2016(03)LCX0041

IN THE CESTAT, PRINCIPAL BENCH, NEW DELHI

Justice G. Raghuram, President and Shri R.K. Singh, Member (T)

San International

Versus

Commissioner of Customs, New Delhi

Final Order No. C/A/50893/2016-CU(DB), dated 1-3-2016 in Appeal No.

Cases Quoted -

Adani Wilmar Ltd. v. Commissioner - 2008(05)LCX0329 Eq 2008 (231) ELT 0545 (Tribunal) - Referred [Para 9]
Commissioner v. Ballarpur Industries Ltd. - 2007(08)LCX0014 Eq 2007 (215) ELT 0489 (S.C.) - Referred [Para 6]
Dharampal Satyapal Ltd. v. Deputy Commissioner - 2015(05)LCX0013 Eq 2015 (320) ELT 0003 (S.C.) - Referred [Para 6]
H.P.L. Chemicals Ltd. v. Commissioner - 2006(04)LCX0009 Eq 2006 (197) ELT 0324 (S.C.) - Referred [Para 9]
Kanishk Steel Industries Ltd. v. Commissioner - 2004(12)LCX0386 Eq 2005 (191) ELT 0231 (Tribunal) - Referred... [Para 9]
Puma Ayurvedic Herbal Pvt. Ltd. v. Commissioner - 2006(03)LCX0001 Eq 2006 (196) ELT 0003 (S.C.) - Referred [Para 9]

Advocated By -

Ms. Surabhi Singh, Advocate, for the Appellant.
Shri Amresh Jain, DR,for the Respondent.

[Order per : R.K. Singh, Member (T)]. -

Appeal is filed against order-in-original dated 31-10-2005 in terms of which Commissioner (adjudicating authority) passed the following order :
"For the reasons aforesaid, I confirm the demand of duty to the tune of Rs. 92,179,54 as per SCN No. VIII (ICD) 6/BE/110153/96, dated 23-11-1996 and Rs. 1,68,34,435/- as per SCN No. VIIl(ICD) 6/10047/SCN, dated 5-12-1996. Having regard to the liability of the impugned goods totally valued at Rs. 11,93,805/- GIF covered by the first SCN and valued at Rs. 3,08,74,405/- C1F covered by the second SCN under Section 111(d) and 11 l(m) of the Customs Act, 1962 and in view of the fact that those goods are not available for confiscation having been provisionally released, I impose a penalty of Rs. 50,00,000/- (fifty lakhs) on the noticee. The bank guarantee already furnished by the noticee be attached and enforced to recover the duty and penaltv. The balance amount be deposited by the noticee forthwith."


2. The demand was confirmed on the ground that the impugned goods were classifiable under Chapter Heading 59.07 as against Chapter Heading 43.04 claimed by the appellant. The appellant had imported artificial fur lining under various bills of entry. The primary adjudicating authority vide order-in-original dated 30-5-1997 held the goods to be classifiable under 43.04 as claimed by the appellant and dropped the demand. Revenue went in appeal and CESTAT vide order dated 20-2-2001 [2001(02)LCX0267 Eq 2001 (136) ELT 0657 (Tri. - Del.)] allowed Revenue's appeal by way of remand as under :
"16. We, therefore consider that this matter needs to go back to the jurisdictional Commissioner of Customs for de novo consideration in the light of our above discussion. We, therefore, remand this matter to the jurisdictional Commissioner of Customs who will provide an opportunity to both the sides to present their respective case and will then pass speaking appealable order, as per law. Thus, the impugned order-in-original is set aside and both the appeals of the Revenue are allowed by way of remand to the jurisdictional Commissioner of Customs, as above."
Pursuant to the aforesaid order of CESTAT, order-in-original dated 14-1-2002 was issued in terms of which the Commissioner passed the following order :
"For the reasons aforesaid, I confirm the demand of duty to the tune of Rs. 92,179,54 as per SCN No. VIII (ICD) 6/BE/110153/96, dated 23-11-1996 and Rs. 1,68,34,435/- as per SCN No. VIII(ICD) 6/10047/SCN, dated 5-12-1996. Having regard to the liability of the impugned goods totally valued at Rs. 11,93,805/- CIF covered by the first SCN and valued at Rs. 3,08,74,405/- CIF covered by the second SCN under Section 111(d) and lll(m) of the Customs Act, 1962 and in view of the fact that those goods are not available for confiscation having been provisionally released, I impose a penalty of Rs. 50,00,000/- (fifty lakhs) on the noticee. The bank guarantee already furnished by the noticee be attached and enforced to recover the duty and penalty. The balance amount be deposited by the noticee forthwith."


