Customs, Excise and Gold Tribunal - Delhi
Indian Thermoplastic (P) Ltd. vs Collector Of Customs on 20 June, 1996
Equivalent citations: 1996(87)ELT536(TRI-DEL)
ORDER
U.L. Bhat, President
1. Appellant is aggrieved by the order passed by the Collector of Customs, Kandla, demanding differential duty of Rs.-5,65,365/- on the import of slitter cum rewinder machine by the appellant, confiscating the machine under Section lll(d) and (m) of the Customs Act, 1962 with option to redeem it on payment of Rs. 1,00,000/-, holding the appellant guilty of misdeclaration of description and value of the machine in order to obtain the benefit of OGL and to evade payment of duty and imposing penalty of Rs. 50,000/- on the appellant and Rs. 25,000/- on one of the Directors of the appellants' sister concern under Section 112 of the Act. The Collector did not impose penalty on the other officers of the appellant.
2. The imported machine was second hand machine. Appellant declared the machine as "fully programmed paper cutting machine with three knife trimmers and accessories and spares" and declared value as Rs. 15,94,044/-. The machine was assessed on the invoice value and duty was paid and the machine cleared. The Central Economic Intelligence Bureau received information that the machine imported was actually slitter cum rewinder machine worth much more than the invoice value. The premises of the Import Executive of the appellant were searched. The Chartered Engineer's certificate in original dated 6-1-1987 which came through banking channel was recovered. On a search of the residence of Director of the appellant's sister concern original Chartered Engineer's certificate also bearing the same date was recovered. It was the later certificate which had been submitted along with the import documents. The former certificate showed the year of manufacture as 1980, the price of new machine as DM 650000 and the CIF value of the imported machine with accessories and spares as DM 450000 while the year of manufacture and the CIF value of the imported machine were mentioned in the latter Certificate as February, 1982 and DM 284000 respectively. Persons connected with the appellant were questioned. Show cause notice was issued alleging misdeclaration of goods, misdeclaration of value and proposing demand of differential duty, confiscation and levy of penalty. The show cause notice proposed the adoption of CIF value as DM 450000 less depreciation. The notice also alleged that the machine imported was not paper cutting machine used in printing industry but slitter cum rewinding machine which would not fall under Item 11(9) of Part B Appendix I of AM 1985-88 Policy and therefore, could not have been imported under OGL.
3. The appellant denied the material averments in the show cause notice with reference to the description of the machine, the permissibility of import under OGL and the valuation. The Collector, however, rejected these contentions and passed the impugned order holding that the machine was a slitter cum rewinding machine and not paper cutting machine falling under the aforesaid item and could not have been imported under OGL but required specific licence. The Collector determined the CIF value at the time of import at Rs. 2,59,181 and the differential value originally.assessed and presently assessed differential duty.
4. Learned counsel for the appellant contended that even assuming that the machine imported could be regarded as slitter cum rewinding machine, it is basically a paper cutting machine which could be used in printing industry and also used in the appellant's industry being an industry for manufacture of coloured paper and photo films. The manufacture of coloured paper and photo films involved cutting jumbo rolls of coloured paper and films for which purpose the paper cutting machine is actually vised. Learned counsel pointed out that the department has no case that the appellant's industry cannot use this machine or the appellant has not used this machine after import or it is incapable of being used in the appellant's factory. Therefore, it is contended that the machine would fall under the category of paper cutting machine attracting Item 11(9) of Part B of Appendix I of the policy. Learned counsel invited our attention to a decision of the Tribunal in Northern Plastic Ltd. v. COC [1996 (83) E.L.T. 192].
5. Shri Handa, SDR rebutted the above contentions. According to him, the paper cutting machine covered by Item 11(9) of Appendix 1B of the policy is only a paper cutting machine used and to be used in printing industry and will not cover a machine used for cutting purposes in any other industry and the actual user condition will be satisfied only if the actual user and importer user is a unit of the printing industry.
