2012 (10) TMI 630 - CGOVT - Customs

Classification - leather applicants claimed the goods having description as buffalo sole leather fall under 410701 - Department held that their goods are classifiable under 410709 as Others - Council of Leather Research Institute (CLRI) has opined that impugned goods meet the definition of finish leather accordingly to Public Notice No. 3-ETC (PN)/92-97, dated 27-5-1992 Held that - Opinion of CLRI clarifies the nature of product i.e. that sole leather is a finished leather. Further, department has also not given any counter argument to CLRI opinion that the impugned goods passes through 16 stages during their processing - when expert body has given opinion in the favour of exporter and department has some reservations about it, the matter can be got clarified by again seeking their opinion as some specific point rather than straightaway rejecting the same in absence of any other contrary documentary evidence - case remanded back to original authority

Summary

Issues:
Classification of exported goods for drawback under Customs Act, 1962.

Analysis:
The revision applications were filed against the Order-in-Appeal by the Commissioner of Customs (Appeals), Chennai, regarding the classification of exported goods for drawback under heading 410701 of the drawback schedule. The applicants claimed that the goods exported were finished leather eligible for a drawback rate of 7.5%. They provided technical evidence from the Central Leather Research Institute and the Council for Leather Exports to support their claim. The Commissioner of Customs (Appeals) upheld the lower rate of drawback under heading 410799, stating that the goods did not undergo major processes like dyeing and protective coating. The applicants argued that the Commissioner erred in not accepting the classification under heading 410701 specifically covering finished leather at a 7.5% drawback rate. They contended that the Commissioner's reliance on presumptions and assumptions without legal basis was incorrect.

The respondent argued that the subject goods, although finished leather, were rightly classified under drawback Serial No. 410799A as they were different from finished leather of cow/buffalo/calf covered under Serial No. 410701A. They claimed that the goods were sole leather and not of the same category as cow/buffalo/calf finished leather. The respondent also highlighted that the Public Notice No. 3/ETC (PN) 92-97 dated 27-5-1992 specified various types of finished leather, including sole finished leather, which fell under the residual entry of 410799A. They further mentioned that leather soles made from sole leather attracted a lower drawback rate under a different serial number.

After reviewing the case records and orders, the Government noted that the applicants exported goods described as "Buffalo Sole Leather" and claimed drawback under heading 410701. The Original authority classified the goods under heading 410709 as 'others' instead of 410701, resulting in a lower drawback rate. The Government observed that the department's classification was based on the number of processing stages, requiring a minimum of 10 stages for heading 410701, which was not supported by specific authority. The Government considered the opinion of the Central Leather Research Institute (CLRI) stating that the goods met the definition of finished leather and underwent 16 processing operations in 45 days. The Government emphasized the weight carried by CLRI's expert opinion in leather-related matters and criticized the lower authorities for disregarding CLRI's opinion without providing counterarguments or seeking further clarification.

Consequently, the Government set aside the impugned orders and remanded the case to the original authority for a decision after seeking specific clarification from CLRI if they disagreed with their previous opinion. Both parties were to be given a reasonable opportunity for a hearing during the redetermination process. The revision applications were disposed of accordingly.