1. The appellant filed appeal before CESTAT against the order-in original dated 144-2002, CESTAT vide Final order dated 5-12-2002 remanded the case for de novo adjudication making the following observations :

"We are constrained to send back the matter to the Jurisdictional Authority with the direction to adjudicate the matter afresh in the light of the observations in the terms of remand contained in the said Final Order No. 62-63/2001-D which reads as under :
"We, therefore, consider that this matter needs to go back to the jurisdictional Commissioner of Customs for de novo consideration in the light of our above discussion. We, therefore, remand this matter to the jurisdictional Commissioner of Customs who will provide an opportunity to both the sides to present their respective case and will then pass speaking appealable order as per law. Thus, the impugned order-in-original is set aside and both the appeals of the Revenue are allowed by way of remand to the jurisdictional Commissioner of Customs, as above."

The appeal is thus allowed by way of remand."

In the wake of CESTAT order dated 5-12-2002 the impugned order was passed.

2. The appellant has contended as under :

(i) Classification has been determined on the basis of report of IIT, Delhi, SASMIRA and NITRA. No opportunity for cross-examination of Shri P.K. Hari of IIT, Delhi, Dr. R. Sarkar of SASMIRA and Shri S.S. Satsangi of NITRA was afforded and therefore their opinion cannot be relied upon. It cited several judgments in support of the said proposition:

(ii) Initially IIT, Delhi gave opinion in favour of the appellant and it was only when Revenue wrote a detailed letter to IIT that the opinion was changed and therefore such opinion cannot be relied upon against the appellant.


(iii) Only samples in respect of some bills of entry were tested and therefore in respect of other bills of entry, the test reports cannot be applied.

(iv) While selling these goods were described as artificial fur lining.

(v) The HSN Explanatory Notes for Chapter 56 of Customs Tariff cannot be used for classification of the impugned goods.


(vi) The burden of proof that the goods are classifiable under 59.07 is clearly on Revenue as has been held by several judgments which were cited.

3. Ld. DR, on the other hand, stated that the Commissioner in the im pugned order has analysed the issue of classification and has come to a clear finding that by virtue of the fact that the length of flock was ranging between 0.45 to 0.50 mm, such goods could not be classifiable under Heading 43.04 as artificial fur lining. He strenuously referred to the Chapter Headings 59.07,56.01 and 43.04 and relied upon HSN Explanatory Notes to contend that the goods have been correctly held to be classifiable under 59.07.

4. We have considered the contentions of both sides and perused the records and the judgments cited. As regards the contention of the appellant that experts' opinions should not be relied upon as their cross-examination was not permitted, we find that in the case of CCE v. Ballarpur Industries Ltd. - 2007(08)LCX0014 Eq 2007 (215) ELT 0489 (S.C.) the Hon'ble Supreme Court inter alia observed that opinion of the technical expert is only an opinion and its evidentiary value has to be ascertained by permitting his cross-examination. In the case of Dharampal Satyapal Ltd. v. CCE - 2015 (87) SCC 519 (SC) = 2015(05)LCX0013 Eq 2015 (320) ELT 0003 (S.C), Supreme Court has summed up to the issue essentially holding that (i) there may be situations where it is felt that fair hearing would make no difference-meaning that a hearing would not change the ultimate conclusion reached by the decision-maker in such situations, fair procedures appear to serve no purpose since the right result can be secured without according hearing/cross-examination, (0ii) It may not be necessary to strike down the action and refer the matter back to the authorities to take fresh decision after complying with the procedural requirement in those cases where non-grant of hearing has not caused any prejudice to the person against whom the action is taken. Therefore, every violation of a facet of natural justice may not lead to the conclusion that the order passed is always null and void, (iii) The validity of the order has to be decided on the touchstone of prejudice. The Hon'ble Supreme Court in Para 40 of the said judgment observed as under :

