Holding

Goods imported as sheets rolled for loading are still “sheets” under Notification No. 20/99 and are entitled to the exemption; the burden of proof lies on the revenue.

Summary

Nanya Imports & Exports Enterprises, a partnership dealing in leather‑footwear materials, imported PU‑coated leather fabrics intended for use as insoles and midsoles. The goods were supplied in 50‑metre lengths and rolled for safe transport, but the Customs authority denied the exemption under Notification No. 20/99, classifying them as “films” or “running sheets” rather than “sheets”. The adjudicating authority and the Customs‑Excise‑Gold (Control) Appellate Tribunal upheld the denial, holding that the rolled form removed the goods from the exemption category. On appeal, the Supreme Court held that the rolled material remains a “sheet” for the purpose of the notification and that the burden of proving otherwise lies on the revenue. Consequently, the Court allowed the appeal, set aside the Tribunal’s order and restored the exemption. The decision reaffirmed that the form of packaging (rolled versus loose) does not alter the statutory description of the goods.

Issues considered

Whether goods imported as long sheets rolled for transport fall within the term “sheets” under Customs Notification No. 20/99.
Whether the revenue bears the burden of proving that the imported material is not a “sheet” but a “film” or “sheeting”.

Legislation cited

Customs Act, 1962s. 25

Subjects

Customs duty exemptionSheets vs filmsBurden of proofImport of PU‑coated leather fabricsNotification 20/99Customs law

Judgment

NANY A IMPORTS & EXPORTS ENTERPRISES A
v.
COMMISSIONER OF CUSTOMS, CHENNAI

APRIL 10, 2006

(ASHOK BHAN AND LOKESHWAR SINGH PANTA, JJ.] B

Customs Act' 1962;

Section 25-Exemption Notification No. 2011999 covering insoles,
midsoles and sheets thereof-"PU coated leather fabrics" used in the leather C
footwear industry as "insoles and midsoles" 'imported in the form of "sheets"
but rolled up for the convenience loading and safe transport-denial of the
benefit of exemption on the ground that goods imported were not "sheets"
but 'films' or 'running sheets '-Held, goods entitled to the benefit of the
exemption Notification. D
Appellant is a partnership firm dealing in the business, inter alia, of
leather footwear materials and accessories. One of the items regularlyl,
imported by the appellant is "PU coated leather fabrics" which are extensively
used in the leather footwear industry as "insoles and midsoles. Appellant
received a consignment of PU coated insoles sheets for leather fabrics at E I
Chennai in June, 1999. Revenue ("the respondent" herein) denied the benefit
of the Notification No. 20/99. Appellant waived show cause notice and the
_personal hearing and placed submissions before the adjudicating authority
based on the earlier imports by it and the order passed by the Commissioner
therein. The adjudicating authority held that though the end use of the subject
goods was established, but denied the benefit of the Notification No. 20/99 to
F
. the appellant on the ground that the subject goods were not "sheets" but
"films" or "running sheets" and therefore, not entitled to the exemption from
customs duty. Aggrieved by the above, the appellant preferred an appeal before
the Customs Excise and Gold (Control) Appellate Tribunal, South Zone Bench
at Chennai (for short.'.'the Tribunal") which was dismissed by the impugned G
order.

For the appellant it was strenuously contended that the impugned goods
had been imported by the appellant in the form of "sheets" but for loading
convenience; the sheets, being 50 metres long and the material being highly
1007 H
1038 SUPREME COURT REPORTS [2006] 3 S.C.R.

A nexible, had been rolled up for loading, which did not detract from the facts
that the goods were sheets in rolls. The Notification merely required the goods
to be in the form of sheets in contradistinction to being cut in shapes and
forms. There is no distinction between being in rolls or loose sheets. It was
further contended that the issue as to whether the subject goods imported in
B rolls had already been the subject matter of several judicial pronouncements,
some of them between the parties, were binding on the revenue as the same
had attained finality.

For the respondent it was contended that the goods imported by the
appellant were no "sheets" but "films" 'or running sheets' and therefore,
C not entitled to the exemption from customs duty.

