Nanya
Imports & Exports Enterprises Vs. Commissioner of Customs, Chennai [2006] Insc
194 (10 April 2006)
Ashok
Bhan & Lokeshwar Singh Panta Bhan, J.
The
point involved in the present appeal is:- Whether the expression "insoles,
midsoles and sheets thereof" used in the exemption Notification No.20 of
1999 issued under the Customs Act, 1962 (for short "the Act") can be
interpreted to mean that the sheets rolled up for the convenience of loading
and transport, would disentitle the assessee from the benefit of the
Notification?
FACTS
Appellant
is a partnership firm based in New Delhi
dealing in the business, inter alia, of leather footwear materials and
accessories. One of the items regularly imported by the appellant is "PU
coated leather fabrics" which are extensively used in the leather footwear
industry as "insoles and midsoles". This item was covered originally
by Notification No.224/85 and thereafter by the successor Notification
No.45/94. As on the date this item figures under the description "insoles,
midsoles and sheets thereof" figuring in Sl. No.108 of List 3 (A) (3) in
Notification No.20/99 which replaced the earlier Notification. The same reads:
TABLE
S. No.
Chapter
or heading No. or sub- heading No. Description of Goods Stand ard Rate Addit
ional Duty rate Condi -tion No. (1) (2) (3) (4) (5) (6) 108 .
64 or
any other chapter Xxx The following goods for use in the leather industry,
namely:
(1)
Parts, consumables and other items specified in List 3(A) (2) Other parts,
consumables and items specified in List 3(B) xxxx 20% 20% -- -- -- 14 xxx xxxx
LIST 3(A) (Sec. S.No.108 of the Table) PARTS, CONSUMABLES AND OTHER ITEMS
-
Leather,
plastic, rubber coco board, masonite board or plastic board, heels with or
without rubber/PVC top lift
-
Toe caps and
counters for leather footwear
-
Insoles or midsoles
and sheets therefor
-
Welts made from
leather or plastic
-
shoes eyelets
-
Felt sleeves
-
Heel tips etc.
xxxx
Before proceeding further it is relevant to mention that PU coated leather
fabrics was the subject matter of a contested adjudication proceeding between
the parties in 1995 in which the appellant sought to clear a consignment
claiming the benefit of the Exemption Notification No.45/94.
A show
cause notice was issued by the Customs Authorities at Chennai claiming that the
goods were not classifiable as "insoles, midsoles and sheets
thereof"; the said goods had no use in the leather industry and that the
goods were capable of other uses and hence the end use requirement was not
satisfied. The Commissioner of Customs, Chennai by a considered order dated
28.2.1995 held that the subject goods were indeed capable of use in leather
footwear industry as insole material. It was further held that the capability
of the goods for being used in the footwear industry having been proved, the
Notification did not contemplate any end use restriction. Consequently, goods
were accepted as "insole" and the benefit of Notification No.45/94
was granted to it. This order of the Commissioner of Customs was cited with the
approval by Eastern Bench of the Tribunal 1996 (14) RLT 174 (CEGAT). This order
of the Tribunal was upheld by the High Court of Calcutta in C.A. No.1717 of
1995 - Tirupati Garments & 11.6.1996. Thereafter, the appellant have been
clearing several consignments of the same material and the department had
permitted the clearance following the order of Commissioner which had become
final since no appeal, review or revision had been preferred against it.
In
February, 1996 another consignment imported by the appellant and cleared by the
Customs Authorities at Chennai was seized by the New Delhi Preventive Wing when
the goods were being unloaded at the appellant's Karol Bagh godown. The said
seizure resulted in a fresh adjudication in Chennai wherein the Commissioner
passed an order holding that the appellant had failed to establish actual use
in leather industry and consequently denied the benefit of the Notification
No.45/94. This order was set aside and the case was remitted back for a fresh
decision. The appellant participated in the fresh adjudication. After hearing
the parties, the judgment was reserved by the adjudicating authority but
according to the appellant the decision is still awaited.
Appellant
received a consignment of PU coated insoles sheets for leather fabrics at
Chennai in June, 1999. Revenue ("the respondent" herein) denied the
benefit of the Notification No.20/99.
Appellant
waived show cause notice and the personal hearing and placed submissions before
the adjudicating authority based on the earlier imports by it and the order
passed by the Commissioner therein. The adjudicating authority held that though
the end use of the subject goods was established, but denied the benefit of the
Notification No. 20/99 to the appellant on the ground that the subject goods
were not "sheets" but "films" or "running sheets"
and therefore, not entitled to the exemption from customs duty. For this
adjudicating authority relied upon the judgment of this Court in Collector of
Customs, (2) SCC 337. Aggrieved by the above, the appellant preferred an appeal
before the Customs Excise and Gold (Control) Appellate Tribunal, South Zone
Bench at Chennai (for short "the Tribunal") which was numbered as
C/457 of 1999 and that has been dismissed by the impugned order dated 25.4.2000.
