2019 (11) TMI 776 - AT - Customs

Exemption under Rule 26 of the SEZ Rules, 2007 - import of New Garments in the name of old and used clothing rags - goods accompanied by Pre-shipment Certificate as per Public Notice no. 12 (RE-2001)/1997-2002 dated 03/05/2001 or not - it is alleged that the unused T-shirts were being sought to be cleared as old and used clothing rags - Confiscation - penalties - HELD THAT - It is seen that the Bill of Entry describes the goods as old and used clothing rags. In the instant case, the new clothes cannot be called rags and, therefore, there is a mis-declaration to this extent. Nonetheless, the said goods are covered by the letter of permission granted by the Development Commissioner and the appellants are entitled to take the same to the SEZ without payment of duty. The impugned order comes to the conclusion that the T-shirts imported by them do not confirm to the letter of permission. We find that contrary to the facts, the letter of permission is specifically issued referring to the project report. Letter of permission also permits them to manufacture reconditioned clothing. The project report clearly states that some of the reported garments that new and could be out of fashion in terms of time in these circumstances the conclusion of the Commissioner in the impugned order that the said T-shirts are not by letter of permission is mis-placed. Thus, the appellants are entitled to clear the goods to SEZ in terms of letter of permission and Rue 27 of the SEZ Rules. Thus, the charge under section 111(m) of the Customs Act, 1962 cannot be sustained in the instant case as the payments. As the appellants were clearly entitles to clear the said goods at SEZ at nil rate of duty. Charge under section 111(d) - HELD THAT - Revenue has relied on Public Notice no. 12 (RE-2001)/1997-2002 dated 03/05/2001. The appellants have pointed out that the said circular permits Revenue to test goods at the time of import for pre shipment certificate. In these circumstances, confiscation can only be ordered if the goods do not confirm. In this case no testing was done by Revenue and, therefore, confiscation under section 111(d) cannot be justified. There is nothing in support for the charges made for invoking section 111(m) and section 111(d). Consequently, all the charges in the Show Cause Notice including imposition of Redemption fine and penalties fail - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Confiscation of goods.
2. Imposition of redemption fine.
3. Imposition of penalty.
4. Classification and description of imported goods.
5. Jurisdiction and authority of Customs authorities.
6. Compliance with pre-shipment certification requirements.

Detailed Analysis:

Confiscation of Goods:
The appeal was filed against the confiscation of goods imported by Texool Wastesavers & Ors. The goods in question included 26 bales of unused T-shirts, 21 bales of old and used clothing, and 41 bales of old and used clothing in different containers. The Tribunal found that the appellant's project report, which was approved by the Development Commissioner, allowed the import of garments that are almost new but could be out of fashion. The Tribunal concluded that the letter of permission did not prohibit the import of such goods, thus the confiscation under section 111(m) of the Customs Act, 1962 could not be sustained.

Imposition of Redemption Fine:
The Commissioner had imposed a redemption fine of ?25 lakhs for the 26 bales of T-shirts and ?50,000 for the remaining bales. The Tribunal found that the goods were covered by the letter of permission and the appellants were entitled to clear the goods to the SEZ without payment of duty. Consequently, the imposition of redemption fine was not justified.

Imposition of Penalty:
Various penalties were imposed on the appellants, including a penalty of ?15 lakhs under section 112(a) of the Customs Act, 1962, and ?5 lakhs against the Chairman & Managing Director. The Tribunal found no basis for these penalties as the charges under section 111(m) and section 111(d) were not sustained.

Classification and Description of Imported Goods:
The Bill of Entry described the goods as old and used clothing rags. However, the Tribunal noted that new clothes cannot be called rags, indicating a mis-declaration. Despite this, the Tribunal found that the goods were covered by the letter of permission and the appellants were entitled to clear them to the SEZ without payment of duty. The Tribunal also noted that the classification of the goods under Tariff Heading 6309 00 00 became irrelevant as the goods were intended for clearance from the SEZ and re-export after reconditioning.

Jurisdiction and Authority of Customs Authorities:
The Tribunal noted that the Customs authorities had no jurisdiction to examine the containers as per Rule 27 of the SEZ Rules. The Tribunal observed that the request for clearance to the SEZ unit without payment of duty was not considered by the Commissioner, and the duty demand was unjustified.

Compliance with Pre-shipment Certification Requirements:
The Tribunal found that the confiscation under section 111(d) of the Customs Act, 1962, based on the lack of a pre-shipment certificate, was not justified. The relevant public notice allowed for the testing of goods at the time of import if a pre-shipment certificate was not available. Since no testing was done by the Revenue, the confiscation under this section could not be justified.

Conclusion:
The Tribunal allowed the appeal, setting aside the confiscation, redemption fine, and penalties. The appellants were permitted to clear the goods to the SEZ without payment of duty, as per the letter of permission and Rule 27 of the SEZ Rules. The Tribunal found no support for the charges under sections 111(m) and 111(d) of the Customs Act, 1962.

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