Nabisha Leathers Vs Commissioner of Customs (CESTAT Chennai)
CESTAT Chennai held that minor deficiency in the processing may not ipso facto make the leather as not fully finished. Accordingly, satisfying the conditions contained in Public Notice No. 21/2009-14 dated 01.12.2009, the same is freely exportable.
Facts- M/s. Nabisha Leathers (appellant) filed a Shipping Bill No. 4090836 dated 16.03.2010 for export of 37 cartons of “Goat Shoe Suede Upper Leather” of four different colours. However, the Appraising Officer (Leather Expert) opined that the item declared as “Goat Shoe Suede Upper Leather” of grey colour packed in 13 cartons might not be satisfying the norms prescribed for finished leather vide DGFT Public Notice No. 21/2009-14 dated 01.12.2009.
It may be mentioned here that only finished leather of all kinds which conform to the conditions contained in the Public Notice No. 21/2009-14 dated 01.12.2009, are freely exportable and all others are restricted for export requiring a valid export license issued by DGFT authorities. As per Export Tariff (S. No. 14) of Schedule II of Customs Tariff Act, 1975, “Hides, skins and leathers, tanned or un-tanned, all sorts”, but not including manufactures of leathers, attract an export duty of 60%. Further, only finished leathers are eligible for drawback.
On the basis of the CLRI report that the exported leather was not conforming to the definition of finished leather, after due process of adjudication, the consignment was confiscated valued at Rs. 6,08,578/- (FOB) u/s. 113 (d) of the Customs Act, 1962. As the consignment was allowed for export on the basis of an undertaking bond, the exporter was allowed redemption on payment of fine of Rs. 50,000/-. Further, export duty of Rs. 3,65,149/- was demanded and a penalty of Rs.10,000/- was imposed on the exporter. The First Appellate Authority has upheld this order and hence the appellant came in appeal before us.
Conclusion- Held that shaving/snuffing as used in the DGFT’s Public Notice dated 01.12.2009 to mean shaving or snuffing. As all the major manufacturing operations are carried out on the impugned goods, the same could not be termed as unfinished goods. The fact of buyer accepting the goods and making payment, ordering further quantities and terming only 13 cartons of suede leather of grey colour as unfinished leather when 24 cartons of other colours of the same consignment as finished leather have weighed in our mind. We have also considered the decision rendered in the case of Collector of Customs, Madras Vs. M. Aslam Aejaz & Co. reported in 1995 (79) ELT 165 (Tri.), to the effect that minor deficiency in the processing may not ipso facto make the leather as not fully finished as the appellant’s have carried out all the major operations.
FULL TEXT OF THE CESTAT CHENNAI ORDER
1.1 M/s. Nabisha Leathers, Chennai, who are the appellants herein filed a Shipping Bill No. 4090836 dated 16.03.2010 for export of 37 cartons of “Goat Shoe Suede Upper Leather” of four different colours. On examination of the said consignment, the Appraising Officer (Leather Expert) opined that the item declared as “Goat Shoe Suede Upper Leather” of grey colour packed in 13 cartons might not be satisfying the norms prescribed for finished leather vide DGFT Public Notice No. 21/2009-14 dated 01.12.2009. As such a sample was drawn and sent to the Central Leather Research Institute (CLRI in short), Chennai for their expert opinion. However, the consignment was allowed for export provisionally on the strength of a bond executed by the exporter. The CLRI vide its letter No. CLRI/TAN/CUSTOMS/046/ 2010 dated 26.02.2010 stated that the subject sample fails to satisfy the norms in terms of DGFT’s Public Notice referred to above, for the reason of “Absence of snuffing on the grain imparting visible evidence of removal of grain”.
1.2 It may be mentioned here that only finished leather of all kinds which conform to the conditions contained in the Public Notice No. 21/2009-14 dated 01.12.2009, are freely exportable and all others are restricted for export requiring a valid export license issued by DGFT authorities. As per Export Tariff (S. No. 14) of Schedule II of Customs Tariff Act, 1975, “Hides, skins and leathers, tanned or un-tanned, all sorts”, but not including manufactures of leathers, attract an export duty of 60%. Further, only finished leathers are eligible for drawback.
