Skip to content


Microna Industries Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Decided On
Reported in(1987)(31)ELT126Tri(Mum.)bai
AppellantMicrona Industries
RespondentCollector of Customs
Excerpt:
.....bombay.2. briefly, the facts of the case are that the appellants imported two consignments of tissue paper valued at rs. 43,979/- and rs. 42,935/-(cif) and claimed clearance of the same against appendix 10(1) of the april 1982 - march 1983 import and export policy. by virtue of this provision of the policy, the appellants claimed that the goods were covered by the o.g.l. the lower authorities, however, held that the goods were not covered by the o.g.l. as claimed by the appellants, and after issuing a show cause notice the case was adjudicated by the deputy collector of customs, bombay. the deputy collector after hearing the appellants held that the two consignments in question were not covered by the o.g.l. and ordered confiscation of the same. however, in lieu of redemption of the.....
Judgment:
1. The present appeal is directed against Order No. S/49-7/84L dated 7-3-84 passed by the Collector of Customs (Appeals), Bombay.

2. Briefly, the facts of the case are that the appellants imported two consignments of tissue paper valued at Rs. 43,979/- and Rs. 42,935/-(cif) and claimed clearance of the same against Appendix 10(1) of the April 1982 - March 1983 Import and Export Policy. By virtue of this provision of the Policy, the appellants claimed that the goods were covered by the O.G.L. The lower authorities, however, held that the goods were not covered by the O.G.L. as claimed by the appellants, and after issuing a show cause notice the case was adjudicated by the Deputy Collector of Customs, Bombay. The Deputy Collector after hearing the appellants held that the two consignments in question were not covered by the O.G.L. and ordered confiscation of the same. However, in lieu of redemption of the goods, the Deputy Collector gave the appellants the option of redeeming the two consignments on a fine of Rs. 44,000/- and Rs. 43,000/-, respectively. Aggrieved with the Deputy Collector's order the appellants moved the Collector (Appeals) Bombay.

The said Collector vide his order dated 7-3-1984 upheld the order of the Deputy Collector and rejected the appeal. It is against the impugned order dated 7-3-84 passed by the Collector (Appeals) that the matter has come up before us for consideration.

3. Shri Balani, the learned counsel for the appellants submitted that the appellants were Actual Users and registered with the D.G.T.D. to manufacture leather footwear, Briefcases and Suitcases. According to him, provisions of Appendix 10(1) of AM 83 read with Condition No. 17 On page 126 of the said Policy, the goods imported by the appellants qualified to be imported under the O.G.L. He submitted that the goods were in the nature of raw materials and consumables and, broadly interpreted, 'inputs' for the manufacture of leather footwear. Further, tissue paper is used in making patterns for Moccasions which is a special type of leather footwear. For this purpose, he relied on certain extracts from the Publication captioned "The Art of Working with Leather" by Steven M. Edwards (Chapter V). The learned Counsel thereafter made several alternative pleas in support of his contention that the goods were covered by the O.G.L.

4. Appendix 10(1) refers to raw materials, components and consumables.

List 8 of Appendix 10 shows Kraft/Tissue Paper as one of the items to be allowed under the O.G.L. subject to Actual User conditions.

According to the learned counsel, the expression "raw material" had not been defined in the ITC Policy. As the goods in question were ultimately required to be used in the manufacture of leather footwear these could, broadly speaking, be treated as raw materials for leather footwear.

5. Alternatively, the goods could be considered as "consumables" because these were used in the manufacture of leather footwear for the purpose of wrapping. Tissue paper can be treated as a consumable article in terms of the definition of the said expression given in paragraph 5(12) of Chapter 2 of the A.M. 83 Policy. The expression has been defined as follows :- "Consumable means any item which participates or is required in a manufacturing process; but does not form part of the end product". The learned counsel submitted that tissue paper is used for wrapping purposes and is therefore required in the manufacturing process of leather footwear. At the same time, being a packing material, strictly it does not form part of the end product, namely, leather footwear.

6. It was urged that according to information available with the appellants, tissue paper was used in the soles of leather footwear to give a 'cushioning' or 'softening' effect. However, the learned counsel conceded that there was no technical authority in support of this.

Nonetheless, the appellants had produced before the Collector (Appeals), a sample of the piece of leather footwear to show that tissue paper was used in the manufacture of leather footwear. The Collector (Appeals) had however brushed aside this important piece of evidence without advancing any cogent reasons. It was open to the Collector (Appeals) to have a sample cut to satisfy himself whether tissue paper had been used in the layers of the footwear. By not doing so, an important piece of evidence had been discarded without any justification.

7. Attacking the Appellate Order as a whole, the learned counsel maintained that the said order suffered from various infirmities. It was not a speaking order, the learned Collector had listed out the various submissions in paragraph 4 of his order but did not discuss them in a well-reasoned manner. Since he gave findings without proper reasonings the order was not in compliance with the principles of natural justice. It was not disputed that the appellants were actual users and were registered as such to manufacture leather footwear, briefcases and suitcases. The imported goods were covered under the O.G.L. because these were in the nature of 'raw materials', 'consumables' and 'inputs' for the leather footwear industry.

