In an interesting ruling relating to Customs Duty refunds, the Delhi High Court has held that women’s footwear without a strap at the back is a “sandal” and not “chappal”..The judgment was delivered by a Division Bench of S Ravindra Bhat and Najmi Waziri in a petition dating back to 2003 when a Chennai-based footwear manufacturing company, Wishall International challenged the amount of customs duty drawback that can be claimed on the export of footwear..Duty drawbacks were introduced by the government under Sections 74 and 75 of the Customs Act, 1962 as one of the most popular methods of encouraging exports..A drawback is a refund of a duty previously paid on exporting excisable articles or on re-exporting foreign goods. A customs duty drawback is when the exporter may claim ‘drawback’ or refund of excise and customs duties paid by his suppliers..The crux of the dispute was whether women’s footwear without backstrap were sandals or chappals because, while export of sandals was entitled to 10 per cent customs duty drawback, the export of chappals was eligible for only 5 per cent refund..The petitioner’s claim was that the goods exported were sandals and hence entitled to 10 per cent duty drawback. This contention was rejected by the Customs Department leading to an appeal to the Central government..The government, relying on an opinion tendered by Footwear Design and Development Institute (FDDI), Noida, rejected the appeal stating,.“The Government observes that the applicant sought to export the goods by declaring the same as ladies leather “sandals” under DBK Sr.No.64.06 attracting 10% of Drawback. The goods were examined 100% and representation samples were sent to Footwear Design and Development Institute, Noida for their opinion. FDDI, Noida vide its letter dated 13.10.2003 stated that goods fell in the category of “chappals” under heading 64.10 and hence, attracts Drawback @5%.”.This eventually led to an appeal in the Delhi High Court..The counsel for the petitioner PV Sarvana Raju argued that the footwear not having a back strap cannot be the sole reason for classifying the same as “chappals”. He further relied on the opinion of the Leather Export Council which had held the disputed goods to be sandals..The Central government, through advocate Harpreet Singh, argued that the question of whether the goods were “sandals” or “chappals” should be left best to the judgment of experts; in the circumstances of the case the goods were subject to scrutiny by experts and FDDI’s opinion was final in this regard..The Court held that the opinion of experts cannot be the final word in this case and the commercial parlance test would have to be applied..“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.”.For this, the Court relied on the Supreme Court decision of United Offset Process Pvt. Ltd. v. Assistant Controller of Customs, in which the apex court had held that when there is no meaning attributed to the expressions used in the particular enacted statute then the items in the customs entries should be judged and analysed on the basis of how these expressions are used in the trade or industry or in the market or, in other words, how these are dealt with by the people who deal in them, provided that there is a market for these types of goods. This principle is well known as classification on the basis of trade parlance..The Court, therefore, allowed the appeal..Read the judgment below.
In an interesting ruling relating to Customs Duty refunds, the Delhi High Court has held that women’s footwear without a strap at the back is a “sandal” and not “chappal”..The judgment was delivered by a Division Bench of S Ravindra Bhat and Najmi Waziri in a petition dating back to 2003 when a Chennai-based footwear manufacturing company, Wishall International challenged the amount of customs duty drawback that can be claimed on the export of footwear..Duty drawbacks were introduced by the government under Sections 74 and 75 of the Customs Act, 1962 as one of the most popular methods of encouraging exports..A drawback is a refund of a duty previously paid on exporting excisable articles or on re-exporting foreign goods. A customs duty drawback is when the exporter may claim ‘drawback’ or refund of excise and customs duties paid by his suppliers..The crux of the dispute was whether women’s footwear without backstrap were sandals or chappals because, while export of sandals was entitled to 10 per cent customs duty drawback, the export of chappals was eligible for only 5 per cent refund..The petitioner’s claim was that the goods exported were sandals and hence entitled to 10 per cent duty drawback. This contention was rejected by the Customs Department leading to an appeal to the Central government..The government, relying on an opinion tendered by Footwear Design and Development Institute (FDDI), Noida, rejected the appeal stating,.“The Government observes that the applicant sought to export the goods by declaring the same as ladies leather “sandals” under DBK Sr.No.64.06 attracting 10% of Drawback. The goods were examined 100% and representation samples were sent to Footwear Design and Development Institute, Noida for their opinion. FDDI, Noida vide its letter dated 13.10.2003 stated that goods fell in the category of “chappals” under heading 64.10 and hence, attracts Drawback @5%.”.This eventually led to an appeal in the Delhi High Court..The counsel for the petitioner PV Sarvana Raju argued that the footwear not having a back strap cannot be the sole reason for classifying the same as “chappals”. He further relied on the opinion of the Leather Export Council which had held the disputed goods to be sandals..The Central government, through advocate Harpreet Singh, argued that the question of whether the goods were “sandals” or “chappals” should be left best to the judgment of experts; in the circumstances of the case the goods were subject to scrutiny by experts and FDDI’s opinion was final in this regard..The Court held that the opinion of experts cannot be the final word in this case and the commercial parlance test would have to be applied..“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.”.For this, the Court relied on the Supreme Court decision of United Offset Process Pvt. Ltd. v. Assistant Controller of Customs, in which the apex court had held that when there is no meaning attributed to the expressions used in the particular enacted statute then the items in the customs entries should be judged and analysed on the basis of how these expressions are used in the trade or industry or in the market or, in other words, how these are dealt with by the people who deal in them, provided that there is a market for these types of goods. This principle is well known as classification on the basis of trade parlance..The Court, therefore, allowed the appeal..Read the judgment below.
