Weft Yarn cannot be included in Chapter Note 52 Regarding Classification of Denim Fabrics, No Change in Classification: CESTAT Upholds Classification of Imported Goods in Bill of Entry [Read Order]

The Kolkata bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) upheld the classification of imported Denim Fabrics as Weft Yarn cannot be included in Chapter Note 52 which states that no change can be done.

M/s S. K. Enterprises, the appellant challenged the impugned order, passed by the Commissioner of Customs, Shillong, wherein he ordered for confiscation of the goods imported vide Bills of Entry under Section 111(m) of the Customs Act, 1962. However, he gave the option to redeem the goods on payment of a redemption fine of Rs.25,00,000/-.  Customs duty of Rs,1,28,82,505/- in total has been confirmed in respect of the goods imported vide the said four Bills of Entry. The penalty of Rs.1,28,82,505/- has also been imposed under Section 114A of the Customs Act.

While passing the Final Order, the Tribunal has ordered for retesting of the remnant samples at CRCL, New Delhi, after following proper procedure. The remnant samples were retested at CRCL, New Delhi and a copy of the Report was given to the Appellant.

The Appellant imported the goods vide the said four Bills of Entry declaring the same as Cotton Polyester Fabrics classifiable under Customs Tariff Heading (CTH) 52113190. On examination, the department observed that the goods imported were Blue Coloured fabrics of 'Denim' classifiable under CTH 52114200. Samples were drawn in the presence of DRI officers and sent for testing to the Customs Laboratory, Kolkata and the Textile Committee Laboratory, Mumbai.

The Reports received from the Laboratories indicated that the samples had the characteristics of Denim fabrics and the fabrics were three-thread twill weave woven fabric in the construction of the fabric, blue coloured (dyed) yarns entirely made of cotton in one direction and white textured polyester multifilament yarn reinforced with other material in the other direction has been used. Based on the Test Report, DRI concluded that the imported goods are 'Denim fabrics' and merits classification under CTH 52114200.  

Show cause Notices were issued proposing for confiscation of the goods. Both the Notices were adjudicated and demands were confirmed. On appeal, the Tribunal has passed the Final Order. The impugned order has been passed in pursuance of the Tribunal's remand order.

The Chapter Notes of  Chapter 52 defines Denim fabrics.  As per the Chapter Notes, Denim” is a fabric of yarns of different colours, three thread or four thread twill, including broken twill, warp-faced, warp yarn of which are of the same colour, and weft yarn of which are unbleached, dyed of a lighter shade of the colour of the warp yarn.

It was evident that the fabric cannot be treated as 'Denim' because, in the Test Report, there is no finding that warp yarn is pre-dominant and the fabric is warp-faced. The Test report says that the fabric is of two colours, blue and white, which cannot be treated as 'Denim' because Denim is made of one colour fabric where the darker side is used in warp and the lighter side in weft or weft should be grey.

It was evident that the colour of the weft yarn does not satisfy the definition of Denim as mentioned in Chapter Note 52. The composition of elastomeric material in the weft yarn indicates that the Test Report does not fully satisfy all the conditions required to classify the fabric as Denim fabric.

The Test Report only indicates that the fabric has the characteristics of Denim fabrics. The Test Report did not categorically say that the fabric is a Denim Fabric. Fabrics having the characteristics of Denim fabric cannot be equated with the Denim fabric itself if it does not otherwise satisfy the requirements of Chapter Note 52.

It was observed that the sample fabric satisfies the requirements of Denim fabrics in the warp yarn but does not satisfy the requirement in the weft yarn as its composition contains 4% elastomeric material. Also, the weft yarn does not satisfy the requirement in the chapter note "unbleached, bleached or dyed, grey or coloured a lighter shade of the colour of the warp yarns”

A two-member bench comprising Mr R Muralidhar Member (Judicial) and Mr K Anpazhakan Member (Technical) observed that the fabric cannot be called, Denim fabric as per Chapter Note 52, as it does not fulfil all the requirements of chapter Note 52.

As per the Test Report, The fabric contains both Cotton and polyester in the ratio of 79.% and 16.8% respectively. The CESTAT held that the fabric is rightly classifiable under the CTH 52113190 as Cotton Polyester fabric. The Tribunal upheld the classification declared by the Appellant in the Bills of entry and rejected the department's reclassification of the fabric.

To Read the full text of the Order CLICK HERE

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