Customs, Excise and Gold Tribunal - Mumbai
Lion Pencils (P) Ltd. vs Cc on 30 September, 1996
Equivalent citations: 1997(69)ECR591(TRI.-MUMBAI)
ORDER R. Jayaraman, Member (T)
1. This is an appeal against the order-in-original No. S/10-67/85-A dated 23.2.1985 passed by the Addl. Collector of Customs, Bombay.
2.1. The appellants are said to be engaged in manufacture of various types of pens and pencils. They imported 5 consignments, which were shipped on the same date and they arrived at Bombay simultaneously. They filed 5 Bs/E for clearance of these consignments. The details as given by the appellants in regard to these Bs/E in the paperbook are briefly indicated as below:
(i) 2000 gross-Plastic moulded Barrel value Rs. 42,957-Date of Bill of lading 27.9.84-Proforma Invoice dt. 5.3.84 B/E No. 1593/84-Sought for clearance of goods against licence No. P/D/2236191-authorising import of items figuring in Appx. 5 of A.M. 84 Policy (relevant item in Appx. 5 claimed is S.No. 430).
(ii) 2000 gross-Plastic moulded nozzles with feeder and metallic tip- Value Rs. 1,57,6187-
B/L dt. 27.9.84-Proforma Invoice dt. 5.3.84 B/E No. 1593/88-Sought for clearance against licence referred to in (i) above.
(iii) 2000 gross-Metal clips-Value Rs. 42,9877- Proforma invoice dt. 5.3.84.
B/E No. 1593/87-B/L dt. 27.9.84-Sought for clearance against the same licence, which is valid for Appx. 3 item (S.No. 506 of Appx. 3)
(iv) 2000 gross each of plastic moulded cap, Plastic moulded Back plug and Plastic moulded top plug-Value Rs. 57316-Proforma invoice dt. 5.3.84.
B/L dt. 27.9.84-Sought for clearance against the same licence as Appendix 5 item S.No. 430.
(v) 2000 gross-Ink cartridges-Value Rs. 28,658/- B/E No. 1593/85 - B/L dt. 27.9.84-Proforma Invoice dt. 5.3.84-Claimed clearance as OGL item under Appx. 6(1) of Policy A.M. 83-84.
2.2. It is not disputed that all the above five consignments were shipped by Zebra Co. Ltd. Japan, who are the manufacturers of Zebra brand Be-Pens and all these consignments arrived by the same vessel 'Maribor'. It is their claim that being a manufacturer of Pens/Pencils, these have been imported against licence issued valid for Appx. 5 & 3 items in respect of 4 consignments and under OGL Appx. 6(1) in the case of one consignment.
2.3. But their was claim objected to by the Dept. on the following ground.
The goods imported are complete ball pens in C.K.D condition. The goods would therefore fall under S. No. 105 of Appx. 2B of A.M. 85 policy as consumer goods.
In view of this, adjudication proceedings were held by the Addl. Collr. who held the importation as unauthorised. He ordered confiscation of the goods, but allowed redemption on payment of fines as below.
B/E No. Redemption fine
B/E 1593/84 Rs. 40,000/-
B/E 1593/85 Rs. 25,000/-
B/E 1593/87 Rs. 40,000/-
B/E 1593/88 Rs. 1,50,000/-
B/E 1593/89 Rs. 50,000/-
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Total - Rs. 3,05,000/-
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2.4. The present appeal is against the above order of confiscation and imposition of redemption fine.
