1990 (6) TMI 140 - AT - Customs

Summary

Issues:
1. Appeal against the order of Collector (Appeals) dated 28-10-1988 regarding the seizure of nylon yarn believed to be smuggled goods.
2. Burden of proof on the respondents under Section 123 CA, 1962.
3. Interpretation of the term "yarn" under the Customs Act.
4. Technical distinction between yarn and thread.
5. Application of Section 123 of the Customs Act to the case.
6. Evidence presented by both parties regarding the nature of the seized goods.
7. Decision on whether the seized goods were yarn or thread.
8. Upholding the order of the Collector (Appeals) and rejecting the department's appeal.

Analysis:
The appeal before the Appellate Tribunal CEGAT, New Delhi involved a dispute arising from the seizure of nylon yarn believed to be smuggled goods. The department contended that the goods were subject to confiscation and a penalty due to being notified items under Section 123 CA, 1962, placing the burden of proof on the respondents, which they allegedly failed to discharge. The Collector (Appeals) had accepted the respondent's contention that the goods were thread, not yarn, based on evidence showing technical distinctions between the two and that the goods were purchased legitimately. The department argued that there was no distinction between thread and yarn, and the term "yarn" in the notification should include thread.

The respondents, however, presented technical literature and certificates from the Hosiery Association demonstrating the clear difference between yarn and thread in trade and usage. They maintained that Section 123 did not apply as it covered only yarn, not thread. The evidence also showed that the seized goods were sewing thread, not yarn, as confirmed by the Collector (Appeals). The Tribunal found that since only yarn was notified under Section 123, it could not be applied to thread, upholding the Collector (Appeals)'s decision.

The Tribunal further considered the physical samples of the seized goods, which were identified as sewing thread based on their packaging and labeling. The Collector (Appeals) had correctly determined that the goods were sewing thread, not yarn, and that the respondents had acted in good faith in purchasing them. Consequently, the Tribunal confirmed the Collector (Appeals)'s order, rejecting the department's appeal and directing the release of the goods. The judgment emphasized the technical distinctions between yarn and thread, clarifying the application of Section 123 and supporting the Collector (Appeals)'s decision based on factual and legal grounds.