Cce, Tirunelvi vs M/S. Sunpak

(Arising out of Review Order No. 3/2007 dated 11.04.2007 passed by the Committee of Chief Commissioner and Order-in-Appeal Nos. 296-298/2009 dated 31.08.09 dated 14.03.2014, passed by the Commissioner of Central Excise (Appeals), Madurai).

A.No. E/326/2007

CCE, Tirunelvi : Appellant

Vs. M/s. Sunpak : Respondent

A.No. E/666 - 668/2009

M/s. Sunpak : Appellant

Vs. CCE, Tirunelveli : Respondent

Appearance

Shri S. Murugappan, Adv., For the applicants

Ms. Indira Sisupal, AC (AR) For the respondent

CORAM

Honble Shri R. PERIASAMI, Technical Member Honble Shri P.K. CHOUDHARY, Judicial Member

Final Order No.: 41757- 41760 / 2015

Date of Hearing/Decision : 10.08.2015

Per: P.K. Choudhary

Both the Revenue appeal and assessees appeals are taken up together for disposal since the issues involved are common in nature.

2. Appeal No. E/326/2007 The brief facts of the case are that the respondents are manufacturers of HDPE Knitted fabrics falling under Chapter 3926 and availed SSI exemption during the period 2005-2006 under Notification No. 08/2003 dated 01.03.2003. The Commissioner in his Order-in-Original dropped the proceedings initiated in the Show Cause Notice and held that the goods manufactured by the respondents are Knitted fabrics and are different from woven fabric and are eligible for exemption given under S.No.2 of the Table under Notification No. 08/2003. Review Committee approved the Commissioner to file appeal to CESTAT and Revenue filed appeal vide Review Order No. 03/2007 dated 11.04.2007.

3. Appeal No. E/666 - 668/2009 All the three appeals are arising out of common order passed by the Commissioner (Appeals). The adjudicating authority has classified the HDPE Rachal Knitted Fabrics, HDPE rope, HDPE Strips and waste were classified under CH 39269099, CH 56079010, CH 39203020 and CH 39151000 respectively and attracts duty under Section 11A of CEA, 1944 for the period from 01.04.2006 onwards. Both the Revenue and assessee have filed appeal against the adjudication order No. 45/2008 dated 07.10.2008. The Commissioner (Appeals) in his order confirmed the classification of all the three products under Chapter 39. Aggrieved by this, the appellants preferred appeals.

4. The Ld. Advocate appearing on behalf of the assessees submitted written synopsis. He submits that they are manufacturers of HDPE warp Knitted fabrics classifiable under 59039090 as against Revenues claim of HDPE Raschal Knitted fabrics classifiable under 39269099, HDPE Rope classifiable under 56079010 as against Revenues claim of Polyethylene rope classifiable under 39269099, HDPE Strips of width less than 5mm classifiable under 54049020 as against Revenues claim of HDPE yarn/strip classifiable under 30203020 and Waste classifiable under 55051090 as against Revenues claim of classification under 39151000. He submits that chapter 39 merits classification as articles of plastics and their products are textile fabrics merits classification under chapter 54,56 and 60.

5. Ld. Advocate reiterated the findings in the adjudication order and especially para 21 of the O-in-A dated 31.08.2009summarized the classification of all the products in detail. He submits that as per Section Note 1(g) of Section XI of CETA 1985 only plastic strip or the like more than 5mm is classifiable under chapter 39 are excluded from textile and textile articles. In their case, the strips are less than 5mm width are covered under Chapter 5404 of CETA 1985. He produced the samples of strips and fabrics and submits that the width of the strips is 1.5 mm. However, he submits that as per Section Note2(p) of Chapter 39 of CETA 1985 clearly excludes the goods of Section 11. Boards Circular dated 24.09.92 was issued against the Notification of HDPE strips which relates to HDPE woven fabrics and not related to knitted fabrics. He relied on HSN Explanatory note under Chapter 54, which also consider strip and the like not exceeding 5 mm to be covered under 54.10. Hence the plastic material out of which strip of less than 5 mm made by the appellant is a synthetic material as per chapter note 1 of chapter 54. Since the Central Excise Tariff is in line with HSN explanatory note relevant for the classification of the products.

Further, he submitted a copy of the Textile Committee Report dated 05.03.2013,, SASMIRA report dated 01.03.2013 and test report issued by CIPET and submitted that all these reports confirm that the fabrics manufactured by the appellants are warp knitted fabrics made out of synthetic yarn of width less than 5 mm to be classifiable under 6005. He relied on the decision of the Ahmedabad Bench of the Honble Tribunal in the case of Flora Agrotech Vs. CCE, Vapi, which has held that such knitted fabrics are classifiable under 6005. In Final order dated 28.10.2014, Tribunal in identical issue held that knitted fabrics are classifiable under 6005 - reported in 2014-indlaw-CESTAT-1084. He further submits that the Honble High Court order in the case of Raj Packwell Ltd., which relates to the period prior to 1990 and also pertains to HDPE strips and HDPE sacks. He also relied upon ISI standard for Agro textiles and shade nets for agriculture and horticulture purposes. As per the ISI Std. the maximum width permissible is 1.7 mm and as per ISI standard also, classified under textile products. On the Revenue appeal he submits that the Commissioner has rightly allowed the Notification benefit under Clause 8 of the Notification which relates to strips woven fabrics and sacks and knitted fabrics.