8. The learned counsel submitted that the lower authorities had discarded their valid pleas and taken harsh action against them by confiscating the goods and pitching the redemption fine approximately equal to the value of the goods. It was submitted that it was very unusual to levy fine of cent per cent level on goods covered by the O.G.L. He maintained that orders passed by the lower authorities were not in conformity with law and therefore deserved to be set aside.

9. Shri Jain, the learned Representative of the Respondent referred to the various relevant documents and orders passed by the Deputy Collector and the Collector (Appeals). Shri Jain submitted that although the expression "raw material" had not been defined in the Policy, nonetheless, the expression was well understood in the commercial circles. A raw material becomes a part and parcel of the finished product. In the case of the appellants, the plea taken before the adjudicating authority was that the tissue paper had been imported for wrapping purposes; wrapping paper cannot be treated as a raw material for the manufacture of leather footwear. He described as "misconceived" the argument of the appellants that without primary packing an article cannot be treated as fully manufactured. This concept supported by the Supreme Court's judgment reported in the 1983 E.L.T. 1896 (S.C.) was relevant in the context of valuation of excisable goods and had no bearing in the case of the appellants. The question for consideration before us is whether tissue paper when used for packing leather footwear could be treated as 'raw material as understood in the trade circles. He submitted that the reply was clearly in the negative.

10. Regarding the contention of Shri Balani that the goods could be treated as 'consumables', Shri Jain submitted that only such goods could be treated as "consumables' which are required in a manufacturing process but do not form part of the end product, e.g. catalysts used in the manufacture of Vanaspati. Tissue paper was not used in the manufacturing process of leather footwear and could hot therefore be treated as 'consumables'. The averment that tissue paper was used to provide layers for cushioning in the leather footwear had not been supported by any technical authority. Further, this plea was not taken by the appellants before the Deputy Collector before whom the only ground taken was that the tissue paper was to be used for the purpose of wrapping the footwear. In any event, the learned Collector (Appeals) had given his finding after seeing the sample. Shri Jain stressed that the appellants had been quite inconsistent in their stand before the lower authorities. At one stage the goods were described as being 'wrapping material'. This ground was shifted and it was contended that the goods were consumables. Later, these were sought to be treated as 'inputs'. This only showed that the appellants were interested in getting the goods covered under the O.G.L. without any regard to consistency or legal support. For instance, it was submitted that tissue paper finds use in the manufacture of leather garments and Moccasins. The actual position, however, was that the appellants were not manufacturing either. I.T.C. Policy in the case of the actual users has to be applied strictly. Instead of supporting their case on concrete evidence of tissue paper being used by them in the leather footwear, the appellants were putting forth pleas of 'possible uses'.

The lower authorities were, therefore, fully justified in rejecting the appellant's claim that use of tissue paper in Moccasins could be deemed to be applicable to other footwear also. The importation of the goods by the appellants under the O.G.L. was in clear violation of the I.T.C.Policy and their appeal deserved to be dismissed. Referring to the quantum of fine, Shri Jain submitted that it was the usual practice to pitch the same keeping in view the approximate margin of profit available to the goods in question.

11. We have heard both the parties at length. The narrow question which falls for our consideration is whether the tissue paper of the specifications imported by the appellants falls within the purview of Item 1 of Appendix 10. As mentioned earlier, the said item covers raw materials, components and consumables. Shri Balani straightaway conceded that tissue paper could not be treated as a 'component'. The expression raw material is not defined in the Policy Book but in trade and manufacturing circles there is hardly any ambiguity about what is meant by the expression 'raw material'. It is the admitted position that tissue paper is used as a wrapping material for leather footwear.

However, wrapping or packing material per se cannot be treated as 'raw materials'. Shri Jain's submission that reliance on the Supreme Court's decision does, not advance the appellant's case is, therefore, correct.

The plea to treat the tissue paper as 'consumables' fails because of the clear definition of expression given in the Policy Itself. This definition of 'consumables' as given in the Policy is somewhat restrictive qua its popular and trade meaning but in deciding the present appeal we have necessarily to follow the definition given in the said Policy. Tissue paper does not fall within the ambit of 'consumables' for the reasons put forth by Shri Jain. We fully endorse his reasoning in this behalf.

12. There is a reference in the records to certain concessions enjoyed by tissue paper when used by the leather industry in I.T.C. Policy in some previous, years. We do not see any relevance to this fact in the present case. 13. We are also not much impressed by the argument of Shri Balani that due cognisance was not taken by the Collector (Appeals) of the sample produced before him. In the first instance, the Collector has made a specific mention that he had rejected the appellant's contention after inspecting the sample. Secondly, this plea was not taken at the earlier stages and appears to us to have been adopted by the appellants as an after thought. Lastly, no technical literature has been shown to us indicating that tissue paper is used in the leather footwear of the types being manufactured by the appellants.

14. Grievance has been made that the fine in lieu Of confiscation is high. We were told by the learned S.D.R. that the redemption fine is fixed keeping in view the margin of profit pertaining to the goods in question. Since this is the usual practice, we do not see any force in the contention of the appellants that the lower authorities have fixed the fine at an excessive level.

15. In the result, we reject the various contentions made by the appellants, uphold the impugned order dated 7-3-1984 and dismiss the appeal.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //