Texool Wastesavers Vs C.C (CESTAT Ahmedabad)
Relying on the permission which was granted in terms of project report made before the Development Commissioner, which stated that the SEZ unit was permitted to import garments that were almost new but could be out of fashion in terms of time as far as the country of production is concerned, CESTAT Ahmedabad has set aside the confiscation of goods under Section 111(m) of the Customs Act, 1962. The Tribunal though noted that new clothes imported could not be called rags and hence there was mis-declaration, it observed that the letter of permission was specifically issued referring to the project report and also permits the assessee to manufacture reconditioned clothing.
As far as the charge under section 111(d) is concerned the Revenue has relied on Public Notice no. 12 (RE-2001)/1997-2002 dated 03/05/2001. The appellants have pointed out that the said circular permits Revenue to test goods at the time of import for pre shipment certificate. In these circumstances, confiscation can only be ordered if the goods do not confirm. In this case no testing was done by Revenue and, therefore, confiscation under section 111(d) cannot be justified.
FULL TEXT OF THE CESTAT JUDGEMENT
This appeal has been filed by Texool Wastesavers & Ors. & Shri Surinder S.Sajdeh against confiscation of goods, imposition of redemption fine and penalty.
2. M/s Texwool Wastesavers is a unit in SEZ in Kandla. On 29/09/2000, Texwool Wastesavers were granted permission to undertake reconditioning of cloth and processing of industrial rags in Kandla Free Trade Zone, which was later converted into Kandla SEZ. In the project report submitted by them, Texwool Wastesavers stated that they would inter alia import “crush packed clothing” which would comprise “Export Surplus” of garment manufacturers and surplus of Departmental Stores remaining after clearance sales which are sold on Kilo basis. He claimed that project report also specified that reconditioning to be undertaken in respect of clothing which does not require any repairing/recycling and which require only cleaning, pressing and packing. In the case of garments which require repair and the process of reconditioning would comprise alteration, sewing before cleaning and pressing. The project report clearly stated that after reprocessing, the aforesaid goods would be re-exported. He pointed out that the Development Commissioner has granted permission dated 29/09/2000 for the manufacture of „Reconditioned clothing” and for processing “Rags”.
2. Learned Counsel for the appellant pointed out that in May, 2009, M/s Texool Wastesavers imported “old and used clothing rags” and filed Bill of entry bearing no. 1763 dated 25/05/2009 alongwith the foreign supplier‟s invoice. As per the invoice, following was revealed:
(a) The goods were imported in two containers bearing nos. MSKU 9258007 and MSKU 9441168 containing 47 bales and 41 bales respectively,
(b) Some of the bales were tied with plastic strips, some were given support of paper carton waste inside the strips and some were given support of plastic woven fabrics inside the strips,
(c) All the bales in container no. MSKU 9441168 contained Old and used Clothing,
(d) 21 bales in container MSKU 9258007 contained old and used clothing and
(e) 26 bales in container MSKU 9258007 contained unused T-Shirts of various colors and sizes, some with full sleeves, some with half sleeves, some with round neck, some with V neck, some being unbranded and some bearing illegible brand labels or cut labels. The T shirts carried stickers with the work “Irregular” and some of the shirts had holes in them.