3. The arguments of the Id. Advocate Shri J.C. Patel on behalf of the appellants can be summed up as below:
(i) The appellants are Actual User and they have imported the goods as components permitted against automatic licence valid for Appx 5 and 3 items and under OGL, where the policy permits. There cannot be any dispute that each consignment, by itself consists of only components for ball pens and it is not open for the Customs authorities to construe the scope of the licence by looking into other consignments imported, for holding that it is a ball pen in C.K.D. condition. If these consignments have come in different vessels and at different ports, no such objection would have been possible. The Customs officer is to look into the consignments in the context of the import licence produced for arriving at the satisfaction that the goods in each consignment are covered by licence or not. In this context he seeks to rely on the decision of the Supreme Court in the case of UOI v. Tarachand Gupta & Bros. ECR C 539 SC : ECR C Cus 779 SC : 1983 ELT 1456 (SC). He particularly invites our attention to paras 14 to 16 of the said judgment to plead that it is not open for the Customs authorities to club the components in 5 consignments to arrive at a conclusion that they constitute a ball pen, which is a consumer good.
(ii) Even by clubbing the items in five consignments, they cannot be said to be ball pens; because ink is not filled in cartridges imported. Ink can be filled in these cartridges, only with the help of a machine, which they have previously imported. A buyer of these assembled pens cannot straightway use it as a pen, without the cartridges being filled with ink, which the consumer cannot do on his own. Hence, it cannot be said that the goods imported go for direct consumption as consumer good.
(iii) As per the policy provisions during the issue of licence, when L.C. was also opened during 83-84, the corresponding No. 93 of Appx. of A.M. 84 does not cover goods in C.K.D. condition as against S. No. 105 of Appx . 2B of A.M. 85 Policy, wherein specific inclusion of goods in C.K.D. condition has been made. Hence there was no specific prohibition in Appx. 4 - S. No. 93, against import of goods in C.K.D. condition-the prohibition was only against consumer goods in S.K.D condition.
(iv) The policy provisions as applicable at the time of issue of the licence, when licence was opened on 30.3.1984, would govern the import. Since the finding is that these goods were in C.K.D. condition and not in S.K.D. condition, it cannot be said to be a consumer item as per S. No. 93 of Appx. 4 of A.M. 84.
4. The main thrust of the arguments of Shri Mondal on behalf of the dept. are as below:
(i) This is a case of import of Japanese made "Zebra brand" ball point pens in the guise of components, for which they were holding licence and when the licence does not cover certain items they seek for clearance under OGL, as component for actual use for manufacture;
(ii) There is no manufacturing process involved. All parts fully manufactured are imported in 2000 gross; Assembly is a simple one, which any consumer can do by putting the barrel, nozzles, cartridges, back and front plugs together to get the pen. No machines are admittedly needed for the assembly.
The claim of the appellant that filling up cartridges with ink, only through a machine has been rebutted by the Collector, based on market enquiries. The appellant has not produced any authentic write-up or evidence to show that filling up with the cartridges is a process, which cannot be done by the buyer of the pen himself. It cannot be envisaged that a pen is not an item of consumer goods without ink. Ink is no doubt needed for the pen, but it is a known fact that manufactures of pen and ink are different and pens come into the market without ink. Hence the argument that it has been imported without ink and does not satisfy directly the consumer needs is not acceptable.
(iii) Shri Mondal seeks to rely on the decision of the Supreme Court in the case of Sharp Business Machines v. CC Bangalore 1990 (31) ECR 177 (SC). He particularly invites our attention to the observations made by the Supreme Court, wherein under similar circumstances of import of all the parts of photocopier, the Supreme Court held that such an attempt is a fraud committed on the import policy.
(iv) In fine, he pleads that the facts of this case are identical to the facts considered by the Supreme Court in Sharp Business Machines case (supra), by pointing out that all the five consignments shipped by the manufacturer of Zebra brand ball pens in Japan are nothing but ball pens in disassembled form (whether it is C.K.D. or S.K.D.) and such ball pens of Japanese brand are not permitted for import, because they are consumer goods figuring in restricted list. Hence import has been resorted to by adopting a colourable device. Their claim that they have imported the components for manufacture of ball pens is bereft of credibility, because in that case they would not have resorted to seek for 2000 gross of each component simultaneously. Their object is to get 2000 gross ball pens, but to beat the policy, they have resorted to this dubious method.
5.1. Shri Patel, in reply, stated that the emphasis of the Supreme Court in the Sharp Business Machines case was that there was a bar on import of not more than 62% of the requirements, the balance being met by indigenous substitution. Hence the Supreme Court hold that import of all the parts of photocopier was fraud on the I.T.C. policy. In the case of the appellants, there is no such prohibition and hence he would urge for accepting the ratio of the judgment in Tarachand Gupta case.
5.2. The Dept. have never revealed the nature of market enquiries relied upon by the Collector to hold that ink can be filled up in cartridges manually. It is incumbent on the Dept. to lead evidences to rebut their contention.
5.3. In the event, the Bench holds a view against the import, he would plead that import is made for study of technology and subsequent indigenous substitution by developing their parts locally. Import is made by a manufacturer of ball pens. Hence 100% redemption fine is not justified.
6.1. After hearing both the sides and perusing the documents in the paper book, we find that all the five consignments have emanated from the manufacturer of 'Zebra brand' ball pens by the Zebra Co. Ltd., Japan, with whom L.Cs have been opened on 30.3.1984, on the basis of Proforma invoices dated 5.3.1994 and the goods were shipped in the same vessel on the same date namely 27.9.1984. We also notice that all the items covered by the five Bs/E would go to make 2000 gross ball point pens of Zebra brand Japan and can be sold in the market as Japanese branded ball point pens. (There is a dispute about ink filling in the cartridges, which we deal with elsewhere). The appellants sought for clearance of 4 consignments against an automatic licence valid for import of Appx. 5/Appx. 3 items as plastic moulded/extruded parts and in the case of ink cartridges, they claimed clearance under OGL Appx. 6(1). Whether such an import can be permitted, notwithstanding the prohibition laid down for import of consumer goods in disassembled condition in Appx. 4 of A.M. 83-84 Policy and Appx. 2A of 84-85 Policy? This is the major question to be answered by us in this appeal.
6.2. For arriving at a conclusion on this main issue, we are to consider the following submissions:
(i) Whether the ratio of the decision in Tarachand Gupta case is applicable to the facts of the case or the decision in Sharp Business Machines case? (both cases decided by the Supreme Court).
(ii) If it is construed as import of ball point pens in disassembled condition, can it still be considered a consumer item, which directly goes to satisfy consumer needs?
6.3. Taking up the case of Tarachand Gupta case first, we are to certify the following relevant facts dealt with in that case by the Supreme Court.
Import of two consignments of 17 cases each, by two different ships, which arrived on two different dates, was effected by Tarachand Gupta. It was alleged that components comprised in the two consignments would constitute motorcycles in C.K.D./S.K.D. condition which cannot be imported against a licence issued for Entry 295 of Section 11 of Part IV of Schedule I of ITC Policy July-Dec., 1956, since the said entry S. No. 295 permits only import of articles (other than rubber tyres and tubes) adapted for use as parts and accessories of motor cycles/scooters.
6.4. The Supreme Court negatived this contention for the reasons recorded in paras 12 to 19 of the judgment, which we carefully read and find the following position.
6.5. We find that in the case of Tarachand Gupta, the Apex Court dealt with two consignments received at different points of time brought in by two different ships, but imported by the same person against the same import licence issued for S. No. 295 of Section 11 of Part IV of Schedule I of I.T.C. Policy July-Dec. 1956. The Apex Court also took note of the fact that S. No. 294 permits import of complete motor cycles with a condition that licence issued for S. No. 294 cannot be utilised for import of motor cycles in C.K.D. condition and such a condition does not exist in respect of S. No. 295. Hence such a condition cannot be reported in S. No. 295, especially when the licence for S. No. 295 does not prescribe any restrictions on import of any item adopted for use as part or accessory of a motor cycle and the admitted position is that tyres and tubes and saddles have not been imported to constitute a full motor cycle. The Supreme Court also took note of the fact that even if it is held that the parts put together make a motor cycle, it is not a prohibited article, as was the case in Girdharlal's case (1964) SCR 62, dealt with by them earlier. In the context of these factors, the Apex Court held that it is not open for the Collector to club both the consignments for construing the goods as motor cycles in disassembled condition.
6.6. As is seen from the other case, subsequently decided by the Supreme Court in Sharp Business Machines, the Apex Court did not approve the Tribunal's action to treat the parts of photocopier for making 10 complete photocopiers, as parts, instead of photocopier and they have observed that Tribunal was not correct in placing reliance on Tarachand Gupta case, because import of fully assembled copiers was prohibited. The appellant was entitled to import 62% of the components. The device adopted by the appellant to import 10 photocopier in the guise of components is a fraud on the Policy. The facts of the case are similar to the case of Girdharilal Bansidhar, decided by them earlier and hence negatived the findings of the Tribunal on this score.
6.7. Thus we have the cases of Girdharilal Bansidhar and Sharp Business Machines on the one side as against Tarachand Gupta quoted by the other side. Applying these cases to the facts of the present case before us, we find the ratio of decision of Sharp Business Machines is found applicable in the facts of the present case for the following reasons.
(i) Import of consumer item in a disassembled condition (whether SKD or CKD) is not permitted for import and the import licence produced only permits certain plastic parts figuring in Appx. 5/3 and not all parts designed for use in Ball point pens, whereas in the case of Tarachand Gupta, the licence permits import of all items adopted for use as parts or accessory of motor vehicle. We also do not find any merit in the contention that as per policy of AM 83-84 there is no condition of CKD import. All the same, consumer goods, in whatever manner described, are prohibited for import. If they are brought dismantled, they attract the mischief even during 83-84 policy period.
(ii) All the five consignments are covered by invoices of the same date. L.C. opened on the same date and goods shipped in the same vessel. They came from a well-known manufacture of Zebra brand ball pens and even the components/clips bear the brand name. They have been imported in 2000 gross of each so as to make 2000 gross ball point pens. Apparently, there is no process of manufacture involved, nor any part or accessory is wanting in this case, as in the case of Tarachand Gupta, where tyres/tubes and saddles were not imported. If the appellants had imported the aforesaid 5 consignments in one consignment of ball point pens (minus ink) could he have utilised the licence held by him or could he claim OGL benefit for a part of the ball pens, as he now does, when the pens are imported in a disassembled condition? The obvious answer would be 'No.' Hence what cannot be done directly under the Policy, the appellants seek to achieve it indirectly by this method. We are also not impressed with the plea that if these consignments are imported separately by different vessels, this objection could not have been taken. In that case, it is the burden on the Dept. to establish their design by evidence. But once their design to circumvent the policy is brought out by tangible evidences, they cannot escape the ratio of the decision of Sharp Business Machines case, where we find the imports were received from two different parties.
(ii) When Ball point pen, a consumer item is banned for import, this fact is also similar to the fact of import of banned items dealt with in Girdharlal Bansal case by the Supreme Court. In the words of Supreme Court (vide ECR C 539 SC : ECR C Cus 779 SC : para 19 in 1983 ELT 1456 (SC).
Further the articles in question, even when assembled together, were not prohibited articles as in Girdharlal's case 1984 ECR 491 SC : (1964) 7 SCR 62. Girdharlal's case is clearly distinguishable because it is not as if motor cycles and scooters are prohibited articles as was the case there_. The restriction is not against licensees importing motor cycles and scooters under entry 294 and parts and accessories under entry 295 but against the licensees under Entry 294 importing motor cycles and scooters in C.K.D. condition. The question in the instant case was not under which of the two entries 294 or 295, the goods fell but whether the goods were parts and accessories covered by entry 295.
Hence viewed in the context of the observations of the Supreme Court in Tarachand case, it is clear that when a fully assembled motorcycle is permitted under S. No. 294 and is not banned, import of parts and accessories of motorvehicles (without any condition in S. No. 295 as is found in S. No. 294) cannot be construed to attract the provisions of S. No. 294.
