Customs, Excise and Gold Tribunal - Delhi
Kakkar And Co. And Ors. vs Collector Of Customs on 9 March, 1988
Equivalent citations: 1988(17)ECR267(TRI.-DELHI), 1988(35)ELT718(TRI-DEL)
ORDER P.C. Jain, Member (T)
1. All the four appeals involve a common question of interpretation of 1TC Policy 1985-88 based on similar facts;1 a common order is being issued.
2. All the aforesaid appellants imported old synthetic rags which they described in the Bill of Entry filed by each of them as "premutilated synthetic rags" or "completely premutilated synthetic rags" as per invoice attached. The importers/appellants herein claimed their import under OGL as listed against S. No. 418, List 8, Part I, Appendix 6 of the relevant Import Policy for April 1985-March 1988. The said serial number at page 197 of the said Policy is reproduced below :-
"418. Woollen rags/synthetic rags/shoddy wool in completely premutilated form only."
Condition No. 37 (at page 168 of the said Policy) further governing the import of such rags under OGL is also reproduced below :-
"(37). (i) Import of woollen rags/shoddy wool/synthetic rags will be allowed only when these are imported in completely pre-mutilated condition.
(ii) Definition of woollen rags is as follows :-
(a) 'New'-waste woollen cloth whether woven or knitted which is left after a garment had been cut out including genuine tailor cutting piece ends, discarded pattern bunches and sample bits.
(b) 'Old' Rags of woollen textile fabrics (including knitted and crocheted fabrics), which are required for manufacture of shoddy yarn and may consist of articles of furnishing or clothing or other clothing so worn out, soiled or torn as to be beyond cleaning or repair."
(iii) The above definition shall also apply mutatis mutandis to synthetic rags."
3. Examination report of the goods actually imported alongwith the source in each of the four appeals is given below :-
Ist appellant : These are "synthetic garments (polyester) consisting of garments cut into 2,3, or 4 pieces. The cut-pieces of all the garments are wholly available and they are restitchable or retrievable as fabrics. As such they do not meet the definition of completely pre-mutilated rags". (Impugned order of the Collector of Customs, New Delhi) IInd appellant : These are "synthetic garments (polyester) consisting of garments cut into two pieces. The cut pieces of all the garments are wholly available and they are restitchable and retrievable as fabrics. As such they do not meet the definition of completely pre-mutilated rags." (impugned order of the Collector) 3rd appellant : Examined bale nos...and found them containing synthetic rags cut into 2-3 pieces without any further mutilation. The other bales were examined prima-facie and similar goods were found in them." (Reverse of Bill of Entry).
4th appellant : ...The entire goods consist of synthetic rags cut into 2 or 3 pieces but the same were not in completely pre-mutilated condition."
4. In view of the foregoing state of facts, the department contends that the goods do not satisfy condition No. 37 of OGL of April 1985-March 1988 Policy inasmuch as these are not "completely pre-mutilated".
5. The appellants on the other hand contend that no standard of mutilation has been laid down in ITC Policy 1985-88 to indicate as to what is meant by the expression "completely pre-mutilated." The department is going on its own pre-notion of the words 'completely premutilated' as is apparent from the Customs Public Notice 7/87 dated 31.3.87 (superseded w.e.f. 17.6.87 by Public Notice 14/87 dt. 17.6.87) without any definition being provided in the Policy itself. Public Notice 7/87 appeared to imply that there should be at least 4 to 5 or 6 pieces by cuts along different directions. The cuts should not be on seams so as to facilitate restitching. The Public Notice 7/87 also further stipulated that goods not mutilated in accordance with the said notice and imported or shipped before 30th April 1987 would be allowed clearance after proper mutilation. (It is to be noted here; that the goods imported by the first two appellants arrived India before 30.4.87). Learned consultant : for the first two appellants submits among other pleas, that the learned adjudicating authority, Collector of Customs, has flouted his own Public Notice 7/87 dated 31.3.87 while passing the impugned orders.
6. The appellants learned advocate Shri Arora has submitted that in common parlance the mutilation of garments is understood to be complete when these are cut into at least two pieces by a long cut either horizontally or vertically across the garment. A copy of Minneapolis Rag Stock Co.'s letter dt. 22.4.87 to Swastick Spg. Mills Panipat, a certificate dt. 16.4.87 from American By-Products, Inc., Philadelphia U.S.A. and another certificate dt. 22.5.87 from Knitwear facility, Ludhiana (UNDP/UNIDO supported undertaking of Punjab Government) have been relied upon.
7. Both the learned consultant and the advocate, appearing for the appellants has taken support from West Regional Bench Order No. 997-998/86-NRB dt. 22.8.87 in the case of Subhash Woollen Mills v. C.C. Bombay which deals with the identical issue i.e. interpretation of the expression "completely premutilated" occurring in the ITC Policy 1985-88. According to this order of the W.R.B., since (i) the expression "completely pre-mutilated" in the ITC Policy is not defined, (ii) no evidence of standard of mutilation has been adduced by the department, (iii) the finding that "mutilation is not proper" is vague, (iv) the appellants are actual users and (v) the appellants therein requested the Collector to order release after mutilating to the satisfaction of Customs authorities, the Collector of Customs (Bombay) was not justified in ordering confiscation or imposing fine.
