Phoenix International Ltd. Vs. Commissioner of Customs, Distt. Raigad, Maharashtra  Insc 630 (29 November 2001)
Mohapatra & K.G. Balakrishnan K.G. Balakrishnan, J.
appellant, a manufacturer and exporter of leather and synthetic footwear,
obtained a Value Based Advance Licence (VBAL) issued in terms of Para 49 of
Export Import Policy 1992-93. The Licence permitted the appellant to import
printed PVC with technical characteristics of PVC Leather Cloth for use in the
manufacture of the export product Synthetic footwear. The appellant filed Bill
of Entry for clearance of goods described Printed PVC (PVC leather clothes) for
consumption, claiming coverage of VBAL Scheme. Appellant sought clearance of
the same as duty free under Notification No. 79/95-Cus. dated 31.3.95 issued by
the Central Government under Section 25(1) of Customs Act, 1962 which permitted
exemption for the whole of the duty of customs for the materials imported into India against VBAL Scheme. The Licence
listed Printed PVC as an eligible item of import. The Assessing Officer after
examination of the sample expressed the opinion that the goods had the
essential characteristics of Shoe Uppers and it could not be identified as PVC
Cloth. A show cause notice was issued to the appellant stating that goods were
liable to be classified as Shoe uppers, which are parts of footwear under the
heading 6406, and the declaration made by the appellant in the bills of entry
was wrong and the goods are liable for confiscation and further imposition of
appellant submitted a reply and also produced a letter issued by Joint Director
General of Foreign Trade, speaking for DGFT, addressed to the Commissioner of
Customs wherein it was stated as under:-
matter has been examined in the Special Advance Licence Committee on the basis
of sample produced. The committee observed that what is allowed for import is
PVC Leather Cloth and just by printing and embossing thereon and importing in
cut lengths, the basic character of PVC Leather Cloth does not change.
just because import has been made in cut length and imported material would be
converted into footwear components, it cannot be treated as footwear
view of this you are advised to take appropriate action.
of sample(2 Pieces) are sent herewith.
considering the matter, the Commissioner held that on examination of goods
imported, it reveals that the item is not just PVC Leather cloth but something
more than that and each piece is having a pattern of 3 shoe uppers,
printed/embossed, and when cut, each of these pieces is distinguishable and
identifiable as a part of shoe upper and, therefore, it merits classification
under heading 6406.10 which specifically covers Uppers and parts thereof, other
order of classification was passed under Section 111(m) of the Customs Act,
1962, permitting redemption of goods on payment of Rs. 10 lakhs and imposing
penalty of Rs. 50,000/- in terms of Section 112(a) of the Act. The appellant
challenged the order before the Tribunal and the Tribunal, upholding the order,
however, reduced the fine from Rs. 10 lakhs to Rs. 1 lakh.
heard Mr. V. Lakshmikumaran, learned Counsel for the appellant and Mr. T.L.V. Iyer,
learned Senior Counsel appearing on behalf of the respondent.
learned Counsel for the appellant contended that Notification No. 79/95 Cus. dated
31.3.95 exempted materials imported into India against the Value Based Advance Licence(VBAL) in terms of Exim Policy
1992-93 from the whole duty of customs leviable thereon and the notification
grants complete exemption of all raw materials, components, intermediaries etc.
required for the manufacture of export products which are specified in the
VBAL. The learned Counsel for the appellant further contended that as the item
imported is printed PVC to be used for the manufacture of the export product
Synthetic footwear, the same should be automatically exempted under the
other hand, the learned senior Counsel for the respondent contended that the
imported item as per the sample is having printing and embossing and hence
acquired the characteristic of a part of Shoe upper and an examination of item
would reveal that each piece, if cut, would give 3 pieces of Shoe Uppers and,
therefore, it becomes identifiable as part of shoe classified under heading
6406 - sub heading 6406.10, which specifically covers uppers and parts thereof
other than stiffeners.