(iii) Applying this principle in this case, we cannot accept the Id. advocate's plea that in Sharp Business case, the thrust of distinction lies in the condition allowing import of only 62% of components, which was taken note of by the Apex Court. The emphasis is mainly on the ban on the import of fully assembled photocopier and further observe that the appellant was entitled to import only 62% of components. Hence it was construed to be a device to beat the policy provisions. Thus 62% restriction was cited by the Apex Court as a corollary to the main point of ban on assembled article and not vice versa. Moreover the Apex Court, in the case of Sharp Business Machine [vide para 16 -1990 (31) ECR 177] observed that the appellant was doing indirectly, what he was not permitted to do directly. They were therefore of the view that the facts of that case (Sharp Business Machine) are akin and similar to the facts of the case of Girdharlal Bansi Dhar. Since assembled ball pen being a consumer item, which has been imported in a dismantled condition by obtaining proforma invoices of the same date, opening LCs on the same date, getting them shipped in the same vessel on the same date, their obvious intention is to import only 2000 gross of ball pens (a prohibited item being a consumer good), they cannot escape the ratio of decision of the Supreme Court in Sharp Business Machine case and Girdharlal Bhansidhar case. We are to point out that Automatic licence is issued for facilitating import of items in restricted appendices to be used as raw material or components in the manufacture of a final product and OGL Appx. 6(1) is also meant for that purpose in respect of items other than restricted ones. They are not meant for importing a final product in a dismantled condition, which the appellants have done. Thus they have attempted to do a thing indirectly what they could not have done directly under the policy. Thus we are to hold this issue in favour of Revenue.
6.8. But then another sub-issue has been raised by the Id. Advocate-to the effect that even if it is held to be a ball pen in unassembled condition, it is not a consumer item, which goes directly to satisfy human needs. For sustaining the contention, he argued that ball pens cannot be marketed without ink, which has to be fitted in the cartridges by a machine and this contention has been rejected by the Collector based on the so-called market enquiries, the nature of which was not revealed to them. The Id. Advocate does not produce any literature or authentic write-up for supporting his contention that inking of cartridges can be done only by machine in this case, while he admits that in certain categories of pens, ink can be filled up by consumers manually. But he pleads that his contention has not been rejected by valid evidences by the Dept. We also do not have the type of ball pens and type of ink cartridges dealt with in the impugned order. Hence in fairness to the appellants, we adopt his stand that a machine is needed for inking this cartridge, which cannot be done by a consumer himself. Even then, it does not appeal to us that on this ground, ball point pen ceases to be a consumer item, which would satisfy the consumer directly. We looked around for illustrations of some consumer goods. Tyres and tubes are items of consumption, which are purchased by bicycle/motorcycle/motor vehicle owners. They cannot be directly used on these vehicles. They are to be inflated and a mechanical device is needed for inflating, which in the case of cycle owners, some might possess themselves but in the case of other vehicles, whenever inflating tubes is called for, they go to service station and avail of the compressor pressure device for inflating the tyres to the required pressure. Can we, on this score, discard that tyres and tubes are not items, which go for consumption directly? We are not persuaded to accept this point of distinction. We are of the view that when all the parts put together constitute a ball pen and inking done whether manually or through a mechanical device, cannot change the nature of the article, as a ball point pen. The consumer, acquiring it, can get the ink filled himself manually in some cases or he can go to a service shop having the mechanical device as the one, which the appellant claims to possess and gets the ink filled. All the same, it remains a consumer item and can be bought or sold as ball pens. Thus, we are unable to agree with the Id. Advocate that because inking is to be done by a machine, it cannot be a consumer item. The words "which can directly satisfy human needs" cannot be given a literal meaning but has to be construed in the sense as to what consumers normally do in the case of such goods. In the case of pens, normally ink is not a 'must' to be supplied along with pens. It can be acquired separately as in the case of ordinary pens or inked refills acquired separately in the case of ball pens. Hence the act of inking the cartridges by a machine is not the criterion for judging it as a consumer item or otherwise. We are unable to persuade ourselves to construe the act of filling a consumable item such as ink as a process, rendering the ball pen as a comsumer item. Another illustration which we can readily think of is that of gas lighters, where gasoline is filled up in some such lighters either manually by the consumer himself or getting it filled up through a mechanical device, whenever lighters' fuel gets exhausted. Merely because some lighters need a mechanical device for filling gas it cannot be held to be not a consumer item.
