COMMISSIONER OF CUSTOMS Vs. BEST FABRICS

JUDGEMENT

(1.) THE department is the appellant. The respondents had filed Bill of Entry No. 5418 dated 08.02.1994 for clearance of certain quantity of 100% Nylon outerlining valued at Rs. 14,10,0657 -, imported from Taiwan under value -based advance licence No. 35493 dated 13.05.1993. Clearance of the goods was allowed duty -free under Notification No. 203/92 -Cus. dated 19.05.1992. Later the Directorate of Revenue Intelligence (DRI), Chennai gathered intelligence regarding evasion of Customs duty in respect of imports made in the name of the respondents under DEEC scheme and launched investigations into the above imports as also similar imports made by M/s. Goyal Dresses, Chennai. Statements were recorded from Shri S. Vaidyanathan, Managing Partner of M/s. Best Fabrics (respondents), Shri Bharat Goyal, a partner of M/s. Goyal Dresses and one Shri Rajesh Bhansali, an associate of Shri Bharat Goyal. These persons admitted that the goods in question had been imported for the purpose of sale in the market and not for utilisation in the manufacture of products for export. Shri Vaidyanathan also disclosed that he had made representation to the then Minister of State for Finance, New Delhi, wherein he had submitted that he had noknowledge of the above consignments and had not ordered for the same. It was also revealed that the consignment was fraudulently brought to the respondent's godown by Shri Bharat Goyal and his associate. Thus Shri Vaidyanathan disowned the goods. DRI also noted that the fabrics imported under the advance licence were to be used in the manufacture of "gents half sleeve shirts and ladies blouses" for export. But the material imported by the respondents was not required for the manufacture of the said export products. Thus it appeared to the DRI that the goods imported by the respondents were not eligible for duty -free clearance under the above licence in the DEEC scheme. It further appeared that the goods had been undervalued inasmuch as the manufacturers' invoice obtained by the investigating officers showed the unit price of the goods as USD 1.405 per metre CIF vis - -vis the declared value of USD 0.60 per metre CIF. On the basis of these results and investigations, the goods were seized and subsequently a show -cause notice was issued for (a) confiscating the goods (b) imposing penalty on M/s. Best Fabrics and their Managing Partner and (c) recovering duty on the enhanced value of Rs. 31,23,371/ - of the goods. After considering the written replies to the show -cause notice and hearing Counsel for the noticees and after examining the evidence adduced by the party, learned Commissioner dropped the proposals made in the show -cause notice and ordered immediate release of the goods to the respondents.

(2.) IN the present appeal, the Revenue has challenged the decision of the lower authority except in respect of assessable value of the goods. The appellant has accepted USD 0.60 per metre as the basis for valuation of the goods for the purpose of levy of duty. However, the Commissioner's order in other respects is challenged on numerous grounds. The main ground raised in this appeal is that there was no basis for extending the benefit of doubt to the respondents where their Managing Partner had disowned the goods and had categorically admitted under Section 108 of the Customs Act that the goods were only meant for sale in the market and were not intended to be used in the manufcture of their export product. Shri Bharat Goyal and Shri Rajesh Bhansali had also admitted in the statements under Section 108 that the goods had been imported by them in the name of M/s. Best Fabrics (respondents) only for sale in the market and not for use in the manufacture of export product of M/s. Best Fabrics. It is also pointed out by the appellant that Shri Vaidyanathan had, in his representation to the then Minister of State for Finance, submitted that he had not ordered for the goods and that S/Shri Bharat Goyal and Rajesh Bhansali had fraudulently brought the goods to his godown. None of the statements was validly retracted. The retraction made for the first time in the replies to the show -cause notice was not valid in the absence of evidence that the retracted statements had been recorded by threat, coercion etc. The appellants has also referred to earlier cases of similar imports by M/s. Leatherman Fabrics (P) Ltd. and M/s. Suntex (P) Ltd. and has relied on the Tribunal's decision rendered in those cases. It is submitted that, in the instance case also, the goods imported by the respondents were suitable for leather garments only and not suitable for the export products mentioned in the advance licence. Learned SDR has reiterated these grounds of the appeal.

(3.) LD . Counsel has argued in support of the impugned order. He submitted that the export obligation in relation to the subject import under the DEEC scheme has been substantially complied with before the import itself. Garments valued at over Rs. 84 lakhs had been exported against a total value of over Rs. 1 crore prescribed for exports under the scheme. Where nearly 84% of export obligation had been discharged by the respondents and the imported input material was seized by the officers of DRI, it was not correct for the department to take action against them on the ground of non -fulfilment of export obligation. Ld. Counsel further pointed out that the Commissioner's finding that the nylon tafetta fabrics imported by the respondents could be used in the manufacture of the export goods mentioned in the advance licence had not been challenged by the appellant and, therefore, the grounds of the appeal were not tenable.