1967 (4) TMI 211 - HC - Customs

Summary

Issues Involved:
1. Eligibility for drawback under Section 42 versus Section 43B of the Sea Customs Act, 1878.
2. Identification and classification of goods for drawback purposes.
3. Interpretation of "manufacture" under the Sea Customs Act.

Detailed Analysis:

1. Eligibility for Drawback under Section 42 versus Section 43B of the Sea Customs Act, 1878:

The petitioner was granted an import license for "textile fabrics or pieces thereof made of 'silk' only" with specific conditions, including the requirement to re-export the finished goods after embroidery. Upon re-exporting the goods as embroidered table covers, the petitioner sought a drawback of duty under Section 43B of the Sea Customs Act, 1878. The Customs authorities allowed the drawback under Section 43B but denied the petitioner's subsequent request to consider the claim under Section 42.

The petitioner's appeal to the Collector of Customs was dismissed on the grounds that the claim under Section 42 was not made prior to shipment and the goods had undergone a manufacturing process, making them unidentifiable as the same imported goods.

2. Identification and Classification of Goods for Drawback Purposes:

The petitioner argued that the goods were re-exported in the same form as imported, merely cut and embroidered, thus remaining identifiable and eligible for drawback under Section 42. The Customs authorities, however, maintained that the goods had undergone a manufacturing process, thus falling under Section 43B, which applies to materials used in the manufacture of exported goods.

The court noted that Section 42 applies to goods "capable of being easily identified" and re-exported in the same form, while Section 43B applies to materials used in manufacturing exported goods. The court found that the embroidered table covers were a new product, distinct from the imported silk, thus fitting the criteria of Section 43B.

3. Interpretation of "Manufacture" under the Sea Customs Act:

The court examined the definition of "manufacture" and concluded that the transformation of silk into embroidered table covers constituted manufacturing. The court referenced the Supreme Court's definition of "manufacture" as a process resulting in a new and different article with a distinctive name, character, or use. The court rejected the petitioner's argument that mere identification of the goods sufficed for Section 42, emphasizing that the goods must not undergo a transformation to qualify under this section.

The court also considered the conditions of the import license, which required the re-export of embroidered goods. However, it held that compliance with the license conditions did not preclude the application of Section 43B if the goods were transformed through manufacturing.

Conclusion:

The court dismissed the petition, affirming that the embroidered table covers were a new product resulting from a manufacturing process, thus eligible for drawback under Section 43B, not Section 42. The petitioner's arguments were found unconvincing, and the Customs authorities' classification and handling of the drawback claim were upheld.