Hon'ble Mr.Justice Syed Shah Mohammad Quadri (Chairman)

Mr.Somnath Pal (Member)

Dr.B.A.Agrawal (Member)

Ruling No. AAR/28(Cus)/2006

in

Application No.AAR/02(Cus)/2006

Applicant                                                                       Mr. Akash Jain,

                                                                                    130, Rishabh Vihar

                                                                                    Delhi - 110092

Commissioner concerned                                               Commissioner of Customs(Prev.)

                                                                                    Amritsar

                                                                                    Commissioner of Customs (Prev.)

                                                                                    Lucknow

Present for the Applicant                                                Mr. Kamal Mehta, Advocate

Present for the Commissioner                                         Shri A.K. Roy, Joint CDR

concerned                                                                     CESTAT, New Delhi

Shri Sanjay Saran, Addl. Commissioner, Amritsar

Shri Gaurav Kumar, Jt. Commissioner, Lucknow

R U L I N G

( By Mr. Somnath Pal, Member )

            The applicant, who is setting up a joint venture with non-resident M/s Uniexcel Ltd., Far East International Plaza, Room No. 1206, No. 83, Loup Shah Guan Rd., Changning District New Town Centre, Shanghai, China-200336, has filed this application seeking advance ruling on three questions.  In Annexure-I to the application, the applicant has stated that the non-resident is interested in setting up a knitting/textile unit in India and for this purpose he is interested in having a joint venture with the applicant who is a resident in India.  The proposed unit requires consumption of Wool as raw material and therefore they are keen in taking the benefit of Customs Notification Nos. 38/96 and 63/94 for importing duty free wool from China from Gunji in Pithoragarh, Uttaranchal or Village Namgaya Shipkila in Kinnaur District of H.P.   The unit will be set up in Baddi, H.P. or in Haryana with an estimated investment of US $ 2 millions in machinery.

            In Annexure-II to the application, the applicant has submitted that import of wool is allowed under OGL (Open General Licence).  By Notification No. 63/94, Government of India has set up Gunji in Uttaranchal and Village Namgaya Shipkila in H.P. as Customs Notified Stations for import/export of permitted goods or services.   By Notification No. 38/96, Government of India has exempted from import duty (both basic plus CVD) on wool if imported from these stations from China.  The applicant has enclosed copies of these two notifications alongwith their application.  The applicant has further stated that the plain reading of the two notifications does not put any limitations on the class of persons who can import through these stations nor does it put any limitation on the use of goods so imported for taking benefit of duty exemption.  In the light of the above the applicant has raised the following three questions for getting advance rulings thereon :-
 

            "(a)      Are we allowed to import through these stations in view of notification no. 63/94?

(b)                           If we import wool from these stations, i.e. Gunji in Uttranchal or Village Namgaya Shipkila in H.P., will we get the benefit of duty free import under notification no. 38/96?

(c)                           Is there any limitation under these notification regarding the actual user of the goods so imported.  Means, if we import duty free wool from these station, can we sell the surplus in open market, if so desired?"

2.         In his comments, the Commissioner has however, contended that the benefit of exemption Notification No. 38/96 is not admissible to the applicant who intends to import the wool as raw material for a knitting/textile unit.  In support of his submission, the Commissioner has referred to para 2.13 of the Foreign Trade Policy, 2004-09, ITC Public Notice No. 33/92-97 dated 17.7.92 and ITC Public Notice No. 5/92-97(PN) dated 20.7.92 regulating the border trade across Indo-China border, Office Memorandum F.No. 2/9/2005-FT(NEA) dated 2.5.2005 clarifying that as per the MOU signed with China, the border trade is meant only for local residents of border on both the sides and permitting the import and export of identified items, Board's letter F.No. 554/02/2005 - L.C. dated 12.8.2005 clarifying that India's trade with China has been allowed as border trade and is meant only for Tribal communities living on either side of the border.  It has therefore been submitted by the Commissioner that the duty free  import of wool from China through Namgaya-Shipkila-Shipki Jui Jiuba land route is permissible only for the use of local residents and not for the commercial use of a manufacturing concern or for the trade in open market.
 