It has
been held that the earlier decision of the Commissioner at Chennai in the
adjudication arising in proceedings relating to the year 1995 was no longer
valid in view of the later judgment of this Court in M/s. K. Mohan and Company
Exports, (supra). The contention raised by the counsel for the appellant that
the judgment in M/s. K. Mohan and Company Exports (supra) was distinguishable
was rejected by observing that the finding recorded by the apex Court in the
said case in the context of description of goods in the Notification were para materia
to the description available in the present Notification under consideration.
Adverting to the finding recorded on the alternative submission of the counsel
for the assessee in the said case it was observed:
"...In
the Apex Court judgment referred to, the term "sheets" and "sheetings"
has been dealt with and the raw material was 'plastic films' in rolled form and
the Apex Court after due consideration held that they are to be considered as
"sheetings" and not 'cut to size'. It has been held that sheets has
to be understood only with regard to the items which have been cut to size and
not those in rolled form. In the present case also, admittedly, appellants have
imported the material in length of 50 mtrs on the requirement of customers.
They
are themselves carrying out the activity of cutting to size before it is sold
to customers for the purpose of manufacture of Insoles and Midsoles. The term
"sheets thereof" should refer to the words 'which should have been
cut to size' for the purpose of manufacture of Insoles and Mid Soles. The words
"thereof" has to be read along with the terms "In-soles and Mid
soles". Where sheets has been imported in cut form and being utilized
solely for the purpose of manufacture of in-soles and Mid soles, they go along
with it in terms of the entire reading of the terms of the notification."
Learned counsel for the appellant strenuously contended that the impugned goods
had been imported by the appellant in the form of "sheets" but for loading
convenience; the sheets, being 50 metres long and the material being highly
flexible, had been rolled up for loading, which did not detract from the facts
that the goods were sheets in rolls.
The
Notification merely required the goods to be in the form of sheets in
contradistinction to being cut in shapes and forms. There is no distinction
between being in rolls or loose sheets. The judgment of this court in M/s. K.
Mohan and Company Exports (supra) is distinguishable as in the said case
subject goods were film rolls and the Court brought out the distinction between
"films, foils and sheets" as well as the contrast between
"sheets" and "sheetings". The said judgment has no
applicability to the present case which on the other hand is directly covered by
the judgment of Collector of Customs, 1993 (66) ELT 441 wherein the Tribunal
specifically dealt with "PVC flocked sheets in rolls". It was further
contended that the issue as to whether the subject goods imported in rolls had
already been the subject matter of several judicial pronouncements, some of
them between the parties, were binding on the revenue as the same had attained
finality.
As
against this the learned counsel for the respondent contended that the judgment
of this court in M/s. K. Mohan and Company Exports (supra) was fully applicable
to the facts of the present case and in view of this judgment which is later in
point the earlier judgments rendered by the Tribunal or the Commissioner
interpreting the Notification in the present case are no longer good law that
the Tribunal has rightly ignored them in view of the judgment of this Court.
That the goods imported by the appellant were not "sheets" and were
"sheetings" as has been held in M/s. K. Mohan and Company Exports
(supra).
Finding
regarding the end use is not in question. Finding recorded by the Commissioner
(Appeals) in favour of the assessee regarding the end use was not challenged by
the revenue before the Tribunal and the same has attained finality.
The
only point to be considered is, whether the judgment in M/s. K. Mohan and
Company Exports (supra) is applicable to the facts of the present case or not.
In the said case M/s. K. Mohan and Company Exports was importing "metallised
polyester films" from Japan under an
import licence. The goods were admittedly in the shape of film rolls several metres
long. They were cleared on payment of customs duty leviable under the Customs
Act, 1962 (Customs Tariff) as well as the additional duty of customs (or
countervailing duty) leviable under Section 3 of the Customs Tariff Act, 1976.
Subsequently,
the assessee made three applications for the refund of the amount of the
additional duty of customs paid by it. The claim for refund was based on the
terms of a Notification of exemption issued under Section 25(1) of the Customs
Act.
Under
notification No. 228/76 dated 2.8.1976, an exemption from the customs duty
payable under Section 3 of the Customs Tariff Act was granted in respect of
"articles made of plastics, all sorts, but excluding those specified in
the table annexed thereto and falling within Chapter 39 of the First Schedule
to the Customs Tariff Act, 1975 (51 of 1975)". The annexed table excepted
the following items from the purview of the exemption:
"Tubes,
rods, sheets, foils, sticks, other rectangular or profile shapes, whether
laminated or not, and whether rigid or flexible including tubings and polyvinyl
chloride sheets." The case of the department was that the goods were
"sheets" or "foils" or "other rectangular or profile
shapes" and hence liable to duty. On the other hand the assessee's case
was that they were "films", a specie of plastic articles different
from any mentioned in the table annexed. It was alternatively contended that,
even if they are treated as thin sheets of plastic material, they can be more
accurately described only as "sheetings" and not "sheets".
