ORDER
Gowri Shankar, Member (T)
1. The appellant imported a consignment of nylon tricot flocking fabrics and claimed the benefit of exemption contained in entry 108(1) of the table to notification 23/98. In the course of investigations by the officers of the Directorate of Revenue Intelligence, a statement was recorded of the proprietor of the importing firm in which he admitted that he had imported the goods for sale to garment manufacturers, and did not ever intend to the importer proposing denial of the benefit of the notification and proposing confiscation and penalty. Adjudicating upon this notice, the Commissioner, in the order impugned before us, has denied the benefit of the notification, confiscated the goods imported and imposed penalty on the appellant. Hence this appeal.
2. Entry 108(1) of the notification reads as follows
“The following goods for use in the leather industry, namely:-
(1) Parts, consumables and other items specified in List 3(A);
(2) Other parts, consumables and items specified in List 3(B)”
3. There are no conditions applicable to the clause (1) of the notification. Condition 14 of the notification which applies to goods in clause (2) of the entry stipulates (except in the case of goods in Item (9) of List 3(B)) that the importer produces a valid registration-cum-membership certificate issued by the Council for Leather Exports, and furnishes an undertaking to the Assistant Commissioner that the imported goods shall be used in the leather industry or to the manufacturer of leather chemicals to the leather industry, maintain proper accounts, produces copy of these accounts within three months and pay duty in the event of failure to comply with the condition.
4. Counsel for the appellant states that he does not wish to question the conclusion that the benefit of notification will not be available to the goods and that therefore he does not question the correctness of the duty that the importer has already paid although without the benefit of the notification. His arguments are limited to confiscation of the goods and imposition of penalty.
5. It is his contention that during the period up to and including the date on which the goods were shipped, the practice of the department was to allow the importer benefit of the notification to nylon tricot flocking fabrics and to other goods. It is only after the issue of the clarification contained in the circular 74/98 dated 6.10.1998 of the Board that the Custom House changed its practice. The circular records that doubts had been expressed regarding the eligibility to the exemption contained in the notification of nylon tricot fabrics and P.U. leather cloth. While the Commissioner considered that these goods would be covered by heading insole and midsole and the notification has been extended to these goods, the Directorate of Revenue Intelligence had suggested reconsideration of this practice. The circular then proceeds to consider the judgement of the Supreme Court as to the use of the goods and concludes by saying that nylon tricot fabrics can only be cleared under the notification if the end use condition as stipulated is applied at the time of clearance from the customs. It then advised the custom houses to change their existing practice in line with the judgement of the Supreme Court that it cites upon.
6. In the order before us the Commissioner has essentially gone by the contents of this circular. It is thus clear that till the issue of this circular it was the practice in Mumbai custom house and therefore presumably in other custom houses to extend the benefit to the fabric without verifying whether it was being imported for use by the leather industry. The applicability of the notification has been considered without any reference to any possible end use of the product. The goods under consideration were exported from Korea on 15th September, 1998, and arrived at Mumbai on 14th October, 1998. The clarification of the Board is dated 6.10.1998. Therefore, when the goods were ordered and exported from Korea, the importer no way knowing that the practice of the department would radically change, and that the benefit which had earlier been extended to these goods would no longer be available. Coke is the. In these circumstances, imposition of penalty and confiscation of the goods was not warranted.
7. The appeal is accordingly allowed and the order of confiscation of the goods and imposition of penalty is set aside.