CESTAT Classifies “Noil Silk Fabrics” under Natural Silk Fabrics, Rejects Department’s Classification under CTH 5007 1000 [Read Order]

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that silk fabrics supplied by Lucky Goldstar Co. Ltd. were correctly classifiable as “Natural Silk Fabrics” under Customs Tariff Heading (CTH) 5007 2090 and not as “Noil Silk Fabrics” under CTH 5007 1000 as claimed by the department.

Lucky Goldstar Co. Ltd. and its director, Shri Manoranjan Mondal, had appealed against the order of the Commissioner ofCustoms (Appeals), Kolkata, which upheld confiscation of goods, denial of duty drawback, and penalties of Rs. 1 crore each.

The case originated from an investigation involving Eastern Silk Industries Ltd. (ESIL), a unit in the Falta SEZ, accused of misdeclaring silk fabric composition and overvaluing exports to claim excess drawback.

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The department’s counsel argued that the goods were made entirely of Noil Silk, while the appellants maintained that they were made from imported Mulberry Silk.

The two-member bench of R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical Member) observed that test reports from the Central Silk Board, Kolkata, and the Central Silk Technological Research Institute, Bangalore, were contradictory. The Kolkata lab found about 51.8 percent Noil Silk, while the Bangalore lab reported 100 percent Noil Silk.

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The tribunal explained that such conflicting findings could not conclusively prove the presence of 100 percent Noil Silk, which is necessary for classification under CTH 5007 1000. It pointed out that the department’s reclassification was unsustainable and that no misdeclaration or overvaluation had been established.

The tribunal also observed that since the export orders were canceled and no foreign exchange was realized, Lucky Goldstar was not entitled to duty drawback. It set aside the confiscation and penalties imposed under Section 114 of the Customs Act, 1962, and partly allowed the appeal in favor of the appellants.

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