Customs, Excise and Gold Tribunal - Tamil Nadu
Collector Of Customs vs Venkateswara Industries on 12 August, 1994
Equivalent citations: 1995(61)ECR150(TRI.-CHENNAI)
ORDER V.P. Gulati, Member (T)
1. By this application the appellant has sought for stay of the operation of the order of the Collector of Customs (Appeals) Madras dated 15.2.1993.
2. The brief facts of the case are that the respondents imported outer lining material under the cover of an advance licence. When it was pointed out to the respondents that the goods they imported were Gent's wear and the licence produced would not cover the goods imported, the respondents produced another similar licence carrying the description of the goods as "lining material", (Woven, non-woven/synthetic/PVC/PV fabrics). It was however, seen that this second licence was issued in respect of export products like leather wallets, purse, key cases etc., and the imported fabrics were not prima facie found to be relatable to the exported products and the same could not be used as lining material in these product range of items. The respondents therefore, sought the clearance of the goods under the description "outer lining" against the first licence. The original authority, after taking into consideration the nature of the goods imported and the exported products for which the advance licence had been issued, held that the goods imported were not covered by the description of the licence and the since the goods imported were covered under the negative list as set out in para 156 of the Export & Import Policy 1992-97, the goods are liable for confiscation under Section 111(d) of the Customs Act, 1962 read with Section 3 of the Foreign Trade (Development and Regulations) Act, 1992 read with Clause 3 of Import (Control) Order 1955, and the goods valued at Rs. 3,58,885/- were allowed to be redeemed on payment of fine of Rs. 4,50,000/-. On appeal however, the Ld. appellate authority under the impugned order accepted the respondent's contention that the goods could be considered as ouLer-lming material for use in leather jackets, the product in respect of which advance licence produced was issued. The Ld. appellate authority in his order has observed that the imported material's suitability for use as lining material, even though they are normally used in men's wear, cannot be ruled out. The Ld. appellate authority while allowing the appeal also set aside the original authority's finding that there should be a nexus between the imported goods to the exported product and that this should be substantiated by the respondents. Jn this regard, the ld. appellate authority has analysed the position as to in terms of para 67 of the Export & Import Policy, under which the respondents have transferred their licence issued under para 47 of the Export & Import Policy and has observed as under:
Nowhere in para 67 it has been stated that once the licence become transferrable, the basic ingredient of the scheme viz., inputs for direct use in export product is to be maintained. In the absence of any specific provision that the basic link provided for in para 47 continues to be applicable even in cases of transfer of licence, I am of the view that what has to be proved is only that whether the material in question is capable of being used or meant to be used for the purpose stated in the licence in the export product. It is not imperative that the transferree should prove that the original licence holder had actually imported similar goods and utilised the same in his export product. Therefore, insisting on the type of evidence referred to in the order of the Lower Authority is not proper and legal.
Against this impugned order, the Ld. Appellant Collector has urged the following grounds:
Collector (Appeals) has erred in facts in as much as it is admitted by him that according to the orders of the original authority, the items imported are textile fabrics (Gent's wear), whereas, he has also observed that"... the imported materials' suitability of use as upholstry could not be held against being used as a lining material"
(Emphasis provided).
According to Fairchild's Textile Dictionary, lining material means fabrics used to cover inner surfaces, especially when the inner face employs different materials than the outer surface. These include garment linings and those used in mechanical utilities and serve to prevent wear on one side. Linings are produced in a wide range, and are generally smooth, lustrous fabrics made of silk or man-made fabrics and or/mercerized cotton. They may be woven in a plain, twill or stain weave. Formerly, principally made with cotton warp and luster wool, alpacca or silk filling.
According to Handbook on Glossary of Textile terms Bureau of Indian Standards the lining cloth is defined as under:
A separate entity used in making-up garments and other articles, consisting of single layer or multiple layers of material loosely held in place along one or more edges. It does not modify the properties of the main fabrics with which it is associated but can impart certain performances characteristics to the article.
3. Shri Gregory, the Id. SDR for the Department relied upon the above grounds.
4. Shri Vijayaraghavan, the Ld. Consultant for the respondents pleaded that the respondents have shown, by evidence before the Ld. appellate authority, the use of the material imported in the leather jackets and since the advance licence had been issued in respect of export product, viz., leather jackets, the Id. appellate authority has rightly held that the goods imported are covered by the description "outer lining" and, therefore, the licence produced is acceptable and no interference in the order of the Id. appellate authority's order is called for. He further pleaded that in the scheme of advance licencing envisaged in para 47 of the Export & Import Policy 1992-97, what is required to be shown is that the product to be imported against the advance licence issued is capable of being used in the finished product against which the licence has been issued. In the present case, he pleaded that the product in question is leather jacket? and the respondents have adequately demonstrated the use of imported material in the leather jackets and the use of the item as such qualifies as outer lining material. He pleaded that the respondents are holders of the licence as transferee and donot require to show in terms of para 67 of the Export & Import Policy that the original holder of the licence had exported leather jackets using the said material. He, therefore, prayed for rejection of the petitioner's prayer for stay of the operation of impugned order.
