Custom, Excise & Service Tax Tribunal
Alm Leather Exports vs Chennai(Air Port & Cargo) on 12 September, 2023
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
COURT HALL No. III
CUSTOMS APPEAL No. 42369 of 2013
(Arising out of Order-in-Original No.658/2013, dated 26.08.2013 passed by
Commissioner of Customs Air Cargo Complex, Meenambakkam, Chennai 600 027)
M/s. Futan Leathers .... Appellant
No.4/9, 1st Floor, Periamet
Sheikh Ali Subeda Street
Chennai 600 003
Versus
The Commissioner of Customs, Chennai ...Respondent
(Airport & Air Cargo), New Custom House
Meenambakkam, Chennai 600 027.
With
CUSTOMS APPEAL No. 42370 of 2013
(Arising out of Order-in-Original No.658/2013, dated 26.08.2013 passed by
Commissioner of Customs Air Cargo Complex, Meenambakkam, Chennai 600 027)
Shri. M. Sarath .... Appellant
Clerk of M/s. Kalki Shipping Associates
No.46, Thambu Chetty Street
Chennai 600 001
Versus
The Commissioner of Customs, Chennai ...Respondent
(Airport & Air Cargo), New Custom House
Meenambakkam, Chennai 600 027.
With
CUSTOMS APPEAL No. 42371 of 2013
(Arising out of Order-in-Original No.658/2013, dated 26.08.2013 passed by
Commissioner of Customs Air Cargo Complex, Meenambakkam, Chennai 600 027)
M/s. Kalki Shipping Associates .... Appellant
No.46, Thambu Chetty Street
Chennai 600 001
Versus
The Commissioner of Customs, Chennai ...Respondent
(Airport & Air Cargo), New Custom House
Meenambakkam, Chennai 600 027.
and
CUSTOMS APPEAL No. 42373 of 2013
(Arising out of Order-in-Original No.658/2013, dated 26.08.2013 passed by
Commissioner of Customs Air Cargo Complex, Meenambakkam, Chennai 600 027)
M/s. ALM Leather Exports .... Appellant
55/22, PeriannaMaistry Street
Periamet, Chennai 600 003
Versus
The Commissioner of Customs, Chennai ...Respondent
(Airport & Air Cargo), New Custom House
Meenambakkam, Chennai 600 027.
APPEARANCE:
Ms. V. Pramila, Advocate
For the Appellant
Mr. R. Rajaraman, Assistant Commissioner (AR)
For the Respondent
CORAM :
HON'BLE MS. SULEKHA BEEVI C.S.,MEMBER (JUDICIAL)
HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL)
DATE OF HEARING :01/09/2023
DATE OF DECISION :12/09/2023
FINAL ORDER No._40785-40788/2023
ORDER :
1. Brief facts are that the appellants viz; M/s. ALM Leather Exports, M/s .Futan Leather and M/s. Avanthi Leathers exports (herein after referred to as appellants) filed shipping bills dated 26/3/2012 and 27/3/2012 for export of item declared as "Goat shoe suede pure finished leather" through CHA M/s. Kalki Shipping Associates. The details of the shipping bills are as under.
Sl. SB No. Exporter Buyer No. of Sq. ft. Value
No. Bundles USD
1 8209404 ALM Hongkong 18 14038.2 214778.45
dated Leather Bushun
27.3.2012 Exports International
2. 8195830 Futan Gown World 32 25002 39503.16
dated Leathers Inc.
