TMI Blog2018 (9) TMI 892X X X X Extracts X X X X X X X X Extracts X X X X ..... 98-CX dt. 27.11.98 which had expounded that omission of Chapter Note 2(c) was neither intended to, nor resulted in, changing the classification of Fusible Interlining Cloth under CETH 5903; that classification of such fabrics may be considered as an exception under Chapter No.2(a) (iv) of Chapter 59 according to which fabrics partially coated or partially covered with plastics and bearing designs resulting from those treatments are excluded from the scope of CETA 5903. The retest reports clearly indicate that the samples of the impugned fabric have characteristics which would fall within the exclusions (i) to (v) of Chapter Note 2 (a) to CETH 59.03. So also, the requirement of “impervious” for the purpose of Board’s telex circular 30.9.88 and Circular No.5/89 dt. 15.6.89 will not then be satisfied. Hence, even based on the output of the retest conducted by the CRCL, New Delhi as per Tribunal’s direction it is clear that the impugned fabric will fall outside the scope of classifiability under CETA 5903. When Chapter Note 2 (c) itself is no longer in existence, and the impugned goods otherwise did not satisfy the requirements laid down in Chapter Note 2(a) read with CBEC circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07.2000 till the date of payment. In appeal, the Commissioner (Appeals) vide the impugned order No.330/2011 dt. 17.10.2011 upheld the order of the original authority and rejected the appeal. Hence the appellants are once again before this forum. 2. Today when the matter came up for hearing, the appellants represented by Shri N. Venkatraman, Sr. Advocate, assisted by Shri S. Muthuvenkatraman, Advocate, made various submissions which can be broadly summarized as under: i) The period of dispute involved in this appeal is from 07.10.1996 to 30.04.2003. ii) Ld. Sr. Advocate drew our attention to comparison chart of the Notes to Chapter 59 of the CETA to point out that sub note (c) namely Note 2 (c) was added w.e.f. 1.3.1989. The said Note 2(c) when introduced, read as under: Textile fabrics, partially or discretely coated with plastic by dot printing process (heading NO.59.03) iii) Note 2(c) was modified w.e.f. 20.03.1990 as under: Textile fabrics, partially or discretely coated with plastic (heading NO.59.03) The Note 2(c) was deleted w.e.f. 16.03.1995, hence for the period of dispute, the said note 2(c) was not in operation. iv) This being so, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar must be taken to be illegal and ultra vires and is hereby quashed. In the appeal filed against this judgment by the department, the Division Bench of the High Court of Madras vide their order dt. 05.01.2009, inter alia set aside the impugned circular on the ground that it is contrary to the proviso (a) of Section 37B of the Act and not on the ground that it is ultra vires of the Constitution of India. xi) However, notwithstanding setting aside of said circular dt. 27.11.98 and the earlier remand order of the CETAT Chennai dt. 16.9.98, both the adjudicating authority and the Commissioner (Appeals) without naming the said circular have nonetheless applied the instructions contained therein. xii) CESTAT Chennai remand order had inter alia upheld the directions for retesting of remnant sample for composition. The results of the retest have been communicated by Central Revenue Control Laboratory (CRCL) vide their communication dt. 16.8.1989 and 6.4.2000. The report dt. 16.8.1989 clearly indicates that the characteristics of the test and material are such that it could have been out of the scope of Note 2(a) of CETH 59. The re-test report dt. 16.4.2000 inter alia clarifies tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lassification of the impugned interlining coated fabrics, for the purpose of the CETA, whether under Chapter 5903 as coated fabrics or in Chapter 52, based on the base textile material contained therein. 5.2 The department has taken the view that the impugned goods are required to be classified only under CETH 5903.90 and had issued SCN, inter alia proposing the same. In the first round of litigation, the original adjudicating authority vide order dt. 26.9.97/14.10.97 finalized the provisional assessment classifying the said fabrics under 5903.90 and demanded differential duty, which on appeal was allowed by the Commissioner (Appeals) by way of remand order dt. 22.1.98 with directions to go for re-testing of the materials on the basis of the samples available. On further appeal to the CESTAT Chennai, the Tribunal vide Final Order No.1828/98 dt. 16.9.98 had disposed of the appeal with directions that (i) remnant sample be tested for composition and (ii) to consider the circular No.5/89 dt. 15.6.89 while taking a decision about the specific classification. 5.3 At this point, it is important to take note that the said Tribunal order dt. 16.9.98 was not appealed against by the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end on 16.3.95. Thus, w.e.f. 16.3.95, in our view, to determine whether any such fabric could be classified under CETH 59.03, the erstwhile Chapter Note 2 (a) read with Board s circulars of 2.9.88 and 30.9.88 would remain the only guiding stars for determining the classification. It is in this context that in the previous round of litigation before the Tribunal, the appellant had made a plea that circular No.5/89 dt. 15.6.89 should be applied in their case even for the period after 16.3.95. On a perusal of the circular, we find that in para-4 therein it is clarified that prior to introduction of Chapter Note 2(c), from 1.3.1989, Fusible Interlining Cloth made by discrete coating with plastic get covered under chapters 52-55 depending on the textile materials whether cotton or man-made fabrics etc. The Tribunal in their Final Order dt. 16.9.98 had acceded to this plea and had given specific direction in the remand order that the said circular should be taken into account while deciding the matter. 5.7 We therefore find that there was no lack of clarity in the de-novo directions at the stage of adjudication. We are then unable to fathom how both the de novo adjudicating authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following report has been made: The sample is a light brownish woven fabric made of cotton, having discrete coating of plastic on one side, with the following percentage composition. Plastic coating = 2.5% (Two decimal five percent) by wt. Cotton fabric = 97.5% (Ninety seven decimal five percent) by wt. The sample has following characteristics :- (i) Coating on the fabric is visible with naked eye. (ii) Sample without fracture bends manually, around a cylinder of diameter 7 mm. At a temperature between 15 o C to 30 o C. (iii) In the sample textile fabric is neither completely embedded in plastic nor entirely coated on both sides with plastic material and coating in the sample is visible with naked eye. (iv) In the sample, there is no design from the discrete coating of plastic on the fabric. (v) The sample is not in the form of plates, sheets or strips of cellular plastic, combined with textile fabric, and the textile fabric of the sample is not present for reinforcing purpose. 5.9 Discernably then, the retest reports clearly indicate that the samples of the impugned fabric have characteristics which would fall within the exclusions (i) to (v) of C ..... 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