3.         In the course of the hearing before the Authority the Ld. Counsel appearing on behalf of the applicant, after some initial submissions, fairly conceded that the question (a) raised in the application is not covered by any of the clauses of Section 28H of the Customs Act, 1962 and hence this question was dropped by him.  Therefore, the questions (b) & (c) alone remain for consideration of this Authority.  They are to be answered only with reference to the exemption Notification No. 38/96 dated 23.7.1996.
           

4.         We observe that the questions (b) & (c) are, in essence, to be treated as seeking applicability in general terms of the exemption Notification 38/96.  The comments submitted by and on behalf of the Commissioner are primarily on the issue of whether the applicant is end to import through the notified Land Customs Stations and along the specific land routes from China.  He has then read this aspect into the exemption Notification No. 38/96 without touching the question of general applicability of this Notification per se.  Since the applicant has agreed and rightly so, to drop the question (a) being outside the jurisdiction of this Authority, we do not see any necessity to express our views on the submissions of the Commissioner.
 

5.         On a plain reading of the exemption Notification No. 38/96, it is clear that this has been issued by the Central Government in exercise of the powers granted to it under Section 25(1) of the Customs Act, 1962, exempting the goods specified in column (2) of the Table annexed to the Notification and falling within the First Schedule or the Second Schedule, as the case may be, of the Customs Tariff Act, 1975, from the whole of the duty of customs leviable thereon under the said Customs Tariff Act, which is specified in the corresponding entry in column (3) of the said Table.  The relevant entry under the heading "description of goods" given in column (2) of the Table to which the applicant has made a reference is at (g) against Serial No. 1 of the said Table.  This reads as follows :-
 

"(g)            Goat skin, sheep skin, horses, goats, sheep, wool, butter, common salt, raw silk, yak tail, yak hair, china clay, borax, szaibelyite and goat cashmere, when imported into India from China through Gunji in Pithoragarh district of Uttar Pradesh along the Gunji Pulan (Tibet) land route or through village Namgaya Shipkila in Kinnaur district of Himachal Pradesh along the Namgaya-Shipkila-Shipki Jui Jiuba land route."

            Under column (3) of the Table against the Sl. No.1, the following remark appears :-

"Duty of customs leviable thereon under  the First Schedule to the Customs Tariff Act, 1975 and Additional duty leviable thereon under Section 3 of the said Act."

As can be seen from the above, 'wool' is one of the specified goods which has been exempted from duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 and also from additional duty leviable thereon under Section 3 of the said Act, when imported into India from China through Gunji in Pithoragarh District of Uttar Pradesh along the Gunji Pulan (Tibet) land route or through Village Namgaya Shipkila in Kinnaur District of H.P. along the Namgaya - Shipkila - Shipki - Jui Juiba land route.  No other condition has been laid down in so far as (g) in column (2) of the Table is concerned.  The Central Government has been given the power to issue general exemption by notification under Section 25(1) of the Customs Act if it is satisfied that it is necessary in the public interest so to do.  Such exemption is in respect of the goods of any specified description and can either be absolute or subject to such conditions (to be fulfilled before or after clearance) as may be specified in the notification.  The exemption can be from the whole or any part of duty of customs leviable thereon.    Therefore, exemption notifications are to be interpreted and given effect to only by (i) the exact identity of the goods specified in the notification, (ii) condition(s), if any, given in the notification which is/are to be fulfilled before or after clearance as may be specified in the notification and (iii) the extent of exemption of duty which is also specified in the notification itself.  We make it clear that in so far as the goods specified in category (g) of this exemption Notification are concerned, no condition(s) has/have been stipulated therein excepting limiting the import of such goods from China and specifying the notified Land Customs Stations and the land routes through which alone the import has to take place for getting the benefit of exemption of duty under the said Notification.   We hasten to add that this ruling does not preclude the concerned authorities from verifying/satisfying themselves as to compliance of requirements under other Acts/Rules.
 

