Dr. Satish Chandra, J. - (1.) THE present appeal has been filed by the appellant -Department under section 130 of the Customs Act 1962 against the judgment and order dated July 14, 2011 passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAF) in Appeal Nos. C/26 to 28/ 2008 -CU (DB). On December 5, 2013, this court has admitted the appeal on the following substantial questions of law: 1. Whether the learned Tribunal has rightly held that the respondents hereto have fulfilled all the conditions of exemption Notification No. 38/1996 -Customs, dated July 23, 1996 while importing the seized silk inasmuch as the Ministry of Commerce letter OM No. 2/9/2005 -FT (NEA), dated May 2, 2005 has clarified that exemption notification is guided by the memorandum of understanding (MOU)/trade treaty/ instructions/clarification?
(2.) WHETHER the learned Tribunal is justified in holding that the dispute in the appeal can be resolved without making any reference to the fact as to whether M/s. Krishna Enterprises is the owner of the goods or he is a dummy importer on behalf of the M/s. Elegant Industries and as to whether the import was made as border trade? 2. The brief facts of the case are that the assessee, M/s. Krishna Enterprises, is a proprietary concern of Shri Krishna Singh Garbyal, who had imported two consignments of raw silk from China and filed bills of entry dated September 2, 2005 and October 3, 2005 with the customs authorities at Gunji land port to claim of exemption from customs duty, in terms of Notification No. 38/1996 -Customs, dated July 23, 1996. But the same was not allowed by the assessing officer as well as the first appellate authority. However, the Tribunal has allowed the claim of the assessee. Being aggrieved, the Department has filed the instant appeal. With this background, Shri Rajesh Singh Chauhan, learned counsel for the Department submits that the said notification exempts specified goods including raw silk, when imported from China to India through Gunji in Pithoragarh District, Uttarakhand, through specified Tibet land route. He also read out the Memorandum between the Government of India and China, where the provision was made between the Government of the Republic of India and the Government of the People's Republic of China to establish border trade markets at a few location including Gunji in Pithoragarh District. In the said Memorandum, it is mentioned that: With a view to facilitating the visits of persons engaged in border trade and the exchange of commodities and means of transportation, the Government of the Republic of India and the Government of the People's Republic of China have decided that Lipulekh (Qiangla) be the border pass for the entrance of the said persons, commodities and means of transportation must be accompanied by valid papers for entrance and exit and shall be subject to the supervision and control of the authorities concerned of either country.
(3.) THE learned counsel submits that exemption was allowed only on the border area for the benefit of tribals of the area, but in the instant case, the goods were brought to Delhi. M/s. Krishna Singh Garbyal, proprietary of M/s. Krishna Enterprises, in his statement recorded on October 21, 2005 stated that his firm was established in July, 2005 only. The raw silk was made available to him from Tibet through Shri Ajeet Kumar Gupta, proprietor of one M/s. Elegant Industries, Delhi, who managed the transaction. The profit which earned was shared equally between the firms. Earlier, Shri Ajeet Kumar Gupta, proprietor, M/s. Elegant Industries has filed a writ petition at Delhi, as mentioned in the Tribunal order (paragraph 5). On May 19, 2006, a search was conducted at the premises of M/s. Elegant Industries and also at the residential premises of Shri Ajeet Kumar Gupta. He submits that the raw silk was brought to Delhi. The entire financial investment was made by M/s. Elegant Industries, who has ultimately sold the raw silk in the market. M/s. Krishna Enterprises is only a dummy importer, so the excise duty is leviable. Lastly, he made a request to uphold the order passed by the assessing officer.;