IMPORTANT POINT
Burden of proof as to whether the item in question is taxable in the manner claimed by revenue is on revenue and mere assertion in that regard is of no use.

Headnote:Customs Act, 1962—Exemption Notification No. 20 of 1999—Appellant-assessee was importing “PU quoted insole sheets” in a rolled up form for loading convenience—Question whether expression “insoles, mid-soles and sheets thereof” used in exemption Notification can be interpreted to mean that sheets roled up for convenience of loading and transportation would disentitle assessee from benefit of notification ? No.
       Held : Assessee in the present case is importing “PU quoted insole sheets” in a rolled up form for loading convenience. Even as per the ISI specifications for “PVC coated fabrics for footwear industry” requires the packing to be in the form of rolls so as to ensure safe transportation. Clause 51 of Indian Standard Institution specification for PVC coated fabrics for footwear industry IS:8699-1977 provides :
       “5.1 Packing – The material shall be securely packed in the form of a roll so as to ensure safe transportation.”
       Contention of the assessee that the goods had been imported in the form of sheets being 50 metres long were rolled up as specified by the ISI standards for loading and safe transportation has gone unrebutted. The burden was on the revenue to prove that the subject goods were not “sheets” for which no evidence whatsoever was led by the revenue. The burden of proof as to whether the item in question is taxable in the manner claimed by the revenue is on the revenue. Mere assertion in that regard is of no use. It has repeatedly been held by this Court that it is for the taxing authority to lay evidence in that behalf. [See Union of India and Others vs. Garware Nylons Ltd. & Others, 1996(10) SCC 413 – Para 15 and Hindustan Ferodo Ltd. Vs. Collector of Central Excise, Bombay, 1997 (2) SCC 677 – Para 4). The burden was on the revenue to prove that the said goods were not “sheets” for which no evidence whatsoever was led by the Tribunal. The goods, imported in the form of the sheets but rolled up for loading and transportation purposes, would not convert them into `films’ or `sheetings’ thereby denying the assessee the benefit of the exemption Notification.(Paras 13 and 14)
       In the present case, the situation is just the reverse. Assessee says that it has imported “sheets” of running length in a rolled up form for the sake of convenience for loading and transportation purposes as per the ISI specifications. Assessee sold the subject goods in different lengths as per requirement of the customer. The customer then used the same by cutting them into different sizes (shape or size of the shoes) as per the requirement to insert them into shoes. In M/s. K. Mohan and Company Exports (supra) this Court considered a different exemption Notification set out in the context of different facts, its import and meaning. In the context of the present notification the distinction drawn by this Court while accepting the alternative submission of the learned counsel in M/s. K. Mohan and Company Exports (supra) between “sheet” and “sheeting”, would not be attracted. To illustrate, if the exemption is granted to the `carpets’ and the assessee imports the carpet in a running length of 50 meters length in a rolled up form, and then sells the same in pieces after cutting them from the running length as per requirement of the customer would not disentitle the assessee from the benefit of the notification exempting duty on carpets simply because the carpets were brought in a rolled up form in a running length.(Para 15)

JUDGMENT

Bhan, J.—The point involved in the present appeal is :—

Whether the expression “insoles, midsoles and sheets thereof” used in the exemption Notification No. 20 of 1999 issued under the Customs Act, 1962 (for short “the Act”) can be interpreted to mean that the sheets rolled up for the convenience of loading and transport, would disentitle the assessee from the benefit of the Notification?

FACTS

2. Appellant is a partnership firm based in New Delhi dealing in the business, inter alia, of leather footwear materials and accessories. One of the items regularly imported by the appellant is “PU coated leather fabrics” which are extensively used in the leather footwear industry as “insoles and midsoles”. This item was covered originally by Notification No. 224/85 and thereafter by the successor Notification No. 45/94. As on the date this item figures under the description “insoles, midsoles and sheets thereof” figuring in SI. No. 108 of List 3 (A) (3) in Notification No. 20/99 which replaced the earlier Notification. The same reads :

TABLE

S.Chapter orDescription of GoodsStandardAdditionalConditionNo.headingRateDutyNo.No. or sub-rateheading No.

(1)(2)(3)(4)(5)(6)

108.64 or anyThe following goods for use in other chapterthe leather industry, namely :

(1) Parts, consumables and other20%——items specified in List 3(A)

(2) Other parts, consumables and 20%—14items specified in List 3(B)

Xxxxxx

xxxxxx

List 3(A) (Sec. S.No. 108 of the Table)

PARTS, CONSUMABLES AND OTHER ITEMS

(1) Leather, plastic, rubber coco board, masonite board or plastic board, heels with or without rubber/PVC top lift (2) Toe caps and counters for leather footwear (3) Insoles or midsoles and sheets therefor (4) Welts made from leather or plastic (5) shoes eyelets (6) Felt sleeves (7) Heel tips etc.

xxxx

3. Before proceeding further it is relevant to mention that PU coated leather fabrics was the subject matter of a contested adjudication proceeding between the parties in 1995 in which the appellant sought to clear a consignment claiming the benefit of the Exemption Notification No. 45/94. A show cause notice was issued by the Customs Authorities at Chennai claiming that the goods were not classifiable as “insoles, midsoles and sheets thereof”; the said goods had no use in the leather industry and that the goods were capable of other uses and hence the end use requirement was not satisfied. The Commissioner of Customs, Chennai by a considered order dated 28.2.1995 held that the subject goods were indeed capable of use in leather footwear industry as insole material. It was further held that the capability of the goods for being used in the footwear industry having been proved, the Notification did not contemplate any end use restriction. Consequently, goods were accepted as “insole” and the benefit of Notification No. 45/94 was granted to it. This order of the Commissioner of Customs was cited with the approval by Eastern Bench of the Tribunal reported in Mod Apparel Exports Vs. CC Calcutta, 1996 (14) RLT 174 (CEGAT). This order of the Tribunal was upheld by the High Court of Calcutta in C.A. No. 1717 of 1995 – Tirupati Garments & another Vs. Union of India & others dated 11.6.1996. Thereafter, the appellant have been clearing several consignments of the same material and the department had permitted the clearance following the order of Commissioner which had become final since no appeal, review or revision had been preferred against it.

4. In February, 1996 another consignment imported by the appellant and cleared by the Customs Authorities at Chennai was seized by the new Delhi Preventive Wing when the goods were being unloaded at the appellant’s Karol Bagh godown. The said seizure resulted in a fresh adjudication in Chennai wherein the Commissioner passed an order holding that the appellant had failed to establish actual use in leather industry and consequently denied the benefit of the Notification No. 45/94. This order was set aside and the case was remitted back for a fresh

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Judicial Analysis

SupremeToday

2006 Supreme(SC) 113

IMPORTANT POINTBurden of proof as to whether the item in question is taxable in the manner claimed by revenue is on revenue and mere assertion in that regard is of no use.

Cases Referred (3)

Judicial Analysis

IMPORTANT POINT
Burden of proof as to whether the item in question is taxable in the manner claimed by revenue is on revenue and mere assertion in that regard is of no use.