2004(10)LCX0031

IN THE CESTAT, NORTHERN BENCH, NEW DELHI

Commissioner v. Matriaco (I) Ltd. — 1999(03)LCX0021 Eq 1999 (114) ELT 0099 (Tribunal) — Referred.......... [Para 4.1]

I.T.C. Ltd. v. Commissioner — 2002(10)LCX0094 Eq 2003 (153) ELT 0366 (Tribunal) — Referred.................. [Para 4.2]

Jay Kay Exports v. Commissioner — 2002(10)LCX0185 Eq 2003 (161) ELT 0443 (Tribunal) — Relied on .... [Paras 3, 8]

Jay Kay Exports and Industries v. Commissioner — 2003(07)LCX0026 Eq 2004 (163) ELT 0359 (Tribunal) — Referred [Para 3]

Northern Plastic Ltd. v. Collector — 1998(07)LCX0097 Eq 1998 (101) ELT 0549 (S.C.) — Relied on............. [Paras 3, 8]

Raj Exports v. National Aluminium Co. Ltd. — 1996(03)LCX0078 Eq 1996 (087) ELT 0349 (Ori.) — Referred... [Para 5]

Raj Exports v. National Aluminium Co. Ltd. — 1997(01)LCX0220 Eq 2002 (141) ELT A282 (S.C.) — Referred [Para 5]

Rico Gems Corporation v. Chief Controller of Imports & Exports — 1991(10)LCX0035 Eq 1992 (058) ELT 0390 (Bom.) — Referred               [Para 5]

DEPARTMENTAL CLARIFICATION CITED

C.B.E. & C. Circular No. 33/2000-Cus., dated 2-5-2000......................................... [Paras 4.1, 5, 9]

Advocated By :        Shri K.K. Anand, Advocate, for the Appellant.

Shri S.M. Tata, SDR, for the Respondent.

[Order per : V.K. Agrawal, Member (T)]. - In these two appeals, filed by M/s. Shree Ganesh International against two separate Orders-in-Originals, the common issues involved are whether the polyester fabrics imported by them is classifiable under sub-heading 5407 61 90 of the First Schedule to the Customs Tariff Act, as declared by them on Bills of Entry or under sub-heading 5407 69 00 and whether the importers are eligible to get the goods cleared without payment of duty against Duty Free Replenishment Certificate (DFRC).

2. Shri K.K. Anand, learned Advocate mentioned that the Appellants imported two consignments of Polyester Fabrics from M/s. Shaoxing Weifing Weaving Printing & Dyeing Co. Ltd. and M/s. Shaoxing Tialong Import & Export Ltd., China respectively; that they had ordered for import of polyester fabrics and in the test Certificates it was clearly mentioned that the impugned goods were non-texturised fabrics; that the Commissioner of Customs, under both the impugned Orders has classified the impugned goods under sub-heading 5407 69 00 of the Customs Tariff as texturised fabrics on the basis of Test Reports received from Textile Committee, Mumbai and CRCL, New Delhi; that the Commissioner has also disallowed their request to allow clearances of the goods against DFRCs on the ground that DFRCs produced by them are not having complete details about the quality, technical characters and specifications of the inputs used in the export goods. The learned Advocate submitted that the test reports relied upon by the Department are of doubtful nature because in all the three tests reports there is a wide variation; that Textile Committee had opined that the constituent yarn as 100% texturised yarn whereas the first CRCL Report opined that the yarn contained texturised multifilament yarn of 63.2% and retest report stated that it contained textured filament yarn to the extent of 62%; that there cannot be such wide variation amongst the three samples when they were drawn from the same consignment; that on the other hand, the supplier had given the test Certificate wherein it has been clearly certified that the fabrics contained non-texturised yarn; that there is no allegation in the show cause notice that Certificates given by the suppliers are incorrect; that the suppliers who had sent the consignment is the best person to know the composition of his product; that thus their declarations that the goods are made of non-texturised yarn is perfectly valid and should be accepted.

