ORDER
M.E.N. Patrudu, J.
1. Identical issue is involved in the above writ petitions. Hence, common order is pronounced.
2. The petitioner is manufacturer of knit fabrics.
3. By paying excise and customs duty, the petitioner is importing raw materials for manufacture of fabrics.
4. The admitted fact is that the petitioner imported hangers and the case of petitioner is, it is to use as a integral part of the garment to sell to the foreign buyer.
5. The petitioner did not pay the custom duty on those imported hangers.
6. The contention of the petitioner is that they applied for Note (II) of the Drawback under Sl. No. 2704 of the schedule of the Customs and Central Excise Duties Drawback Rule, 1971 by claiming that the hangers were imported as one of the items as duty free under Quantity Based Advance License Scheme.
7. The entire case of the petitioner is relied on the expression used in Note (II) 'embellishment' and claiming the relief. The prayer of the petitioner is that it is entitled to drawback duty under: Note (II) if he avails the facility of Quantity Based Advance License Scheme and permitted to import other embellishment also in the manufacture of knitwear. The specific case of the petitioners is that they were granted Quantity Based Advance License for import of MAC Gregor Hang tags, MAC Gregor Main Label, Care and content Label and they imported Top Hanger 18' (Plastic sizer hook) and Size Tabs with Black Wording.
The contention of the petitioners is that the hangers are used for adornment of the export garments, hence it is an embellishment, as it is for the purpose to display the garments to make it more attractive, hence it should be duty free.
8. The grievance of the petitioner is that the third respondent without assigning any reason rejected the case of the petitioner, whereas the second respondent observed that the embellishment is an item used for adorning and rejected the case of the petitioner. The petitioner is challenging the same.
9. The respondents filed detailed counter affidavit. It is stated in the counter that petitioners are entitled for drawback only if their case is covered under Note (II). The case of the respondents is that in Note (II), it is clearly stated the exporter avails the facility of Quantity Based Advance License under DEEC Scheme and permitted to import other embellishment also, other than zips snap fasteners, labels and tags and not any other item duty free for using the manufacture of knitwear. It is stated that Zips, Snap fasteners and Labels are part of the garments and hangers are totally alien to the garment. The case of the respondents is that hanger can not be used in the manufacture of knitwear, and it is not a raw material for manufacture of knitwear.
10. It is stated that the contention of the petitioners to include hanger as an embellishment is not permissible. It is further stated that all fact finding authorities namely Original authority, Original Appellate authority and the reviewing authority has taken a uniform decision that hangers are not part of the knitwear and the drawback on hangers are excluded, hence the prayer of the petitioner is liable to be rejected.
11. Mr. N. Prasad learned Counsel for the petitioner appeared and argued and Mr. K. Veeraraghavan A.C.G.S.C. appeared and argued for the respondents.
12. Points for determination.
Whether the petitioners are entitled to drawback duty either under (II) of the Sl. No. 2704 to the drawback schedule?
13. Drawback duty under Note (II) of serial No. 2704 is as follows:
Sub. Serial Description of goods Rate of AllocationNo DBK Cus. C.Ex.2704 Knitwear and articles of hosiery 7.5% (5% 2% 5.5%ineluding Readymade garments made only ofwholly or mainly from knitted/hosiery f.o.b.fabrics of cotton and/or valueNote (II) clearly says-
In case the exporter avails the facility of Quantity Based Advance License under DEEC Scheme and is permitted to import other embellishment also, other than zips snap fasteners, labels and tags and not any other item duty free.
For use in the manufacture of knit mentioned against above Sections No. The exporter shall be allowed drawback @ 3% (Three percent only) of the F.O.B Value only.
A plain reading of the above drawback policy clarifies that it gives a right to take drawback to the extent stated in the Note II.
14. Knitwear and articles of hosiery including readymade garments made wholly or mainly from knitted/hosiery fabrics of cotton and/or Cellulosic yarn, the rate of draw back is 7.5% in the above read Sl. No. 2704.
15. With regard to Note (II), if the importers avail the facility of Quantity Based Advance License under the scheme, he is permitted to import other 'embellishments' other than Zips, Snap Fastners, Labels and Tags and no other items duty free in using manufacturers of knitwear.
16. The forceable contention of the learned Counsel for the petitioner is that the hangers which were imported in order to export hosiery comes under other embellishments.
17. The word embellishment is not defined under the Act, the Oxford dictionary meaning of the embellishment is as follows:
embellish : 1. beautify, adorn. 2. add interest to (a narrative) with fictitious additions, n. embellishment.
18. If the petitioner is covered under Sl. No. 2704, he will be entitled for draw back otherwise he is not entitled. While considering this fact that whether the hanger has to be treated as embellishment, it is necessary to consider whether such item is necessary for the use in the manufacture of the knitwear as mentioned in Sl. No. 2704.
19. The policy of the scheme is to permit to import other embellishment also other than Zips, Snap Fastners, Labels and Tags for use in the manufacturing of knitwear. Therefore, it is made clear that what ever is permitted to be imported which are not duty free is for the use in the manufacturing of knitwear and not for any other purpose. The plain reading of Note II clarifies this. Therefore it is clear the hanger can never be treated as an item or raw material for the use in the manufacture of the knitwear.
20. The arguments advanced by the learned Counsel for the petitioner is that Section 75 of the Customs Act contemplates not only for manufacturers but also for process of goods of which any operation are carried out. Even if the said arguments is accepted, hanger cannot be treated as an item for process of a goods of which a manufacturing operation has to be carried out. The packing material can be treated for process of the goods.
