Case Law Details
Sri Vijayalakshmi Leathers Vs Commissioner of Customs (Exports) (CESTAT Chennai)
In the case of Sri Vijayalakshmi Leathers vs. Commissioner of Customs (Exports) heard by the CESTAT Chennai, the appellant had filed a shipping bill in 2013 for the export of leather declared as “F/C Sheep Grain Finished Upper Leather.” However, upon examination, it was discovered that the goods did not meet the quality standards of finished leather. The Central Leather Research Institute (CLRI) report highlighted the absence of finishing coat and wax/oil coat, which are essential for categorizing leather as finished. Consequently, the original authority ordered confiscation of the consignment and imposed penalties under Section 114(ii) of the Customs Act, 1962.
Upon appeal, the Commissioner (Appeals) remanded the case for reconsideration of the penalty, leading to the appellant’s appeal before the CESTAT Chennai.
During proceedings, the appellant’s counsel argued that there was no intent to export improper goods. The appellant had cooperated with the authorities and took back the goods upon receiving the CLRI report to complete the necessary processing before re-exporting. The appellant contended that the absence of finishing coat and wax/oil coat, as highlighted by CLRI, did not imply an attempt to export semi-finished leather as finished. The appellant had undertaken all other processes satisfactorily, as verified by CLRI.
The department, represented by its advocate, reiterated the findings of the impugned order.
After hearing both sides and examining the records, the CESTAT Chennai concluded that the appellant had not attempted to export semi-finished leather under the guise of finished leather. The appellant had cooperated with the authorities, rectified the deficiencies highlighted in the CLRI report, and re-exported the goods after completing the necessary processing. The presence of finishing coat and wax/oil coat is crucial for protecting leather during transit, and the appellant had taken appropriate steps to ensure the quality of the exported goods.
As a result, the CESTAT Chennai ruled in favor of the appellant, setting aside the penalty imposed under Section 114(ii) of the Customs Act, 1962. However, the redemption fine was upheld.
In conclusion, the case of Sri Vijayalakshmi Leathers vs. Commissioner of Customs (Exports) underscores the importance of intention and cooperation in export-related matters. The ruling reaffirms the need for exporters to adhere to quality standards while also acknowledging their efforts to rectify any deficiencies detected during the inspection process.
FULL TEXT OF THE CESTAT CHENNAI ORDER
Brief facts are that the appellant filed shipping bill dated 5.10.2013 for export of 8951 sq.ft. of leather declared as “F/C Sheep Grain Finished Upper Leather” and the value declared was Rs.7,71,205/- and under claim of Drawback of Rs.46,273/-.
1.1 On examination, it was found that the goods do not conform to the quality of finished leather. The goods were sent for examination and for report of Central Leather Research Institute (CLRI). As per the report dated 10.10.2023 certified by expert, it was reported that the goods do not conform to the norms of finished leather, as stipulated under DGFT Public Notice No.21/2009-14 dated 01.12.2009. As per report, the goods did not satisfy the norms of finished leather for the reasons, “Absence of Finishing Coat” and Absence of Wax/Oil coat”. The appellant vide letter dated 21.10.2013, requested for adjudication by waiver of Show Cause Notice and for grant of personal hearing.
1.2 The Original Authority vide Order dated 30.11.2013, ordered confiscation of the consignment giving an option to the appellant under Section 125 of Customs Act,1962 to redeem the goods on payment of fine of Rs.70,000/-. A personal penalty of Rs.70,000/- was also imposed on the exporter under Section 114(ii) of the Customs Act, 1962.
1.3 Against this Order, the department filed an appeal before the Commissioner (Appeals), contesting that the penalty imposed under Section 114(ii) is insufficient and not in accordance with the provisions of the Customs Act, 1962. The appellant filed a cross objection in the said appeal. The Commissioner after considering the appeal filed by the department, as well as cross objection filed by appellant (exporter) set aside the order by way of remand to the adjudicating authority to reconsider the penalty imposed. Aggrieved by such order, the appellant is now before the Tribunal.
1.4 The Learned Advocate, Shri T.Sundaranathan appeared and argued for the appellant.
1.5 It is submitted that the present case is only against an attempt for export of leather which does not satisfy the norms of finished leather. The Commissioner (Appeals) failed to note that the appellant had cooperated with the department and there is no intention to export any improper goods.
1.6 The appellant had agreed to wait for the CLRI report and on receiving the report has taken back the goods to complete the processing and thereafter exported the same. It is submitted that the deficiency in the goods certified by the expert is only the “Absence of Finishing Coat” and Absence of Wax/Oil Coat”. The report of the expert does not indicate any other deficiency with regard to the goods. Such coatings are given to the product (Leather) so that it withstands the period of transhipment and does not get damaged. Every exporter would be interested in the goods reaching the destination without damage. The appellant had given such necessary coatings. However, on the report of CLRI that the coating is not sufficient, the appellant had redeemed the goods and after given sufficient coating exported the goods. This would show that the appellant had no intention to export unfinished goods as finished goods. All the other processes undertaken by the appellant were found to be satisfactory by CLRI.
1.7 It is submitted that penalty imposed under Section 114(ii) of the Customs Act, 1962, is not at all attracted in the present case as the appellant (exporter) has taken back the goods for reprocessing. The defect noted by the CLRI report is not legally sustainable, so as to hold that the appellant attempted to export unfinished leather. It is prayed by the Learned Counsel that the appeal may be allowed.
2. Learned AR, Shri R.Rajaraman appeared and argued for the department. The findings in the impugned order was reiterated.
3. Heard both sides.
4. On perusal of records and as per the CLRI report, the deficiency noted in the goods to be exported is, “Absence of Finishing Coat” and Absence of Wax/Oil Coat”. Only finished leather can be exported free of duty. The present case arises out of an allegation that the appellant has attempted to export semi-finished leather by declaring the goods as finished leather. On appreciation of the facts, we do not find that there is any attempt on the part of the appellant to export semi-finished leather in the guise of finished leather. The appellant has waited for the CLRI report and also co-operated with the department. On coming to know of the report, the appellant has requested to redeem the goods for reprocessing. The leather undergoes various processes before it can be termed as finished leather. The Finishing Coat and Wax/Oil Coat on the leather is used to protect the leather. It is common that every exporter/manufacturer uses such coat on the goods so as to reduce damage to the goods due to climate changes in transportation. The appellant has taken the goods back and exported after completing the process of necessary coating. This shows that there was no intention to export goods in the guise of finished leather. In the circumstances, the penalty of Rs.70,000/- imposed under Section 114(ii) is not warranted. However, the Redemption fine of Rs.70,000/- not call for any inference. The impugned order is modified to the extent of setting aside the penalty of Rs.70,000/- imposed under Section 70 of Customs Act, 1962.
The appeal is partly allowed in above terms with consequential reliefs, if any.
(Order dictated in open court)
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