1.3 On the basis of the CLRI report that the exported leather was not conforming to the definition of finished leather, after due process of adjudication, the consignment was confiscated valued at Rs. 6,08,578/- (FOB) under Section 113 (d) of the Customs Act, 1962. As the consignment was allowed for export on the basis of an undertaking bond, the exporter was allowed redemption on payment of fine of Rs. 50,000/-. Further, export duty of Rs. 3,65,149/- was demanded and a penalty of Rs.10,000/- was imposed on the exporter. The First Appellate Authority has upheld this order and hence the appellant came in appeal before us.
2. Learned Counsel for the appellant Shri S. Murugappan has argued that the item exported was finished leather only as per the purchase order and the buyer satisfied with the consignment and effected full payment by accepting the goods as finished leather; that the Joint Commissioner did not consider their request in their letter dated 02.08.2010 to retest the leather sample by CLRI though subsequent exported goods on test by the CLRI have satisfied as finished leather vide their other report No. CLRI/TAN/368/2010 dated 11.06.2010. He has relied on the decision rendered in the case of Collector of Customs, Madras Vs. M. Aslam Aejaz & Co. reported in 1995 (79) ELT 165 (Tri.), wherein it was held that where a number of processes involved in converting raw leather into finished leather, a minor deficiency in the processing may not ipso facto make the leather as not fully finished. He has put forth that the appellants have carried out all the major and substantive steps to make the raw leather into finished leather, the presence or absence of snuffing is determined by visible check and such check is always subjective and therefore CLRI report alone should not be the basis to hold that the leather under question is not finished leather. He has argued that there is no malafide intention on the part of the exporter to export the prohibited goods and as the buyer has accepted the goods as finished leather and has made payment and also placed order for further quantities and so imposition of penalty and fine are not justified and arbitrary.
3. Learned AR Ms. Sridevi Taritla has reiterated the findings as in the Order-in-Original dated 06.12.2010 and justified the confiscation of the exported leather, demand of export duty, and imposition of penalty as CLRI report has testified the absence of snuffing. She has relied on the decision of Mondepal Vs. Commissioner of Customs, Chennai reported in 2011 (267) ELT 269 (Tri.-Chen.) and also Devi Enterprises Vs. Commissioner of Customs (Sea), Chennai reported in 2009 (238) ELT 543 (Tri.-Chen.), wherein on the basis of the CLRI reports confiscation, fine and penalty were upheld.
4. We have carefully heard both sides and examined all the records.
5.1 The issue for determination in the appeal is whether CLRI’s interpretation of the conditions/norms prescribed in DGFT’s Public Notice No. 21/2009-2014 dated 01.12.2009 is correct or not for Export of Finished Leather. Ld. Advocate has argued that as per DGFT’s Public Notice, Shaving or Snuffing is required for allowing this type of leather for export but the report is silent with regard to compliance with the process relating to shaving and though CLRI’s report may be factually correct as to absence of snuffing but it’s interpretation as to fulfilment of the norms/conditions of DGFT’s Public Notice to treat as finished leather is not legally tenable. He has further referred to “Guidelines for Identification of Finished Leather for Export by the Bureau of Indian Standards” to support his contentions. So, it is necessary to go through the norms and conditions prescribed in DGFT’s Public Notice dated 01.12.2009 and also the guidelines of BIS for ready identification of different varieties of finished leathers particularly for export purposes. Relevant portions as required in respect of impugned goods are extracted below:-
(A) “Public Notice No. 21/2009-2014 Dated 01.12.2009
Export of Finished Leather – Revised Leather Norms
In exercise of the powers conferred by Section 5 of the Foreign Trade (Development & Regulation Act, 1992 (No.22 of 1992), the Director General of Foreign Trade hereby specifies, for the purpose of the entry “Finished Leather all kinds” appearing at Serial No. 143, Chapter 41, Schedule l2 – Export Policy, of the Foreign Trade Policy 2009-14, that the items mention in column 2 of the table hereunder shall constitute “Finished Leather” and the same may be exported without a license but subject to the terms and conditions specified against each item in column 3 of the table hereunder.”
