1991 (3) TMI 251 - AT - Customs

Summary

Issues Involved:
1. Classification of imported goods as "rags"
2. Compliance with the Import-Export Policy, 1988-91
3. Valuation of imported goods
4. Legality of the imposed fine and penalty

Detailed Analysis:

1. Classification of Imported Goods as "Rags":
The primary issue was whether the imported items could be classified as "rags" under the Import-Export Policy, 1988-91. The adjudicating authority held that the items, which included skirts and pants with minor cuts, did not qualify as "rags" because they could be repaired and reused. The Collector relied on the Concise Oxford Dictionary definition of "rags" and concluded that the items did not fit this definition. However, the Tribunal found this reliance to be a misdirection in law, emphasizing that the statutory definition in the ITC Policy should prevail. The Tribunal noted that the goods were indeed woollen and synthetic rags but questioned their complete premutilation as per the norms.

2. Compliance with the Import-Export Policy, 1988-91:
The appellants argued that the goods were imported under the 1985-88 ITC Policy, and thus should be covered by it. However, the Tribunal dismissed this plea because it was not raised before the adjudicating authority or in the memorandum of appeal. The Tribunal focused on the 1988-91 ITC Policy, which required that woollen and synthetic rags be completely premutilated. The Tribunal found that the goods did not meet the mutilation standards as per Public Notice No. 33/88, which was in effect at the time of import. The appellants' request to clear the goods without further mutilation indicated non-compliance with the policy.

3. Valuation of Imported Goods:
The adjudicating authority had increased the value of synthetic rags from US $0.35/kg to $0.40/kg and woollen rags from US $0.77/kg to $0.95/kg. The appellants contended that the valuation was arbitrary and not based on specific instances. They provided evidence of similar imports at lower values. The Tribunal found that the Collector's action in enhancing the value was not sustainable, noting that if synthetic rags were valued at $0.40/kg, woollen rags should also be valued similarly. The Tribunal concluded that there was no under-declaration of value and accepted the appellants' declared value of Rs. 4,84,540.

4. Legality of the Imposed Fine and Penalty:
The adjudicating authority had imposed a fine of Rs. 10,00,000 and a personal penalty of Rs. 1,00,000 on the appellants. Given the revised valuation, the Tribunal reduced the fine to Rs. 5,00,000 and the penalty to Rs. 50,000. The Tribunal held that the goods were liable to confiscation under Section 111(d) of the Customs Act due to non-compliance with the mutilation standards but adjusted the penalties accordingly.

Conclusion:
The appeal was disposed of with the Tribunal modifying the penalties and fines imposed by the adjudicating authority. The Tribunal upheld the classification of the goods as rags but required compliance with the mutilation norms. The valuation was corrected, and the penalties were reduced to reflect the revised valuation and compliance issues.