26.3.2012
3. 8193846 Arman Ample Dragan 13 10506.8 16810.88
dated Leather Enterprises
26.3.2012 Exports
2. On examination it was seen that the consignments in respect of Shri ALM Leather Exports and M/s. Futan Leathers did not conform to the standards of finished leather. Samples were drawn and sent for testing to CLRI, Chennai. The report was received stating that the goods did not fulfill the standard of finished leather as per public notice no.21/2009/14 dated 1/12/2009 for the reason that the processes of dyeing and shaving/snuffing has not been done. The appellants thereafter got provisional release of the goods; and after reprocessing the goods were exported. The department issued the present Show Cause Notice alleging attempted export of prohibited goods and proposing to confiscate the goods, to impose redemption file and penalties. After due process of law, the original authority held that as the goods which were unfinished leather were attempted to be exported as finished leather, the goods are liable for confiscation. As goods were already provisionally released and re-exported after reprocessing, the adjudicating authority imposed redemption fine and penalties. The proceedings were dropped in regard to Arman Leather Exports. Aggrieved the appellants are now before the Tribunal. The details of fine and penalty imposed are as under:
Sl.No. Appellant'Name Appeal No. Redemption Penalty Fine Imposed Imposed (Rs.)
1. M/s.Futan C/42369/2013 7,40,000 4,60,000/-
Leather
2. M.Sarath C/42370/2013 ------ 25,000/-
3. Kalki Shipping C/42371/2013 ------ 1,00,000/-
Associates
4. ALM Leather C/42373/2013 4,00,000/- 2,50,000/-
Exports
3. The Ld. counsel Ms. V. Pramila appeared and argued on behalf of the appellants. The charge on the appellant exporters is that they attempted to export the unfinished leather in the guise of finished leather with an intent to escape export duty at the rate of 60% and to avail undue benefits on export of goods. The Ld. counsel submitted that the department has concluded that the goods did not confirm to the standard of finished leather by relying on the Public Notice No.21/2009 dated 1/12/2009 and the CLRI report. The goods were released provisionally on execution of bond and bank guarantee. The appellant reprocessed the goods and exported the same after satisfying the norms as prescribed under the Public Notice. After such export, the impugned order has been passed holding that the goods which earlier did not conform to standards of the finished leather were attempted to be exported.
4. The Ld. counsel submitted that CLRI had pointed out absence of few processes, based on which the department alleges that the leather sought to be exported was not finished leather. According to CLRI report dated 3.7.2012 the goods did not conform to the standard of finished leather for the reason of:
a) Absence of Dyeing
b) Absence of snuffing imparting visual evidence of removal of grain.
5. The PN 21/2009 dated 21.8.2009 prescribes the following processes for Goat Shoe suede leather to be treated as 'finished leather'.
a) Tanning
b) Dyeing in light / paste / medium / dark shades (in case of doubt, the presence of dye to be ascertained by chromatographic technique)
c) Fatliquoring
d) Buffing to produce suede nap
e) Shaving / snuffing of the grain along the back bone 2 inches on either side in the case of goat and sheep skin and in the case of bovine hides / sides and calf skins all over the grain side.
6. The degree of dyeing and snuffing varies depending on the requirement of the buyer. The Ld. counsel submitted that even in situations where the goods were exported after completing the processes, the charge of confiscation fails. Once the goods have been exported, the imposition of the redemption fine is without any legal basis. There was no intention on the part of appellant / exporters to violate the provisions of law. It is pleaded that penalties may be set aside.
7. The decision in the case of Vijayalakshmi Leathers Vs. Commissioner of Customs, Chennai 2000 (119) ELT 656 (Tribunal) to argue that when process of dyeing as well as snuffing/shaving was absent, the Tribunal held that these were minor variations. It was observed that the appellant having incurred considerable financial loss on account of taking the goods back for reprocessing and the delay in carrying out their exports and realization of export value, the Tribunal set aside the redemption fine and penalties imposed by department. The decision in the case of Commissioner of Customs (Air port, Chennai) Vs Avanti Leathers Ltd. 2010 (261) ELT 491 (Tribunal, Chennai) was also relied.
