CUSTOMS CIRCULAR No.36/2000 Dated 8th May,2000.

Laying down of uniform guidelines for clearance of rags - regarding.

I am directed to invite your attention on the above mentioned subject. It. has been reported that divergent practices are being followed by Custom Houses with respect to clearance of rags. It is seen that at some of the Custom Houses garments having 2-3 cuts are being cleared as rags, whereas other Custom Houses are insisting for 6-8 cuts on the garments for them to be considered as completely mutilated rags. The matter was discussed in the Conference of Commissioners of Customs on Tariff and Allied Matters held at Chennai on 21st and 22nd January, 2000, and in this connection, please find enclosed a copy of the extract of proceedings of Conference. After discussions, the said Conference concluded as under:

(i) If garments are only old and used but serviceable after repair, they must be classified under CTH 63.09.Only such garments which are totally unserviceable and beyond repair, should be classified under CTH 63.10.

(ii) In cases where garments declared to be rags are actually found to be only old and used garments falling under heading 63.09, as is mostly the case, the imposition of fine and penalty for violation of EXIM Policy should be such that it not only wipes out the Margin of Profit (MOP) but also acts as a deterrent against repeated imports.

(iii) Rags to be considered as completely mutilated should be totally unserviceable and beyond repair, and this can be ensured by applying criteria of three cuts or more, through the entire length of the garment, in a crisscross manner, not along the seams.

(iv) Only such garments, which are found to be completely mutilated rags, as imported, should be allowed clearance without licence. Clearance subject to post importation mutilation must not be allowed.

(v) In case it is found that garments are not completely mutilated rags i.e.,garments having less than 3 cuts, the same should be allowed clearance only on such fine and penalty which not only wipes out the MOP but also acts as a deterrent against future imports.

2. All cases pending at your level may be decided on the basis of above guidelines.

3. These instructions may kindly be brought to the notice of all concerned by way of issuance of suitable Public Notice / Standing Orders.

4. Difficulties, if any, in implementation of these instructions may be brought to the notice of the Board. This Circular supersedes are previous ones on the subject issued by the Board from time to time. Kindly acknowledge receipt ofthe Circular.

(Rajendra Singh)
Under Secretary to the Govt. of India


Copy of the extracts of proceedings of Conference held on 21st and 22ndJanuary, 2000 at Chennai.

Subject:- Laying Down of uniform Guidelines for Clearance of Rags.
Issue: Divergent practices are being followed by Customs Houses with respect ofclearance of rags. While at Calcutta and Chennai, garments having 2-3 cuts are beingcleared as rags, Cochin Customs House is insisting on 6 to 8 cuts on the garments forthem to be considered as completely mutilated rags.

Import of "worn clothing and other worn articles" falling in CTH 63.09 [ITC (HSN)63090000] is restricted under the EXIM Policy 1997-2002. However, import of syntheticand woolen rags in completely mutilated condition is allowed freely subject to thecondition that mutilation conforms to the requirement specified by Customs by way ofPublic or Trade Notice.

Mumbai Custom House had issued a Public Notice in 1988 (PN60/88) which required thegoods to have 6-8 cuts depending upon the type of garment. Board had also issuedinstructions to all Custom Houses vide letter dated 26.9.88, to follow norms ofmutilation specified by Mumbai Custom House. Accordingly, other Custom Houses had alsoissued Public Notice along the same lines. However, the norms specified in MumbaiCustom House Public Notice were not implemented uniformaly by various Custom House, inview of Supreme Court order in case of Swastika Woolen Industries [ 1990 (47) ELT -216 (SC)] that garments cut into 2,3,4 pieces 'not along the seams) can be regarded ascompletely mutilated. The issue was placed before Conference in view of existence ofdivergent practices.

The conference discussed the issue and observed that lack of uniform assessmentpractice results in complaints that the same goods which can be freely imported asrags at one port, are treated as restricted at another. The Conference elaborately discussed the scope of heading 63.09 and 63.10 of Customs Tariff. Heading 63.09 covers"worn clothing and other worn articles". According to HSN Explanatory Notes, garmentsto be classified under heading 63.09, must show signs of appreciable wear, whether ornot they require cleaning or repair before use. and must be presented in bulk e.g. inbales, sacks. etc. Heading 63.10 covers 'rags'. According to HSN Explanatory Notes,garments to be classified as rags under heading 63.10 must be so worn out or torn asto be beyond cleaning or repair and generally fit only for recovery of fibres. TheConference therefore noted that if garments are declared to be rags, but are actuallyfound to be only old and used garments serviceable after repair, they must beassessed under CTH 63.09. Only such garments which are totally unserviceable andbeyond repair should be classified under CTH 63.10. Commissioner of Customs, Calcuttastated that at their port 90-95% of consignment of rags are found to be old and usedgarments and are accordingly classified under CTH 63.09 and cleared afteradjudication.

The Conference noted that under the EXIM Policy 1997-2002, the old and used garmentsfalling under Heading 63.09 are restricted for import. However, rags falling under63.10 are freely importable subject to the condition that they are imported in acompletely mutilated form, and such mutilation conforms to the requirements laid downby Customs. The conference observed that EXIM Policy condition for free importability,does not provide any scope for mutilation subsequent to import. Commissioner ofCustoms, Nhava Sheva stated that as norms for mutilation of rags have not beennotified under section 24 of Customs Act, 1962, allowing clearance subject to postimportation mutilation is illegal. The Conference further noted that for garments tobe considered as completely mutilated, they should be totally unserviceable and beyondrepair and this can be ensured by applying the criteria of three cuts or more throughthe entire length of the garment, in a crisscross manner, not along the seams.

In view of the above the Conference concluded that:
(i) If garments are only old and used but serviceable after repair they must beclassified under CTH 63.09. Only such garments which are totally unserviceableand beyond repair, should be classified under CTH 63. 10.

(ii) In cases where garments declared to be rags are actually found to be onlyold and used garments falling under heading 63.09, as is mostly the case, theimposition of fine and penalty for violation of EXIM Policy should be such thatit not only wipes out the Margin of Profit (MOP) but also acts as a deterrentagainst repeated imports.

(iii) Rags to be considered as completely mutilated should be totally unserviceableand beyond repair and this can be ensured by applying criteria of three cuts ormore, through the entire length of the garment, in a crisscross manner, notalong the seams.

(iv) Only such garments which am found to he completely mutilated rags, as imported,should be allowed clearance without licence. Clearance subject to postimportation mutilation must not be allowed.

(v) In case it is found that garments are not completely mutilated rags i.e.garments having less than 3 cuts, the same should be allowed clearance only onsuch fine and penalty which not only wipes out the MOP but also acts as adeterrent against future imports.

It was decided that instructions would be issued by Board on the above lines forensuring uniformity in assessment practice.

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