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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.