3. The learned Advocate further submitted that there was no intentional mis-classification of the goods by the Appellants; that they had earlier imported polyester fabrics and the same was assessed as containing non-texturised yarn; that the present Bills of Entry were also filed on the same lines; that the polyester fabrics from its look cannot be distinguished and the nature of constituent yarn could not be ascertained as such; that they had no way to know that the goods have yarn which is less than 85% non-texturised yarn; that it was only on testing conducted by the laboratories that the same could be revealed; that even the results of tests conducted by the Textile Committee and CRCL are widely different which goes to show that when the result of Government Laboratories could vary by such a large extent, then a normal business man definitely cannot tell the quantum of texture in fabrics simply by the look or feel of the fabric; that Shri S.K. Garg, authorised signatory of the Appellants, in his statement, has deposed that he has no technical knowledge regarding quality and composition of the fabric; that there is no material on record to show that the Appellants had intentionally misdeclared the composition of the goods and, therefore, wrongly, classified the goods; that they were under the bona fide impression that the impugned consignments are identical to the one they had imported earlier from the same supplier in which test report of the Department had confirmed the non-texturised content; that they had filed the Bills of Entry on the basis of documents received from the suppliers. The learned Advocate relied upon the judgment in the case of Northern Plastic Ltd. v. CC & CE, 1998(07)LCX0097 Eq 1998 (101) ELT 0549 (S.C.) = 1998 (027) RLT 0556 (S.C.) wherein the Apex Court has held that it cannot be claimed that “by claiming benefit of exemption under notifications which really did not apply to the imported goods, the Appellant had intentionally tried to evade proper payment of customs duty” and that the declaration made on the basis of the belief entertained by the appellant “cannot be said to be a misdeclaration contemplated by Section 111(m) of the Customs Act.” Reliance has also been placed on the following decisions :

(i)      Jay Kay Exports v. C.C. (Port), Calcutta, 2002(10)LCX0185 Eq 2003 (161) ELT 0443 (T)

(ii)    Jay Kay Exports & Industries v. C.C. (Port), Kolkata, 2003(07)LCX0026 Eq 2004 (163) ELT 0359 (T) wherein the Tribunal has held that the finalisation of the Tariff Heading under which the goods would fall is the ultimate job of the Customs authorities and if the Appellants have claimed wrong classification according to his understanding, mens rea cannot be attributed on his part.

4.1 The learned Advocate mentioned that the Adjudicating Authority has disallowed the clearance of goods under DFRC Scheme on the ground that technical characteristics, quality and specification should be declared in the shipping bill and that the licensing authority, while issuing DFRC, shall mention the technical characteristics, quality and specification in respect of such inputs; that the Commissioner has relied on the language of Notification No. 46/02 and Board’s Circular. The learned Advocate submitted that in the present matters, the DFRCs produced by the appellants refer to 100% polyester fabrics (GSM 200 + & - 10%); that thus the description of the goods and its quality has been clearly mentioned in DFRCs; that when the Customs Authorities and the licensing Authority are treating the description of the exported items as sufficient for allowing the import of a particular item, it is not open to the Adjudicating Authority to embark upon unnecessary deficiencies; that it is not the case of the Department that the DFRCs have not been issued as per the relevant Import-Export Policy and therefore, it is not open to the Department not to allow the import of the goods; that since the DFRCs were issued as per the provision of law and the same were legally transferred to the Appellants and they had imported goods as per description mentioned therein, the impugned Order is wholly untenable in the eye of law; that it is settled law that in respect of licensing matters, DGFT is the final Authority and if they had issued a DFRC in a particular manner, it is not open to the Department to reject the same. He relied upon the decision in the case of Commissioner of Customs v. Matriaco (I) Ltd., [1999(03)LCX0021 Eq 1999 (114) ELT 0099 (T)] wherein the Tribunal has held as under :

“It was open to the licensing Authority to specify the kind or grade of cotton fabrics from which the shirts were to be exported were to be made and, equally, specify that kind or grade of fabrics for import. This requirement has not been, insisted upon, either for export or for import. The premise upon which the department’s case is based that the imported goods do not tally in technical characteristics of the export goods therefore is not entertainable. On this basis alone, the conclusion of the Collector (Appeals) will have to be confirmed.”

