Case Law Details

Case Name : Thaya Tanning Company Vs Commissioner of Customs (CESTAT Chennai)
Appeal Number : Customs Appeal No. 40172 of 2022
Date of Judgement/Order : 07/07/2022
Related Assessment Year :

Thaya Tanning Company Vs Commissioner of Customs (CESTAT Chennai)

Revenue alleged switching of the samples sent / taken to the Central Leather Research Institute (CLRI) for getting favourable certification for the goods as ‘Finished Leather’ and thereby facilitating fraudulent export of ‘Semi-finished Leather’ in the guise of ‘Finished Leather’, to evade payment of export duty and to avail duty drawback, apart from other incentives.

Revenue has only alleged about the switching of samples, but has nowhere established how and where the switching had taken place since, admittedly, right from day one, the goods were at the godown of the CFS, the accessibility of which may not be that easy.

Revenue has not satisfactorily and effectively shook the first report of the CLRI dated 07.10.2016 and hence, it has to be held that the norms and conditions laid down under the Public Notice No. 21/2009-14 dated 01.12.2009 are satisfied, as opined by the expert. Hence, the demand of confiscation apart from demand of duty liability and the various penalties levied on the appellants cannot sustain, since the very basis on which the case of the Revenue rests is not well-founded. In view of the above, the impugned orders are set aside and so also the various demands confirmed therein.

FULL TEXT OF THE CESTAT CHENNAI ORDER

The present appeal is filed by the exporter of leather goods to whom a Show Cause Notice dated 13.12.2019 was issued alleging, inter alia, that there was switching of the samples sent / taken to the Central Leather Research Institute (CLRI) for getting favourable certification for the goods as ‘Finished Leather’ and thereby facilitating fraudulent export of ‘Semi-finished Leather’ in the guise of ‘Finished Leather’, to evade payment of export duty and to avail duty drawback, apart from other incentives.

2. A perusal of the Show Cause Notice reveal, inter alia, that a team of officers from the Special Intelligence and Investigation Branch (SIIB), Custom House, Chennai carried out a surprise check at the Container Freight Station (CFS), Virugambakkam, on 07.10.2016 where some of the consignments of finished leather meant for export were lying at Godown No. 03, which was sealed by the said officers; that the said officers visited the CFS on 14.10.2016 wherein they appeared to have found relevant documents, including the first test report of the CLRI dated 07.10.2016; that thereafter, the said officers, with the help of Custodian and CHA, examined the consignments in the presence of Mahazar witnesses and Customs Broker; that accordingly, Mahazar dated 14.10.2016 was drawn; that as per the Show Cause Notice, samples were forwarded for testing to the CLRI vide letter dated 08.11.2016; that the CLRI thereafter vide its letter dated 11.11.2016 certified that the samples did not satisfy the norms and conditions laid down in the Public Notice No. 21/2009-14 dated 01.12.2009; that thereafter, the exporter approached the Hon’ble High Court of Judicature at Madras by filing writ petition against the SIIB communication dated 23.11.2016; that the Hon’ble High Court, vide Order dated 22.12.2016, allowed the export of the impugned consignments subject to certain terms and conditions; that thereafter, the Revenue proposed confiscation of the goods in question covered under the shipping bill No.1466982 dated 05.10.2016 involved under Section 113(i) of the Customs Act, 1962, apart from proposing to demand duty, redemption fine, penalty under Section 114(ii) ibid., withdrawal of duty drawback amount claimed and penalty under Section 114AA ibid.; the Show Cause Notice has relied upon various documents. On adjudication, the Joint Commissioner of Customs, passed the Order-in-Original No. 76786/2020 dated 28.10.2020, wherein, he confirmed the demands raised in the show cause notice and the same was upheld in the impugned Order-in-Appeal dated 10.02.2022, against which the present appeal has been filed before this forum.

3. Heard Shri Subendra Kumar, Learned Advocate for the appellant and Shri Vikas Jhajharia, Learned Additional Commissioner for the Revenue.

4. Learned Advocate for the appellant would submit that the issue has now been decided in favour of the appellant by this very bench of the Tribunal in M/s. Karpaga Leathers and six others, in Final Order Nos. 40268-40274/2022 dated 30.06.2022.

5. Heard both sides and perused the documents on record. Ld. Counsel is correct in his assertion that the issue in the case on hand is already decided by this Tribunal in M/s. Karpaga Leathers and six others vs. Commissioner of Customs, Chennai in Final Order Nos. 40268-40274/2022 dated 30.06.2022. The relevant portion which is reproduced as under for the sake of convenience:-

“8. I have considered the rival contentions, perused the documents placed on record as also the orders of the lower authorities. After hearing both sides, I find that since a common issue is involved and the relief sought is also common, these cases could be clubbed together for convenience and common disposal.

9. The first test report dated 07.10.2016 issued by the CLRI clearly mentions that the sample of leather satisfies‟ the norms and conditions laid down in the Public Notice ibid. for the type of finished leather as declared (“Sheep Leather with Finishing Coat, Colour: WHITE (0162), Category: I”). The second report dated 09.11.2016 certifies that the sample does not satisfy the norms and conditions laid down in the Public Notice for the type of finished leather as declared (“Sheep Finished Leather, Colour: OFF-WHITE, Category: I”). From the said reports, there is a difference inasmuch as the first report mentions the colour of the goods as “WHITE” as against “OFF-WHITE” in the second report.

10. From perusal of the first Mahazar dated 14.10.2016, I do not find any mention as to the same witnessing the drawing of samples, as contended by the Learned Advocate for the appellants, and hence, the Revenue has to explain as to what was sent for examination since the same is not forthcoming even from the orders of the authorities below. Even if it is to be assumed that samples were drawn on 14.10.2016, the Revenue has not brought out on record as to how and where the samples were preserved since more than three weeks after drawing the samples have they sent the samples to the CLRI for examination/report, since, as contended by the Learned Advocate for the appellants, leather is such a goods on which even the weather will have an impact; hence, preservation of the same is very much material.

11. Further, the Revenue has only alleged about the switching of samples, but has nowhere established how and where the switching had taken place since, admittedly, right from day one, the goods were at the godown of the CFS, the accessibility of which may not be that easy.

12. These facts coupled with the fact that the Mahazar dated 14.10.2016 did not witness drawing of any samples, throws sufficient doubts about the allegation of switching of samples and, in any case, the Revenue has not explained anywhere as to the source of the sample which was sent to the CLRI for testing/report. The above is sufficient to dislodge the veracity of the second report which goes to the very root of the report of the CLRI dated 09.11.2016.

13. By this, I am of the view that the Revenue has not satisfactorily and effectively shook the first report of the CLRI dated 07.10.2016 and hence, it has to be held that the norms and conditions laid down under the Public Notice No. 21/2009-14 dated 01.12.2009 are satisfied, as opined by the expert. Hence, the demand of confiscation apart from demand of duty liability and the various penalties levied on the appellants cannot sustain, since the very basis on which the case of the Revenue rests is not well-founded. In view of the above, the impugned orders are set aside and so also the various demands confirmed therein.”

There is no change in the facts of the above cases vis-à-vis, the above case and hence, the ratio laid down therein would equally apply to the fact of this case also. Hence, the impugned order is set aside and so also the various demands confirmed therein and the appeal is allowed.

(Operative part of the Order pronounced in the open court on 07.07.2022)

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