6. Northern Plastic Ltd. case also dealt with import of a machine regarded by the department as slitter cum rewinding machine imported by a person unconnected with printing industry but running a plastic industry where also a cutting machine would be necessary. The Bench relied on the Explanatory Note to Heading 84.33 to the effect that Heading includes "slitter-reelers" for unwinding reels of paper and cutting the paper into bands of required width and rewinding it. The Bench also relied on Explanatory Note to Heading 84.41 of the HSN to the effect that it included winders (slitter-winders) for unwinding reels of paper, slitting the paper into bands(slits) of the required width and rewinding it and held that a slitter cum rewinding machine is internationally recognised as a paper cutting machine.
7. The heading of Item 11 of Appendix 1 Part B is "Printing Machinery" Sub-Item (9) refers to "Fully Programmed Paper Cutting Machine and 3 Knife Trimmers". The Collector has not referred to and the departmental representative has also not referred to any provision in the policy indicating that the paper cutting machine referred to in Item 11(9) could be imported only by a member of the printing industry and that it cannot be imported by an actual user in another industry. This aspect assumes significance when we find that a restriction to that effect has been imposed in the policy for the next period, namely, 1988-91. Paragraph 7(l)(i) of Appendix 6 of that policy imposes a condition to the effect that "capital goods listed for a particular category can be imported by Actual Users falling under the same category and if an actual user wants to import an item of capital goods permissible for import under Open General Licence by another category, its import shall be allowed by the customs on the basis of a certificate from the DGTD that the item is also required for vise in his industry." The restriction is the requirement of a certificate from the DGTD to the effect that the item is required for use in the particular industry, The emphasis is on the requirement for use in the importer's industry. This requirement of a certificate was not provided for in the subject policy. So far as the nature or category of the machine is concerned, we find no reason not to follow the finding in Northern Plastic Ltd. to the effect that slitter cum winding machine is internationally recognised as a paper cutting machine. Assuming that paper cutting machine in the instant case is a machine of general use in printing industry, even so, in the absence of any specific restriction to that effect it cannot be said that an industry other than paper industry cannot import this machine under OGL.
8. We, therefore, disagree with the conclusion of the Collector and hold that the import of the machine under OGL was permissible.
9. The declared invoice price was Rs. 15,94,044. The value determined under the impugned order is Rs. 22,59,181. If this be the correct value, it would follow in the circumstances of the case, that there was deliberate undervaluation. The Chartered Engineer's certificate which was received by the appellant directly (not through banking channel) showed the price of the new machine as DM 450000. The Collector has adopted this as the basis and deducted depreciation for seven years each at the rate of 5%. This is quite contrary to the normal practice followed in the Custom House of quantification of depreciation. At the relevant time there was Board's instruction in force suggesting deduction of depreciation at 4% for each of the first four quarters, 3% for each of the next four quarters 2 1/2% for each of the next four quarters and 2% for each succeeding quarter subject to maximum 17%. The Collector has not indicated any reason for disregarding the norms suggested by the Board. If the depreciation is to be deducted at the norms suggested by the Board, the CIF value at the time of import would be much less than the declared value of Rs. 15,94,044. That being so, this was not a case of misdeclaration of value or undervaluation. The declared invoice value was much more than the value which would be arrived on the basis of the value of new machine indicated in the Chartered Engineer's certification seized from the residence of one of the Director's of the appellant's sister concern.
9. In the light what we have indicated above, the fine in regard to valuation, duty payable, misdeclaration and penalty cannot stand. As pointed out by Shri Handa, SDR, the intention of the appellant was not honourable. That is clear from the circumstance that the two certificates of the same Chartered Engineers bearing the same date and showing different particulars regarding year of manufacture and value of new machine were procured by the appellant, one through the banking channel and other through ordinary channel. This must certainly be motivated. The Custom House has not succeeded in discovering the motivation behind this action. The department is not able to point out any provision of law by which such an action can be regarded as an offence on a violation of law. Therefore, the penalty levied cannot be sustained to any extent.
10. In the result, the impugned order is set aside and the appeals are allowed.