Allowing the appeal, the Court

HELD 1.1. The goods, "PU coated leather fabrics" extensively used in
the leather footwear industry as "insoles and midsoles," imported in the form
D of the sheets being 50 metres long, rolled up as specified by the ISi standards
for loading and safe transportation, would not convert them into 'films' or
'sheetings' thereby denying the assessee the benefit of the exemption
Notification. (1039-D-E; 1041-G-H; 1045-B-C)

Collector of Customs, Bombay v. Mis. K. Mohan and Company Exports,
E 119891 2 sec 337, distinguished
P/ast Fahs v. Collector of Customs, (1993) 66 ELT 441; Mod Apparel
Exports v. CC Calcutta, (1996) 14 RLT 174 (CEGA T); order dated 11.6.1996
of the High Court of Calcutta in C.A. No. 1717of1995 and Tirupati Garments
& Anr. v. Union ofIndia & Ors., referred to.
F
2.1. The burden of proof as to whether the item in question is taxable
in the manner claimed by the revenue is on the revenue. Mere assertion in
that regard is of no use. It is for the taxing authority to lay evidence in that
behalf. (1044-H; 1045-AI

G Union of India and Ors. v. Garware Nylons Ltd. & Ors., (1996) 10 SCC
413 and Hindustan Ferodo Ltd v. Collector ofCentral Excise, Bombay, (19971
2 sec 677, relied upon.

CIVIL APPEL LA TE JURISDICTION : Civil Appeal No.1520 of 2001.

H
t
'

NANYA IMPORTS & EXPORTS ENTERPRISES 1·. COMMR. OF CUSTOMS, CHENNAI [BHAN,J.] } 039

From the find Order No. 547/2000 dated 25.4.2000 of The Customs, A
Excise & Gold (Control) Appellate Tribunal, South Zonal Bench at Chennai
in Appeal No. C/475/99.

S. Muralidhar and Amit Sharma for the Appellant.

Rupesh Kumar, T.A. Khan and P. Parmeswaran for the Respondent. B

The Judgment of the Court was delivered by

BHAN, J. The point involved in the present appeal is:-

Whether the expression "insoles, midsoles arul sheets thereof' used in C
the exemption Notification No.20 of 1999 issued under the Customs Act, 1962
(for short "the Act") can be interpreted to mean that the sheets rolled up for
the convenience of loading and transport, would disentitle the assessee from
the benefit of the Notification?

FACI'S D
Appellant is a partnership firm based in New Delhi dealing in the
business, inter alia, of leather footwear materials and accessories. One of the
items regularly imported by the appellant is "PU coated leather fabrics" which
are extensively used in the leather footwear industry as "insoles and midsoles".
This item was covered originally by Notification No.224/85 and thereafter by E
the successor Notification No.45/94. As on the date this item figures under
the description "insoles, midsoles and sheets thereof' figuring in SI. No.108
of List 3 (A) (3) in Notification No.20/99 which replaced the earlier Notification.
The same reads:
F
TABLE
S. No. Chapter Description of Goods Standard Additional Condition
or heading Rate Duty No.
No. or rate
sub-heading
No. G
(I) (2) (3) (4) (5) (6)
108 64 or The following goods for
any use in the leather industry,
other namely:
chapter (I) Parts, consumables and 20% H
1040 SUPREME COURT REPORTS [2006) 3 S.C.R.

A other items specified in
List 3(A)
(2) Other parts. consumables 20% 14
and items specified in
List 3(B)
Xxx xxx
B
LIST 3(A) (Sec. S.No.108 of the Table)
PARTS, CONSUMABLES AND OTHER ITEMS
( 1) Leather, plastic, rubber coco board, masonite board or plastic
board, heels with or without rubber/PVC top lift (2) Toe caps and
C counters for leather footwear (3) Insoles or midsoles and sheets therefor
(4) Welts made from leather or plastic (5) shoes eyelets (6) Felt sleeves
(7) Heel tips etc.