5. We observe that the plea of the Revenue is that the material imported cannot be considered as a lining material taking into consideration the definition as given in the Fairchild's Textile Dictionary and the Handbook on Glossary of Textile terms Bureau of Indian Standards and the use as demonstrated by the respondents before the Ld. appellate authority could not be considered as the i:se of Ihe material as lining material and since the goods are gents suiting material! iho same cannot be considered as lining material as such. The short point that falls for our consideration is whether the licence produced, which was issued in terms of para 47 of the Export & Import Policy 1992-97 and transferred to the respondents in terms of para 67 of the said policy, covers the goods imported. The goods permitted for import under the licence is outer lining material. We observe that there is no dispute that the goods imported are gents suiting material and the question that arises for consideration is whether despite this description of the goods for the general use to which it is put, the goods can be allowed import under the description outer lining material. The Ld. appellate authority has merely stated after seeing the jackets produced before him that the "imported material's suitability of use as lining material, even though they are normally used as mens wear cannot be ruled out". We observe that as seen from the definition of the lining material as given in the Fairchild's Textile Dictionary and relenvd to in the Grounds of appeal and also in the Handbook on Glossary of Textile terms Bureau of Indian Standards, the lining cloth materials are a separate category of textile which answer to a specific use and are used for a specific purpose in the garments. According to the Textile Dictionary, this fabric is used to cover inner surfaces, specially when inner space employ different material than the outer surface. It is also set out therein that linings are produced in a wide range, and are generally smooth, lustrous fabrics made of silk or man-made fabrics, and or/mercerized cotton. They may be woven in a plain, twill or stain weave, formerly, principally made with cotton warp and luster wool, al-pacca or silk filling. What can be read from this definition is that while the lining materials are manufactured in a wide range, these are specifically manufactured and are held out so for the specific use as lining material. So far as the use of these materials are concerned, the same has been spelt out in the Handbook on Glossary of Textile terms Bureau of Indian Standards, wherein the lining cloth has been defined as under:
A separate entity used in making-up garments and other articles, consisting «t' single layer or multiple layers of material loosely held in place along one or more edges. It does not modify the properties of the main fabrics with which it is associated but can impart certain performances characteristics to the article.
The well defined term in the Textile terminology, the lining material has to have certain specific functional utility as set out above. In the present case, as seen from the records, the use of the material imported has been demonstrated by producing two reversible jackets before the learned lower appellate authority, who after seeing the same has held that since the material has been used on the inner side of the jacket, the same can be said to be answered to the use as lining material. We observe that the learned appellant Collector has rightly urged that this use cannot be taken to be as use as lining material. The use as we see it is it makes the body of the garment itself and forms one side of the reversible jacket and it is not in the nature lining material as given in the Handbook on Glossary of Textile terms Bureau of Indian Standards. Further, we observe that once it is accepted that the goods are gents suiting material, so far as its normal use is concerned the same stands established, i.e., as suiting material for gents and further it establishes that the material imported has neither been manufactured as lining material nor it has been held out to be so by the manufacturers. It is further seen that there is no plea that the leather jackets using such a material have in fact been exported by the respondents or by somebody else. The only plea is that the supplier of the goods has supplied this stating that these should be used as lining material in the leather jackets to be supplied to them. As stated, \mmn facie the use, as demonstrated by the respondents cannot be taken to be that as the lining material. Primn facie it is not possible to accept that textile material which have been manufactured for a specific purpose, i.e., for gents suiting etc. can be taken to be lining material when the lining material itself has been defined as answering to a specific description and use which prima facie is not the case here. The licence carries a specific description of goods as outer lining material and it has to be established that the goods as imported have been manufactured and marketed as lining material and further it is that these are in the nature of outer lining material. In our view the respondents have not established set. The letter produced from the supplier cannot be taken to be establishing in any way the nature and character of the use of the goods. Merely because the supplier has stated that these have to be used lining materials in the leather jackets for which they have placed an order cannot be taken, prima facie in any way demonstrative of the fact that the material imported are outer lining material. In our view even this letter does not show as to on what context this was written by the supplier of the goods and no correspondence leading to the writing of this letter has been produced. The learned appellate authority should have gone into the evidentiary value of this letter before accepting the same. Prima facie the learned lower appellate authority