2018 (11) TMI 240 - AT - Customs

Levy of export duty - Cow Split Wet Blue Leather - Cow Pickle Leather - benefit of nil rate of duty as per Notification No.133/2000-Cus dated 17.10.2000 - it was alleged that there are export of unfinished leather items by mis-declaring the same as finished leather by wrongly claiming the benefit of Notification No.133/2000-Cus dated 17.10.2000. Whether the exported goods were finished (as claimed by the exporter) or were unfinished or partially finished leather (as claimed by the Department)? Held that - It is pertinent to note that the term Finished Leather used in the Notification is to be interpreted in terms of ITC Pubic Notice No.3/ITC(PN)/92-97, dated the 27th May, 1992 in terms of the Explanation appended at the foot of the said Notification - Reference to the relevant ITC Public Notice (supra) reveals that Industrial Leathers are to be considered as finished, subject to certain minimum operations in manufacture which ought to carried out on them. List of the processes specified include Levelling, Fatliquoring, Shaving/snuffing of the grain and other processes specified in the ITC Public Notice. However, from the impugned order, it is seen that the adjudicating authority has not examined the exported goods from the perspective of whether they have been subjected to any or all of these processes. The test reports only confirmed the fact that the goods are permitted for export and that they are in the nature of Cow Split Wet Blue Leather. The test reports do not record what processes have been carried out on the leather which were being exported. The meaning of the term finished leather is required to be considered in terms of what is specified in the ITC Public Notice referred above. The ITC Public Notice lists out a series of several processes which the leather should have been subjected to for considering the same as finished leather. But it is seen that the Adjudicating Authority has made no reference to the ITC Public Notice, nor has he examined whether the exported goods have been subjected to these processes or atleast some of these processes - It is seen that the exported goods have been entered for export, the relevant bills of export have filed, goods examined, even samples drawn and opinion of CLRI taken and finally, allowed for export. In the bills of export benefit of exemption notification has been claimed and the same has been allowed. Before denial of such benefit at the stage of adjudication, the onus is on Revenue to establish that the exported goods had not satisfied the conditions of the notification. In our view, Revenue has failed to discharge such burden - The onus is on Revenue to establish that the conditions of the Notification were not satisfied. In the circumstances of the present case, it is concluded that the Revenue has failed in satisfying the said onus. Consequently, the demand and penal proceedings against M/s. M.N.Roy Sons as well as its proprietor are set aside. Penalty on the M/s. Indo Foreign (Agents) Pvt. Ltd. under Section 117 of the Customs Act, 1962 - Held that - M/s. Indo Foreign (Agents) Pvt. Ltd. had filed the bills of entry on the bonafide belief that the goods do not attract export duty. Such documentation was filed on the basis of the export documents handed over to them by the exporter. As such, CHA cannot be held liable for any penalty. The demand for export duty is not sustainable and have been set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of exported leather as finished or unfinished.
2. Eligibility for 'nil' rate of export duty under Notification No.133/2000-Cus.
3. Validity of penalties imposed on the exporter and Custom House Agents (CHAs).
4. Invocation of the extended period of limitation under Section 28 of the Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Classification of Exported Leather as Finished or Unfinished:
The central dispute revolved around whether the exported leather items, described as "Cow Split Wet Blue Leather" and "Cow Pickle Leather," were finished products eligible for 'nil' export duty or unfinished products subject to a 60% export duty. The Directorate of Revenue Intelligence (DRI) contended that the goods were unfinished, based on the statement of the exporter, which indicated only partial processing. However, the tribunal found that the adjudicating authority did not adequately examine whether the exported goods met the criteria for finished leather as specified in ITC Public Notice No.3/ITC(PN)/92-97. The tribunal noted that the test reports from the Central Leather Research Institutes (CLRI) confirmed the goods were Cow Split Wet Blue Leather but did not assess the completion of required processes.

2. Eligibility for 'nil' Rate of Export Duty under Notification No.133/2000-Cus:
The exporter claimed exemption from export duty under Notification No.133/2000-Cus, which applies to "Finished Leather of Goat, Sheep, and Bovine Animals and their young ones." The tribunal emphasized that the term "finished leather" should be interpreted according to the ITC Public Notice, which lists specific processes that must be carried out. The tribunal concluded that the adjudicating authority failed to establish that the exported goods did not meet these requirements, and thus, the benefit of the 'nil' rate of duty should not have been denied.

3. Validity of Penalties Imposed on the Exporter and Custom House Agents (CHAs):
Penalties were imposed on the exporter, M/s. M.N.Roy & Sons, its proprietor, and three CHAs under Section 117 of the Customs Act, 1962. The tribunal found that since the demand for export duty was not sustainable, the penalties imposed on the exporter and the CHAs were also unjustified. The CHAs had filed the export documentation based on the information provided by the exporter, and there was no evidence of their involvement in any wrongdoing.

4. Invocation of the Extended Period of Limitation under Section 28 of the Customs Act, 1962:
The tribunal addressed the issue of the extended period of limitation invoked in the show cause notice. The exporter argued that the extended period should not apply since a previous notice had already covered a similar issue. The tribunal did not explicitly rule on this argument but set aside the demand and penalties on other grounds, rendering this issue moot.

Conclusion:
The tribunal set aside the impugned orders, concluding that the Revenue failed to prove that the exported goods did not meet the criteria for finished leather as specified in the ITC Public Notice. Consequently, the demands for export duty and the penalties imposed on the exporter and CHAs were dismissed. The appeals were allowed, and the tribunal emphasized the principle that the onus to prove a fact lies with the party asserting it, which in this case, was the Revenue.