4.2 He also relied upon the decision in the case of ITC Ltd. v. Commissioner of Central Excise, Chennai, [2003 (153) ELT 366] wherein the Tribunal has allowed the benefit of exemption under Notification No. 80/95 holding that close nexus with reference to quality and technical specification of inputs vis-a-vis export product is not required to be established.

5. Countering the argument Shri S.M. Tata, learned Senior Departmental Representative, reiterated the finding as contained in the impugned order and submitted that Notification No. 46/2002-Cus., dated 22-4-2002 provided that DFRCs Licence should contain the standard input-output norms, number, description and value of the resultant product exported on the reverse, the shipping bill and date, FOB value of the resultant product and the description, value and quantity of the materials which are allowed to be imported; that proviso to Notification further mentions that in respect of resultant products specified in the sensitive list contained in Para 4.31 of the Handbook of Procedure (Volume 1) of the import and Export Policy, the materials permitted in the licence shall be of the same quality, technical characteristics and specifications as the materials in the said resultant product; that the condition of the Notification has to be complied with before the benefit of the same can be availed of by the Appellants; that the condition of the Notifications applies also to the transferee of DFRCs licence. He relied upon the decision in the case of Raj Exports v. National Aluminium Company Ltd. [1996 (087) ELT 349] and order of the Supreme Court on Appeal filed by M/s. Raj Exports as reported in 1997(01)LCX0220 Eq 2002 (141) ELT A282 (S.C.). He also relied upon the decision in the case of Rico Gems Corporation v. Chief Controller of Imports and Exports, 1991(10)LCX0035 Eq 1992 (058) ELT 0390 (Bombay) wherein the Bombay High Court has held that an absolute and inviolable right cannot be claimed by the transferee in view of the positive provisions contained in the licence itself to the effect that the licence is granted without prejudice to the application of any other prohibition or regulation; that it has also been held by the Bombay High Court that transferee steps into the shoes of the transferor. He contended that in the present matters the DFRC has been issued as per Notification No. 46/2002 and the fabrics is covered in the sensitive list; that as per the Board’s Circular No. 33/2000-Cus., dated 2-5-2000, the exporter operating under DFRC is required to give a declaration on the Export Promotion copy of the shipping bill indicating GSM No. and SION, product group of the export product; that EP copy of the shipping bill should also contain the declaration regarding the quality, technical characteristics of the inputs used in the export products; that DFRC licence shall permit import of inputs having same quality, technical characteristics and specifications which have been used in the export product and which are specified in the shipping bills; that all these details are missing in the present matters; that except GSM, no other technical details such as types of fabrics, yarn in warp and weft, type of weave have not been declared; that when all such details would be declared at the time of export in the shipping bill, the same details would be incorporated in the DFRC issued by the licensing Authority; that DFRCs which are not having the complete details cannot be allowed for clearance of the goods under DFRC scheme as per Notification No. 46/2002-Cus.

6. Learned Senior Departmental Representative, further, submitted that for the purpose of classifying the fabrics under sub-heading 5407 61 90, the fabrics should contain 85% or more by weight of non-texturised yarn polyester filaments; that both the test report of CRCL and the test report of Textile Committee, Mumbai clearly show that the fabrics in question did not contain 85% or more by weight of non-texturised polyester yarn filament and as such the impugned goods are not classifiable under the said sub-heading; that the goods are classifiable correctly under sub-heading 5407 69 00; that as the goods have been mis-declared in the Bills of Entry, they are liable to be confiscated and penalty is to be imposed on the appellants.

