TMI Blog1992 (2) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... Fabrics as alleged by the Department but they are : (i) Cotton Fabrics not subjected to any process; and (ii) Fabrics of Man-Made Filament Yarn, not subjected to any process; The assessee had filed various classification lists and had got approved during the period from 28-2-86 to 6-5-87, in which they had cleared - Cotton Fabrics not subjected to any process classifiable under Chapter sub-heading 5205.00 chargeable to Nil rate of duty and Fabrics of Man-Made Filament Yarn not subjected to any process classifiable under Chapter sub-heading 5408.00 chargeable to nil rate of duty. These classification list were got a approved from time to time and clearances were made without payment of duty. 2. The Department got information and based on the said information received by them that the products are Industrial Fabrics and classifiable under Chapter sub-heading 5909.00 only. The scrutiny and verification of their products were conducted. The scrutiny and examination of their records and the products manufactured revealed that the items manufactured by them were Grey Cotton, Belting, Duck and Grey Cotton Canvass Cloth 100% cotton used for Industrial purposes. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed by the Collector of Central Excise, Nagpur. The assessee in their letter dated 7-6-89 raised several contentions which has been summarised by the learned Collector in the impugned order which are stated below : (i) Show cause notice has been issued illegally and without jurisdiction, a view of the Collector (Appeals) decision of 23-3-89 holding that the goods manufactured by them are plain, ordinary, Cotton Fabrics classifiable under sub-heading 5205.00; (ii) The charges of mis-declaration and suppression of facts are not substantiated with any proof or evidence or material facts and therefore, the demands raised are barred by time and the proviso to Section 11A of the Act cannot be invoked; (iii) The matter is sub-judiced in the High Court and also as the department had filed an appeal against the classification list approved by the Asstt. Collector and the show cause notice suffers from legal bias and therefore, the Collector had no jurisdiction to issue show-cause notice or to proceed further in the matter. (iv) They are not carrying out any process on the Grey Fabrics manufacture in their factory. Therefore, the Fabrics manufactured by them are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent is that Cotton Fabrics and Man-made fabrics in question manufactured and cleared by them are Industrial Fabrics and therefore, rightly classifiable under Chapter Heading 5909 and not under 5205 or 5408. Therefore, the learned Collector has held that the first argument of the assessee that their fabrics manufactured and cleared or plain Grey Fabrics and not processes is neither relevant in the context of the charges made in the Show Cause notice nor correct. He has further pointed out that even if the fabrics manufactured by them or processed, these would have been classified under respective heading of Chapter 52 or 54, if they are for industrial use. The learned Collector has held that section note 6 of Section XI clearly states along with other things that Chapters 52 to 55 do not apply to goods of Chapter 56 to 59. Therefore, he has held that once the goods are of Chapter 55 to 59, Chapter 52 to 55 will not be relevant. He has held that under the new Tariff the Chapters 52 and 54 exclude the fabric which are of a kind suitable for Industrial use. He has held that Chapter 5909 specifically includes Belting cloth, endless felts of textile fabrics and straining cloth. Straining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Asstt. Collector for de novo consideration. The assessee had moved against the said order before the Bombay High Court, Nagpur Bench in Writ Petition No. 1896/89 and the Hon ble Bombay High Court by its order dated 28-7-89 allowed the Writ Petition with the direction to the Asstt. Collector to decide the matter afresh. As a result the Asstt. Collector took up all the classification lists in question and passed the impugned order-in-original dated 2-5-1989 rejecting the assessee s claim for classification under sub-heading 5205.00 and held that the products were classifiable under heading 5909. The Asstt. Collector relied on the test report of the Chemical Examiner, who had indicated in test memo dated 23-5-89 as Textile Fabric for Industrial use . He has held that the assessee had not challenged the test report and therefore, the test report had become final. The learned Asstt. Collector had also noted the stamping on the fabric as for Industrial