2009 (3) TMI 454 - AT - Customs

Buttons- Notification No. 21/2002-Cus.- The appellant imported parts of snap buttons and cleared the same at nil rate of duty availing the benefit of exemption Notification No. 21/2002, Sl. No. 140. A bond was executed for producing proof of re-export within 3 months from the date of import. Subsequently, proceedings were initiated against the appellants on the ground that the said exemption notification is not applicable to parts of snap buttons. The lower authorities confirmed the demand of Rs.27,52,846/- being the duty foregone on the imported goods. The appellants were aggrieved over the order of the Original Authority and therefore, they approached the Commissioner (Appeals) for relief. The Commissioner (Appeals) passed the impugned order and upheld the order of the Original Authority. The appellants are aggrieved over the impugned order. Hence they have come before the Tribunal for relief. Held that- The garments had also been exported, even though the Notification gives exemption to button only. In the circumstances of the case, the benefit to be extended to parts. The snap button consists of 4 parts, a single part in isolation does not have any use at all. If one part is imported, all the other parts also, have necessarily to be imported for use. In such circumstances, the part also would be covered by entry No. 140. Any other interpretation would lead to absurdity. Moreover, the fact that the parts of the snap buttons had been used in the garments and exported is not disputed. In our view the appellants had fulfilled the conditions of the relevant Notification by which the goods imported have to be used in the exported goods and thereafter exported. As long as this condition had been fulfilled, no duty can be demanded on the imported goods. There is no merit in the order demanding duty foregone. Hence, we set aside the same and allow the appeal with consequential relief.

Summary

Issues:
- Interpretation of exemption Notification No. 21/2002, Sl. No. 140 for imported parts of snap buttons.
- Applicability of the exemption to individual parts of snap buttons.
- Whether all parts of snap buttons should be imported for use in garments to qualify for exemption.
- Fulfillment of conditions under the relevant Notification for duty exemption.

Analysis:
The appeal before the Appellate Tribunal CESTAT, Bangalore was filed against the Order-in-Original (OIA) No. 542/2007 passed by CC (Appeals), Cochin. The appellant had imported parts of snap buttons and cleared them at a 'nil' rate of duty under exemption Notification No. 21/2002, Sl. No. 140, with a bond executed for re-export proof within 3 months. Subsequently, proceedings were initiated against the appellant, contending that the exemption did not apply to parts of snap buttons, leading to a demand of Rs.27,52,846 being the duty foregone. The Commissioner (Appeals) upheld the Original Authority's order, prompting the appellants to approach the Tribunal seeking relief.

During the proceedings, it was observed that different parts of the snap buttons collectively formed a snap button, even though each part was imported separately. The Revenue argued that the exemption applied only to the button itself, not its parts, citing the specific entry in the notification. However, the appellant relied on Rule 2(a) of the General Rules of interpretation, asserting that the term "button" encompassed its parts as well. Moreover, the appellant highlighted that all parts were used in manufactured garments that were subsequently exported, emphasizing that the parts' import was integral to the button's functionality. The Tribunal agreed with the appellant's interpretation, emphasizing that the parts had been utilized in exported garments, meeting the notification's conditions. Consequently, the Tribunal set aside the duty demand, allowing the appeal with consequential relief.

In conclusion, the Tribunal's decision centered on the expansive interpretation of the term "button" to include its constituent parts under the exemption notification, emphasizing the functional necessity of importing all parts for garment production and export. The judgment underscored the fulfillment of notification conditions through the parts' utilization in exported goods, ultimately leading to the duty exemption and relief granted by the Tribunal.