Karnataka Umbrella Manufacturers vs Commr. of Cus., Bangalore>1998(09)LCX0152

1998(09)LCX0152

IN THE CEGAT, SOUTH ZONAL BENCH, MADRAS

Justice U.L. Bhat, President, and Shri K. Sankararaman, Member (T)

KARNATAKA UMBRELLA MANUFACTURERS

Versus

COMMR. OF CUS., BANGALORE

Order Nos. 1942-45/98, dated 24-9-1998, in Appeal Nos. C/461 & 462/97 and C/568 & 569/97

Cases Quoted

Radhey Shyam Ratanlal v. Collector — 1994(04)LCX0080 Eq 1994 (072) ELT 0910 (Tribunal) — Relied on [Para 9]

Ingersoll Rand (India) Ltd. v. Collector — 1988(06)LCX0062 Eq 1989 (039) ELT 0454 (Tribunal) — Relied on [Para 9]

Advocated By : Shri Rajesh Chander Kumar, Advocate, for the Appellant.

Shri S. Kannan, JDR, for the Respondent.

[Order per : Justice U.L. Bhat, President]. - The common-appellant in these appeals, engaged in the manufacture of umbrellas, imported four consignments of “Umbrella Nylon Cloth Panels with Straps and Chandwa of different qualities from United Arab Emirates and presented Bills of Entry with relevant import documents seeking classification of the goods under Chapter sub-heading 6603.90 and seeking clearances under OGL. Two Bills of Entry were presented on 13-11-1996 and other two Bills of Entry were presented on 3-1-1997. Two show cause notices were issued to the appellant proposing classification of goods under Chapter sub-heading 6307.90, in which case the import would requires specific licence and proposing confiscation of the goods and imposition of penalty, since the appellant did not possess any specific licence. Though the appellant resisted the notices, the Commissioner of Customs, Bangalore, passed two separate orders confirming the proposals in the notices and confiscating the goods, allowing redemption on payment of fine of Rs. 3.5 lacs in respect of the consignments covered by Bills of Entry dated 13-11-1986 and of Rs. 53,000/- in respect of remaining Bills of Entry. He also imposed penalty of Rs. 50,000/- in one order and Rs. 5,000/- in the other order. These orders are challenged by the appellant.

2. Learned Counsel for the appellant contended that a plain reading of Chapter Note 2 to Chapter 66 of the Customs Tariff would make it clear that umbrella nylon panels imported separately would be classifiable under sub-heading 6603.90. This contention is rebutted on behalf of the department by relying on HSN Explanatory Notes.

3. Chapter 63 of the Tariff deals with “Other made-up textile articles; sets; worn clothing and worn textile articles; rags”. Chaper Heading 63.07 deals with “Other made-up articles, including dress patterns”. Sub-heading 10 relates to “Floor-cloths, dish-cloths, dusters and similar cleaning cloths”, sub-heading 20 relates to “Life-jackets and life-belts” and sub-heading 90 deals with “Others”. Note 7 to Section XI explains the meaning of the expression “made-up”. According to clause (a) “made-up” means ‘cut otherwise than into squares or rectangles’. The panels in this case, being cut in triangular shape would attract clause (a). According to clause (d) “made-up” also means ‘cut to size and having undergone a process of drawn thread work’. The panels imported by the appellant had drawn thread work and would therefore, attract clause (d) also. In other words, the panels are capable of being regarded as “made-up” textile articles, attracting Chapter Heading 63.07

4. Chapter 66 of the Tariff with ‘Umbrellas, sun-umbrellas, walking-sticks, seat-sticks, whips, riding-crops and parts thereof". Heading 66.01 takes in ‘Umbrellas and sub-umbrellas’. Heading 66.02 takes in ‘walking-sticks, seat-sticks, whips etc.’ Heading 66.03 takes in ‘parts, trimmings and accessories of articles of Heading Nos. 66.01 to 66.02. Sub-heading 10 relates to ‘Handles and knobs’. Sub heading 20 relates to ‘Umbrella frames, including frames mounted on shafts’. Sub-heading 90 takes in ‘Other’. It is significant to note that parts, trimmings and accessories are specifically referred to in Heading No. 66.03 and Heading 66.01 takes in also parts of umbrellas other than textile materials (nylon materials). That being so, according to the appellant, sub-heading 90 which takes in “Other” would take in nylon panels imported by the appellant.

5. Note 2 to Chapter 66 of the Tariff reads as follows :

“Heading No. 66.03 does not cover parts, trimmings or accessories or textile material, or covers, tassels, thongs, umbrella cases or the like, of any material. Such goods presented with, but not fitted to, articles of Heading No. 66.01 or 66.02 are to be classified separately and are not to be treated as forming part of those articles.”