8. Shri Arora, learned advocate for the two of the appellants has further drawn attention to the analogy of Section 24 of the Customs Act. This Section enables the Customs authorities to order mutilation if the mutilation is not to the satisfaction of the authorities to serve the desired purpose and to charge duty accordingly; similarly in ITC matter, the same Policy should have been adopted at Delhi Customs, on the lines of practice prevalent at Bombay Customs, to avoid hardship to the trade.
9. Shri Arora has further submitted that Additional Collector's observation that the rags cut into two or three pieces could be utilised by manufacturers of children's garments or of other garments/articles is merely based on presumption without any evidence and from this presumption, the learned Additional Collector further concludes that these cut-pieces are still suitable for making other garments and articles from the cloth available in them. His finding that the garments have not been mutilated in such a manner that they become unserviceable in any manner is based on no evidence and is a result of conjectures and surmises.
10. Both the learned consultant and the learned advocate appearing for the appellants, in the alternative, have pointed out that the excessive fine and penalty has been imposed on the appellants without ascertaining the proper market price, margin of profit if any, without taking into account the fact that the appellants are actual-users duly registered with the Director of Industries and without any regard to the past practice.
11. Learned 3DR, appearing for the department has re-iterated the findings of the adjudicating authorities. He has also pointed out that Condition No. 37 appearing in Appendix 6(OGL) in 1985-88 ITC Policy did not occur in earlier Policies. Therefore, the present Policy has to be interpreted on its own without considering the practice during earlier policy periods.
12. We have carefully considered the pleas advanced on behalf of all the appellants and those on behalf of the department.
Condition No. 37 at Rage 168 - the subject of interpretation - in the current Policy 1985-88 has already been extracted. Condition in previous Policy in 1984-85 (and for that matter in 1983-84 Policy) is as follows:-
"In the case of woollen rags/shoddy wool/synthetic rags, clearance of imported goods will be allowed by the Customs authorities only after the goods have been completely mutilated." We observe that while there is some change in the Condition in the 1985-88 Policy vis-a-vis previous policy, the word 'completely' occurs in both without laying down the standard of completeness in mutilation. Department has laid down its own standard without any authority to back up its standard. On the other hand, the appellants have furnished some evidence as to how 'mutilation' is understood in international and national trade. We do not have any reason to disbelieve this evidence. Additional Collector's finding that these are evidences of interested parties is not tenable because we do not understand as to how the parties who have given the certificates can be treated as the interested parties. They are not the supplier of the goods in the instant cases.
13. In the absence of any identifiable test of complete mutilation laid down in the Policy for the guidance of the importers and the enforcement agencies, the benefit has to be given to the importers. Supreme Court has held so in the case of U.O.I. v. TISCO (ECR C 450$C) on the controversy whether the goods produced by the respondent therein are skelp or strip. The Court has ruled in that case : "Since the duties on strip and skelp are not the same it. is absolutely necessary to define the word 'skelp' so that there can be no doubt or confusion in the mind either of taxing authority or of the tax payer with regard to the tax liability qua skelp as opposed to strip". This principle squarely applies in the instant cases,
14. Factual examination reports, shorn of the expression of opinion of the examining officers, indicate that goods in the first two appellants cases are synthetic garments cut into 2,3,4 pieces or in two pieces wholly available. The fact that these are 'rags' as declared in the Bills of Entry has not been disputed because there is neither an allegation nor a finding that the goods are not rags. The goods have been assessed as rags. The dispute is that these are not 'completely mutilated' and that these are retrievable and restitchable as fabric or garments. We are unable to agree with this finding of the Collector of Customs on the basis of the examination report and other material on record. There is no indication that the 'cut' made is along the seams of the old clothing so that these are restitchable and retrievable as garments.
15. Similarly, the finding of the. Additional Collector of Customs on the basis of the factual examination report "synthetic rags cut into 2-3 pieces" that these are not "completely pre-mutilated" is also not sustainable on the face of it, in view of the above observations, due to lack of any identifiable test of complete mutilation.
16. Additional Collector's further finding that the imported goods are capable of being retrieved for manufacture of children's garments or of other articles is without any evidence. It is unwarranted assumption.
17. Even if it is felt that the mutilation is not sufficient, Customs authorities at Delhi could have ordered further mutilation on the analogy of Section 7k of the Customs Act and on the basis of similar practice prevalent in the Bombay Customs referred to in the W.R.B's Appeal Order No. 997-998/86-WRB dated 22.8.87 mentioned supra. Facts of the case before the W.R.B. of this Tribunal are almost identical to the facts in these cases. We respectfully agree with the decision of the W.R.B. in the case of Subhash Woollen Mills.
18. In the instant cases, however, since the goods are not available, no further mutilation is possible. For that reason, however, the impugned orders cannot be sustained because confiscation cannot be justified on the basis of our finding of lack of identifiable test of complete mutilation,
19. Lastly, the finding of mis-declaration given by the Additional Collector in the case of the last two appellants on the ground that the goods were found to be "pre-mutilated" only and not "completely pre-mutilated" as declared in the Bills of Entry is not sustainable for the same reason i.e. lack of definite standard of mutilation in the Policy.
20. In view of the foregoing discussion, while setting aside the impugned orders, we allow all the four appeals with consequential relief to the appellants.