The assessee's claim for refund was accepted by the Tribunal. It was held that
the goods imported by the assessee were articles made of plastic. The subject
goods were 'films' and did not fall in any of the excepted articles enumerated
in the table annexed to the Notification.
In the
appeal this Court keeping in view that the articles in question were recognized
in the trade as "films" rejected the contention of the revenue that
the same were either "foils" or "sheets". Assessee's
contention was accepted. It was observed that it was difficult to imagine any
person going to the market and asking for the films by describing them either
as 'foils' or as 'sheets'. The alternative submission of the learned counsel
for the assessee in the said case that a film of indefinite length and not in
the form of individual cut pieces can be more appropriately described as "sheetings"
rather than "sheets" was accepted. It was observed that the Indian
Standard Institution also defines 'sheets' as a piece of plastic 'sheeting'
produced as an individual piece rather than in a continuous length or cut as an
individual piece from a continuous length.
Revenue's
contention that articles were covered by the expression "other rectangular
or profile shapes" was also rejected by observing that such articles had a
distinct name in the market as 'films' and therefore they are outside the table
as already pointed out. That it will not be possible to accept the contention
that the articles which have a clear commercial identity as 'films' should be
brought within the wide and vague expression "other rectangular or profile
shapes", because, if the film is cut into small pieces, each piece will be
rectangular in shape.
It
would be thus seen from the facts enumerated above and the finding recorded by
the Court that the assessee had imported the goods in the form of
"films" and the trade also understood the articles in question to be
"films" and not "sheets" and therefore, this Court
primarily held that the goods imported by the assesses were "films"
and not "sheets". Assessee in the present case is importing "PU
quoted insole sheets" in a rolled up form for loading convenience. Even as
per the ISI specifications for "PVC coated fabrics for footwear
industry" requires the packing to be in the form of rolls so as to ensure
safe transportation. Clause
5.1 of
Indian Standard Institution specification for PVC coated fabrics for footwear
industry IS:8699-1977 provides:
"5.1
Packing The
material shall be securely packed in the form of a roll so as to ensure safe
transportation." Contention of the assessee that the goods had been
imported in the form of sheets being 50 metres long were rolled up as specified
by the ISI standards for loading and safe transportation has gone unrebutted.
The burden was on the revenue to prove that the subject goods were not
"sheets" for which no evidence whatsoever was led by the revenue. The
burden of proof as to whether the item in question is taxable in the manner
claimed by the revenue is on the revenue. Mere assertion in that regard is of
no use. It has repeatedly been held by this Court that it is for the taxing
authority to lay evidence in that Garware Nylons Ltd. & Others, 1996 (10)
SCC 413 Central Excise, Bombay, 1997 (2) SCC 677 Para 4).
The
burden was on the revenue to prove that the said goods were not
"sheets" for which no evidence whatsoever was led by the Tribunal.
The goods, imported in the form of the sheets but rolled up for loading and
transportation purposes, would not convert them into 'films' or 'sheetings'
thereby denying the assessee the benefit of the exemption Notification.
The
judgment of M/s. K. Mohan and Company Exports (supra) was reverse case where
the assessee's case was that the subject goods were "metallised polyester
films imported in the shape of film rolls" entitling him to the exemption
from the customs duty. The revenue's case was that the subject goods were
"sheets' which was one of the excepted goods mentioned in the table
annexed to the Notification and therefore, not entitled to the exemption from
duty. In the present case, the situation is just the reverse. Assessee says
that it has imported "sheets" of running length in a rolled up form
for the sake of convenience for loading and transportation purposes as per the
ISI specifications. Assessee sold the subject goods in different lengths as per
requirement of the customer. The customer then used the same by cutting them
into different sizes (shape or size of the shoes) as per the requirement to
insert them into shoes. In M/s. K. Mohan and Company Exports (supra) this Court
considered a different exemption Notification set out in the context of
different facts, its import and meaning. In the context of the present
notification the distinction drawn by this Court while accepting the
alternative submission of the learned counsel in M/s. K. Mohan and Company
Exports (supra) between "sheet" and "sheeting" would not be
attracted. To illustrate, if the exemption is granted to the 'carpets' and the assessee
imports the carpet in a running length of 50 meters length in a rolled up form,
and then sells the same in pieces after cutting them from the running length as
per requirement of the customer would not disentitle the assessee from the
benefit of the notification exempting duty on carpets simply because the
carpets were brought in a rolled up form in a running length.
For
the reasons stated above, we accept this appeal, set aside the order of the
Tribunal and that of the authorities below with consequential effects. No
costs.
Back
