Full Judgment Text
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CASE NO.:
Appeal (civil) 4940 of 1999
PETITIONER:
M/S. PHOENIX INTERNATIONAL LTD.
Vs.
RESPONDENT:
COMMISSIONER OF CUSTOMS, DISTT. RAIGAD, MAHARASHTRA
DATE OF JUDGMENT: 29/11/2001
BENCH:
D.P. Mohapatra & K.G. Balakrishnan
JUDGMENT:
K.G. BALAKRISHNAN, J.
The 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 penalty.
The 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:-
2. The 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.
Moreover, just because import has been made in cut length and
imported material would be converted into footwear components, it
cannot be treated as footwear components.
3. In view of this you are advised to take appropriate action.
Specimen of sample(2 Pieces) are sent herewith.
After 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
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identifiable as a part of shoe upper and, therefore, it merits classification under
heading 6406.10 which specifically covers Uppers and parts thereof, other than
stiffeners.
An 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.
We heard Mr. V. Lakshmikumaran, learned Counsel for the appellant and
Mr. T.L.V. Iyer, learned Senior Counsel appearing on behalf of the respondent.
The 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 notification.
On 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.
The 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.
Thus, 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 Schedule.
That 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.
The 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
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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.
Based 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 force.
The 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.
It was 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.
It is 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.
The appeal is without any merit and it is dismissed.
.J
(D.P. Mohapatra)
.J
(K.G. Balakrishnan)
November 29, 2001.
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