ORDER
G.R. Sharma, Member (T)
1. The Additional Collector in the impugned order held (in paras 12, 14, 15, 16, 17 and 18) as under :-
“As regards their contention, that milling of neps along with polyester staple fibre and artificial staple fibres for production of nep yarn, there is proper classification of the yarn under sub-headings 5506.21 and 5504.22, since the mill neps are not the same as artificial staple fibre or polyester staple fibre and they are in the capacity of other textile material, the blended yarn in question is to be classified under sub-headings 5504.29 and 5506.29 as the case may be and not according to the pre-dominance of the fibres and because other textile material has been used. The chemical examiner in his report has clearly specified that brown coloured fibres are introduced at irregular interval giving special effect to the yarn. Thus in fact although the yarn contains fibres but in addition they also contain other textile material, since the mill neps contain fibres in intangled mass, which are not being spun as yarn but come at irregular interval in the yarn. It is not correct for them to contend that the yarns do not contain other textile material and hence they should be classified under sub-heading 5506.21 or 5504.22. Their detailed submissions in support of their contention where seen with a clear mind do not stand the clear cut interpretation of the tariff proper blend of the neppy yarns manufactured by them in which they added the other textile material i.e. mill neps also and also to classify the same correctly under sub-heading Nos. 5504.29 and 5506.29. Since they suppressed the information from the department, they are liable to pay duty demanded for the larger period of five years.”
“I, therefore, confirm the demand of Central Excise duty of Rs. 20,982.01 on 3,081.73 kgs. of mill neps manufactured and cleared by them in the entire period of the demand under Rule 9(2) of the Central Excise Rules, 1944, read with proviso to Section 11A(1) of the Central Excises and Salt Act, 1944.”
“I also confirm demand of Central Excise duty amounting to Rs. 4,76,881.73P short-paid on 69,243.3 kgs of neppy yarn falling under sub-headings 5506.29 and 5504.29, under the proviso to Section 11A(1) of the Central Excises and Salt Act, 1944.”
“I confiscate 188.5 kgs of mill neps valued at Rs. 13,195/- under Rule 173Q. However I allow the assessee to redeem the same on payment of redemption fine of Rs. 2,000/- (Rupees Two Thousand only).”
“I confiscate nep yarn weighing 2,550 kgs valued at Rs. 2,72,250/- under Rule 173Q. I however, allow the assessee to redeem the goods on payment of redemption fine of Rs. 50,000/- (Rupees Fifty Thousand).”
“For the various contraventions of the Central Excises and Salt Act, 1944 and the Rules thereunder, I impose a penalty of Rs. 1,00,000/- (Rs. one lakh only) under Rule 173Q of the Central Excise Rules, 1944.”
2. Being aggrieved by this order, the appellants have files the captioned appeal before us.
3. Briefly stated the facts of the case are that the appellants are engaged in the manufacture of blended yarn and cleared it under sub-headings 5504.22 and 5506.21. The department alleged that since the yarn contained mill nep which was the other textile material, therefore, the yarn manufactured by them would be classifiable under chapter sub-headings 5504.29 and 5506.29. Accordingly a show cause notice was issued to the appellants asking them to explain as to why the duty should not charged on mill neps falling under chapter sub-heading 5601.00 and captively consumed, why blended yarn containing mill neps should not be classified under chapter sub-headings 5504.29 and 5506.29, why the differential duty should not be demanded from them, why a penalty should not be imposed on them and why the longer period should not be invoked.
4. In reply to the show cause notice, the appellants submitted that they were not manufacturing the mill neps classifiable under chapter sub-heading 5601.00; that the tariff does not define mill neps; that the mill neps manufactured by them were not marketable commodity; that they did not have machinery to produce mill neps; that their mill neps are not of regular size to fit in the definition of mill neps given in HSN; that the mill neps that are manufactured by them are like staple fibres; that the mill neps are produced during the continuous process of manufacture of mill nep yarn; that it is mixed with fibres at the mixing stage for spinning of yarn.
5. It was also contended by the appellants that mill neps used in the manufacture of synthetic yarn are not other textile materials to take resultant yarn away from the purview of chapter sub-headings 5506.21 and 5504.22. It was also contended by them that the textile material has not been defined in the tariff; that it essentially means of which it is made of; that the neps have to be treated as viscose or polyester fibres as the case may be: that they are not any other textile material; that the test report did not mention that the sample contained mill neps; that the yarn manufactured by them has correctly been classified and claimed under Chapter sub-headings 5506.21 and 5506.22.
6. It was also argued by them that they were maintaining lot-wise register for mixing of fibres for blended yarn when the Central Excise Officers visited their factory; that they never pointed out about the excisability of neps or different classification of neps; that the demand prior to 18-12-1989 is wholly barred by time under Section 11A as there was no deliberate intention to evade payment of duty. After careful consideration of the submissions made, the Additional Collector held in para 11 as under : –
“Mill neps are different from polyester fibres and viscose staple fibres. This has been recognised by mentioning them separately in sub-heading No. 5601.00 of the Central Excise Tariff Act, 1985. They are thus a different textile material. The test result also shows that in the yarn neppy fibres have been introduced at irregular intervals in the weave giving special effect. Mill neps are definitely other textile material different from man-made fibre as specified in the tariff and for the purpose of the tariff they cannot be considered as polyester staple fibre or artificial polyester fibre and they cannot be spun into yarn, the fibre in the neps having become entangled in the process of manufacture of neps. The assessee has cleared mill neps for captive consumption without accountal in statutory records, without payment of duty, without issue of gate pass and without filing classification lists or price lists. Thus there has been suppression of facts. They have also not shown that they were using nep yarn in the actual blend and thus use of another textile material has been suppressed. They have only declared the mixing of polyester staple fibres and artificial staple fibre but not mill nep which is wilful misdeclaration of the blend of yarn on statutory records with intent to evade payment of duty of excise. They have not produced any proof to show that the excise officer on their visit to the factory examined their private records relating to neps. They have referred to judgments which are not relevant to their case. Non-declaration about manufacture of mill neps and blending of mill nep in the nep yarns and not declaring the appropriate blend amounts to wilful suppression of facts and larger period of 5 years become applicable in their case.”
