Differential Duty on Cotton Fabric: CESTAT Mumbai Orders Re-Test by CRCL

Titanium Ten Enterprises Pvt Ltd Vs Commissioner of Customs (CESTAT Mumbai)

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in Mumbai has set aside an order that demanded differential duty from Titanium Ten Enterprises Pvt Ltd for imported cotton fabrics. The company was challenging a 竄ｹ4,96,186 duty demand and the confiscation of 29,506 meters of fabric, which it had attempted to clear under a duty-free import scheme. The dispute arose after a test report from the Central Revenue Control Laboratory (CRCL) contradicted an earlier report from the Textile Committee.

Initially, the goods were allowed duty-free clearance based on the Textile Committee’s report. However, discrepancies were found when samples from different styles of fabric were tested by the Deputy Chief Chemist (DyCC) of CRCL. This led to the denial of the duty-free benefit, and the goods were confiscated under sections 111(d) and 111(m) of the Customs Act, 1962. The company was also penalized and given an option to redeem the goods upon payment of a fine.

Titanium Ten appealed, arguing that further tests by the Director, CRCL, were necessary due to the conflicting reports. The tribunal agreed, noting that accepting the subsequent CRCL report without confirming its veracity violated principles of natural justice. The tribunal remanded the case back to the original authority, instructing them to refer samples to the Director, CRCL, for a final and definitive test before re-assessing the duty. The appeal was allowed by way of remand.

FULL TEXT OF THE CESTAT MUMBAI ORDER

This appeal of M/s Titanium Ten Enterprises Pvt Ltd challenges the demand for differential duty of ₹ 4,96,186 on, and confiscation thereof of, 29,506 metres of ‘100% cotton fabrics 102 GSM, width 57/53 inch’ (29506 meters) valued at ₹ 24,61,046.39 imported vide bill of entry no. 5293279/25.11.2011 that had been upheld in order¹ of Commissioner of Customs (Appeals), Mumbai – III. Though the impugned goods, attempted to be cleared against ‘duty-free import authorization (DFIA)’ scheme of the Foreign Trade Policy (FTP), were confiscated under section 111(d) and 111(m) of Customs Act, 1962, option of redemption on payment of fine of ₹ 3,00,000/- under section 125 of Customs Act, 1962 was allowed while importer was imposed with penalty of ₹ 2,00,000 under section 112 of Customs Act, 1962. The goods were initially allowed benefit of import without payment of duty under the said scheme owing to purported compliance with condition of eligibility upon positive result in test report of Textile Committee which, however, was found to be inadmissible as sample had been drawn from only one of the styles out of the many and testing of different samples from among other styles by Deputy Chief Chemist (DyCC) of Central Revenue Control Laboratory (CRCL) threw up discrepancies with description that scripted denial of ‘duty free’ imports.

2. On appeal, the first appellate authority, placing reliance on the facts and circumstances as recorded and on the finding of lack of any evidence to the contrary offered by importer, upheld the detriments which are now under challenge before us on the limited plea of further tests not having been carried out by the Director, Central Revenue Controlled Laboratory (CRCL) in the light of conflicting test reports and that report against them had not been evaluated for relevancy by subjecting the official concerned to cross-examination. These were elaborated upon by Learned Counsel.

3. We have heard Learned Authorized Representative.

4. The issue is limited to the correctness of tests that had been relied upon and the challenge arises from conflict with test report of the Textile Committee affirming the description as permissible under the said scheme of the Foreign Trade Policy (FTP). Consequently, the acceptance of subsequent report of Central Revenue Control Laboratory (CRCL) for arriving at the impugned decision without ascertaining its unqualified veracity runs contrary to the principles of natural justice. Therefore, we set aside the impugned order and remand the matter back to the original authority for referring the samples to the Director, Central Revenue Control Laboratory (CRCL) for undertaking final and definitive tests before deciding the assessment afresh.

5. Appeal is, thus, allowed by way of remand.

(Order pronounced in the open court on 13/12/2024)

Notes;
¹ [order-in-appeal no. 511(Gr.VII-I)/2013(JNCH)/EXP-128 dated 10^th June 2013]