D Before proceeding further it is relevant to mention that PU coated
leather fabrics was the subject matter of a contested adjudication proceeding
between the parties in 1995 in which the appellant sought to clear a consignment
claiming the benefit of the Exemption Notification No.45/94. A show cause
notice was issued by the Customs Authorities at Chennai claiming that the
E goods were not classifiable as "insoles, midsoles and sheets thereof'; the
said goods had no use in the leather industry and that the goods were
capable of other uses and hence the end use requirement was not satisfied.
The Commissioner of Customs, Chennai by a considered order dated 28.2.1995
held that the subject goods were indeed capable of use in leather footwear
industry as insole material. It was further held that the capability of the goods
F for being used in the footwear industry having been proved, the Notification
did not contemplate any end use restriction. Consequently, goods were
accepted as "insole" and the benefit of Notification No.45/94 was granted to
it. This order of the Commissioner of Customs was cited with the approval
by Eastern Bench of the Tribunal reported in Mod Apparel Exports v. CC
G Calculta, ( 1996) 14 RLT 174 (CEGAT). This order of the Tribunal was upheld
by the High Court of Calcutta in C.A. No.1717 of 1995 - Tirupati Garments
& Anr. v. Union of India & Ors., dated 11.6.1996. Thereafter, the appellant
have been clearing several consignments of the same material and the
department had permitted the clearance following the order of Commissioner
which had become final since no appeal, review or revision had been preferred
H against it.
1
'

NANYA IMPORTS & EXPORTS ENTERPRISES'" COMMR. OF CUSTOMS. CHENNAI [BHAN, J.] } 041

In February, 1996 another consignment imported by the appellant and A
cleared by the Customs Authorities at Chennai was seized by the New Delhi
Preventive Wing when the goods were being unloaded at the appellant's
Karol Bagh godown. The said seizure resulted in a fresh adjudication in
Chennai wherein the Commissioner passed an order holding that the appellant
had failed to establish actual use in leather industry and consequently denied B
the benefit of the Notification No.45/94. This order was set aside and the case
was remitted backJor a fresh decision. The appellant participated in the fresh
adjudication. After hearing the parties, the judgment was reserved by the
adjudicating authority but according to the appellant the decision is still
awaited.

Appellant received a consignment of PU coated insoles sheets for
c
leather fabrics at Chennai in June, 1999. Revenue ("the respondent" herein)
denied the benefit of the Notification No.20/99. Appellant waived show cause
notice and the personal hearing and placed submissions before the adjudicating
·authority based on the earlier imports by it and the order passed by the
Commissioner therein. The adjudicating authority held that though the end D
use of the subject goods was established, but denied the benefit of the
Notification No. 20/99 to the appellant on the ground that the subject goods
·. were not "sheets" but "films" or "running sheets" and therefore, not entitled
to the exemption from customs duty. For this adjudicating authority relied
upon the judgment of this Court in Collector of Customs, Bombay v. Mis. K. E
Mohan and Company Exports, [1989] 2 SCC 337. Aggrieved by the above,
the appellant prefe1Ted an appeal before the Customs Excise and Gold (Control)
Appellate Tribunal, South Zone Bench at Chennai (for short "the Tribunal")
which was numbered as C/457 of 1999 and that has been dismissed by the
impugned order dated 25.4.2000. It has been held that the earlier decision of
the Commissioner at Chennai in the adjudication arising in proceedings relating F
to the year 1995 was no longer valid in view of the later judgment of this Court
in Mis. K. Mohan and Company Exports, (supra). The contention raised by
the counsel for the appellant that the judgment in Mis. K. Mohan and
Company Exports (supra) was distinguishable was rejected by observing that
the finding recorded by the apex Court in the said case in the context of
description of goods in the Notification were para materia to the description G
available in the present Notification under consideration. Adverting to the
finding recorded on the alternative submission of the counsel for the assessee
in the said case it was, observed:

" .. .In the Apex Cou1t judgment referred to, the term "sheets" and
"sheetings" has been dealt with and the raw material was 'plastic H
1042 SUPREME COURT REPORTS [2006] 3 S.C.R.

