MADURA COATS LTD Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THIS appeal arises from Order -in - Original dated 2.4.92 passed by Collector of Central Excise, Madurai in respect of classification of an item known as "Dipped Tyre Cord Warp Sheet - Tenacity of Polyester yarn". By show cause notice dated 17.12.90 it was alleged that the appellants had cleared tyre cord fabric of lower tenacity warp during the period from 1.1.87 to 7.10.90 evading duty under Rule 9(2) of C.E. Rules read with Proviso to Section 11A(1) of Central Excise Act and the same is required to be classified under sub -heading 5905.20 of the CET. The demand was for an extended period of 5 years and the show cause notice also invoked provisions for imposing penalty. As a result of this adjudication, the Commissioner confirmed the demand to an extent of Rs. 34,83,053 for the said period and imposed penalty of Rs. 1,00,000. The allegation is that the appellants had manufactured tyre cord fabrics of other than high tenacity yarn, but declared and removed the same as tyre cord of high tenacity yarn by mis -classifying them under Heading 5902 contravening the provisions of Rule 173B of C.E. Rules, 1944 and had willfully suppressed the correct tenacity of the yarn in tyre cord fabrics and removed the tyre cord fabrics of lower tenacity by mis -declaring as 'Tyre cord fabrics of High Tenacity Yarn' with an intention to evade payment of duty. It is further alleged that the textile fibre in the form of cord is the major reinforcing material in tyres. One of the major factors which determine the ultimate tyre performance is the tenacity of the tyre cord. During the running of tyres, cords undergo complex tension and compression. The testing method for the product is always chosen in such a manner that the results and analysis of other test should guide the manufacturer to estimate the performance of the end product. To find out the tenacity of the yarn in the tyre cord in the normal procedure, only dipped cords are taken for testing. The tenacity of the yarn taken from the tyre cord should satisfy the conditions specified for high tenacity yarn. As per the Section Notes, the processed multifold yarn of polyester should have the tenacity of 55 CN/tex or more, and then only it can be called as high tenacity yarn. As per the standard test procedure, to determine the tenacity of yarn in the tyre cord fabric, the dipped cord is only taken. The buyers have also given the specifications of tenacity which should be determined as per the standard test procedure.

(2.) THE department seeks to classify the item in question under heading 5905.20 also on the basis of reading of Section Note 4 of Section XI of CET 1985, which laids down that "High Tenacity Yarn" means Yarn having a tenacity expressed in CN/tex (Centinewtons per tex) greater than the following:

(3.) IT was also alleged that during the course of visit to the unit by the officers of Preventive Group, they perused a Register "Summary of Tyrecord Fabrics" maintained by the appellants to record the result of test of the tenacity of yarn. Perusal of the results recorded in the above Register revealed that in respect of Polyester Tyre cord of multifolded yarn, certain lots of tyre cord fabrics manufactured by them had a tenacity of less than 55 CN/tex. It is also noted that in the said Register the specification of the buyer was also recorded in red ink. The specification of the buyer so recorded was also less than 55 CN/tex. Statement of V. Swaminathan, Synthetic Twisting and Tyrecord Manager was also recorded. He had stated that the buyer's specification was always for the end product that is supplied to them. Normally the buyer is specifying the following parameters: denier of the filament, strength per cord, number of plies, elongation at reference load/breadth, width of the warp sheet and number of thread per inch both in warp and weft and TPI. To a particular question about the low tenacity of the tyrecord warp sheet tested on 12.3.89 and 2.4.89, he admitted that these results were quite normal and the reason for such abnormality was due to some abnormality either at twisting stage or at dipping page. In his further letter dated 8.8.90, he had stated that the customers stipulate the minimum breaking strength in dipped cord and products are cleared on the basis of actual results being more than the stipulated strength. In respect of certain items having low tenacity, he explained that twisting process for any tyre cord always results in loss in strength and in polyester tyre cord the loss is around 15%, that the grey cord undergoes processing in their dipping unit and the cord is subjected to high temperature with which there is a marginal loss in strength of 3% to 6% in polyester cord. He stated that during the dipping process, the cord absorbs about 4% dip solution. The absolute tenacity after deducting the 4% dip pick up will result in higher tenacity of the cord. On the basis of these material, department had proceeded against the appellants for reclassification and has invoked larger period, for confirmation of the demands.