use but upheld the Department s classification. The Collector (Appeals) had set aside this order and allowed the assessee s claim on the ground that the Heading 5909.00 is a residuary item covering all other textile items which have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 52 and only those articles which specifies would be classified under Chapter 59. He contended that the product in question is not used for purposes of filtration of oil and the stamping of the product with words Industrial use is not communicative of Industrial use of the product. He further contended that the effect of sale for Industrial use is not relevant for the purpose of classification as the product has to be classified on the basis of Chapter notes Section notes and Chapter Heading. He contended that if the assessee had carried on industrial processes on the fabric then they would be classified under Heading 5909. He contended that the product is not a textile product and neither it is an article of a kind suitable for industrial use as a textile fabric. The product is a cotton fabric woven and not subjected to any process and hence it is rightly classifiable under heading 5205. He contended that the textile fabrics which has been cut to pieces alone can be brought under 5909 and the said fabric cleared is in running length sub-heading 5909 is not appropriate and not applicable. He explained the reasons as to why the stamping of the words Industrial Use is done. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CET. He submitted that Chemical Examiner in his report had referred to only to the use of the product which is not negatived of classification and therefore the Test Report was not significant for the purpose of classification the goods in question. He also relied on the following rulings to support his arguments. (i) Randip Shipping Transport Co. Pvt. Ltd v. Collector of Customs reported in 1989 (41) E.L.T. 392. (ii) Brakes, India - 1987 (31) E.L.T. 1030 On the question of limitation, he has relied on the following rulings. (i) CCE v. Chemphar Drugs Liniments reported in 1989 (40) E.L.T. 276 (S.C.) (ii) Padmini Products v. CCE reported in 1989 (43) E.L.T. 195. 5.3 On the question of Collector not having jurisdiction to issue show cause notice, he has relied on the rulings rendered in the case of Modi Rayon and Silk Mills v. CCE, Meerut reported in 1987 (29) E.L.T. 933. 6. Shri J.N. Nair, learned JDR contended that the heading note does not have statutory force and in this context relied on Rule 1 of the interpretation Rule. He contended cotton that Chapter Heading 5909 need not cover only processed cotton fabrics or Belting Cloth but it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to fabrics and the product being a Cotton fabric, the specific Heading Chapter 52 would be attracted in the present case. He contended that the assessee had not admitted at any stage of the product being readily usable for industrial purposes. 8. We have carefully considered the submissions made by both the sides and perused the records. The question that arises for consideration and our reasoning are noted below. 9. Does the product in question declared in classification list as Grey Unprocessed Loom State Cotton fabrics and fabrics of man-made filament fall under Tariff Item 52.05 and Tariff Item 54.08 of CET 1985 as claimed by the assessee? 10. The findings given by the Collector in impugned Order-in-Original No. 15/89, dated 18-10-89 in Appeal No. E 753/91-D in Paras 7 to 12 are reproduced herein below : 7. The charge of the Department in the Show Cause Notice is not at all based on the fact that they have processed the grey cotton fabrics after manufacture. The Departments charge is that the grey cotton fabrics and man-made fabrics manufactured by them are Industrial fabrics whether they are processed or not processed after manufacture. Therefore, whether they p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not marketed as Industrial fabrics and not known and understood in the market as industrial fabrics and not bought and sold as industrial fabrics is neither correct nor acceptable which is evident from the physically marking of the goods by the party themselves. Further these cotton fabrics and man-made fabrics manufactured by the party are also sold to industrial users engaged in the oil processing or similar filtering processes. The verification done with the Collector, Central Excise, Calcutta-II and Collector, Central Excise, Ahmedabad, reveals that their fabrics in question are used as industrial fabrics for filtration of similar processes. Therefore, all the conditions are fulfilled in the case of their goods in question for classifying