7. Shri K.K. Anand, ld. Advocate, appearing for the appellants reiterated the submissions made before the lower authorities. In addition to that, he specifically referred to the decision of this Tribunal in the case of Super Syncotex (India) Limited [1996 (87) E.L.T. 56]. He submitted that an identical issue came up before the Tribunal in the case cited above. In that case, the Tribunal held that Mill Nep which is in the nature of small knot like aggregate of tightly entangled fibres, usually not larger than a common pin head (about 2 mm in diameter) is not textile material. He submitted that their case is fully covered by the decision of this Tribunal in the case of Super Syncotex (India) Limited and prayed that the appeal may be allowed.
8. Shri Satnam Singh, ld. SDR, submitted that the Additional Collector has undertaken detailed examination of the various submissions made and referred to various technical terms and dictionaries and came to the conclusion that mill neps were different materials and, therefore, the lower authorities have rightly held that duty was demandable on mill neps as well as blended yarn containing mill neps. He, therefore, prayed that the appeal may be rejected.
9. Heard the submissions of both sides. We find that the similar issue came up before the Tribunal in the case of Super Syncotex (India) Limited. The Tribunal had held in paras 15 and 16 of its judgment are as under :-
“On perusal of the entire literature produced by the appellants, it is seen that the definition of the term ‘nep’, appearing in” Handbook on Glossary of Textile Terms Bureau of Indian Standards” at page 172 is “a small knot-like aggregate of tightly entangled fibres, usually not larger than a common pin head (about 2 mm diameter)”. The question that arises for consideration is as to whether this mill nep which is admittedly an artificial staple fibre on being mixed with polyester and artificial fibre would go out of the Tariff sub-heading 5206.21 which reads:-
“Containing artificial staple fibre and polyester staple fibre (not containing any other textile material), and in which the proportion of polyester staple fibre is more than 40% by weight of the total fibre content.”
“It is the contention of the Revenue that by mixing the mill neps along with other two items artificial and polyester fibre, the item which comes out in the form in which it is removed from the factory would not be covered by sub-heading 5206.21 as ‘mill nep’ is a textile material and it is excluded from the said sub-heading. In our opinion mill nep which is in the nature of knot-like aggregate of tightly entangled fibres, usually not larger than a common pin head (about 2 mm diameter) is not a textile material. The reason being a textile material as defined in “Fairchild’s Dictionary of Textiles” at page 613 is “an inclusive term for fibres, yarns, fabrics, and products which keep relatively the same tensile strength, flexibility and properties of the original fibres”. What is required to be considered is as whether this ‘mill nep’, which is about 2 mm in diameter in size and not larger than a common pin head can have the same tensile strength, flexibility and properties of the original fibre. In this regard, no evidence has been placed by the Revenue that it satisfies these criterion as stated in the definition of textile material. In that view of the matter, we have to consider that mill nep being in the nature of common pin head cannot be considered as textile material in the sense in which it is understood technically as well as in common trade and commercial understanding. The Revenue has also not placed any evidence to show that this ‘mill nep’ satisfies all the criterion of a textile material, as understood technically and as understood in the trade. It is also seen that HSN Explanatory Notes at page 771 under Chapter 5601 has categorised ‘mill nep’ in Category (C) at page 773. Category (A) refers to “Wadding of textile materials and articles thereof”. Category (B) refers to “Textile fibres, not exceeding 5 mm in length (floch) and textile dust”. Category (C) refers to “Mill neps”. Therefore, “mill neps” have been separately categorised and not placed along with the category of wadding of textile materials and articles thereof” as well as textile fibres. Therefore, on a reading of these materials, it is clear that ‘mill nep’ cannot be considered as a textile material. It continues to remain as an artificial staple fibre. In combination with artificial and polyester staple fibres, it continues to fall within the sub-heading 5606.21 and hence the contention of the appellants is required to be accepted. In the case of Indian Rayon and Industries Ltd, (supra) the Tribunal held that it is well settled that the terms used in the tariff have to be given their normal trade parlance meaning, obviously staple fibre (made of polyester) is a form of polyester staple. The Tribunal has further held that there is no warrant to give any restricted meaning to the term Polyester Fibre. Therefore, the Tribunal held that the Notification which extends to articles other than polyester fibre cannot be extended to staple fibre of polyester. Therefore, mill nep being in the nature of artificial staple fibre continues to remain so and its addition to give attraction to the fibre, cannot change its characteristic and bring within the category of ‘textile material’.”
10. On perusal of the above decision of this Tribunal, we note that the issues raised by the Revenue and discussed by the lower authorities have been dealt with appropriately in the above paragraphs. We do not find any reason to disagree with the decision of this Tribunal in the aforesaid case. In this view of the matter, we hold that mill neps or neps in the instant case are not textile materials classifiable under Chapter Heading 5601.00. In the result, the impugned order is set aside and the appeal is allowed.