The Kolkata bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the classification of non-textured fabrics must be based on nature and material coated.
M/s. Umbar Marketing Private Limited, the Respondent assessee has imported Non-Texturised Polyester Lining Fabric and filed the Bill of Entry No 4760255 dated 27/02/2014, by classifying the same under the Chapter Heading No.5903.
The SIB wing of Customs, Kolkata intercepted the impugned goods filed under the above said Bill of Entry and on examination found that the imported goods were ‘Umbrella Panel Fabrics’ classifiable under Chapter Heading 5407. Accordingly, the goods were seized and later provisionally released on execution of the bond and Bank Guarantee.
The samples of the goods were drawn and sent for testing to IIT, Delhi. From the Test Report received on 05/12/2014, it was revealed that the goods are coated and that the coating is visible with the naked eye and was coated with water-repellant/waterproof substances as well as ultraviolet-proof substances. Based on this test report, the Department alleged that the Respondent has mis-declared their goods and wrongly classified them under the CTH 5903.
A Show Cause Notice was issued proposing to classify the above goods as ‘Non-Texturised Polyester Lining Fabric’ under Chapter Heading 54071094 with specific Basic Customs Duty of Rs.115 per Kg. The Show Cause Notice demanded differential duty of Rs.3,69,17,393.00/- under Section 28(4) of the Customs Act, 1962. The Notice also proposed penalties under Sections 112(a), 112(1), 114A and 114AA of Customs Act, 1962.
Commissioner of Customs passed an order holding that the subject goods have fulfilled the criteria as mentioned in Chapter Note 2 (a) to Chapter 59.03 and also they do not fall under the exception clauses (1) to (6) in general. He further observed that the test report of IIT, Delhi have not been substantiated by the Second test report of RLTC. He concluded that the impugned goods have fulfilled the criteria for classification under CTH5903 based on the General Rules of interpretation.
Based on the two test reports of RLTC and IIT Delhi indicates that the impugned fabrics are not coated with plastics, the Department contended that once the fabric is not coated with plastics, whether it can be seen with the naked eye not, is immaterial, and the goods cannot be classified under the Chapter Heading 5903.
A two-member bench comprising of Mr P K Choudhary, Member (Judicial) and Mr K Anpazhakan, Member (Technical) observed that coated fabrics visible to the naked eye would fall under Chapter 59 only. But, the specific sub-heading under which it is to be classified will depend on the nature of the material coated.
While rejecting the appeal, the CESTAT held that the goods are not classifiable under CTH 54071094 as proposed by the Appellant department.
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