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Zarina Leather Exports V/S Commissioner of Customs [Exports], Chennai

    C/00191/2009 (Arising out of Order-in-Original No. 910/200, dated 14.05.2009 by the Commissioner of Customs, Chennai) and Final Order No. 41772/2017

    Decided On, 17 August 2017

    At, Customs Excise Service Tax Appellate Tribunal South Zonal Bench At Chennai

    By, MEMBER

    For Petitioner: S. Sankaravadivelu, Advocate And For Respondents: K. Veerabhadra Reddy, JC (AR)

Judgment Text

1. Based on intelligence, that certain exporters were exporting semi-finished leathers as finished leathers, without payment of duty and wrongly claiming duty draw-back thereon, the container was detained by the Dock Intelligence Unit (DIU). The said container, was found to be ladened with export cargo covered by Shipping Bill filed by the appellants herein. Samples were drawn and sent to M/s. Central Leather Research Institute (CLRI, in short), Chennai for testing to confirm whether the goods can be considered as Finished Leathers. In its report, M/s. CLRI certified that on account of absence of waxy protective coating and dyeing to impart medium to dark shade, the leathers do not conform to the norms as per the DGFTs Public Notice No. 3-ETC (PN)/92-97, dated 27.05.1992. Consequently, the goods were held to be liable for confiscation for attempting to export Unfinished Leathers in violation of Foreign Trade Policy, without payment of export duty by obtaining ineligible draw-back.

2. After due process of law, the original authority held that the goods under export are not Finished Leathers and were misdeclared and confiscated the same by giving an option to redeem the goods on payment of redemption fine of Rs. 5,00,000/-. A penalty of Rs. 1,00,000/- was imposed on the appellants under section 114 of the Customs Act, 1962. Being aggrieved, the appellants are before the Tribunal.

3. Learned counsel Shri S. Sankarvadivelu appearing on behalf of the appellants submitted that he is contesting only the quantum of redemption fine and penalty. He argued that different operations have to be carried out on the hides for converting into Finished Leather. Though, the quantitative process have been satisfied by the samples drawn from the consignments, the qualitative process have not been satisfied. The qualitative process such as, dyeing & waxing and coating varies in degree depending upon the requirements of the buyers. Since, the appellants are in tropical country and leather is destined to a temperate country, it is common in trade and industry that the sellers sometimes carry out further dyeing and coating to make the products suitable for using in temperate countries. Therefore, if at all, the leather is destined for a temperate country, the nature of dyeing and coating be lighter coating and not strong. Therefore, it may not be conclusively inferred that the leather exported is not Finished Leathers. In any case, the adjudicating Commissioner has imposed fine and penalty, which 20% of the value of consignments, which is excess. Learned counsel prayed that the Redemption fine and penalty may be reduced.

4. The learned Authorised Representative Shri K. Veerabhadra Reddy reiterated the findings in the impugned order. He submitted that the export of Unfinished Leathers in the guise of Finished Leathers would not have come to light but for the interference by the department. The appellants have accepted their lapses and deposited an amount of Rs. 3,00,000/- towards their liability. Therefore, the Redemption Fine and penalty imposed are legal and proper.

5. Heard both sides and perused the records.

6. The learned counsel has put forward their arguments mainly requesting for setting aside both the Redemption Fine and penalty. The main issue involved is whether the goods exported are Finished Leathers is not contested by him. Section 113 of the Customs Act, 1962 provides for confiscation of goods that are entered for exportation which do not correspond in any material particular with any information furnished by the exporter. Since the finding has been entered that the goods declared as Finished Leathers do not conform to the standards of Finished Leathers, the same are liable for confiscation. However, in our view, impositio

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n of both the Redemption Fine and penalty are on the higher side and both are required to be reduced to Rs. 1,00,000/- and Rs. 50,000/- respectively. 7. From the above discussion, the impugned order is modified to the extent of reducing the Redemption Fine to Rs. 1,00,000/- (Rupees One Lakh only) and the penalty to Rs. 50,000/- (Rupees Fifty Thousands only). Appeal is partly allowed in the above terms.