2006 (4) TMI 123 - SC - Customs

Whether the expression insoles, midsoles and sheets thereof used in the exemption Notification No. 20 of 1999 issued under the Customs Act, 1962 can be interpreted to mean that the sheets rolled up for the convenience of loading and transport, would disentitle the assessee from the benefit of the Notification? Held that - Contention of the assessee that the goods had been imported in the form of sheets being 50 metres long were rolled up as specified by the ISI standards for loading and safe transportation has gone unrebutted. The burden was on the revenue to prove that the subject goods were not sheets for which no evidence whatsoever was led by the revenue. The burden of proof as to whether the item in question is taxable in the manner claimed by the revenue is on the revenue. Mere assertion in that regard is of no use. It has repeatedly been held by this Court that it is for the taxing authority to lay evidence in that behalf. The burden was on the revenue to prove that the said goods were not sheets for which no evidence whatsoever was led by the Tribunal. The goods, imported in the form of the sheets but rolled up for loading and transportation purposes, would not convert them into films or sheetings thereby denying the assessee the benefit of the exemption Notification. In favour of assessee.

Summary

Issues Involved:
1. Interpretation of the expression "insoles, midsoles and sheets thereof" in Exemption Notification No. 20/1999 under the Customs Act, 1962.
2. Whether the form of the imported goods (rolled for convenience) affects the entitlement to the exemption.

Detailed Analysis:

1. Interpretation of the Expression "Insoles, Midsoles and Sheets Thereof":
The central issue is the interpretation of the expression "insoles, midsoles and sheets thereof" in Exemption Notification No. 20/1999. The appellant, a partnership firm dealing in leather footwear materials, regularly imports "PU coated leather fabrics" used in the leather footwear industry as insoles and midsoles. The appellant argued that these goods, even when rolled for loading and transport convenience, should be considered as "sheets" under the notification.

2. Form of Imported Goods and Entitlement to Exemption:
The appellant previously benefited from similar exemptions under Notification No. 224/85 and No. 45/94, where the goods were classified as "insoles, midsoles and sheets thereof." However, in 1999, the Revenue denied the exemption under Notification No. 20/99, arguing that the goods were "films" or "running sheets," not "sheets." The adjudicating authority and the Tribunal relied on the Supreme Court's judgment in Collector of Customs, Bombay v. M/s. K. Mohan and Company Exports, which distinguished between "sheets" and "sheetings."

The appellant contended that the goods were imported as "sheets" and rolled for transportation, which does not change their classification. The appellant cited several judicial pronouncements supporting their interpretation, including a judgment by the Tribunal in Plast Fabs v. Collector of Customs, which dealt with "PVC flocked sheets in rolls."

Findings and Conclusion:
The Supreme Court analyzed the applicability of the judgment in M/s. K. Mohan and Company Exports, where the goods were recognized as "films" and not "sheets." The Court noted that the appellant's goods were "PU coated insole sheets" rolled for transportation as per ISI specifications. The burden of proof to show that the goods were not "sheets" lay on the Revenue, which failed to provide evidence.

The Court concluded that rolling the sheets for loading and transportation does not convert them into "films" or "sheetings," thus not disqualifying the appellant from the exemption. The distinction between "sheet" and "sheeting" in M/s. K. Mohan and Company Exports was not applicable in this context. The Court illustrated that if carpets were imported in a rolled form, it would not disqualify them from an exemption meant for carpets.

Therefore, the appeal was accepted, and the orders of the Tribunal and authorities below were set aside, granting the appellant the benefit of the exemption under Notification No. 20/99.