should not have relied on this letter for arriving at his conclusions. Further, we find that the learned appellate authority has taken cognisance of the letters produced by the respondents from the Council for Leather Exports, Madras and the Chamber of Commerce, Taiwan, stating that synthetic/polyester fabrics men's wear and suiting fabrics can be used as lining material in leather garment. The learned appellate authority should have examined the relevance of these letters before accepting the same, with reference to the description of the goods in licence, viz. outer lining, in the light of what we have observed above. It is further seen that the learned appellate authority in his order has taken note of the fact that the licence under reference has been transferred to the respondents under para 67 of the Export Import Policy and therefore since the export obligation has been already fulfilled in respect of this licence, the respondents, as per the licence need not show that the materials now imported have been used earlier by the licence holder in the goods exported. We observe that under Chapter VII of the Policy which bears the heading "Duty Exemption Scheme" under para 47, raw materials intermediates, components, consumable, parts, accessories, packing materials and computer software required for direct use in the product to be exported may be permitted duty free for processing and export by the competent authority under the categories of licences mentioned in this chapter. In para 48 the provision is for issue of advance licence and in para 49 there is a provision for value based advance licence and in para 50 the quality based advance licence. In para 51 it is clearly set out that the standard input-output norms for the imports and exports for the grant of both value based and quantity based advance licences and value addition norms for value based licences shall be in accordance with the norms published by the Director General of Foreign Trade in the Handbook of Procedures (Vol. II). This clearly shows that for the licence in question there is a nexus prima facie between the goods allowed import and the goods exported and it is not correct to say that the respondents could have imported any goods so long as some possibility of the use of the goods can be shown in the export of the goods. It is seen that the whole scheme in Chapter VII is to facilitate the import of goods for use in the export goods and the use of the goods prima facie has to be related to the exported goods. The respondents in the present case have not shown that this is so. We observe that the learned appellate authoritv has not adverted to the issue in the context of the Policy provision as setout in Chapter VII and the Revenue has rightly urged that the constraints as laid down in this chapter have to inform the type of goods that can be imported. In view of the above we hold that the learned appellate authority's order prima facie is not proper and we, therefore, allow the prayer of the Revenue for stay of the impugned order. Since the issue arises in the context of the export of the goods, the matter should be heard at an early date and the date can be fixed at the convenience of both parties.
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(V. P. Gulati) Member T) S. Kalyanam, Vice-President
6. I have gone through the order proposed by the learned brother. I am afraid I cannot acceed to his view for granting interim stay of the operation of the impugned appealed against
7. Detailed reasons have been given in the impugned order for the conclusions arrived at by the Collector of Customs (Appeals), Madras dated 15.12.1993. Dealing as 1 do with an interlocutory application for the limited purpose of considering the issue in exercising the judicial discretion regarding the grant of stay of the operation of the impugned order appealed against, in my view it would be difficult to hold prima facie that the impugned order is unsustainable either on facts or on law. The scope of the application is limited in nature and prima facie sustainability of the impugned order on facts and on law, and the balance of convenience would be decisive criteria for exercising the judicial discretion in passing an order on the interlocutory application filed by the appellant. For the reasons stated in the impugned order and on prima fade ground and also on grounds of balance of convenience I am of the view that interim stay of the operation of the impugned order is not called for in the facts and circumstances of the case. I deliberately refrain myself from dilating at length on the evidence on merits of the case as the same is outside the scope of an interlocutory order. The learned Collector (Appeals) has given cogent and convincing reasons for the conclusions arrived at and on prima facie grounds in my view the same would not call for interference by way of an interim stay at this interlocutory stage. I, therefore, dismiss this application of the appellant seeking stay of the operation of the impugned order appealed against, pending appeal. However, I agree, having regard to the fact that the issue for determination lies in a narrow compass and in the interests of justice and also in the interests of both parties, the appeal could be listed for an early hearing in accordance with law.
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(S. Kalyanam) Member POINT OF DIFFERENCE Whether the reasons given in the impugned order are prima facie sustainable on facts or on law on grounds of balance of convenience, and therefore interference at the interlocutory stage seeking stay of the operation of the impugned order appealed against is not called for in the facts and circumstances as held by Member (J) or whether for the reasons stated in the order of the learned Member (T) taking into consideration the nature of goods imported using the description of the goods in their case interim stay of the operation of the impugned order is called for.
