Judgment:
1. The appellant Mahavir Corporation, imported in various dates between 1997 and 1998, live consignments, which, in the bills of entry filed their clearance were declared to be "nylon tricot flocking fabrics" "(insole sheets for leather footwear)". The benefit of the exemption contained in entry 108 of the table to notification 11/97 was claimed and was granted. The goods were cleared on payment of concessional rate of duty available in terms of the notification.
2. Entry 108 of the table to the notification exempts from duty "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)." The investigation carried out by the department as to the sue of nylon flocking fabric in the leather industry and it is concluded that the fabrics had many uses apart from making as insole and midsole for footwear. In the course of the investigation, statements of an importer Ranjit Shah were recorded, in which he accepted that he sold the goods to a trader and not to any person in the leather industry and he could not establish that they were to be used in the leather industry Notice was therefore issued to him and to various other persons who imported the goods cleared them in terms of the notification, proposing denial of the exemption and consequently recovery of duty short levied and penalties. The notice to the appellant, which is dated 3.11.1999 invoked the extended period contained in the proviso to Sub-section (1) of Section 28 of the Act alleging that the importer has wilfully misdeclared the goods as sheets for making insole and the benefit of the exemption. In the order impugned in these appeals, the Commissioner has held that the goods were not entitled to the notification, and were wrongly claimed by misdeclaring the goods, upheld the applicability of the extended period and imposed a penalty.
3. The arguments of the appellant are confined to the limitation. It is contended that the extended period of limitation will not apply on two counts. The first is that the department itself had, despite being aware of the various possibilities of the usage of the product, the benefit of the exemption contained in the notification without insisting upon evidence of end use, produced later. It is alternatively contended that the nature of the goods was clearly declared by the importer and material that was available to the department to deny the exemption has been presented to it. There has therefore been no misdeclaration.
4. The Board issued a circular 74/98-Cus dated 6.10.1998, the subject of which was imposition of actual user condition and end use bond condition for insole/midsole and sheets thereon. Notification 11/97-Cus Sl.No.94(1) and notification 23/98-Cus Sl No. 108. The first paragraph of the circular reads as below: "Commissioner of Customs, Mumbai had made a reference on the eligibility of Nylon Tricot Fabrics/P.U. leather cloth under the above Sl. No. of the Notification No. 11/97-Cus read with list 3(A) therein. The dispute was that the product was having multiple uses and the main use not being that of use in leather industry. While Commissioner of Customs, Mumbai considered, this item to be covered under the heading Insole and Midsole, the DRI Zonal Unit, Mumbai suggested, citing the judgment of the Supreme Court and the views of Central Leather Research Institute, Chennai that this Nylon Tricot Flocking material is not covered under the said Notification. In addition, he stated that in view of the recent judgment of the Supreme Court in the cases of Commissioner of Customs, Mumbai v. Pacific Exports and Commissioner of Customs, Mumbai v. Handicraft Exports both pertaining to leather industries, the existing practice of the Customs Houses allowing unconditional benefit of the Notification to this fabric needs reconsideration." 5. The Board noted that since nylon tricot fabric has more than one use and in the light of the judgment of the Supreme court referred to it, it concluded that for the exemption to be available to the goods, it has to be shown that it has to be actually used in the leather industry. It therefore said that the goods could get the benefit of the notification if the end use condition is stipulated. In concluded "The Custom House may, therefore, change their existing practices to fall in line with the above judgments." 6. It is clear from this circular therefore that there was a practice in the in Mumbai Customs, allowing nylon tricot flocked fabrics to be cleared in terms of the notification without insisting upon any condition even in the light of the fact that it is capable of being put to other use. In addition, the importer had indicated the specific nature of the commodity by declaring nylon tricot flocking fabric the nature of what was imported was known to the department. The fact that it was claimed to be insole material, by itself is misleading since it appears that it is capable of making such use. It is settled law that a claiming an exemption by itself does not amount to misdeclaration.
7. The departmental representative relies heavily upon the contents of the Board's circular to say that the product has more than one use and in the absence of specific evidence of use in the leather industry, the benefit of the exemption cannot be given and misdeclaration of the goods as insole of leather footwear. The contents of the circular of the Boar relating to the department of end use certificate is not in issue before us. It cannot be disputed that after its issue, the end use certificate is required. However, this does not answer the question of regular practice of the Custom House of clearing these goods. As we have noted the nature of the product was declared.
8. We therefore hold that there was no justification for invoking the extended period of limitation and the demand is barred by limitation.
The provisions of Section 114 of the Act would not be available.
10. The appeals filed by Gaunir Impex Pvt. Ltd., Niren Ajmera and Sudha Ajmera are taken up for disposal with the consent of both sides, after waiving deposit. The basis for the demand for duty and imposition of penalty is identical as in the case of Mahavir Corporation. The period of importation is also prior to the issue of Board's circular on 6.10.1998. The reasoning that is advanced with regard to Mahavir Corporation would apply to these. They are also allowed and the impugned order set aside.