sample of the item imported is having measurement of 20 X 14. It is a PVC sheet
bonded with textile fabric. This PVC sheet is not a plain sheet, but having
regular pattern and groves are made for cutting to 3 pieces. The pattern is
clearly distinguishable and if cut through the groves, 3 patterns of Shoe
uppers could be separated. It is to be noticed that each sheet is shaded in colours
and there is printing also. Thus, the sheet consists of the impression of 3
Shoe Uppers, each bearing a logo.
it could be seen that PVC Cloth has all the characteristics of Shoe Uppers and
we are unable to accept the contention of the learned Counsel for the appellant
that merely because it is printed and embossed it would not cease to be a PVC
Cloth. The learned Counsel for the appellant placed reliance on the decision of
this Court in Abrol Watches Pvt. Ltd. vs. Commissioner of Customs, Bombay
1997(1) SCC 321 and contended that if the imported item satisfies the
description given in the notification, the benefit is to be extended
irrespective of the classification of the item under the Customs Tariff
is a case where the assessee imported horological machinery for being installed
in a watch-making factory. The import was treated a project import within the
meaning of Chapter 98 of the First Schedule of Customs Tariff Act and the goods
were cleared under Heading 98.01 and claimed exemption from customs duty leviable
thereon in excess of 20%, based on Exemption Notification dated 19.4.85. There
was another Exemption Notification dated 28.2.85, which granted exemption from
customs duty to horological machinery over and above 10% advalorem. Assessee
claimed the benefit of this notification. The Tribunal took the view that since
the assessee had chosen to classify the imported machinery under Chapter 98 as
project import, the assessee was not entitled to the benefit of the larger
exemption. This Court held that the assessee was entitled to the benefit of the
larger exemption, though he had cleared the goods under the Heading 98.01. We
do not think this decision is of any assistance to the appellant.
learned Counsel for the appellant also brought to our notice the decision of
this Court in Vareli Weavers Pvt. Ltd. vs. Union of India 1996(83) ELT 255(SC).
That is a case where the appellant-assessee imported Partially Oriented Yarn(POY).
The controversy was whether the POY imported by the appellant should be taken
to fall within Item(iv) under the head Polyester Yarn relating to POY of 75
deniers and above but below 100 deniers, or within item (iii) relating to POY
of 100 deniers and above but not above 750 deniers. The authorities held that
POY was assessable to countervailing duty and excise duty at the final denierage
stage, that is to say, after POY had been texturised. This Court held that
countervailing duty must be levied on goods in the state in which they are
imported and not upon the basis that subsequent to the process of texurising
the POY that was imported would have different denierage.
on the above findings it was argued that goods imported by the appellant should
have been considered for the purpose of duty as it existed at the time of
import and the learned Counsel submitted that the PVC Cloth could be
transformed into Shoe Upper only after cutting into pieces and piercing holes
therein and putting a flap on it. This contention also does not carry much
PVC Cloth is printed and embossed and, by cutting into 3 pieces, 3 Shoe Uppers
are available and they have all substantial and essential characteristics of
shoe uppers. It is pertinent to note that printing and embossing work is not
merely cosmetic in nature to give an added appeal to the goods, but they
distinctly give the patterns of Shoe Upper and therefore, we do not think that
the Tribunal had gone wrong in affirming the decision of the Commissioner.
further contended that the question for consideration before the authority was
whether the appellant was entitled to benefit of exception or not and under
such circumstance, Rule 2(a) of the General Rules of Interpretation attached to
the Customs Tariff Schedule has no relevance. It was argued that such rule
could be invoked only when a dispute regarding classification arises.
true that the dispute as such is not regarding classification. However, if the
imported goods fall within a particular classification, for which duty is to be
paid, authority is well within its rights to hold that goods do not come under
the exempted category. The goods in question have got only the general
characteristics of PVC Cloth whereas they have distinct and clear features of
Shoe Uppers and we do not think that Tribunal went wrong in holding that view.
appeal is without any merit and it is dismissed.
(D.P. Mohapatra) .
(K.G. Balakrishnan) November