under Chapter 5909 as industrial fabrics. They manufacture and market the goods as industrial fabrics and they are also being sold to the Industrial consumers and they are being used as industrial fabrics for straining or filtering purposes. Hence the test of marketing of their product as industrial fabrics is clearly established and that they are bought and sold and used and known in the market as industrial fabrics. Hence these are right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or acceptable. Therefore, it is clear that on their own admission and from the fact that they market the goods by marking them as industrial fabrics and that they are being used as industrial fabrics for filtering or similar other processes, their goods are rightly classifiable under Chapter 59.09 as charged in the show cause notice. It may be further stated that entry under Chapter Heading 59.09 reeds as under : All other textile products and articles of a kind suitable for industrial use (for example, textile fabrics, contained with one or more layers of rubber, leather or other material, bolting cloth, endless felts of textile fabrics, straining cloth) . From the reading of the above entry, it clearly reveals that all such fabrics which are suitable for industrial use are classifiable under Heading 50.09. Therefore, the party s contention that use is not relevant in the context of the classification is neither correct nor valid. It may further be added that Chapter Note 6 of Chapter 59 is not exhaustive for the items to be classified under heading 59.09. The fabrics under reference therefore, merit classification under Heading No. 59.09 as Textile products on the ground tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 200 g/m2. The note under this Heading at page 735 states that This heading covers woven fabrics (as defined in Part I(c) of the General Explanatory note of Section XI) weighing not more than 200 g/m2, containing 8596 or more by weight of cotton. Cotton fabrics are produced in great variety and are used, according to their characteristics for making clothing, household linen, bed spreads, curtains, other furnishing articles etc. The heading does not include (a) Bandages medicated or put up for retail sale (Heading 30.05) (b) Fabrics of Heading 58.01 (c) Terry toweling and similar fabrics (Heading 58.02) (d) Gauze (heading 58.03) (e) Woven fabrics for technical uses, of Heading 59.11 (underlined by us). 13. The heading 52.09 in HSN explanatory note has a Heading with description Woven fabrics of cotton, containing 85% or more by weight of cotton, weighing more than 200 g/m2. The note clearly lay down that this heading does not include the categories (a) to (e) as shown in above, under Heading 52.08 of HSN explanatory note. 14. The tariff heading 5408.00 of CET 1985 reads : Fabrics of man-made filament yarn (including fabrics obtained from m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd includes :- (a) Cloth in any running length, exceeding 90 cm where the width of the fabric is one metre or more, or exceeding 135 centimeters where the width of the fabric is less thon one metre, (b) Dhoties and Sarees, ordinarily sold by pair or piece, the total length of such uncut cloth and (c) Hand-kerchiefs, pillow cases, towels chhaddars, blankets, bedsheets and bed covers. (ii) Fent means :- Cut piece of cloth of length 45 centimeters or more but not exceeding 90 centimeters where the width of the fabric is one metre or more and of length of 65 centimeters or more but not exceeding 135 centimeters where the width of the fabric is less than one metre. The above reading of the definitions of piece of cloth and Fent as appearing in the Said Regulation, and the fact of assessee taking exemption from the application of the Regulation, is a clear indication that the use of the product is not as of a Cotton fabric as is understood in the trade parlance and commercial usage. 17. There is another piece of evidence which has not been controverted by the assessee and that is the report of the chemical examiner. The full report of the chemical exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoices and it being of industrial use as Industrial Fabric is excluded from Chapter 54. 19. The Chapter on Industrial fabrics appear on page 495 of the Encyclopedia of Textiles third edition published by the Editors of American Fabrics and Fashion Magazine 1980 Edition. This encyclopedia has been referred by this Bench in the case of Multiple Fabrics Co. (P) Ltd., Calcutta v. Collector of Central Excise, Calcutta as reported in 1984 (16) E.L.T. 301 (confirmed by the Hon ble Supreme Court of India) [1987 (29) E.L.T. 481 (S.C.)]