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Imposition of actual user condition and end-use bond condition for
insole/ midsole and sheets thereon Notification No. 11/97-Cus. Sl. No. 94(1) and
Notification No. 23/98-Cus. Sl. No. 108
Circular No. 74 dated 6th
October 1998
Commissioner of Customs, Mumbai has made a reference
on the eligibility of Nylon Tricot Fabrics/ P. U. leather cloth under the above
Sl. No. of the Notification No. 11/97-Cus. read with list 3 (A) therein. The
dispute was that the product was having multiple uses and the main use not being
that of use in leather industry. While Commissioner of Customs, Mumbai
considered, this item to be covered under the heading Insole and Midsole, the
DRI Zonal Unit, Mumbai suggested, citing the Judgement of the Supreme Court and
the views of Central Leather Research Institute, Chennai that this Nylon Tricot
Flocking material is not covered under the said Notification. In addition, he
stated that in view of the recent judgement of the Supreme Court in the cases of
Commissioner of Customs, Mumbai Vs. Pacific Exports and Commissioner of Customs,
Mumbai Vs. Handicrafts Exports both pertaining to leather industries, the
existing practice of the Custom House allowing unconditional benefit of the
Notification to this fabric needs reconsideration.
This issue was examined in the Board. The said
Notification, which has been repeated at. Sl. No. 108 of Notification No.
23/98-Cus. is seen to have made a distinction between the 2 parts of the entry
in column 3. The first part, containing parts and consumables and other
items of list 3(A) does not have a specific restriction. In the second part,
containing items of list 3(B), the importer is required to furnish an
undertaking to the Assistant Commissioner that the goods shall he used in the
leather industry and that he shall maintain an account of imported goods and
that he shall submit such accounts periodically etc.
2. It is seen that
the goods in the first part are, undeniably, goods for use in the leather
industry only. In the second part because there are some goods, which are likely
to have more than one use, the said list had been hemmed by the stipulation that
the accounts should be maintained. However, both the lists put together, only
the goods for use in the leather industry can be covered under this
Notification. The items, which is being sought to be cleared i.e., Nylon Tricot
Flocking Fabric is undeniably having more than one use. The judgement of the
Supreme Court in the case of Commissioner of Customs, Mumbai v. Pacific Exports
cited in 1998 (99) ELT 488 (SC) and Commissioner of Customs, Mumbai v.
Handicrafts Exports 1997 993) ELT 6 (SC) have discussed the exemption
Notifications pertaining to the goods used in leather industry though of an
earlier notification. In the said earlier notification the words used were also
'for use in the leather industry'. There is no substantial difference in the
words used in the 3 notifications. The Supreme Court had stipulated that
the goods imported are having use in leather industry and could also be used in
other industry. If the importer is a trader should adduce evidence to show that
the goods imported by him were meant for use in the leather industry. In the
subsequent case of Handicraft Export, the Supreme Court has mentioned that the
importer will have to prove that the goods are not only capable of being
utilised as embellishment for sheets but also they were imported for that
purpose. It has to be shown that the goods were actually used as embellishment.
3. In view of the
two judgements of the Supreme Court, which pertain to the leather industry and
which mainly examine the import of the goods for use in the leather industry,
the above goods viz. Nylon Tricot Flocking Fabric can only be cleared under this
notification provided the imported abide by the condition stipulated by the
Supreme Court i.e. end use condition has to be stipulated at the time of
clearance of the goods from the customs.
4.
The Customs House may, therefore, change their existing practices to fall
in line with the above judgements.
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