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CASE NO.:

Appeal (civil) 1520 of 2001

PETITIONER:

Nanya Imports & Exports Enterprises

RESPONDENT:

Commissioner of Customs, Chennai

DATE OF JUDGMENT: 10/04/2006

BENCH:

ASHOK BHAN & LOKESHWAR SINGH PANTA

JUDGMENT:

J U D G M E N T

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

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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

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LIST 3(A) (Sec. S.No.108 of the Table)

PARTS, CONSUMABLES AND OTHER ITEMS

(1) Leather, plastic, rubber coco board, masonite

board or plastic board, heels with or without

rubber/PVC top lift (2) Toe caps and counters for

leather footwear (3) Insoles or midsoles and sheets

therefor (4) Welts made from leather or plastic (5)

shoes eyelets (6) Felt sleeves (7) 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

reported in Mod Apparel Exports Vs. CC Calcutta,

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 &

another Vs. Union of India & others dated

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

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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,

Bombay Vs. M/s. K. Mohan and Company Exports, 1989

(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

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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

the Tribunal in the case of Plast Fabs Vs.

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

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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

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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 \026 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

behalf. [See Union of India and Others Vs.

Garware Nylons Ltd. & Others, 1996 (10) SCC 413 \026

Para 15 and Hindustan Ferodo Ltd. Vs. Collector of

Central Excise, Bombay, 1997 (2) SCC 677 \026 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

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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.