The said 26 bales were seized on the charge that the unused T-shirts were being sought to be cleared as old and used clothing rags in the said BOE. Rest of the goods, though old and used rags, were seized as goods used to hide the unused clothing. Learned Counsel for the appellant Texool Wastesavers, pointed out that the said order of the Commissioner was challenged in Tribunal. The Tribunal vide order dated 18/05/2010 remanded the matter to the Commissioner for fresh consideration and also ordered that the appellant was entitled to clear the goods on payment of duty to the SEZ. In the remand proceeding vide order dated 27/09/2010, 26 bales of T-Shirts imported in containers MSKU 9258007 under section 111 (d) and (m) of the Customs Act, 1962 and redemption fine of Rs. 25 lakhs was imposed, apart from payment of duty on T-Shirts. The remaining 21 bales in the said container no. MSKU 9258007 were also confiscated under section 119 and 111(d) of Customs Act and redemption fine of Rs.50,000/- were imposed on that. The 41 bales in containers MSKU 9441168 were also confiscated and offered for release on payment of Rs. 50,000/-. Aggrieved by the said order, the appellants appealed before the Tribunal again. Learned Counsel pointed out that the letter of permission needs to be read along with project report, on the strength of which the letter of permission was issued. He pointed out that the appellants were permitted to manufacture “reconditioned clothing”. He pointed out that the letter of permission permits that clothing which did not require any repair/ recycling, process of reconditioning is to be undertaken which comprises of cleaning, pressing and packing. Only in cases where garments require repair, the process of reconditioning would require alteration, sewing, etc before cleaning and pressing. He pointed out that the project report clearly contemplated import of surplus called by manufacturers and departmental stores which may be new and in respect of which no repairs are required. He pointed out that the T-shirts in the 26 bales in question were of assorted size, colors and types, some having round neck, v- neck, some of them were unbranded and other had illegible or cut brand labels. He pointed out that some had holes, etc and some had stickers with the word „Irregular‟ printed on it. He further pointed out that the manner of packing of goods viz in bales with plastic strips.
2.1 Learned Counsel pointed out that in this context the Commissioner has erred in holding that the goods are new and unused and did not require re-conditioning. He pointed out that the Joint Commissioner who was appointed by the Commissionerate to examine the goods has in his report dated 16/08/2010 found on a random examination that the T-shirts which were improperly stitched, had holes, dyeing defects and disturbed or broken knits. He argued that the Commissioner had erred in proceeding with the examination report dated 16/08/2010, showed that 95% of the shirts were free from dyeing and weaving defects. He argued that only two to four shirts in each bundle was examined and conclusion made on the basis on that, 95% shirts were free from defects is totally incorrect. Learned Counsel argued that even new T-shirts from old stock of mixed and rejected T-shirts were permissible for import as per project report. He pointed out that in this circumstances, invocation of section 111(m) of the Customs Act,. 1962 is wrong. He further pointed out that the impugned order wrongly holds that new T-shirts that were surplus/assorted/defective/irregular were not classifiable under Tariff Heading 6309 00 00. He argued that the question of classification becomes irrelevant since the goods were intended for clearance from SEZ and to be re-exported after reconditioning. He argued that in this background, order of payment of duty under section 125 (2) of the Custom Act, 1962, is misplaced. He argued that in this regard, the impugned order disregards the Tribunal‟s order dated 18/05/2010. He further argued that the impugned order wrongly order confiscation under section 119 under Customs Act, 1962 of the remaining 21 bales container no. MSKU 9258007 consisting of old and used clothing. He argued that the T-Shirts were not packed in the same bales as the old T-Shirts but were packed in separate bales and thus cannot be said to have concealed any other T-shirts. He relied on the decision in the following cases:
1. Mazda Chemicals v CC-1996 (88) ELT 767
2. Vikas Road Carriers v CC- 2004 (164) ELT 298
He further argued that the impugned order wrongly holds goods liable for confiscation under section 111 (d) of the Customs Act 1962 for the fact that the goods were not accompanies by Pre-shipment Certificate as per Public Notice no. 12 (RE-2001)/1997-2002 dated 03/05/2001 to the effect that the imported goods did not contain any hazardous dye. He argued that the said public notice clearly prescribes that in case the pre shipment certificate is not available, the goods shall be allowed to be cleared after getting tested from the specified agencies. Only if on such testing, any prohibited dyes are found, the goods become liable for confiscation.
3. Learned Authorized Representative from the Revenue relies on the impugned order.
4. We have considered rival submissions. We find that the appellants are a unit functioning in the Kandla SEZ under letter of permission issued by Development Officer, KASEZ, Gandhidham for manufacturing of following goods:
