2000 (10) TMI 491 - AT - Central Excise

Issues Involved:

1. Classification of the imported item as "Outer Lining" material.
2. Validity of the transferred Advance Licence for the imported goods.
3. Nexus between the imported material and the export product.
4. Functional utility and trade understanding of the term "lining material."

Detailed Analysis:

1. Classification of the Imported Item as "Outer Lining" Material:

The primary issue was whether the imported polyester fabric could be classified as "Outer Lining" material. The Deputy Collector initially held that the imported item could not be treated as outer lining, ordering confiscation under Section 111(d) of the Customs Act, 1962, read with Section 3 of the Foreign Trade (Development and Regulations) Act, 1992, and clause 3 of the Import (Control) Order, 1955. The Commissioner (Appeals) overturned this, accepting the importers' argument that the polyester fabric could serve as lining material for leather jackets, particularly reversible types. The Commissioner relied on certificates from the Council for Leather Exports and the Chamber of Commerce, Taiwan, which certified that synthetic/polyester fabrics could be used as lining material in leather garments.

2. Validity of the Transferred Advance Licence for the Imported Goods:

The original Advance Licence described the import as "outer lining" for export products like leather jackets. The Deputy Collector found that the imported fabric was not covered by the licence as it was a textile fabric for gents wear/suiting material, not suitable for leather wallets, key cases, etc. The Commissioner (Appeals) held that once the export obligation under the licence was fulfilled, the licence became freely transferable, and the transferee did not need to prove that the original licence holder used similar goods in their export product.

3. Nexus Between the Imported Material and the Export Product:

The Deputy Collector emphasized the lack of evidence showing that the imported material was used in the export products of the original licence holder. The Commissioner (Appeals) dismissed this requirement, stating that the focus should be on whether the material could be used for the purpose stated in the licence. The Commissioner found that the imported polyester fabric could be used as lining material in leather jackets, thus fulfilling the licence requirements.

4. Functional Utility and Trade Understanding of the Term "Lining Material":

The Deputy Collector's decision was based on definitions from Fairchild's Textile Dictionary and other textile glossaries, which described lining material as fabric used to support the main fabric, providing smoothness and comfort. The Commissioner (Appeals) accepted broader interpretations, allowing for the use of strong polyester fabric as lining material in heavy leather garments. However, the appellate tribunal found that the imported fabric, being a gents suiting material, did not fit the definition of "lining material" as understood in trade and by the definitions cited. The tribunal held that the fabric's use in reversible jackets did not qualify it as lining material, as it altered the nature of the finished product, making it a reversible jacket rather than a leather jacket with lining.

Conclusion:

The appellate tribunal concluded that the imported polyester fabric did not meet the definition of "lining material" and upheld the Deputy Collector's order. The tribunal emphasized that the fabric's primary use as gents suiting material could not be reclassified based on its intended use in reversible jackets. The tribunal set aside the Commissioner (Appeals)'s order, confirming the original order of confiscation and penalties. The appeal by the Revenue was allowed.

← Previous Next →