Judgment:
1. In this appeal filed by M/s. Mangala Textiles, the matter relates to the classification of the product "leno gauze cloth". The assessee had classified the said cloth as bleached cotton fabrics under sub-heading No. 5206.11 of the Central Excise Tariff (CET), and had paid the Central Excise duty (CED) as applicable to the goods classifiable under sub-heading No. 5206.11 CET. At the un-processed stage, the fabric had been woven on powerlooms with a dobby of cross woven. In the show cause notice dated 20-9-1991, it was alleged that the said processed leno gauze cloth was classifiable under Heading No. 58.03 of the CET as 'gauze'. Central Excise duty of Rs. 1,29,895.38 was demanded for the period September, 1986 to March, 1991. Central Excise duty on the goods seized-was also demanded. Penal provisions were invoked. The Collector of Central Excise, Pune, who adjudicated the matter, confirmed the classification of the processed leno gauze cloth under Heading No.58.03 and confirmed the demand of Rs. 1,29,895.38. A redemption fine of Rs. 15,000/- in lieu of confiscation of the goods, a redemption fine of Rs. 10,000/- in lieu of confiscation of land, building and machinery and a penalty of Rs. 5,000/-, was imposed.
2. The matter was heard on 2-2-2000 when Shri N.S. Kulkarni, Son of the Proprietor submitted that under the erstwhile Central Excise Tariff the goods in question were being classified under Item No. 19(1). While it was admitted that the fabric was gauze, it was contended that it was not covered by the definition as given in Note-3 under Chapter 58 of the present Tariff. The goods were cleared in roll form and the duty under Heading No. 52.06 had already been paid by their processors. The goods after bleaching were sold to Pharmaceutical Companies. It was also pleaded that there was no suppression. He relied upon the Madurai Collectorate's Trade Notice No. 67/90, dated 11-6-1990 as appearing at page T-38 of 1990 (48) E.L.T.In reply Shri V.M. Udhoji, DR submitted that it was an admitted fact that the goods in question were gauze which were specifically covered by heading No. 58.03. He also mentioned that the goods were covered by Note-3 under Chapter 58. The Trade Notice referred to by the appellant's representative was in respect of the pharmaceutical products and it was a nobody's case that the leno gauze in the form cleared was a pharmaceutical product. He pleaded for rejection of the appeal.
3. We have carefully considered the matter. The issue for our consideration in these proceedings is whether the fabric in dispute is 'gauze' which is classifiable under heading No. 58.03, sub-heading No.5803.00 of the CET. Section XI of the CET covers textiles and textile articles. Chapter 58 is within Section XI and covers special woven fabrics, tufted textile fabrics; lace embroidery. The gauze is specifically covered under Heading No. 58.03 and has been defined under Note-3 of Chapter 58 as to mean a fabric with a warp composed wholly or in part of standing or ground threads and crossing or doup threads which cross the standing or ground threads making a half turn, a complete turn or more to form loops through which thread pass.
4. It is an admitted position that the goods in dispute were leno gauze cloth. In his statement dated 6-6-1991, Shri N.S. Kulkarni, Power of Attorney holder had admitted that the goods were crossed woven leno gauze cloth and not plain woven fabric. On test also, the same were found to be gauze fabric. It is an un-disputed fact that at the stage of removal, the goods were not pharmaceutical products which were classifiable under Chapter 30. Under Heading No. 30.04 only those gauze which were impregnated or coated with pharmaceutical substances or put-up in forms or packings for medical, surgical, dental or veterinary purpose, were classifiable. There is no doubt that the goods in question were not of the type which were classifiable under Heading No.30.04; sub-heading No. 3004.00 of the CET.5. As clearly the goods in question were not pharmaceutical products, their classification under Heading No. 30.04 is ruled out. It is also obvious that the gauze with which we are concerned in these proceedings were an item of textiles.
In the Fairchild's Dictionary of Textiles - 6th Edition 'Gauze' has been defined at page 261 as under :- "Gauze : A thin, sheer, open weave fabric of cotton, silk, rayon or other man-made fibres in which some of the warp ends are interlaced with each other in a leno weave. There are also plain weave gauzes not made with a leno. The cotton fabric is used primarily for blouses and surgical dressings, the silk, rayon gauze for dress trimmings. The term is sometimes applied to very sheer knitted fabric. Derived from the city of Gaza in the Near East." In the same dictionary, 'leno' has been defined at page 349 as under :- "Leno : A fabric made with a leno weave; it is generally a lightweight, open weave fabric of cotton, rayon or other man-made fibres." 6. In test report dated 24-4-1991, Principal of the Textile Institute Echalkaranji had certified that the fabric sample supplied to the Institute by the Central Excise Deptt. along with their letter dated 19-4-1999 was gauze fabric.