7. We have considered the submissions of both the sides. The Revenue has clearly established that polyester fabrics imported by the Appellants does not contain 85% or more by weight of non-texturised polyester filament by getting the test report from CRCL and Textile Committee; that once the non-texturised polyester filament is less than 85% the polyester fabrics imported by the Appellants is not classifiable under sub-heading 5407 61 20. The mere fact that there were wide variations between the test results arrived at by the Textile Committee and CRCL will not make any difference as much as there is nothing on record to show that the impugned goods contain 85% or more by weight of non-texturised polyester filament. The appellants have not brought on record any test report showing that the impugned goods contain non-texturised polyester filament 85% or more by weight. They have only referred to the Test Certificate given by the foreign supplier. The perusal of the said Test Certificate reveals that the supplier has only stated that the goods are non-texturised fabrics without indicating the contents of the texturised polyester filament. In view of this, this Certificate is of no importance. On the other hand, the Revenue has brought on record, the test report given by CRCL. Accordingly, we hold that the impugned polyester fabric is classifiable under sub-heading 5407 69 00 of the Customs Tariff.

8. We, however, agree with the learned Advocate that the impugned goods are not liable for confiscation. It has not been denied by the Revenue that the appellants have made the declaration on the Bills of Entry on the basis of documents received by them from their foreign suppliers. The test report of the foreign supplier is dated 9-8-2003 which clearly mentions that the goods are non-texturised fabrics. They have also claimed that a similar consignment imported by them from the same supplier had earlier been cleared as non-texturised polyester fabrics which gave them the bona fide belief that the present consignment would also be of non-texturised variety. In similar situations, the Supreme Court has held in the case of Northern Plastics Ltd. (supra) that the declaration is in the nature of a claim made on the basis of belief entertained by the Appellants and therefore cannot be said to be misdeclaration under Section 111(m) of the Customs Act. It has also been held by the Tribunal in the case of Jay Kay Exports and Industries (supra) that finalisation of Tariff Heading under which the goods will fall is the ultimate job of the Customs authorities and if the Appellants have claimed wrong classification according to his limited understanding of the Customs Law, mens rea cannot be attributed to him. Accordingly, we hold that in the present matters, it cannot be claimed by the Revenue that the Appellants have deliberately misdeclared the goods with a view to avail the benefit of lesser rate of duty. We, therefore, set aside the confiscation and consequently the redemption fine imposed on them in both the appeals as well as the penalty.

9. The appellants have also claimed clearance of the imported goods against DFRCs licences. It is not the case of the Revenue that the DFRCs licences presented by the appellants are not valid licence. In these licences the goods which can be imported is mentioned as 100% polyester fabrics (GSM 200 +/- 10%). The Revenue has denied the clearance of the imported goods against these DFRCs licences on the ground that all the technical specifications such as type of fabrics, type of weave, etc. are not mentioned in DFRC licences. DFRC licence is issued by the Director General of Foreign Trade. Once the licence has been issued by the DGFT on the basis of export of goods, it is not open to the Revenue to disallow the clearance of imported goods against these licences on the ground that these licences do not contain some further details. As long as the licence has been validly issued by the DGFT after ascertaining the export of goods, the Customs have to allow the clearance of the specified goods against these licences. As observed by us earlier the Revenue has not denied that goods imported are polyester fabrics GSM of which is 200 +/- 10%. We also observe that the Board in Circular No. 33/2000-Cus., dated 2-5-2000 has explained the salient features of DFRCs licence. One of the salient feature is that “DFRCs licence shall permit import of inputs having same quality, technical characteristics and specifications which have been used in the export product and which are specified in the Shipping Bills.” In the present matter, the export products were of polyester fabrics of GSM 200 +/- 10% and the DFRCs licnence has also permitted the import of same product with same technical specifications. We, therefore, find no reason to disallow the clearance of the imported goods against DFRCs licence. We, therefore, allow both the appeals of the appellants on this count also. Both the appeals stand disposed of in the above terms.

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Equivalent 2004 (174) ELT 171 (Tri. - Del.)