By TIOL News Service

NEW DELHI , JAN 27, 2017: THE petitioner filed a shipping bill to export the consignment declared as "ladies leather sandals" and claimed drawback.

At the instance of SIIB Customs, the goods were considered "chappals" and not "sandals" as declared.

So as to ensure clarity,the petitioner forwarded the samples to the Council of Leather Exports, New Delhi and who certified that the goods were as claimed i.e. Leather sandals. This was in May 2003.

In July 2003, the Supdt.SIIB Customs addressed a letter to the Council for Leather Exports seeking opinion for the categorization of the product. The Council forwarded the sample to Footwear Design and Development Institute and the institute by its letter of October 2003 stated that the export goods fell under the category of "chappal" covered under Sl.No.64.10 of the drawback schedule.

Resultantly, a SCN was issued to the petitioner on 20.5.2005 asking it as to why an amount of Rs.1,30,800/- claimed and erroneously sanctioned and paid as differential duty drawback should not be recovered along with interest @15% p.m. and why the amount of Rs.2,935/- in drawback account maintained at Punjab National Bank should not be appropriated towards the drawback amount paid and recoverable from the petitioner. Penalty was also proposed u/s 114 of the Customs Act.

The order went against the petitioner and so were the appeal and the revision application. The Central Government, however, in revision proceedings granted limited relief in respect of the penalty imposed; it reduced it to Rs.10,000/-. This was in March 2012.

And so, the petitioner knocked the doors of the High Court in a Writ Petition filed in the year 2013.

While emphasizing that merely because the goods did not contain strap, it could not have been construed as chappals as the goods were known to the user and in commercial terms as "sandals", the petitioner also submitted that the opinion of Council of Leather Exports, being an expert body could not have been rejected and the FDDI's opinion could not have been preferred. Furthermore, not according an opportunity to the petitioner to cross-examine and/or question the expert apropos the FDDI's opinion would cast a doubt on the validity of the opinion itself, the petitioner pleaded.

The counsel for the Revenue submitted that the Court should not exercise its discretionary jurisdiction to upset findings of fact; as to whether the articles were "sandals" or "chappals" should be left best to the judgment of the experts; in the circumstances of the case, the goods were subject to scrutiny by experts and FDDI's opinion was final in this regard; that the goods did not contain a strap at the back and were, therefore, Chappals.

The High Court while adverting to the apex court decision in United Offset Process Pvt. Ltd 1989 Supp (1) SCC 131 inter alia observed –

++ The respondents, in our opinion, acted upon prejudice and a preconceived notion that ladies sandals cannot be without a back strap.

++ To hold so, there ought to have been some evidence of commercial purpose; the fact that the Council - a Central government body, which routinely deals with these issues in the context of export, had, based on evidence and instructions of the Government furnished an opinion that the goods were sandals and not chappals was deemed insufficient.

++ Apart from these, the court wonders whether any of the experts in this case was a woman, the ultimate customers. In such cases, the commercial parlance test would predominate.

Conclusion: Court is of the opinion that the impugned orders, upholding duty drawback withdrawal and imposing penalty cannot be sustained. They are hereby quashed. The writ petition is allowed.

(See 2017-TIOL-181-HC-DEL-CUS)