21. The other contention of the petitioner is that when the word embellishment is not defined it has to be taken in the meaning in the context. It is true while accepting the said argument and taking the meaning of the word embellishment in to the context it is used. It is clear that such embellishment should be used in the manufacturer of knitwear and not for any other purpose. The common sense, the legal sense, and the human sense clarifies that the hanger is used at the time of selling the garment and not for manufacturing the garment. It is nothing but a decorative item and it is not a raw material for manufacturing the garment. For effective looking and for a decent and dignified display to attract the customers, hangers are used while selling the garments like models in plaster of Paris or plastic models. Thus it is clear that the use of hanger is only at the time of sale of the garment and not at the time of manufacturing of the garment. During the course of argument it is clarified that the hangers are not part of the garments even while computing All Industries Rate of drawbacks.
22. In the instant case the petitioner has imported the hangers separately under DEEC Scheme without payment of any duty. It is admitted case that the object of the scheme is to encourage the export to get more and more foreign money and thereby India will develop. In order to achieve this purpose a policy has been introduced by the Government that the goods manufactured by the exporter should satisfy the needs, for selling the same, in the foreign market, thereby they must maintain the standard on the international market to satisfy the foreign buyer. In this process the scheme permits import of certain items which are used in the manufacture of goods for the purpose of exports. Therefore the object of the scheme is to permit import of the particular items which will be used in the manufacture of the goods for the purpose of the export. Sl. No. 2704 to be noted that the word embellishment is used in that context. When any item which is not specifically stated in Sl. No. 2704; it is only stated as a embellishment and such item is not used in the process of manufacturing of the goods which are meant for export, such items should be excluded.
23. The petitioner has tried to take maximum advantage in his favour on the ground that the word embellishment is used in Sl. No. 2704 and the combined reading of Sl. No. 2704 clarifies that items like Zips, Snap Fastners, Labels and Tags are part of the garment. So also hanger as embellishment. Without Zips there can not be a garment; without Snap Fastners or without Labels or without Tags it is difficult to satisfy the foreign buyer for purchase, they also part of the garment. But the use of hanger is only for display and it is not a part of garment. The Zips, Snap Fastners, Labels and Tags will be attached to the garment and it will be sold along with the garment whereas the hanger is only for the purpose of displaying the garment in the showcase or at the business place and seller need not give the hanger to the buyer as it is not a part and parcel of the garment either for manufacturing or for processing for manufacturing.
24. Apart from that the exporter is expected to export garment but not the hanger which was imported because it is for the seller in the foreign market to use and for export the garment hanger is unnecessary.
25. The Court cannot ignore the over all policy of the State and objectives of the schemes behind exemptions. Taxation and that cannot be decided or prevented by the Courts. In this case, there is a violation of statutory mandate.
26. Further in many cases, the Apex Court has clarified that the Court has to take the plain language while adjudicating the dispute in taxing arena. While taking the plain language, it is clear that hanger cannot be included for the purpose of manufacturing the garments.
27. In this context it is necessary to note that the board circular No. 5/20001-Cus., dated 19-1-2001, wherein it is clarified that while formulating 'All Industries Rate' of draw back for the ready made garments, duty incidence on account of hangers has not been included. Therefore it is clear that the hangers will not come within the meaning of word other embellishments.
28. Various decisions cited by the petitioners are pronounced, depending upon particular facts and circumstances. Each case has to be judged on the facts and circumstances of that Case. Each case will be decided on the basis of the contents of the notification and the nature of the policy and the provisions. The petitioner did not cite any direct decision concerning with importing and exporting of hangers to be used for manufacture of the knitwear.
29. The other contention of the learned Counsel for the petitioner is that the appellate authority has powers for alternative remedy, therefore the power of appellate authority should be exercised to accept his alternative arguments. It is no doubt that the power of appellate authority is restricted and it is not an absolute power but subject to some statutory restrictions and certain limitations. The contention of the petitioner is that he is prepared for payment of duty for the hangers and his case may be transferred to other schemes so as to use the hangers along with the knitwear. This plea was rejected by the appellate authority on the ground that such plea was never raised at the initial stage or before the adjudication at the original stage. It is also observed that the appellate authority did not have the power to accept the new ground at the appellate stage. The learned Counsel for the petitioner fairly submits that though the appellate authority has taken such decision, this Court can give a suitable direction for treating the goods of the petitioner under any other schemes which is permissible and calculate duty for the hangers.
30. However the learned Counsel for the respondents vehemently opposed for giving such direction on the ground that the case of the petitioners has to be rejected in toto at present and if he so chose, he has to make plea before the competent authority to treat his case under other schemes.
31. Now the petitioner is prepared to pay the duty for the hangers, if there is violation under the DEEC schemes.
32. This Court is of the considered opinion that the authorities can treat the case of the petitioner under any other schemes, even though the import is completed. No doubt the claim of the petitioner is entirely binding under the taxation law and all conditions must be completed. Exemption notification is different from another notification but the authority can consider the case of the petitioner because the very object of the Government is to encourage the manufacturers to import certain items in order to export the same for the purpose of increasing the foreign trade. The other object is to get more revenue.
33. Before me it is stated that the petitioner intends to export both the garments as well as the hanger, so that it will have a effective sale in the foreign market and they can compete with the standards of other countries. Considering the same, I am of the opinion that the respondents are directed to consider the case of the petitioner under other schemes as he is prepared to pay the duty and the respondents are directed to pass necessary orders in this regard expeditiously.
34. Therefore, the Court, holds that the petitioners are not entitled to claim tax benefits under Sl. No. 2704 as the hanger is not an embellishment for use in the manufacture on knitwear. However, the respondents are directed to consider the case of the petitioners under other schemes and calculate the tax as well as other duties whichever is liable.
35. In the result, the writ petitions are dismissed. No costs.