yarn as A yarn that differs from the normal construction of single and folded yarn by way of deliberately produced irregularities. These irregularities relate to an increased delivery of one or more of its components or to the inclusion of periodic effects such as knops, curls, slubs and the like ; that all the affidavits and technical literature furnished by the appellant supports the view that taspa yarn is fancy yarn; that looking to the process of manufacture of Taspa yarn, it cannot be termed as doubled yarn but is specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on list and therefore Mens rea on the part of the appellants is proved beyond doubt. He, therefore, submitted that imposition of penalty was legal and fully justified. 30. Heard the submissions of both sides and considered them. We find that the admitted position by both sides is that prior to 1-3-1986, Taspa yarn was classified under the then Central Excise Tariff Item 18-II(i)(b). There was no entry in the Tariff introduced with effect from 1-3-1986 which was pari materia to the then Tariff Item No. 18-II(i)(b). There were seven chapters in the new Central Excise Tariff which covered the items classified under Tariff Item 18 earlier. These seven chapters were from Chapter 50 to Chapter 56. 31. For proper appreciation of the classification of goods, we reproduce Chapter Headings 50, 51, 52, 53 and 55 in general and Chapter Headings 54.03 and 56.06 in particular. CHAPTER 50 SILK - CHAPTER 51 WOOL; FINE OR COARSE ANIMAL HAIR - CHAPTER 52- COTTON - CHAPTER 53- OTHER VEGETABLE TEXTILE FIBRES; PAPER YARN, WOVEN FABRICS - OF SUCH YARNS CHAPTER 55- MAN-MADE STAPLE FIBRES - -CHAPTER 54- MAN-MADE F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... knop at regular intervals. This was known as taspa effect and the yarn known as taspa texturised yarn. The ld. SDR referred to the technical literature cited and relied upon by the appellant and submitted that the admitted position was that taspa texturised yarn consisted a minimum of two yarns and one of the yarns acted as a core yarn and other yarn was having gimps to produce folded knops and curls at regular intervals. Thus the yarn which was moving at a slower speed, according to the position admitted by the appellants, the ld. SDR submitted that it was factually the core yarn. 33. We observe that core yarn has been defined in the Fairchild Dictionary of Textile Terms. The effect of producing certain folds or curls mechanically by over-feeding one additional yarn during texturising has been admitted by both sides. This fact has further been testified by the persons who furnished the affidavits and the certificate given by MANTRA and SASMIRA. A scrutiny of the certificates shows that Taspa yarn does not contain such core type configuration and therefore it cannot be termed as core yarn ; and further that Taspa yarn is entirely different yarn and cannot be called as core ya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lified Engineer and Shri Shah, Director of the appellant company. 35. Another point that was emphasised by the appellants was that in the market, taspa yarn was not known as a special yarn, and that the affidavits produced by them support this contention. On this issue, we find that the admitted position was that during the material period, there was no sale of taspa yarn to the market or the sale was negligible but the entire product was utilised in the units of the appellants and therefore the argument that in common parlance it was known only as textured yarn is not supported by facts of the case. 36. Having regard to the above facts and circumstance and the discussions on the various issues raised by both the sides, we find that taspa yarn is a special yarn. 37. It is a fact that man-made filament textured yarn falls under Chapter 5403. However, having regard to the discussion that taspa yarn actually is not ordinary man-made filament textured yarn classifiable under Chapter 54, it was a special yarn as held above. We also observe that there is a special Chapter for special yarns. That Chapter is Chapter 56 and therefore, having regard to the facts and circumstances of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the first yarn. The consumption of the faster moving yarn is higher than the consumption of the slower moving yarn and therefore the yarn which moves at the slower speed can be termed as a core yarn and the yarn which moves at the higher speed is the yarn which covers the slow moving yarn by producing curls and knops. Thus, examining the process of manufacture of taspa yarn in the light of the Explanatory notes on HSN under the relevant chapter, we find that taspa yarn is not ordinary textured yarn but a special yarn. 39. Now, going through the various entries of Chapter 56 of the Central Excise Tariff, we find that Heading No. 56.01 does not cover the product. Heading No. 56.02 and 56.03 also do not cover the product under Chapter 56. Heading No. 56.04 also does not cover the product. So also can be said of Chapter Sub-heading 56.05. Sub-Heading 56.06 covers special yarns other than those specified under the other sub-headings. 40. Having regard to the above findings, we hold that taspa yarn shall be classifiable under 56.06 of the Central Excise Tariff Chapter 56. 41. During the course of arguments, the ld. counsel also submitted that the dispute arose with the issue of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied upon by the appellants. The ld. Counsel for the appellants submitted that there was absolutely nothing suppressed or mis-stated to the department nor was anything held back with the intention to evade payment of duty so as to attract the Proviso to Section 11A of the CESA, 1944 for extending the period beyond six months. 43. The department had argued that with the introduction of new Central Excise Tariff effective from 1-3-1986, there was wholesale change in the description of goods and their classification etc., the appellants were required to file revised classification list as required under Rule 173-B(4)(c) of the Central Excise Rules, 1944 and that the appellants if they thought that they were eligible for an exemption, they should have claimed that exemption by filing the requisite classification list as required under the law; that the appellant did neither submit the revised classification list as required under the Central Excise Rules nor did they claim the exemption under the Notification and therefore the department had rightly invoked the proviso to Section 11-A of the Act ibid. On careful examination of the submissions of both sides and the case law referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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