"40. In this behalf, we need to notice one other exception which has been carved out to the aforesaid principle by the Courts. Even if it is found by the Court that there is a violation of principles of natural justice, the Courts have held that it may not be necessary to strike down the action and refer the matter back to the authorities to take fresh decision after complying with the procedural requirement in those cases where non-grant of hearing has not caused any prejudice to the person against whom the action is taken. Therefore, every violation of a facet of natural justice may not lead to the conclusion that order passed is always null and void. The validity of the order has to be decided on the touchstone of 'prejudice'. The ultimate test is always the same, viz., the test of prejudice of the test of fair hearing."
There is no doubt that there can be a situation whether denial of cross-examination of expert may not cause any prejudice and in such case not allowing cross-examination would not vitiate the proceedings. However, in the present case it is eminently arguable that not allowing cross-examination of the experts has caused prejudice to the appellant as their opinion was relied upon to negate the appellant's plea/contention and therefore the least that follows is that as the cross-examination of the experts who gave their opinions was not permitted/held, their opinion is to be ignored for the purpose of deciding the issue at hand.


5. We have perused the show cause notice and the impugned order. We find that it was categorically mentioned in the show cause notice that the impugned fabrics comprised a synthetic knitted base and were coated/covered with coloured nylon flocks with an average flock height ranging between 0.45-0.50 mm. Even though the appellant sought cross-examination of the person who wrote the test report, at no stage during the proceedings it disputed that the average flock length was not ranging between 0.45 to 0.50 mm or claimed that it was more than 5 mm. As a matter of fact, in the reply to the show cause notice (in Para 20) the appellant claimed that "the minimum of length of fur is nowhere laid down in the chapter notes of Chapter 43 of Customs Tariff. Therefore the department's contention by cross reference to some length referred to in subheading 56.01 has no relevance". Not only that, even in its appeal (in Para 7 Page 28 of the appeal) it has made an assertion that "length of the fur is totally irrelevant for the reason that the purpose of fur is to safeguard the animal from external temperature/environment" Thus the appellant never disputed the length of flock being 0.45 to 0.50 mm. Once it was not disputed at any stage earlier, by the principle of non traverse, this cannot be contested at this stage even if the appellant chose to attempt to do so.

8. We have perused the HSN notes pertaining to 59.07; as per note (G) under that chapter it is stated as under :
"(G) Fabric, the surface of which is coated with glue (rubber glue or other) plastics, rubber or other materials and sprinkled with a fine layer of other material such as :-

(1) Textile flock or dust to produce imitation suedes (fabrics pro-duced in a similar manner with longer textile fibres are excluded if they have the character of artificial fur of heading 43.04). Fabrics covered with textile flock or dust to produce imitation pile (for example, corduroy) remain classified in this heading.

(2) Powdered cork (e.g. for wall coverings)


(3) Powder or small granules of glass (e.g. "microspheres" for cinematograph screens)

(4) Powdered Mica.'