The adjudicating authority has rightly allowed the SSI exemption under the said notification. He relied 2005 (189) ELT 311 (Tri.-Mum).

6. On the other hand, the Ld. AR reiterated the findings of the impugned order in the case of assessees appeal and the grounds of appeal in the case of departments appeal. She submits that as per the Boards order and the Honble High court of Madhya Pradesh decision in the case of Raj Packwell Ltd. 1990 50 ELT 201 (M.P) goods are rightly classifiable under Chapter 39 as articles of plastics. She drew attention to Section note 1 (h) and note 2 (a) of Section 11 of CETA and as per Section note, articles of plastics falling under chapter 39 are excluded from textile and textile articles. She further submits that as per section note 2A predominance of material is plastics. Therefore, it is rightly excludable under Chapter 39 as articles of plastics.

7. The Ld. Advocate in his rejoinder pointed out Ld. ARs submission and submitted that on the Revenue appeal, the period involved is 01.04.2005 to 20.09.2005 and they have not contested the classification dispute under Chapter 39 and the issue was on denial of exemption notification No. 08/2003 dated 01.03.2003. On the assessees appeals, consequent on allowing of HSC, the goods are strips and rightly classifiable under articles of textile articles. He submits that the department never disputed the predominance of material in their case. In counter, the Ld. AR submits that Chapter Note 1 (h) and 2 A of Section 11 relates to knitted or interknitted fabrics with plastics. Section note and chapter note of Chapter 59 has to be read together and also interpretative Rule 1A. As per chapter note 2A of Chapter and 2B of chapter 59, clearly listed various kinds of fabrics. Section note alone cannot be read in isolation as per the interpretative rules and classification has to be under Section note. She further submits that Section note alone is taken, the entire note 59 becomes outside the scope of textile. Since, there was no dispute on the predominance of material is plastics, Section note 2A of Section 11 is not applicable to the present case. All the Committee reports show width is less than 5mm. Both strips, fabrics are rightly classifiable under 54049020 and knitted fabrics under 60059000 and are rightly classifiable under 56079010.

8. Heard both sides and perused the records. The issue involved in the present appeals is regarding classification of DHPE warp knitted fabrics, HDPE ropes, strips, rachal knitted fabrics for agro products and wastes made out of plastic strip less than 5 mm in width. There were different practices for classification of plastic woven bags within the country. The Madhya Pradesh High Court in the case of M/s. Raj Packwell Ltd. held that such bags are classifiable as other articles of plastics under Chapter 39. This decision of Madhya Pradesh High Court relates to a period prior to 1990. Based on this, CBEC issued a classification circular dated 24.09.1992 directing classification of HDPE Tapes Strips and HDPE Sacks as classifiable under Chapter 39. Section XI Note 1 (g) states that strips of an apparent width exceeding 5mm of plastics fall under Chapter 39. Heading 54.04 specifically includes in the heading description synthetic textile material of apparent width not exceeding 5mm. Note 2 (p) to Chapter 39 excludes textile and textiles article from Chapter 39. HSN Explanatory Notes 54.04 explains Synthetic Textile materials of apparent width not exceeding width 5mm as under:-

Strips and the like, of synthetic textile materials. The strips of this heading are flat, of a width not exceeding 5mm, either produced as such by extrusion or cut from wider strips or from sheets.

Chapter Note 1A to Chapter 54 was inserted with effect from 29.06.2010 with retrospective effect. The products under question in the present appeals are not plastic woven bags. These are knitted fabrics used as agro net. Hence distinct from the plastic bags considered in the earlier cases. By taking into account the changes in the scope of the tariff heading and the item under consideration recently the Ahmedabad Bench of the Honble Tribunal in the case of Flora Agrotech Vs. CCE Vapi (supra) has held that such knitted fabrics are classifiable under 60059000. In this decision, the previous decisions of Madhya Pradesh High Court and the Board Circular have been distinguished. The appellants have also obtained the following certificates for classification of their products:

1. Certificate from Central Institute of Plastics Engineering and Technology dated 19.01.2015.

2. Certificate from Textiles Committee, Mumbai dated 05.03.2013.

3. Certificate from Sasmira dated 01.03.2013.

These certificates confirm that the fabrics manufactured by the appellants are warp knitted fabrics made out of synthetic yarn of width less than 5mm be classified under 6005. Further, the ISI standard notified by Bureau of Indian Standards for agro textiles  shade nets for agriculture and horticulture and as per this standard the above textile fabrics are made from tapes of 1.7 mm width. And in the present case the width of the tape is of 1.5 mm and the goods manufactured by the appellants are classifiable as textile fabrics and articles of fabrics rightly classifiable under chapter heading 60059000 and the strips (HDPE) not exceeding 5mm is classifiable under 54049020. Accordingly, we set aside the impugned order to that extent and

(i) all the three assessees appeals are allowed with consequential benefit.

(ii) correspondingly, the revenue appeal is rejected.

(Order pronounced in the open Court on 10.08.2015)

(P.K. CHOUDHARY) (R. PERIASAMI) JUDICIAL MEMBER TECHNICAL MEMBER BB 1