1986 (11) TMI 233 - AT - Customs

Summary

Issues Involved:

1. Validity of the import license.
2. Suitability of imported fabric for manufacturing shirts.
3. Jurisdiction of the Additional Collector in imposing conditions for clearance.
4. Introduction of extraneous issues in the adjudication process.
5. Compliance with the Duty Exemption Scheme and warehousing provisions.

Issue-wise Detailed Analysis:

1. Validity of the Import License:
The appellants, M/s. Kays International, imported textile fabrics under an advance license for manufacturing and re-exporting shirts. The Additional Collector of Customs questioned the validity of the license, alleging that the imported fabric was suiting material, not shirting, thus violating the license conditions. The Tribunal noted that the appellants had imported about two-thirds of the permitted quantity but had almost exhausted the value limit of the license. The Additional Collector accepted the license after being shown a sample of the safari shirt, indicating that shirts could be manufactured from the imported cloth. However, the Tribunal found that the Additional Collector's order suffered from the introduction of extraneous grounds, such as the correspondence with the Export Commissioner, which was not part of the original show cause notice.

2. Suitability of Imported Fabric for Manufacturing Shirts:
The appellants argued that the heavy material imported was necessary for manufacturing safari shirts. The Customs authorities, however, found the fabric to be suiting material, not suitable for making shirts. The Tribunal noted that the Additional Collector was satisfied that shirts could be stitched from the imported cloth, thus accepting the license. The Tribunal found that the Additional Collector had no jurisdiction to preemptively act against any future contravention of the Import Control Regulations, as there was no breach of the license condition requiring the export of shirts.

3. Jurisdiction of the Additional Collector in Imposing Conditions for Clearance:
The Additional Collector imposed conditions for the clearance of the consignment, including manufacturing the shirts under Customs supervision and re-exporting them through Bombay. The appellants contended that these conditions could not be imposed under Section 125 of the Customs Act. The Tribunal agreed, stating that the law does not bestow the adjudicating officer with the authority to attach such conditions. The Tribunal further noted that the goods were imported under the duty exemption scheme and were not dutiable, making the condition for warehousing under Section 59 of the Customs Act inapplicable.

4. Introduction of Extraneous Issues in the Adjudication Process:
The Tribunal found that the Additional Collector introduced extraneous issues by referring to the correspondence with the Export Commissioner, which suggested that there was no contract between the appellants and their foreign buyer. This evidence was not part of the original show cause notice, and the appellants were not given an opportunity to rebut it. The Tribunal held that the Additional Collector's order suffered from this infirmity and required de novo adjudication.

5. Compliance with the Duty Exemption Scheme and Warehousing Provisions:
The Tribunal noted that the goods were imported under the advance license and duty exemption scheme, meaning they were not dutiable. Therefore, the condition for warehousing under Section 59 of the Customs Act was not applicable. The Tribunal cited Supreme Court decisions stating that conditional orders of redemption of goods under the Customs Act are invalid. The Tribunal concluded that the Additional Collector's order was bad in law and required to be set aside.

Conclusion:
The Tribunal set aside the Additional Collector's order and remanded the matter for de novo adjudication in accordance with the law, emphasizing the need for proper jurisdiction, avoidance of extraneous issues, and compliance with relevant legal provisions.