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Oswal Woollen Mills Ltd. Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1983)LC347DTri(Delhi)
AppellantOswal Woollen Mills Ltd.
RespondentCollector of Customs
Excerpt:
.....the transactions. in that case, there is no mention of there being any objection to sale of goods imported under the licence, which has been contended by the senior departmental representative in this case. we find that 66 appeals relating to confiscation of so-called woollen rags, which contained a substantial percentage of serviceable garments, were allowed by the board on the ratio of the nagesh hosiery mills judgement.8. we, therefore, accept the pleas made by counsel in this case and set aside the order of confiscation as well as penalty. the goods may be released to the appellant, subject to the stipulation that the said woollen garments are mutilated in their mill under customs or central excise supervision, so as to render them totally unserviceable, for use in the.....
Judgment:
1. This is a Revision Application transferred to the Tribunal for disposal under the provisions of Section 131B (2) of the Customs Act, 1962.

2. The facts of the case are that at about 23-30 hrs. on 9-11-72, the Cenlral Excise staff at Ludhiana intercepted two horse driven carts loaded with 9 boras each containing imported old and used woollen serviceable garments. In follow-up action, 5 bales and 16 boras containing such garments were also recovered from the godown belonging to M/s. Oswal Woollen Mills. In the subsequent adjudicating proceedings, the Deputy Collector held that the circumstances and manner of removal showed the goods were intended for sale in violation of Customs law. No import of second hand clothing has been permitted for several years and the garments seized could not have been validly imported. No proof could also be produced by the persons from whom the goods were recovered to establish valid import. He accordingly confiscated the goods under Section 1ll (d) of the Customs Act, 1962 but permitted redemption on payment of a fine of Rs. 4000 and also imposed a penalty of Rs. 1000 on the appellant under Section 112.

3. The appeal against this order was rejected by the Appellate Collector on the ground that the firm from which they purchased the goods, M/s Adya Industries, had described them as mutilated woollen rags and they were stated to have been on the way to mutilation and not for sale when intercepted. The firm in (Juestion had also failed to reply to the show cause notice and the appellants failed to produce a Bill of Entry or Import Licence to show the import by M/s. Adya Industries.

4. In the present appeal, the grounds urged are that the appellants are manufacturers of shoddy yarn for which they import, and also purchase, woollen rags from the market for such manufacture. They pay lakhs of rupees by way of central excise duty on the shoddy yarn manufactured.

This proves that the purchase of rags was for bonafide consumption, which the Deputy Collector had ignored. The authorities below failed to appreciate that there was no restriction or prohibition of transport of goods at night and the goods were validly imported. There is no evidence that the goods were sold in violation of Customs law or that they were being transported to an undisclosed destination, as observed by the Appellate Collector. Besides, only 18 boras were seized from the carts while 5 bales and 16 boras were lying in the appellant's godown.

The markings on the bales also showed that they were lawfully imported and it is well settled that old and worn clothes come within the term "Rags". It was for the department to rebut the evidence of purchase from M/s. Adya Industries. The goods do not also fall under Section 123, so it has been wrongly held that the appellants should substantiate their claim regarding legal import. A number of consignments seized by the Customs have been released, subject to the condition that they be mutilated to the satisfaction of the customs authorities and there has been discrimination in this case.

5. The appellant was heard on 17-1-83. Shri Harbans Singh, Advocate, reiterated the above contentions. He cited the Nagesh Hosiery Mills case where it was held that 'rag' had not been defined in the import policy and its meaning in commercial parlance had to be adopted. The Central Board of Excise & Customs had allowed appeals in similar cases, vide its orders Nos. 1-66 of 1981, No. 1184/80 and No. 1105/6 of 1980.

In another case, the same Deputy Collector had also given the concession for release after mutilation by a shoddy spinner in his order No. 55/76, where the party was himself not a spinner. The case of the appellant is stronger. The movement at night in a place like Ludhiana, where there was a traffic congestion during day, has to be seen in the context of the lakhs of excise duty paid on shoddy yarn by the appellant and why they should indulge in smuggling of goods worth a petty Rs. 35,000. Failure of Adya Industries to respond to the department is not the appellant's fault. There is, therefore, no reasonable ground for confiscation. The penalty and fine should be remitted and the goods released. The appellant had no objection to mutilation of the goods on release.

6. Representing the Respondent, Shri Yuvraj Gupta, Senior Departmental Representative, conceded that there was validity in the arguments of the Counsel. However, there was transfer of the goods, even assuming they were validly imported in violation of the conditions of the import licence. The Bill of Entry produced also mentions "old original mutilated and unserviceable woollen hosiery" but the goods were not in a mutilated state. However, he conceded that in one of the Board's orders allowing release in similar cases, identical terminology "old original mutilated and unserviceable woollen hosiery (rags)" has been used. The Board had accepted the logic of the Nagesh Hosiery Mills decision.

7. The Tribunal observes that in this case the burden of proving that the seized goods have been imported in violation of any restriction or prohibition rests on the department. The evidence regarding lawful import was cited and it was for the department to controvert it.

Because the named importer failed to respond to the show-cause notice, the appellant cannot be held responsible, ignoring the powers of the department to investigate, summon and otherwise enquire. Under his order No. 55/76 cited by Counsel, release of similar goods was allowed by the Deputy Collector, because the party named the importer from whom the goods were purchased, the importer indicated the import licence and Bill of Entry and the Bombay and Ludhiana Customs authorities verified the transactions. In that case, there is no mention of there being any objection to sale of goods imported under the licence, which has been contended by the Senior Departmental Representative in this case. We find that 66 appeals relating to confiscation of so-called woollen rags, which contained a substantial percentage of serviceable garments, were allowed by the Board on the ratio of the Nagesh Hosiery Mills judgement.

8. We, therefore, accept the pleas made by Counsel in this case and set aside the order of confiscation as well as penalty. The goods may be released to the appellant, subject to the stipulation that the said woollen garments are mutilated in their mill under Customs or Central Excise supervision, so as to render them totally unserviceable, for use in the manufacture of shoddy yarn.


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