8. On behalf of the appellant M/s. Kalki Shipping Associates (CHA) and Shri M. Sarath the Ld. counsel submitted that there was no deliberate intention to substitute the goods or attempt to export unfinished leather as finished leather. The department alleges that the appellants tried to substitute and export the unfinished leather consignment with another consignment of finished leather for which shipping bill was filed by the same CHA. The Ld. counsel submitted that Shri Anand who was the then In-charge of CHA firm is alleged by department to be master mind for substituting the consignments in the warehouse. Shri Anand is no more and the appeal filed by Shri Anand has been dismissed as abated. Shri M. Sarath was only an employee working under the instructions of Shri R. Anand. Further, the CHA firm had no knowledge about the acts committed by Shri Anand. It is pleaded that the penalty imposed on Sarath and Kalki Shipping Associates may be set aside.
9. The Ld. counsel prayed that the appeals may be allowed.
10. The Ld. AR Shri. R.Rajaraman supported the findings in the impugned order. It is submitted that the CHA had filed the shipping bill on behalf of another exporter M/s. Elite Leather also for 64 bundles which was examined and found to be finished leather. Later the goods with regard to the present appellants which was of 63 bundles also came to the examination area of the Customs. It is brought out from the findings recorded by adjudicating authority that Shri Anand had deliberately tried to substitute the unfinished leather consignment of appellants with the finished leather consignment of Elite exports so as to export the unfinished leather of the appellants without payment of duty. These facts have been admitted by Shri Anand in his statement recorded on 27/4/2012 given under Section 108 of the Customs Act 1962. Shri Anand acted on behalf of CHA firm. The penalties imposed on the CHA as well as the employee is therefore legal and proper. It is also argued that the appellant exporters had knowledge that the export goods were unfinished leather, and therefore, the redemption fine and penalties imposed are proper. The Ld. AR prayed that the appeals may be dismissed.
11. Heard both sides.
12. The allegation of the department is that the appellants attempted to export unfinished leather in the guise of finished leather. The statement recorded from the exporters and others reveal that the exporters do not own a tannery or factory for manufacture of leather. They placed job work orders with various persons and collected leather for export from them after processing. These were sent directly from such persons to the air cargo complex. Shri R. Anand (who is no more) was in charge of the exports in the CHA firm (M/s.Kalki Shipping Associates). It is stated by Shri. A. Chandrakumar, Proprietor of the CHA firm with Shri Anand was having the over all charge of exports and approached the clients directly and collected documents for filing shipping bills. Shri Anand was taking care of the export related work at air cargo complex. On 30 March 2012 Anand informed him about the wrong unloading 64 bundles of M/s. Elite Leathers instead of 63 bundles of the exporters, namely M/s. Futan Leathers, M/s. Arman Leather Exports and M/s.ALM Leather Exports. He immediately instructed Mr. Anand to sort out the matter with Air Customs. It has been argued by the Ld. counsel that there was some mistake as the consignment of M/s. Elite Leathers contained 64 bundles whereas the consignment of these appellants contained 63 bundles. The Ld. counsel argued that it was only mixing up of bundles by mistake and there was no deliberate intention to export unfinished leather in the guise of finished leather.
13. It has to be noted that the goods were provisionally released, reprocessed and exported. Thus the goods are not available for confiscation at the time of passing the order by the adjudicating authority. In a similar situation, when the goods were exported after re-processing, in the case of Vijayalakshmi Leathers Vs. CC, Chennai 2000 (119) ELT 656 (Tribunal) it was held that the imposition of redemption fine and penalties are required to be set aside. The facts of the said case revealed that the samples drawn and tested by CLRI, Chennai showed certain deficiencies and defects in the nature of a) absence of dyeing b) colour not distinctly different from that of crust c) thickness more than 1mm d) absence of protective coat e) absence snuffing / shaving on the grain. The relevant para reads as under.
"4. Heard ld. DR for the Revenue. He submitted that the Export Control Public Notice specified that the processes as contained therein have to be satisfied to make the goods finished leather and to make such goods eligible for export without a licence. Further for claiming Drawback also, these processes are required to be carried out. He also submitted that the C.L.R.I. is a national level export authority with regard to leather and the Customs authorities could not be faulted for following their opinion in deciding whether the goods in question fulfilled the conditions for finished leathers. He also submitted that the redemption fine and penalty levied are also very low compared to the value of the goods (5%).
5. I have considered the submissions made by both sides. The finished leather is produced from raw skin by carrying out several processes. In all these cases deficiencies have been pointed out with regard to some of the processes. Therefore, it is agreed by all parties that the processes themselves have been carried out, though deficiencies have been pointed out with regard to very few of the procedures. The Appellants have explained that they are falling between two stools. The C.L.R.I. expects certain standards, while their buyers stipulate certain others. The confiscation of the goods and the penalties have been caused by their failure to satisfy both the sides. As the goods tendered for export conforms to most of the criteria and the variations has been explained as minor and on account of differences between the C.L.R.I. deficiencies and requirements of the buyers, these cannot be considered o be deliberate or committed with intent to export prohibited goods out of the country. With regard to deficiencies, the Appellants are only seeking permission to take the goods back to the units and to make good the deficiencies. There was also no deliberate attempt to conceal the deficiencies or to misdeclare the goods. The whole dispute has arisen only because of variations, inaccuracies in mechanical operations or the difference between experts and traders with regard to grades. There was no effort to export prohibited goods. The Appellants have already incurred considerable financial loss on account of taking the goods back for reprocessing and the delay in carrying out their exports and realization of he export value. Taking all these facts and circumstances into account, the appeals are allowed with consequential relief to the Appellants and the impugned orders are set aside.
14. In the case of Commissioner of Customs Vs. Airport Chennai Vs. Avanti Leathers Ltd. 2010 (261) ELT 491 Tribunal, Chennai, the issue was similar whether the department held the goods to be unfinished leather for the reason of absence of protective coating. The goods were provisionally released. The exporter reprocessed the goods and exported the same. It was held that the confiscation and imposition of penalties are not warranted. Relevant paragraph reads as under
[Order per: Jyoti Balasundaram, Vice President]. - Revenue is aggrieved by the order of the lower appellate authority who has set aside confiscation of goods "Buff upper finished leather" and penalty imposed by the adjudicating authority.
2. We have heard both sides. The Commissioner (Appeals) has followed the decision of the Tribunal in Vijayalakshmi Leathers v. CC, Chennai (2000 (119) E.L.T. 656 (Tribunal) holding that confiscation of goods and imposition of penalty is not warranted when there was no effort to export prohibited goods and the goods had been allowed to be taken back for the purpose of applying protective coating so as to make the goods conform to the definition of finished leather. Since there is no intention to export prohibited goods and the goods have been only allowed to be taken back for re-processing, there is no reason to interfere with the impugned order which accordingly upheld. The appeal is therefore rejected.
(Dictated and pronounced in open court)
15. In the case of M/s. Kaja Moideen Leather Company Vs. Commissioner of Customs, Air Cargo 2017 (11 TMI 989), CESTAT, Chennai, the Tribunal relied upon the decision in the case of Vijayalakshmi Leathers and other similar decisions to set aside the confiscation and the penalties imposed.
16. After taking note of the fact that the goods have been provisionally released, re-processed and exported, we are of the considered view, that the confiscation of the goods is not warranted and justified. Accordingly, the redemption fine imposed is also to be set aside. The department has not been able to show any mens rea on the part of the appellant. Appellants herein have taken release of the goods reprocessed the same and exported. The appellants have already incurred considerable financial loss on taking back the goods reprocessing and exporting goods. Noting these facts, we find that the penalties imposed are also required to be set aside which we are hereby do.
17. The impugned order is set aside. The appeals are allowed with consequential reliefs.
(order pronounced in court on 12.09.2023)
(VASA SESHAGIRI RAO) (SULEKHA BEEVI C.S.)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
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