A films' in rolled form and the Apex Court after due consideration held
that they are to be considered as "sheetings" and not 'cut to size'.
It has been held that sheets has to be understood only with regard
to the items which have been cut to size and not those in rolled form.
In the present case also, admittedly, appellants have imported the
material in length of 50 mtrs on the requirement of customers. They
B are themselves carrying out the activity of cutting to size before it is
sold to customers for the purpose of manufacture of Insoles and
Midsoles. The term "sheets thereof' should refer to the words 'which
should have been cut to size' for the purpose of manufacture of
Insoles and Mid Soles. The words "thereof' has to be read along with
c the terms "Jn-soles and Mid soles". Where sheets has been imported
in cut form and being utilized solely for the purpose of manufacture
of in-soles and Mid soles, they go along with it in terms of the entire
reading of the terms of the notification."
Learned counsel for the appellant strenuously contended that the
D impugned goods had been imported by the appellant in the form of "sheets"
but for loading convenience; the sheets, being 50 metres long and the material
being highly flexible, had been rolled up for loading, which did not detract
from the facts that the goods were sheets in rolls. The Notification merely
required the goods to be in the form of sheets in contradistinction to being
cut in shapes and forms. There is no distinction between being in rolls or
E loose sheets. The judgment of this court in Mis. K. Mohan and Company
Exports (supra) is distinguishable as in the said case subject goods were film
rolls and the Court brought out the distinction between "films, foils and
sheets" as well as the 'contrast between "sheets" and "sheetings". The said
judgment has no applicability to the present case which on the other hand
F is directly covered by the judgment of the Tribunal in the case of Plast Fahs
v. Collector of Customs, (I 993) 66 EL T 441 wherein the Tribunal specifically
dealt with "PVC flocked sheets in rolls". It was further contended that the
issue as to whether the subject goods imported in rolls had already been the
subject matter of several judicial pronouncements, some of them between the
parties, were binding on the revenue as the same had attained finality.
G
As against this the learned counsel for the respondent contended that
the judgment of this court in Mis. K. Mohan and Company Exports (supra)
was fully applicable to the facts of the present case and in view of this
judgment which is later in point the earlier judgments rendered by the Tribunal
or the Commissioner interpreting the Notification in the present case are no
H longer good law that the Tribunal has rightly ignored them in view of the
NANYA IMPORTS & EXPORTS ENTERPRISES 1·. COMMR. OF CUSTOMS, CHENNAJ [BHAN,J.] J043

judgment of this Court. That the goods imported by the appellant were not A
"sheets" and were "sheetings" as has been held in Mis. K. Mohan and
Company Exports (supra).
Finding regarding the end use is not in question. Finding recorded by
the Commissioner (Appeals) in favour of the assessee regarding the end use
was not challenged by the revenue before the Tribunal and the same has B
attained finality.

The only point to be considered is, whether the judgment in Mis. K.
Mohan and Company Exports (supra) is applicable to the facts of the present
case or not. In the said case Mis. K. Mohan and Company Exports was
importing "metallised polyester films" from Japan under an import licence. The C
goods were admittedly in the shape of film rolls several metres long. They
were cleared on payment of customs duty leviable under the Customs Act,
1962 (Customs Tariff) as well as the additional duty of customs (or
countervailing duty) leviable under Section 3 of the Customs Tariff Act, 1976.
Subsequently, the assessee made three applications for the refund of the
amount of the additional duty of customs paid by it. The claim for refund was D
based on the terms of a Notification of exemption issued under Section 25(1)
of the Customs Act. Under notification No. 228176 dated 2.8.1976, an exemption
from the customs duty payable under Section 3 of the Customs Tariff Act was
granted in respect of "articles made of plastics, all sorts, but excluding those
specified in the table annexed thereto and falling within Chapter 39 of the First E
Schedule to the Customs Tariff Act, 1975 (5 l of 1975)". The annexed table
excepted the following items from the purview of the exemption:
'Tubes, rods, sheets, foils, sticks, other rectangular or profile shapes,
whether laminated or not, and whether rigid or flexible including tubings
and polyvinyl chloride sheets."
F
The case of the department was that the goods were "sheets" or "foils"
or "other rectangular or profile shapes" and hence liable to duty. On the other
hand the assessee's case was that they were "films'', a specie of plastic
articles different from any mentioned in the table annexed. It was alternatively
contended that, even if they are treated as thin sheets of plastic material, they
can be more accurately described only as "sheetings" and not "sheets". The G
assessee's claim for refund was accepted by the Tribunal. It was held that the
goods imported by the assessee were articles made of plastic. The subject
goods were 'films' and did not fall in any of the excepted articles enumerated
in the table annexed to the Notification.
( In the appeal this Court keeping in view that the articles in question H
1044 SUPREME COURT REPORTS (200613 S.C.R.