We find that as per HSN note be under 56 textile flock is described as under :
"Textile flock" consists of textile fibres not exceeding 5 mm in length (silk, wool, cotton, man-made fibres etc.). It is obtained as waste during various finishing operations and, in particular, from the shearing of velvets. It is also produced by cutting textile tow or fibres. Textile dust is obtained as waste, or by grinding textile fibres to a powder. Textile flock and dust fall in this heading even if bleached or dyed or if the fibres having been artificially curled.
These products are used for a wide variety of purposes (e.g. for blending with other fibres and spinning into yarns, for making imitation suedes, for coating or decorating wallpaper, as a basis for face powder or "make up]".
A combined reading of the above-quoted Explanatory Notes make it very clear that fabrics produced in a similar manner with textile fibres of length 5 mm and above are excluded from CTH 59.07 if they have the character of artificial fur of Heading 43.04. The clear implication of this is that fabrics covered with textile flock of less than 5 mm length are not excluded out of the purview of 59.07 even if they have the character of artificial fur. We also find that the appellant have nowhere claimed that the impugned goods looked like fur of any particular animal. That however is not of any consequence because even if the impugned goods looked liked some fur, by virtue of the HSN notes cited earlier and the analysis above, because of the fact that nylon flocks had the length between 0.45 mm to 0.5 mm, the impugned goods do not get excluded from the scope of Chapter Heading 59.07. We may repeat that to exclude the goods from the scope of 59.07 (i) the flocks have to be of length 5 mm or longer and (ii) the goods should have the character of artificial fur.


6. The appellant referred to the judgment in the case of Adani Wilmer Ltd. - 2008(05)LCX0329 Eq 2008 (231) ELT 0545 (Tri.-Ahmd.) to assert that where more than one test report of government laboratory was available showing different results, it is not possible to accept only one of them which is in favour of Revenue. The judgment in the case of Kanishk Steel Indus. Ltd. v. CCE - 2004(12)LCX0386 Eq 2005 (191) ELT 0231 (Tri.-Chennai) is also to the same effect. The judgment in the case of Puma Ayurvedic HerM Pvt, Ltd. v. CCE - 2006(03)LCX0001 Eq 2006 (196) ELT 0003 (S.C.) was cited to support the proposition that the burden of showing correct classification lies on Revenue and the expert's opinion has no relevance for determining classification of products as the role of chief chemist is only to supply analytical data. In the case of HPL Chemicals Ltd. v. CCE, Chandigarh - 2006(04)LCX0009 Eq 2006 (197) ELT 0324 (S.C), Supreme Court reiterated that if department needs to classify goods under a particular heading or sub-heading different from claimed by assessee, department needs to produce proper evi dence and discharge burden of proof. In the present case the various expert's reports did not change the findings of facts, only the opinion about classification was changed and no reliance has been placed on that opinion in the foregoing analysis. Further the classification is not being determined in the present case on the basis of the opinion given by the experts regarding classification. As stated earlier, the classification has been determined on the basis of the length of the flock fibres being between 0.45 limited to 0.5 mm which was never contested and on the basis of the HSN Explanatory Notes on classification which are standard and internationally accepted for the purpose of determining the classification of goods. Thus, Revenue has discharged its burden of proof while determining the classification.

7. As regard the contention of the appellant that when the samples have not been drawn from the goods covered under various bills of entry, the test reports relating to goods which were covered under some other bills of entry of the appellant cannot be used for the purpose of classifying goods imported under bills of entry from where no samples were drawn, we note that the author ised representative of the appellant in his statement dated 23-11-1996 categorically stated that the appellant had imported artificial fur lining of the same quality,character and technical specifications (except colour) under all the bills of entry. Further the examination of samples drawn from a number of consignments imported under various bills of entry supported the said statement of the authori ed representative. Therefore we do not find any infirmity in using the result of tiie test reports certifying the length of fibre to be between 0.45 mm to 0.5 mm for the goods imported under the bills of entry from where no samples were drawn. Indeed insisting on drawing samples from all the consignments when the authorised representative categorically accepted that the goods were of the samequality characteristic and technical specifications as the ones from which samples
had been drawn would/could have invited the allegation of undue harassment. Samples are drawn when there is a dispute. When there were no dispute that the goods imported under other bills of entry were the same in quality characteris tics and technical specifications, there was no requirement of drawing the sam ples from each and every consignment imported under each and every bill of entry. Thus this contention of the appellant is clearly unsustainable.

11. In the light of the foregoing analysis, we do not find merit in the as-sessee's appeal and therefore dismiss the same.
(Pronounced in Court on 1-3-2016)

Equivalent 2016 (337) ELT 0093 (Tri. - Del.)