TaxTMI 
TaxTMI 
1981 (1) TMI 258
X X X X Extracts X X X X
X X X X Extracts X X X X
....llants at Sl. Nos. 34 and 36; Shri Harbans Singh, Advocate for the appellants at Sl. Nos. 37 to 39; Shri C.L. Beri, Advocate for the appellant at Sl. No. 42; Shri H.D. Bhalla, General Manager for the appellant at Sl. No. 45; and Shri V.S. Gupta, Partner for the appellant at Sl. No. 46. Nobody represented the appellants at Sl. Nos. 35, 40, 41, 43, 44 and 47 to 53. Appellants at Sl. Nos. 55 to 66 have not asked for any personal hearing. 4. The two issues common to most of these appeals are :- (i) The validity of the importations under the Import Control Regulations and whether there has been any contravention of clause 3 of the Import Control Order, 1955; and (ii) The liability for Customs Duty on the goods imported. 5. The Board now takes up the first issue for consideration. 6. The Board observes that (as argued by the Counsels, and at length by Shri J.R. Gagrat) there was no dispute regarding the licensing aspect till 1972. 7. For several years prior to 1967 "woollen rags" were being allowed to be imported as a raw material for the manufacture of "shoddy yarn". However, from 27-11-1967, the item became canalised for import through th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Court, on a petition (Misc. Petition No. 92 of 1974 , filed by Nagesh Hosiery Mills, in which the Court quashed the order passed by the Collector of Customs, Bombay confiscating absolutely 81 bales of "woollen rags" (seized from town, after their clearance through Customs) belonging to the petitioners under section 111(d) of the Customs Act, 1962 read with section 3 of the Imports and Exports (Control) Act, 1947. 11. It is the appellants' contention in all these appeals before the Board that their cases are on all fours with the case dealt with in the said petition and therefore the Collectors' orders should be set aside in these cases also. 12. In the Nagesh Hosiery Mills Case, the Court had taken the view that since there was no "special definition" for the item ''woollen rags" anywhere (either in the Import Trade Control Order (hereafter referred to as "ITC") or the First Schedule to the Indian Tariff Act, 1934 (hereafter referred to as the "ICI") it will "have to be construed not in the scientific or technical or laboratory sense but in the sense which persons dealing or commercially conversant" with the item would attribute to it, as observed by Tulzapurkar in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... item should have been made. If for example, the import of a particular item otherwise well-known to the trade was to be prohibited the item itself must contain some statutory prohibition or a special definition given, which of course would then be known to the party importing and also to the party exporting. In any other case, the ordinary meaning as known to the trade must be applied. This is not to accept the conclusion of the 1st Respondent (i.e. Collector of Customs, Bombay) that hosiery or garments discarded in richer countries and implying thereby that they are "Rags" only in richer countries and are "second hand clothing in India". The expression "rags" must be given its ordinary meaning viz. "hosiery or garment which is ordinarily discarded by the wearer thereof when it cannot be put to any other use economically". This does not mean that the expression "rags" has to be construed in the light of the wearer of the hosiery or the garment by an individual. The expression "rags" is not to be construed in the light as to what use such a hosiery or a garment would be made by a beggar on the street or by a poor individual. It has to be given a common sense meaning viz., as would ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ave to be mutilated before release by Customs authorities". It was further provided in the Public Notice that "the above definition will also apply to consignments that had arrived prior to the date of issue of the Public Notice hut are yet to be cleared". 20. The Public Notice No. 115-ITC (PN)/74 issued on 8-8-74 thus provided for application of the new definition of "woollen rags" to shipments arrived but not yet cleared. 21. The Board is of the firm view that while it would be proper to define a product by executive fiat and on a particular date, it would not only be imprudent to apply that definition retrospectively, but that such an act would not be sustainable in law. The new definition cannot hence be made applicable to goods already shipped/arrived. 22. The imports dealt with in these appeals are all of dates prior to the issue of the above Public Notice and therefore it has to be conceded that there was no statutory (or even satisfactory) definition of "Woollen rags" at the time of importation of the consignments under appeal. In such an absent situation what are "woollen rags" is a matter which has to be decided according to what they had come to b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....these appeals before the Board, are only those made in the Nagesh Hosiery Mills case. 31. The Board accordingly holds that the appeals under consideration before it are in all respects the same as the one in Nagesh Hosiery Mills in as much as (a) these goods were also imported against STC's global tenders or (b) against indents approved by STC, and (c) at a time when there was no statutory (or satisfactory) definition of the term "woollen rags" for ITC purposes. 32. For all the reasons which have been set out above the Board comes to the conclusion that the "woollen rags" imported would have to be treated as validly imported against the licences in the name of STC with letters of authority in the names of the importers or against REP licences issued to the importers. 33. Accordingly, the Board holds that the orders of absolute confiscation under appeal were not justified and accordingly sets them aside. However, in terms of the description of the licences governing the importations, and the global tenders or indents placed on the suppliers, which refer in terms to unserviceable or mutilated garments the Board in allowing the appeals directs that the goods....