. The Bench has also considered the ISI specification No. 2364 - 1979 on the definitions of the terms Impregnated fabrics and Industrial fabrics , which had defined these terms as follows : Industrial Fabrics : Fabrics whose interstices in the Yarn have been filled with chemical compound so as to cover the entire surface. Commonly used for leather bags, garments insulation tapes etc. Industrial Fabrics - Fabrics made from man-made or natural Yarn which are commonly used on machine such as belting duck, filter cloth, sizing flannel etc. . The Bench also referred to the definition of Fabric as appearing in Chambers Twentieth Dictionary, Revise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this case. 20. The further observations of the bench made in Paras 21 and 22 of the report are reproduced herein below : 21. We now come to the authorities cited by Shri Tayal. It is correct that in The New Encyclopaedia of Textiles there is an item belting which comes within the Chapter on Industrial Fabrics . The same publication contains a Dictionary of Textile terms . The dictionary does not contain any definition of the term fabrics . It does contain a definition of the term Industrial fabrics which reads as follows :- INDUSTRIAL FABRICS : As differentiated from consumer textiles products which are commonly used in the various manufacturing industries for factory purposes. Prominent in this group are such textile products as machine belting, straps, pads and similar types of fabrics or yarns, both man-made and natural. It has been argued that since this Encyclopaedia is published by the Editors of American Fabrics and Fashions Magazine, it can rightly be regarded an conveying the understanding of trade and industry. 22. While this argument is not without force, it appears to us that the Encyclopaedia, which runs to over 600 pages exclusive of the index ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vital to many industries, ranging from primitive agriculture to get transportation. Industrial fabrics are largely Specification fabrics (underlined by us) since they are produced by specifications set by the large corporations, institutions, or Government agencies which buy them. Such fabrics may be roughly divided into four categories : DIRECT USE : This group includes specification clothes which are used directly for end products, such as boat sails begging, coverings, tentings, belting, webbing, book binding, etc. Also included are rugs, upholstery and drapery fabrics produced to specification for auto-mobiles, air planes, rail road card, buses and institutions. INDIRECT USES : These includes textiles which go into the composition of other products shoe linings, tire fabric, type writer ribbons, coated materials, plastics. PRODUCTION USES : A wide variety of specially constructed textiles are used by industry during the course of production or processing for such. purposes as buffing, insulating, filtering, ventilating, laundering. WORK CLOTHING : Fabric used for work clothing is also classified as an industrial material special types of cloth are used for industrial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ph. D. TexScD published by Textile Book Service, at page 297 is as follows :- INDUSTRIAL FABRICS. A wide variety of fabrics, chiefly cotton, used in various mechanical processes or which, in turn, are processed or treated in order to become part of another product. Some fabrics of this type include print cloth, cheese cloth, tobacco cloth, duck of all types, sheeting, osnaburg, filter twill, chain cloth, press cloth, jean, drill, twill, and broken twill bottom fabric, sateen, moleskin, multiple fabric, leno or donp-woven fabric, terry, airplane cloth, balloon fabric, typewriter ribbon fabric. Let us look into the term Belting as appearing in Encyclopaedia of Textiles Third Edn (by the Editors of American Fabrics and Fashion Magazine) at page 502-503 under the Chapter - Industrial fabrics. Beltings Belting are of two types Flat belting, both rubberized, and non-rubberized, and V-beltings. Such belts are used for power transmissions and for handling and conveying materials. The Original belting was made of cotton, then succeeded by rayon, which in turn has been superseded by nylon and polyester, with Momex nylon becoming and large factor in V-belts. (Underlined by us) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corrosibility are required. In this area, acrylic, nylon and polyester are the important man-made fibres Acetate tow is major man-made fibre used to make cigarette filters. Woven fabrics, non-woven fabrics and random fibres are all used in filtering. Practically every industry employs filtration in some form, either to cleanse liquids or gases, or