CESTAT Quashes Confiscation Of Goods, Imposition Of Redemption Fine, Penalty, Customs Duty Demand In Absence Of CLRI Report

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that it quashes confiscation of goods, imposition of redemption fines, penalties, and customs duty demands in the absence of the Central Leather Research Institute, Chennai (CLRI) Report.

The bench of Sulekha Beevi C.S. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) has observed that the CLRI report is a very crucial document in deciding the issue as to whether the impugned goods are finished leather or not. The Department has failed to supply a copy of the report to the appellant and also furnish a copy to the Tribunal.

The assessee/appellant filed a shipping bill under a claim of duty drawback for the export of a consignment declaring the item as ‘cow crumbled upper finished leather’. The declared total value of the consignment was Rs. 18,29,251. The export consignment consisted of the same item in three different colours, as detailed in the invoice filed along with the shipping bill.

During the course of examination, the Appraising Officer (Leather Expert) had doubt as to whether the third item of the said invoice, viz., cow crumbled upper finished leather-off-white, would satisfy the norms prescribed for the finished goods under Public Notice. Samples were drawn and sent for testing at the Central Leather Research Institute, Chennai (CLRI). The value of this item alone works out to be Rs. 4,10,597 (FOB) for the declared quantity of 4857.50 sq. ft.

The consignment was permitted to be exported based on the assurance from the exporter of an undertaking to furnish a bond binding the exporter for the consequential action based on the test report by CLRI.

Later, a report was received from CLRI wherein it was reported that the leather did not satisfy the norms and conditions laid down in the public notice for the type of finished leather declared as ‘Cow Softy Upper Leather (crumbled)’ as there was no protective coat.

The exporter requested to adjudicate the matter without issuing a Show Cause Notice but sought permission for a personal hearing. At the time of the personal hearing, the exporter claimed that there was a protective coat on the leather. The leather had been crushed and had a polishing character.

The assessee contended that the exported goods had a protective coating, the goods had been received by the foreign importer, and there had been no complaint of any sort from them. There was no difficulty in getting the remittance from the foreign buyer, and the documents in regard to the amount received from the buyer were also furnished to the authorities.

The department contended that the CLRI report stated that the goods did not satisfy the norms and conditions laid down in the public notice in the absence of a protective coat. However, the report has not been furnished to the appellant. Merely because it is stated that there is no protective coat, it cannot be said that the goods are not finished leather. The protective coat is only one of 40 processes that take place before the export of the goods.

The tribunal ruled that the authorities below have not included the discussions or tests made in the report or the method of testing done by CLRI as part of the report. In the Order-in-Original as well as the Order-in-Appeal, it is merely stated that CLRI reported that the goods do not conform to the criteria of public notice. If the report had been available, it would have been possible to check the type of test done and how the testing authority arrived at the conclusion that there is no protective coating.

Case Title: M/s. Benign International Versus Commissioner of Customs

Case No.: Customs Appeal No. 40105 of 2013

Date: 01.09.2023

Counsel For Appellant: Sundaranathan T.

Counsel For Respondent: N. Satyanarayanan

Click Here To Read The Order