Sd/- Sd/- (V. P. Gulati) (S. Kalyanam) Member Member T.P. Nambiar, Member (J)
8. The learned Consultant Shri Vijayaraghavan appeared for the Respondents and the learned SDR Shri Victor Thyagarajan appeared for the applicant. The Hon'ble President has nominated me to hear the difference between the learned Judicial Member (Vice-President) and the learned Technical Member in respect of the Stay Petition filed by the Department in this case. The learned Technical Member held that the learned lower authority's order prima-facie is not proper and allowed the stay application filed by the Revenue, The learned Judicial Member (Vice-President) held that prima-facie the order as passed by the learned Collector of Customs (Appeals) is not called for interference by way of an interim stay at this interlocutory stage. However, both the learned Technical Member as well as Judicial Member (Vice-President) were of the view that the appeal itself should be heard early in accordance with law.
9. The facts of the case are that the respondents imported different lining materials under the cover of an advance licence. It was pointed out to the respondents that the goods they imported were Gent's wear and the licence produced will not cover the imported goods. Then the respondents produced another similar licence carrying the description of the goods as lining materials and the second licence as found in the order passed by the learned Technical Member, was issued in respect of the export products like leather wallets, purse, kay cases etc. The respondents sought clearance and the adjudicating authority has held that the goods are not covered by the licence.
10. The learned Consultant Shri Vijayaraghavan contended before me that the respondents had produced several literatures and letters before the learned adjudicating authority and those literatures and letters were not at all discussed by the adjudicating authority. He pointed out that when the matter was taken up in appeal, the learned Collector of Customs (Appeals) went through all those documents which were produced by the respondents and in the light of those letters as well as the literatures produced by the respondents he came to the conclusion that the imported materials are covered by the licence. He pointed out that these materials are of very cheap nature and these are used as lining materials and to come to the above said conclusion there were detailed discussions by the learned adjudicating authority and the findings of the learned Judicial Member (Vice-President) that the order prima-facie is sustainable may be agreed upon. He pointed out that the elaborate reasons given by the learned Technical Member requires to be looked into and at this juncture he pointed out that when there was a reasoned order passed by the learned Collector of Customs (Appeals), the same is prima-facie sustainable. He also pointed out to me that in the order passed by the learned adjudicating authority, the documents relating to imports produced were not dealt with and in that view he pointed out that the question, which at this juncture is required to be seen is whether the impugned order is sustainable and he stated that the balance of convenience is in favour of the applicant. It was pointed out that the respondents are regularly importing such materials and other materials from time to time and they are having their own business and ultimately if it is found that their case is not sound, they will definitely honour the verdict given by the learned adjudicating authority. At this juncture when I was dictating the order, both the sides pointed out that the goods have already been cleared.
11. The learned SDR Shri Victor Thyagaraj contended before me that it is true that the goods have been cleared but he pointed out that the stay of operation of the order passed by the learned Collector of Customs (Appeals) is sought in view of the fact that such future clearances should not be allowed. He also referred to para 47 of the Import and Export Policy and pointed out that the norms laid down in the said para are not complied with in this case. He also pointed out that the adjudicating authority has dealt with the above said matter and has given proper reasons whereas the learned Collector (Appeals) without verifying the veracity of the letters as well as the literatures has passed the order which is not tenable.
12. I have considered the submissions. Now it is seen that the goods are already released in terms of the orders passed by the Collector of Customs (Appeals). Stay is to be granted for staying the operation of the order passed by the Collector of Customs (Appeals). When the order passed by the Collector (Appeals) is stayed the resultant position will be that his order wherein he allowed the appeal in terms of which the appellant is entitled for release of the goods will be stayed. If the goods are released, in my view, there is nothing to be stayed. A general stay for future clearances is not contemplated under the Customs Act. The learned SDR states that future clearances will be affected, but in this case in granting the stay the Tribunal has not come to any final opinion either this way or that way. The adjudicating authority and the Collector (Appeals) can take such decision as per law and the stay granted in this case pertains to this individual case, since the goods have already been released in favour of the applicant even prior to the stay petition, I agree with the view taken by the learned Judicial Member (Vice-President) that the balance of convenience in this case lies in rejecting the stay petition. However, since both the learned Members have stated that the matter requires to be heard at an early date, it is for the Department to make a prayer to get the matter heard early so that any dispute in the matter of future clearances can also get solved. In view of the above I agree with the view of the learned Judicial Member (Vice-President) and hold that on the facts and circumstances of this case no stay as sought for is merited. The files may now be placed before the Regular Bench for passing suitable orders.
(Pronounced and dictated in the open Court) Sd/-
(T.P.Nambiar) Member (J) FINAL ORDER In view of the majority decision, the application of the Department seeking stay of the operation of the impugned order is rejected.