The Note is in two sentences. The first sentence makes it clear that Heading 66.03 does not cover parts of textile materials. The second sentence indicates that parts of textile materials presented with, but not fitted to articles of Heading No. 66.01 and 66.02 are to be classified separately. According to learned counsel for the appellant, there is a contradiction between the ideas apparently conveyed by these two sentences and the contradiction can be resolved only by holding that parts of textile materials not presented with umbrellas, but imported separately would not be covered by the exclusion indicated in Note 2. This contention at first blush appears to be attractive, but when considered in the light of HSN Explanatory Notes cannot be accepted.

6. We have seen the HSN Chapter 66 and Explanatory Notes thereto. We find Headings and Sub-headings in the HSN Chapter are identical to the Headings and sub-headings in the Indian Customs Tariff. We also find that Chapter Notes in the Chapter 66 of Indian Customs Tariff are identical to HSN Chapter Notes.

7. The follwoing Explanatory Note occurs below HSN Chapter Heading 66.03 :-

“This heading excludes parts, trimmings and accessories of textile materials and covers, tassels, thongs, umbrella cases and the like of any material; these are classified separately even when presented with, but not fitted to, umbrellas, sun-umbrellas, walking-sticks etc. (see Note 2 to this Chapter). With these exceptions, the heading covers identifiable parts, fittings and accessories for articles of Heading No. 66.01 or 66.02".

The above Note while referring to parts `when presented with, but not fitted to’ state “Parts” even when presented with, but not fitted to “umbrellas”. The use of the expression “even”, in our opinion, makes all the difference. The Note itself refers to HSN Chapters Note 2, which is in identical terms as in the corresponding Note of the Indian Customs Tariff. If the second sentence in Chapter Note 2 is to be read in conjunction with the word “even”, the sentence would read as follows :-

“Such goods even presented with, but not fitted to, articles of heading No. 66.01 or 66.02 are to be classified separately and are not to be treated as forming part of those articles.”

The meaning of the above is clear and definite. The first sentence makes it clear that heading No. 66.03 does not cover parts of textile materials and the second sentence makes it clear that such parts even when presented with, though not fitted to umbrellas, are to be classified separately and not under Heading 66.03. The Indian Customs Tariff merely copied the HSN Chapter Note 2, which is to be understood in the light of HSN Explanatory Note referred to above using the word “even” which brings out a complete and correct picture sought to be presented in Chapter Note 2. It is thus clear that umbrella panels of textile material do not fall under Chapter Heading 66.03 and therefore , must be classified under Chapter Heading 63.07. In this view, the Commissioner was justified in holding that the import requires specific licence.

8. The Appellant challenges the confiscation ordered and penalty imposed by the impugned order. In reply to the show cause notices, appellant stated that for the past several years, appellant as well as other umbrella manufacturers have been regularly importing identical goods for past several years, classifying the same under Heading 6603.90 and the same has been in the past regularly accepted by the Customs authorities and the Bills of Entry have been duly assessed accepting the classification and the revenue has taken a contrary view only since December, 1996. Supply orders in these cases had been issued long prior to December, 1996 and the goods had been received only in November, 1996. In reply, it was furhter stated that in view of the consistent practice of classifying under the Chapter Heading 66.03, appellant had reasoned belief that goods in question fell under Heading 66.03 and do not require specific licence. Appellant’s conduct has been throughout bona fide and there has been no wrongful intent. In the submission made before the Commissioner, appellant stated that the Bombay Customs continued to clear the consignments under Chapter Heading 66.03, without licence and subsequently Bombay Customs took a contrary view and on the representation of the Trade in Bombay, the Commissioner of Customs Bombay, desired to give the importers an opportunity to adjust to the new situation and allowed clearances without confiscation or penalty and after merely cautioning them against future import without licence. It is also pointed out that with effect from 1-4-1997 the import policy was altered to permit import of these panels under OGL. The Commissioner has not contraverted any of these statements in the impugned order, on the other hand, in the second order passed by him i.e. on 3-1-1997, he took the above circumstances into consideration in quantifying redemption fine and penalty and imposed comparatively lower amount by way of fine and penalty. The circumstances relied on by the appellant clearly show that the Trade as well as several Commissionerates were under the belief that umbrella nylon panel would attract Chapter Heading 66.03 of the Tariff and would be importable under OGL. The appellant had effected earlier imports under OGL. The Bombay Collectorate issued Trade Notice allowing the imports under OGL. The import policy was also amended within a few months to enable import of these goods under OGL. Having regard to all these circumstances, there can be no doubt in importing these goods wihout specific licence, Appellant was acting entirely bona fide and without any intention to contravene the law in any manner.

9. In these circumstances, we are of the opinion, that the Commisioner should have refrained from confiscating the goods or imposing penalty. We find a similar view taken by the Tribunal in Radhey Shyam Ratanlal v. Collector of Customs reported in 1994(04)LCX0080 Eq 1994 (072) ELT 0910 (Tribunal), and Ingersoll Rand (India) Ltd. v. Collector of Customs reported in 1988(06)LCX0062 Eq 1989 (039) ELT 0454 (Tribunal) and other cases.

10. For the reasons indicated above, we set aside the impugned orders and allow the appeals.

Equivalent 1999 (108) ELT 216 (Tribunal)