Applying this principle, we give the rulings on the questions (b) & (c) as follows :-

Qn. (b)  -   On a plain reading of the text of the category (g) in column (2) against Serial No. 1 of the Table annexed to the Notification No. 38/96-Cus dated 23.7.96 the goods specified therein which includes 'wool' are end to get exemption from duty when imported into India from China through the specific Land Customs Stations and along the specified land routes mentioned  therein. 

Qn. (c)   -  The category (g) in the aforesaid exemption Notification does not  have any actual user condition after the specified goods are imported.   

             Pronounced in the open Court of the Authority on this 29th day of August, 2006.

       Sd/-                                        Sd/-                                                 Sd/-

(B.A.Agrawal)                     (Justice S.S.M.Quadri)                             (Somnath Pal)     

     Member                          Chairman                                       Member

Registered /A D 

F. No. AAR/44/01(Cus)/2005                                                    Dated:  29^th August, 2006 

(A) This copy is certified to be a true copy of the Ruling and is sent to :-

1.         Mr. Akash Jain, 130, Rishabh Vihar, Delhi-110092

2.         Commissioner of Customs, Custom House, Central Revenue Building, The Mall, Amritsar-143001

3.         Commissioner of Customs, 5^th & 11^th Floor, Kendriya Bhawan, Sector-H, Aliganj, Lucknow-226024

4          Member (Customs), Central Board of Excise & Customs, North Block, New Delhi.

5.         Mr.A.K.Roy,Joint Chief Departmental Representative, Customs, Excise & Service Tax Appellate Tribunal, West Block-2, R.K.Puram, New Delhi-66.

6.         Guard File

(VIJAI KUMAR)

 JOINT COMMISSIONER

Registered /A D

 F. No. AAR/44/01(Cus)/2005                                                  

Dated:  5^th September, 2006 

(A) This copy is certified to be a true copy of the Ruling and is sent to :-                                                                                                          

1.         Mr. Akash Jain, 130, Rishabh Vihar, Delhi-110092

2.         Commissioner of Customs, Custom House, Central Revenue Building, The Mall, Amritsar-143001

3.         Commissioner of Customs, 5^th & 11^th Floor, Kendriya Bhawan, Sector-H, Aliganj, Lucknow-226024

4.       Member (Customs), Central Board of Excise & Customs, North Block, New Delhi.

5.         Mr.A.K.Roy,Joint Chief Departmental Representative, Customs, Excise & Service Tax Appellate Tribunal, West Block-2, R.K.Puram, New Delhi-66.

6.         Guard File

(VIJAI KUMAR)

 JOINT COMMISSIONER 

(B)    In view of the provisions contained in Rule 25 of the Authority for Advance Rulings (Procedure) Regulations, 2005, permission of the Authority is accorded for publication of the Advance Ruling. Copy of the Advance Ruling is forwarded to:

1.   Centex Publications Pvt. Ltd., 1512-B, Bhishma Pitamah Marg, Opp. ICICI Bank of Defence colony, New Delhi-110 003

2.   Deeparchie Publications, M-93, Marg-46, Saket, New Delhi-110 017

3.   Excise & Customs Cases, B-37, Sector-1, Noida-201301 (U.P.)

4.   Cen-Cus Publications, A-252, Shivalik, New Delhi-110 017

5.   Taxindiaonline.com Private Limited., B-XI/8183, Vasant Kunj, New Delhi-110 070

6.   Taxmann Allied Service Pvt. Ltd, 59/32, New Rohtak Road,  New Delhi-110005.

7.   www.allindiantaxes.com, 803, Kirti Shikhar, District Centre, Janakpuri, New Delhi-110058

(VIJAI KUMAR)

 JOINT COMMISSIONER