In reply to question No. 4, Dr. Khadim Hussain, Chemical Examiner, Grade-I, Central Excise Laboratory, Mumbai had categorically stated in the cross-examination by Shri N.S. Kulkarni that pattern of weaving in the fabric in question satisfied the definition as given in Chapter Note-3 under Chapter 58.
On their own, subsequently, after the proceedings have been instituted against the assessee, the assessee had sent a sample to the Textile Institute. This has been discussed in paras 26 and 27 of the adjudication order.
7. Chapter Heading No. 52.06 covers cotton fabrics. It is a general entry for cotton fabrics. On the other hand, Heading No. 58.03 covers gauze. For the product 'gauze', Heading No. 58.03 is specific.
It is the well established Rule of Interpretation that a specific entry will have precedence over general entry.
In the case of Superintendent of Central Excise v. Vac Met Corporation Pvt. Ltd., Mumbai - 1985 (22) E.L.T. 330 (S.C.), the Supreme Court had held that where an article falls within a specific entry they must necessarily be excluded from the general entry.
In the case of Siemens India Ltd. v. State of Gujarat - 1984 (57) STC (Gujarat, Ahmedabad) (Full Bench) at page 1, the Gujarat High Court after making a reference to the Supreme Court's decision in the case of Siemens Engg. & Mfg. Co. India Ltd. v. U.O.I. - AIR 1976 SC 1785 had held that a specific item must give way to a general item is a rule well established and after a specific provision is made and that provision is applicable, even though the goods may fall within the general provisions also, it is the specific provision that would apply.Pacific Exports v. Collector of Customs - 1991 (52) E.L.T. 622 (Tribunal), the Tribunal had also observed that the specific entry will prevail over a residual or general entry.
8. The appellants have referred to the Explanatory Notes to the Harmonised Commodity Description & Coding System (HSN). In the Explanatory Notes, it has been explained that Heading No. 58.03 does not apply to plain loosely woven fabric of plain weave such as those cheaply used for bandages and dressings. We find that the goods in question were not loosely woven fabrics of plain weave. According to the Beiersdorf of India Ltd., the goods conformed to the British Pharmacopoeia specifications and were for use in the manufacture of Plaster of Paris Bandages (BP). They were not for use as bandages and dressings as such. It is also an admitted position that they were not at the point of clearance a pharmaceutical product.
These submissions with regard to the HSN Explanatory Notes have been discussed by the adjudicating authority in para 25 of his order with which we agree.
9. The sample drawn by the Central Excise Authorities was sent for test and it had been referred to in the show cause notice. There is nothing to indicate that the nature of the product had undergone any change with reference to the sample drawn and got tested under the prescribed procedure. In the case of Ramalinga Choodambikai Mills Ltd. v. Govt. of India -1984 (15) E.L.T. 407 (Madras), the Madras High Court had held that the representative sample could be taken to represent the given quantity manufactured unless it is shown that after taking the sample the production pattern had undergone a change. Para 7 from that decision is extracted below :- "7. The second ground of attack is that the result of the test reports can be applied only to the quantity of yarn manufactured on the date when the sample was taken and not for the entire period between 14-9-1966 and 20-10-1966. The contention of the petitioner is that it cannot be assumed that the count of yarn manufactured by the petitioner on subsequent days was the same as one found on 14-9-1966 and that the test report based on a sample of 840 yards cannot be taken to represent the entire 38638.2 Kgs. produced during the period. It must be remembered that the department cannot be expected to take samples every day and for every bale. It is seen that a sample is taken periodically at regular intervals and the test result of such a sample is taken to govern production of yarn made by the petitioner till the next drawal of the sample. If the petitioner's contention is accepted that the sample drawn on particular day can be taken to represent a count of yarn produced only on that day, it becomes necessary for the department to take the same sample every day or even every hour to be more accurate.