X X X X Extracts X X X X
X X X X Extracts X X X X
....msp;Moreover, this "Advice" has no statutory authority behind it. The term "Woollen Rags" is not defined anywhere in the ICT. In fact there is no item in the ICT (i.e. the First Schedule of the Customs Tariff Act) covering "Rags" per se except Item 53(1) which however refers to rags for paper making and hence not relevant to the issue in question. 39. Then again, no percentage of wool content has also been laid down in the ICT as a criterion for deciding upon old woollen rags. As all discarded textile materials, i.e. garments and clothing would come under the term 'old rags', old rags would obviously also include all discarded "hosiery" and "knitted apparel" which are specifically mentioned in Item 51(1) of the ICT. 40. The Board considers it as highly material that Tariff Item 51(1) considers articles "containing not less than 15% of wool by weight" as "woollen hosiery and woollen knitted apparel". 41. Against this prescription (for obviously new and unused goods) the Board fails to understand the logic in laying clown a minimum percentage of 60% wool for discarded hosiery and knitted apparel for their being considered as "woollen rags". In any event such a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o any specific item of the ICT. It was perhaps in printing the working edition of the ICT, that it started making its appearance as a footnote to Item 49 (4). This Item refers to "Woollen carpets, floor rugs, shawls and other manufactures of wool, not otherwise specified, including felt". 48. The two points that the Board, in this context, want to make are these : Firstly, while some "woollen rags" could fall under Item 49(4), ICT, it is not necessary that all "woollen rags" must fall under that Item alone. Since discarded clothings are also "woollen rags" they could very well fall under different other appropriate items in the Tariff (since no Item has been specified in the Notifications). Secondly, wool content of any "woollen rags" will become, applicable only if it were specified either under any Item in the ICT and referred to in the Notifications-which-is not the case here, or in the Notifications themselves-which is also not the case here. 49. Two other factors are also important and relevant in this context. 50. The first is the method of sampling adopted in the Bombay Custom House (to which all these appeals relate). 51. The Board unde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of), or a "substantial" quantity of serviceable garments (i.e. in considerable quantity but did not form a major portion of a bale), or serviceable garments were present in a "predominant" quantity (i.e. the major portion of the contents of a bale consisted of serviceable garments). Representative samples were also required to be sent along with the examination reports. From the end of February, 1973 the procedure for selection of packages for examination was slightly changed so as to make it tighter. 52. The above retailing of the methods of sampling adopted would show that it was not uniform and varied in "quality" and "quantity" from time to time. It stands to reason that in consignments of this nature which included a vide variety of articles of men's women's and children's wear, no sampling can be said to be perfect, or even complete, unless each article in each bale of each consignment was physically examined and chemically tested thereafter, wherever necessary. This would have been a labour worthy of an epical Hercules, but an obvious physical impossibility for the Custom House, considering the entire spectra of the various articles that would have had to be so ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(3 from woollen & 3 from non-woollen) : 5 samples found to be woollen and 1 non-woollen 5 samples 46% woollen 54% non-woollen 34 153 (i) 3 bales (i.e. 1.96%) Woollen 20.30% only 2nd examination 8 samples Woollen - 12.5% Non-woollen - 87.5% 2 samples Average 21.95% woollen (ii) 4 bales (i.e. 2.6%) Woollen - 26% 20 samples 60% woollen 40% non-woollen 35 98 3 bales (i.e. 3.06%) Orlon & Nylon 2 samples both non-woollen - 55. It is, therefore, not beyond the realms of probability, and well within the realms of possibility, that if the sampling and testing of the goods imported had been ample and uniform, the results might predictably have been different showing some percentage of woollen content. [It is relevant here to again recall that the only Tariff Item that prescribes a woollen content is Item 51(1) relating to "Hosiery and Knitted Garments"]. 56. In passing, the Board would also like to make a mention of a ground which has been urged in the appeals by some of the appellants, to quote one:- "Due to Woollen Rag Scandal at that time the examination was not done properly to the exten....