1995 (11) TMI 215 - AT - Customs

Imported goods exempt under Notification No. 224/85 for leather industry use. Actual use proof not required.

The Tribunal ruled in favor of the appellants, finding that the imported goods were eligible for exemption under Notification No. 224/85 for use in the ... Demand - Exemption Issues Involved1. Eligibility for exemption under Notification No. 224/85.2. Requirement of proof for actual use in the leather industry.3. Validity of the Assistant Collector's demand for recovery of short-levied duty.Issue-wise Detailed Analysis1. Eligibility for Exemption under Notification No. 224/85The appellants imported metallic chains and brass fittings declared as embellishments for use in the leather industry. The initial clearance was granted under Notification No. 224/85, which exempted goods imported for use in the leather industry from additional customs duty and provided a 40% ad valorem exemption on basic customs duty. The notification described the specified goods as 'Metallic embellishments other than zip fasteners.'The Assistant Collector and the Collector of Customs (Appeals) later contested this exemption, arguing that the goods imported were brass chains in running length, which required further processing and could be used in products other than leather goods, such as imitation jewelry. Therefore, they did not qualify for the exemption. The Tribunal, however, found that the goods were eligible for the exemption under Notification No. 224/85, as the term 'for use' means intended use, not actual use, as per the Supreme Court's interpretation in the State of Haryana v. Dalmia Dadri Cement Ltd.2. Requirement of Proof for Actual Use in the Leather IndustryThe notices for short levy under Section 28 of the Customs Act were issued on the grounds that there was no conclusive proof that the imported chains were used in the leather industry. The appellants argued that they held SSI Registration Certificates for manufacturing leather goods, which should suffice as proof of intended use.The Tribunal agreed with the appellants, citing the Supreme Court's interpretation that 'for use' should be construed as intended use. The Tribunal also referenced its own decision in Asean Trading Agency v. Collector of Customs, which followed the Supreme Court's ruling, stating that proof of actual use is not a condition for exemption. The Tribunal found that the initial clearance was granted after examining the goods and that the SSI Registration Certificates supported the appellants' claim for exemption.3. Validity of the Assistant Collector's Demand for Recovery of Short-levied DutyThe appellants contended that the Assistant Collector could not modify the original assessment and demand duty after the goods had been cleared. They argued that such an order should be appealed against or reviewed by a higher authority, citing judgments from the Delhi High Court and Bombay High Court.The Tribunal, however, clarified that Section 28 of the Customs Act specifically empowers the Assistant Collector to recover duty short-levied. Therefore, the Assistant Collector's actions were within legal bounds. However, since the Tribunal concluded that the goods were eligible for exemption under Notification No. 224/85, the issue of short-levied duty did not arise.ConclusionThe Tribunal found in favor of the appellants, holding that the goods imported were eligible for exemption under Notification No. 224/85. The requirement for actual use proof was deemed unnecessary, as intended use sufficed for the exemption. Consequently, the orders of the Assistant Collector and the Collector of Customs (Appeals) were set aside, and the appeals were allowed.