else for recovery of valuable wastes in dusts or sediment. Among the industries which employ filter media most extensively are : Petroleum, chemicals, dyes, pigments, soap, plastics, food beverage metals, rubber, coal products. Man-made fibres are used exclusively in the applications where heat or chemicals are involved for example, in filtration of hot concentrated acids which would not be possible with any natural fibre except perhaps asbestos. Glass fibres are extensively used in air filtration for domestic purposes, their freedom from organic contamination being an asset. In instances where factorial rotting is a consideration, for example in sewage filtration, man-made fibres are found to give approximately five times longer service than wool fibres. The type of textile used in a particular fibre varies with the type of filtrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age 101 is - Canvas : A general classification of strong, firm, closely woven fabrics usually made with cotton, originally made of hemp or unbleached flax. It is produced in many grades and qualities and may be softly finished or highly sized. The term canvas and duck are usually interchangeably, but canvas generally relates to the lighter constructions. See Duck. Canvas cloth - 1. Plain, open weave woollen dress fabric made with plied yarns. Three-ply yarns are generally used. 2. A British term for a plain weave cotton fabric made with hard spun yarn. 25. The term Duck appears at page 198 of the said dictionary and it is defined as : Duck - A broad term for a wide range of strong, firm, plain weave fabrics, including the heaviest, strongest, single woven fabric made; duck is usually made of cotton, although sometimes linen is used. Different types of Duck include : 1. Duck in which both warp and filling yarns are single. 2. Duck in which the warp yarns are single and the filling yarns plied; 3. Duck in which both warp and filling yarns are plied. The most important ducks are numbered duck, army type duck and flat duck. Numbered and army type duck are woven with me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the distance between the motor and the power unit is from five to six feet and up See Belting. The term Duck as appearing at page 539 of the above stated Encyclopedia of Textiles is as fallows : Duck : The name duck covers a wide range of fabrics. It is the most durable fabric made. A closely woven heavy material. The most important fabrics in this group are known as number duck, army duck, and flat or ounce duck. Number and army ducks are always of plain weave with medium or heavy ply yarns; army ducks are the lighter. Ounce ducks always have single warp yarns woven in pairs and single or ply filling yarns. 26. The term Filter cloth and Filter Duck appears at page 229 of the Fair Childs Dictionary of Textiles and they are reproduced below. Filter Cloth : A general term for a number of different fabrics used for filtering purposes, ranging from fine flour filter fabric (bolting cloth) made of silk or synthetic fibres, to very coarse cotton or man-made fibre filter fabric. The cloth vary in weave, weight, fibre, size of yarns and all other features. Man-made fibres such as nylon, acrylic, vinyl, polyethylene and others as well as glass fibres are very useful as indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 55 or in Heading No. 58.06 or 59.02 and of a mixture of two or more textile materials are to be classified as if consisting wholly of that one textile materiel which predominates by weight over any other single textile material. Note 6 Chapter 50 to 55 and, except where the context otherwise requires, Chapters 56 to 60 do not apply to goods made up within the meaning of note 5 above, Chapter 50 to 55 do not apply to goods of Chapters 56 to 59. (Underlined by us) This note 6 of Section XI clearly indicates Chapters 50 to 55 and, except where the context otherwise requires, and Chapters 56 to 60 do not apply to goods made up within the meaning of Note 5 above. Thus the product in question not being goods within the context of note 5, hence it still remains within the Chapters 50 to 55, and 56 to 60. But Chapter 50 to 55 do not apply to goods of Chapter 56 to 59. 29. Therefore, it has to be seen as to whether the products in question falls within Chapters 56 to 59 in more particular context Chapter 55 which the revenue is seeking to classify. As we have seen Chapter 52 is excluded for the products in question. We have to only see whether it fits in Chapter 59. The note 1 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corresponding note 6 of Chapter 59 is HSN explanatory note is note 7 and that of 59.09 of CET 85 is note 59.11. The heading of 59.11 of HSN explanatory notes reads : Textile products and Articles, for Technical uses, specified in Note 7 of this Chapter The various heading and the accompanying notes under heading 59.11 of HSN explanatory note reads as follows : 5911 Textile products and articles, for technical uses, specified in Note 7 to this Chapter. 