Cut Umbrella Panels Treated As Made-Up Textile Articles, Not Woven Fabric For Tax: CESTAT Kolkata

The Kolkata Customs, Excise and Service Tax Appellate Tribunal (CESTAT) on 4 August held that umbrella panel fabric cut into predetermined triangular shapes and sizes is classifiable as a “made-up textile article” under Customs Tariff Heading (CTH) 6307 and not as woven fabric of synthetic filament yarn under CTH 5407.

A Bench comprising Judicial Member Justice R. Muralidhar and Technical Member K. Anpazhakan set aside the demand of differential customs duty, interest and penalty, holding that the extended limitation period under Section 28(4) of the Customs Act (which allows recovery of duty for an extended period in cases of suppression or misdeclaration) could not be invoked as the importer had disclosed the description and classification of the goods in the Bills of Entry. It observed:

“We find that there is no dispute that the goods imported are cut in triangular shape. As per Section Note 7 of Section XI (Textiles and Textiles Articles) of the First Schedule of the Customs Tariff Act, 1975, the expression 'made-up' includes articles cut otherwise than into squares or rectangles. We find that CTH 6307 specifically covers made-up textile articles. Even if the goods originate from fabric, once they are cut into triangular panels they acquire a distinct identity and character. In the present case, we find that the essential character of the goods imported is umbrella panels and not textile fabric.”

The case concerned an importer who brought in umbrella panel fabric that had already been cut into specific shapes and sizes and classified the goods under CTH 6307 as “other made-up textile articles”. The Customs Department, however, proposed reclassification under CTH 5407 as woven fabrics of synthetic filament yarn and demanded differential duty along with interest and penalty.

Before the Tribunal, the importer argued that the goods were already cut into triangular panels and therefore fell within the definition of “made-up” under Section Note 7 of Section XI of the Customs Tariff Act, which includes articles cut otherwise than into squares or rectangles. It was also argued that CTH 5407 covers fabric in running length and not finished umbrella panels. It relied on the Tribunal's earlier decision in Karnataka Umbrella Manufacturers v. Commissioner of Customs, Bangalore.

Accepting the contention, the Tribunal held that once the fabric was cut into umbrella panels, it acquired a distinct identity and essential character separate from ordinary textile fabric. It observed that CTH 6307 is a specific entry covering made-up textile articles, whereas CTH 5407 is a general entry covering woven fabrics of synthetic filament yarn.

Applying the General Rules for Interpretation of the Customs Tariff, the Bench held that the specific heading would prevail over the general heading and followed the earlier decision in Karnataka Umbrella Manufacturers, which had classified triangular umbrella cloth panels under CTH 6307.

On limitation, the Tribunal found that the importer had disclosed the description and tariff classification of the goods in the Bills of Entry, which were accepted by Customs during assessment. Since there was no suppression or misdeclaration, the extended period under Section 28(4) of the Customs Act was held to be unavailable. Relying on Padmini Products v. CCE, the Bench held that the demand was barred by limitation.

Accordingly, the CESTAT set aside the impugned order and allowed the appeal with consequential relief, holding that the demand of customs duty, interest and penalty was unsustainable both on merits and limitation.

Appearances for the Appellant: Shri Rathindra Nath Bandyopadhyay, Advocate, and Smt. Rupsha Chatterjee, Advocate.

Appearance for the Respondent: Shri Subrata Debnath, Authorized Representative.