Such a procedure is quite impossible to be followed and it will also lead to unnecessary waste of time. If the petitioner in a particular case shows that after the taking of the sample the machinery has been attended to and the yarn produced is of a different count than the one produced on the day when the sample was taken the officers cannot base the test results on the sample for the entire goods manufactured during the period till the next sample is taken. But in this case the petitioner has not shown that anything has been done between 14-9-1966 and 20-10-1966 to produce a lesser count of yarn than the one represented by the sample taken on 14-9-1966. We are not therefore inclined to accept the petitioner's contention that the test reports cannot be taken to represent the count of yarn for the entire quantity manufactured between 14-9-1966 and 20-10-1966."Soma Textiles v. Collector of Central Excise, Ahmedabad -1998 (98) E.L.T. 154 (Tribunal), similar observations had been made by the Tribunal in para 8 of their order, which is extracted below :- "8. The appellants have also contended that the test results had been made applicable to the earlier clearance also. The samples are drawn and are tested to classify the excisable goods as and when such test results are relevant for proper classification. They are made applicable to the clearances which are considered representative of such samples. In case the contention of the appellants is admitted, then the samples had to be drawn continuously each day, may be each hour. This is not practical and this is not feasible. The appellants have not contended that their process of manufacture had undergone a change or that raw material used by them was changed by them during the course of the period involved in these proceedings." The period involved was September, 1986 to March, 1991. The assessee on their own sent the sample on 17-6-1991 without the presence of Central Excise officers. The test report is at page-15 of the paper book. It is extracted below :- This is with reference to your letter dated 17-6-1991 along with a sample of cotton fabric of Leno Weave. As per your request we have studied the matter and our findings are as follows:- Analysis of the sample of your fabric shows that it is woven with the principle of cross weaving using a single weft thread. This fabric is technically known as simple or plain gauze. Whereas the fabric described inch.hd. 58.03 of Central Excise Tariff Act, 1985 la a variation of plain gauze since it is woven with the principle of cross weaving using two or more weft threads. Hence, in our opinion your fabric cannot be identified with the 'gauze' falling under Heading No. 58.03 of Central Excise Tariff Act, 1985.
Even this test report certified that the sample tested was technically known as simple or plain gauze. There is no reference to Chapter Note.
It is also seen that the Institute had gone beyond the purview of the test and had sought to classify the matter. In the case of Collector of Customs v. East West Exporters - 1991 (52) E.L.T. 66 (Tribunal), the Tribunal had clearly held that the Chemical Examiner is not competent to express his opinion regarding classification of a product and he has only to give his finding and results on the tests carried out by him.
Para-12A from that decision is extracted below :- "12A. The Revenue in this appeal is mostly relying on the letter of the Chief Chemist. It has to be observed that the letter of the Chief Chemist reads more like an order on classification. Time and again, the Tribunal and Courts have pointed out that the Chemical Examiner has to only give his findings and results on the test carried out by him and not enter into a dialogue or exceed from that limit in expressing his opinion in the form of an order regarding the classification of the product. It is hoped that such exercises are avoided." 10. The plea that the gauze referred to in Heading No. 58.03 was the one manufactured using metal thread is without any basis. The appellants have not correctly appreciated Note-I under Chapter 59. This Note clarifies the scope of textile fabric in the expression "impregnated, coated, covered or laminated textile fabrics", which were covered by Chapter 59. The base of the impregnated, coated, covered or laminated fabric for classification under Chapter 59 was to be of textile fabric. To say that Chapter Heading No. 58.03 will be applicable to fabrics which were made-out of metal yarn was not correct. We also agree with the submissions made by the Departmental Representative that the Madurai Collectorate Trade Notice 67/90, dated 11-6-1990 as appearing at page T-38 of 1990 (48) E.L.T. was in respect of pharmaceutical products and did not relate to the goods in question.
12. As regards the limitation, the adjudicating authority had discussed the same in para-30 of the order and in the facts and circumstances of the case, we consider that full particulars of the goods manufactured had not been given to the Department to enable the jurisdictional officers to classify the products.
13. A plea has also been made that as the goods were provisionally released, no redemption fine could be imposed.Weston Components Ltd. v. CC, New Delhi - 2000 (115) E.L.T. 278 (S.C.) had held that the redemption fine could be imposed even when the goods were no longer in the custody of the Department.
14. In view of the above discussion and after taking into account all the relevant considerations, we do not find any infirmity in the Order passed by the ld. Collector of Central Excise, Pune; however, in the facts and circumstances of the case, the redemption fine of Rs. 10,000/- in lieu of confiscation of the land, building and machinery is set aside. Rest of the order is confirmed. Ordered accordingly.