5911.10 Textile fabrics, felt and feltlined woven fabrics, coated, covered or laminated with rubber, leather or other material, of a kind used for card clothing, and similar fabrics of a kind used for other technical purposes. 5911.20 Bolting cloth, whether or not made up - Textile fabric and felts, endless or filled with linking devices, of a kind used in paper making or similar machine (for example, for pulp or asbestos-cement) : 5911.31 Weighing less than 650 g/m 2 . 5911.32 Weighing 650 g/m 2 or more. 5911.40 Straining cloth of a kind used in oil process or the like, including that of human hair. 5911.90 Other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed fabrics of synthetic fibres (e.g. nylon) thinner than the foregoing but of a close weave and having a characteristic rigidity. It also includes similar straining cloth of human hair. (4) Flat woven textile fabrics with multiple warp or weft, whether or not felted, impregnated or coated, of a kind used in machinery or for other technical purposes. (5) Textile fabrics, reinforced with metal, of a kind used for technical purposes, the metal thread (bare metal, wire twisted or gimped with textile yarn, etc.) may, for example, be incorporated during weaving (in particular, as warp) or introduced between plies of the material. Felt reinforced with metal is, however excluded (heading 56.02). (6) Cords, braids and the like of a kind used in industry as packing or lubricating materials, these are usually of square section, coated or impregnated with grease, graphite, talc etc., and sometimes reinforced with metal. Cords, etc., not coated or impregnated, remain classified here provided they are clearly recognizable as products used in industry as packing or lubricating materials. (B) Textile articles of a kind used for technical purposes All textile articles of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d suitable for industrial use (for example, textile fabrics, combined with one or more layers of rubber, leather or other material, bolting cloth, endless felts of textile fabrics, straining cloth.) 30. The example of articles of a kind suitable for industrial use given are textile fabrics, combined with one or more layers of rubber, leather or other material, and that there is bolting cloth, endless felts of textile fabrics, straining cloth . There is comma (,) after textile fabric and also after the words other material, and after each item bolting cloth and preceding straining cloth. Therefore, it cannot be presumed that these items textile fabric, bolting cloth straining cloth should be in cut piece and be in only coated. A clear reading indicates that Industrial fabric of various types like bolting filter cloth Duck Canvas Straining cloth are all varieties of Industrial fabrics and hence even if they are not coated or cut as articles, they fall under heading 59.09 of CET 1985. It is interesting to note that Transmission or conveyor belts or belting, of textile material, whether or not reinforced with metal or other material come specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant s contention. It is seen that the GP-1 and the invoices had carried a clear description as noted above. In case the appellant had not shown these descriptions on the GP-1 and invoices, than certainly the demands for larger period would have been sustainable on the ground of suppression. The fact of nature of the goods has been clearly indicated in the GP-1 and invoices, of which knowledge the department were having, and therefore, the charge of suppression fails. However, the demands would be maintainable for six months as held by the Hon ble Supreme Court in the case of TISCO v. CCE - 1988 (35) E.L.T. 605, Plasma Machine Manufacturing Co. v. CCE [1991 (51) E.L.T. 161 (S.C.) = 1991 (31) ECC 221], Elson Machines v. CCE [1988 (38) E.L.T. 571 (S.C.) = 1989 (19) ECC 80]. 34. The learned advocate contended that the Collector cannot exercise his jurisdiction for larger period under proviso to Section 11A, as the Collector had filed review petition against the orders of the Assistant Collector. The learned advocate relied on the ruling of the Tribunal rendered in the case of Modi Rayon Silk Mills (supra). But this ruling has not been approved by the Hon ble Calcutta Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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