Custom, Excise & Service Tax Tribunal
Welfare Leather Co vs Chennai -Port Export on 25 June, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. I
Customs Appeal No. 41792 of 2014
(Arising out of Order-in-Appeal No.691/2014 dated 22.04.2014
passed by Commissioner of Customs (Appeals), Chennai)
M/s. Welfare Leather Co, ..... Appellant
#327/2-AC Abdul Hakeem Road,
Melvisharam, Vellore Dist.
Versus
The Commissioner of Customs (Port-Export), ....Respondent
Custom House, 60, Rajaji Salai, Chennai 600 001 APPEARANCE :
Shri. T. Sundaranathan, Adovacate for the Appellant Shri. N. Satyanarayana, Authorised Representative for the Respondent CORAM :
HON'BLE MR. AJAYAN T.V. MEMBER (JUDICIAL) FINAL ORDER No.40667/2025 DATE OF HEARING: 25.06.2025 DATE OF DECISION:25.06.2025 Per AJAYAN T.V.
M/s. Welfare Leather, the appellant herein, is aggrieved by the impugned order in appeal whereby the appellate authority has upheld the order in original imposing a redemption fine of Rs.25,000/- under Section 125 of the Customs Act, 1962 and a penalty of Rs.5000/- under Section 114(ii) of the Customs Act, 1962.
2. Briefly stated, facts are that the appellant filed a drawback shipping bill for the export of Buff sole Leather. The goods were subjected to examination before export. A sample of the consignment was drawn by CLRI for their expert opinion from Box No.396 on 26.12.2013. The CLRI vide their letter No. CLRI/TAN/CUSTOMS/5182/2013 dated 30.12.2013 certified that the leather referred above does not satisfy the norms and 2 conditions laid down as per Public Notice No.21/2009-14 dated 01.12.2009 due to thickness less than 3mm and apparent density less than 0.9gm/c.c. As per the appellant's request dated 31.12.2013 to adjudicate the case allowing a personal hearing but without issue of show cause notice, personal hearing was granted on 07.01.2014 , consequent to which the Adjudicating Authority passed the impugned order in original holding that the test report of CLRI established that the appellant has attempted to export unfinished leather by misdeclaring the goods as finished leather to evade duty and also attempted to claim drawback. Therefore, the goods valued at Rs.3,02,206.39/- was ordered to be confiscated with option given to appellant to redeem the said goods after payment of fine of Rs.25,000/- under Section 125 of the Customs Act and allow shut out of the cargo and imposed a penalty of Rs.5000/- under Section 114(ii) of the Customs Act, 1962. Aggrieved by the order in original, the appellant preferred an appeal before the Commissioner Appeals, who upheld the order of the adjudicating authority. Hence this appeal.
3. Shri. T. Surendranathan, Advocate appeared on behalf of the appellant and contended as under:
a) That the appellant had explained in detail to the adjudicating authority that the process of making finished leather comprises of more than 40 processes and there may have been an imperfect application of any of the process, resulting in a thinness, but that does not deprive the leather of the characteristic of Finished leather. That the appellant had made a number of exports earlier and this has happened for the first time. That they had sought to take back the cargo so that they could reprocess the same and had done so incurring expenses for the same. That the appellant is contesting the redemption fine and penalty as the goods were finished leather that was presented for export and there was no misdeclaration or intent or attempt to export unfinished leather.
b) That both the lower authorities failed to appreciate that the DGFT Public Notice 21/2009 dated 01-12-2009 enumerates 13 3 types of finished leather and prescribing norms for the same and it was further provided that in any other case the CLRI has to certify as to the goods being finished leather or otherwise.
c) That the appellant had declared the goods as Buffsole leather and it is not the case of the testing agency that the export goods are raw skins or hides and the test report vaguely stated that it is not as per Public Notice No.21/2009-14 dated 01.12.2009 due to thickness less than 3mm and apparent density less than 0.9gm/c.c. without stating as to which of the 13 category it is referring to and without certifying that it was not finished leather. That there is also no finding by both the lower authorities that the goods are not finished leather or that the goods are semi-finished leather.
d) The learned counsel places reliance on the decision of this Tribunal in Vijalakshmi Leathers v Commissioner of Customs, Chennai, 2000 (119) ELT 656 (Tribunal).
4. Shri. N. Satyanarayana, Ld. Authorised Representative, appearing for the Respondent fairly conceded that the matter stood settled in the appellant's favour by the aforementioned Tribunal decision.
5. Admittedly, the lower authorities have relied solely on the test report to conclude that the appellant had attempted to export unfinished leather and had misdeclared the goods as finished leather. I am of the view that when the public notice itself states that any new type of finished leather not covered shall be permitted to be exported, subject to testing and certification by Central Leather Research Institute (CLRI), it was incumbent for the testing authority to have stated whether the leather sample tested was finished leather or not. Absent, such a finding in the test report, I find force in the submissions of the learned counsel that lower authorities have erred in their conclusion that the appellant attempted to export unfinished leather by 4 misdeclaring the goods as finished leather. Further, when the appellant has declared the goods as 'Buff Sole Leather', neither the appellate authority nor the adjudicating authority has stated as to what is the deliberate act of misdeclaration that shows that the goods entered for exportation under claim for drawback did not correspond in any material particular with the information furnished by the appellant, so as to attract the liability to confiscation. No mens-rea to deliberately evade payment of duty is evidenced. Establishing mes-rea is a prerequisite to attribute attempt. In fact there is no evidence or any statement relied upon to indicate any contumacious conduct on the part of the appellant.
6. It is seen that in similar circumstances, in the decision of this Tribunal in Vijalakshmi Leathers v Commissioner of Customs, Chennai, 2000 (119) ELT 656 (Tribunal) it has been held as under:
"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 to be deliberate or committed with intent to export prohibited goods out of the country. With regard to the 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 5 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 the 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."
7. Similar views are also seen taken in the decisions in CC Chennai v Avanthi Leathers Ltd, 2010 (261) ELT 491 (Tri-Chennai), Krishna International v CC, Chennai, 2010 (259) ELT 242 (Tri- Chennai) and M/s. Khaja Moideen Leather Company v CC (Air Cargo), Chennai, 2017 (11) TMI 989- CESTAT CHENNAI.
8. In view of the discussions above, respectfully following the ratio of the aforementioned decisions, it is held that in the facts and circumstances of the appellant's case herein, confiscation of the goods was neither warranted nor justified. Consequently, the redemption fine imposed as well as the penalty imposed also do not sustain. In sum, the impugned Order in Appeal is set aside.
The appeal is allowed, with consequential relief in law, if any.
(Order pronounced in the open court on 25.06.2025) (AJAYAN T.V.) MEMBER (JUDICIAL) psd