A were recognized in the trade as "films" rejected the contention of the revenue
that the same were either "foils" or "sheets". Assessee' s contention was
accepted. It was observed that it was difficult to imagine any person going
to the market and asking for the films by describing them either as 'foils' or
as 'sheets'. The alternative submission of the learned counsel for the assessee
in the said case that a film of indefinite length and not in the form of individual
B cut pieces can be more appropriately described as "sheetings" rather than
"sheets" was accepted. It was observed that the Indian Standard Institution
also defines 'sheets' as a piece of plastic 'sheeting' produced as an individual
piece rather than in a continuous length or cut as an individual piece from
a continuous length.
c Revenue's contention that articles were covered by the expression
"other rectangular or profile shapes" was also rejected by observing that
such articles had a distinct name in the market as 'films' and therefore they
are outside the table as already pointed out. That it will not be possible to
accept the contention that the articles which have a clear commercial identity
D as 'films' should be brought within the wide and vague expression "other
rectangular or profile shapes", because, if the film is cut into small pieces,
each piece will be rectangular in shape.

It would be thus seen from the facts enumerated above and the finding
1ecorded by the Court that the assessee had imported the goods in the form
E of "films" and the trade also understood the articles in question to be "films"
and not "sheets" and therefore, this Court primarily held that the goods
imported by the assesses Wt!re "films" and not "sheets". Assessee in the
present case is importing "PU quoted insole sheets" in a rolled up form for

F
loading convenience. Even as per the ISi specifications for "PVC coated
fabrics for footwear industry" requires the packing to be in the form of rolls
so as to ensure safe transportation. Clause 5. I of Indian Standard Institution
-
specification for PVC coated fabrics for footwear industry IS:8699- l 977
provides:
"5.1 Packing-The material shall be securely packed in the fonn ofa
ro II so as to ensure safe transportation."
G
Contention of the assessee that the goods had been imported in the
form of sheets being 50 metres lo;ig were rolled up as specified by the ISi
standards for loading and safe transportation has gone unn:butted. The
burden was on the revenue to ~rove that the subject goods were not "sheets"
for which no evidence whatsoever was led by the revenue. The burden of
H proof as to whether the item in question is taxable in the manner claimed by · \
NANYA IMPORTS & EXPORTS ENTERPRISES 1·. COMMR. OF CUSTOMS, CHENNAI [BHAN, J.] } 045

. the revenue is on the revenue. Mere assertion in that regard is of no use. It A
' has repeatedly been held by this Court that it is for the taxing authority to
lay evidence in that behalf. [See Union of India and Ors. v. Garware Nylons
Ltd. & Ors., [1996] 10 SCC 413 - Para 15 and Hindustan Ferodo Ltd. v.
Collector of Central Excise, Bombay, [ 1997] 2 SCC 677 - Para 4, The burden
was on the revenue to prove that the said goods were not "sheets" for which B
no evidence whatsoever was led by the Tribunal. The goods, imported in the
form of the sheets but rolled up for loading and transportation purposes,
would not convert them into 'films' ot 'sheetings' thereby denying the assessee
the benefit 'of the exemption Notification.

The judgment of Mis. K. Mohan and Company Exports (supra) was C
reverse case where the assessee's case was that the subject goods were
"metallised polyester films imported in the shape of film rolls" entitling him
to the exemption from the customs duty. The revenue's case was that the
subject goods were "sheets' which was one of the excepted goods mentioned
in the table annexed to the Notification and therefore, not entitled to the
exemption from duty. In the present case, the situation is just the reverse. D
Assessee says that it has imported "sheets" of running length in a rolled up
fonn for the sake of convenience for loading and transportation purposes as
per the ISi specifications. Assessee sold the subject goods in different
lengths as per requirement of the customer. The customer then used the same
by cutting them into different sizes (shape or size of the shoes) as per the
requirement to insert them into shoes. In Mis. K. Mohan and Company E
Exports (supra) this Court considered a different exemption Notification set
out in the context of different facts, its import and meaning. In the context
of the present notification the distinction drawn by this Court while accepting
'· the alternative submission of the learned counsel in Mis. K. Mohan and
Company Exports (supra) between "sheet" and "sheeting" would not be F
attracted. To illustrate, if the exemption is granted to the 'carpets' and the
assessee imports the carpet in a running length of 50 meters length in a rolled
up form, and then sells the same in pieces after cutting them from the running
length as per requirement of the customer would not disentitle the assessee
from the benefit of the notification exempting duty on carpets simply because
the carpets were brought in a rolled up form in a running length. G
For the reasons stated above, we accept this appeal, set aside the order
of the Tribunal and that of the authorities below with consequential effects.
No costs.

B.K. Appeal allowed. H