7.1. Now, the alternative plea for reduction in redemption fine is to be considered. Even though the appellants are stated to be manufacturer of ball pens, in this import, their obvious intention is to import complete ball pens by splitting one consignments of 2000 gross of ball pens into 5 different consignments of parts and thus imported ball pens in dismantled condition for trading. This, as has been observed by the Apex Court in Sharp Business Machines case is a fraud on the I.T.C. policy and even penalty has been sustained in that case by the Apex Court. We also note that in this case also, imports of parts of photocopier was done by a manufacturer. We are therefore not persuaded to extend any leniency in the quantum of redemption fine which has been imposed at 100% of the value. This, in our view, is the normal margin of profit in the case of restricted consumer goods of the type imported.
7.2. In the result, we dismiss the appeal.
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(R. Jayaraman) Member (T) Dt. 15.2.1994 P.K. Desai, Member (J)
1. I have the privilege of going through the order as proposed by my learned brother, but have been unable to persuade myself to agree with the same and hence I go on to record my separate finding.
1.2. The factual position as has been reproduced by my learned brother, is not under any challenge, and hence the same is not reiterated.
2. The import of the subject consignment has been objected to only on the ground that the goods imported are only Ball pens in CKD condition and fall under Sr. No. 105 of Appx. 2B of the Policy Book AM 85 as consumer goods.
3. The items imported are 2000 gross of (1) plastic moulded barrels, (2) plastic moulded nozzles with feeders and metallic tips, (3) metal clips, 4(a) plastic moulded caps, (b) plastic moulded back plugs, (c) plastic moulded top plugs, (5) Ink cartridges. The appellants have claimed clearance of the items, other than Ink cartridges, under the licence available for import of goods specified in Appx. 3 and 5 of the Policy Book and Ink cartridges as importable as OGL item under Appx. 6(1) of the same policy book for AM 1983-84. The objection as to importability is restricted to the items being the ball pens in CKD condition and as such the consumer goods.
4. There is virtually no challenge that all these items, when assembled do bring into existence, an item, but the contention raised is that such an assembly would not bring into existence the item known and accepted in the consumer market as the consumer goods, as the ink cartridges imported are empty and for the purpose of bringing a consumer item in the form of a ball point pen, besides the assembly of the items, the ink cartridges are required to be filled with ink of a special type, and that for the purpose of such filling, the special type of the ink has to be injected in the cartridges with the aid of special injecting machine, which also, the appellants have imported. The contention of the appellants is that it is only after the filling of the cartridges with ink, that the consumer item namely, ball point pen would come into existence. Thus according to them some processing besides mere assembly is required to be undertaken before the product could go to the market as consumer goods.
5. The contention so raised has been negatived by the adjudicating authority, and the same appears to have also not found favour with my learned brother, and it is here that I have to regret my inability to endorse to the reasonings given and conclusion drawn by my learned brother, that the components wen assembled would be consumer goods though I agree that if the same can be construed as consumer goods, the import would be unauthorised.
6. The word "consumer goods" for the purpose of interpreting the provisions of Import and Export Policy, has been defined in Para 5(13) of the Policy Book AM 84, which read thus:
"Consumer goods" for the purpose of import policy will mean consumption goods which can directly satisfy human needs without further processing, it would include consumer durable also.
The criteria to ascertain the category of the goods as a consumer goods therefore, would be, whether they "can directly satisfy human needs without further processing" and to ascertain the human needs, a prospective consumer or a common man on the street has to be kept in view, and the question is to be posed, whether a common consumer would accept the item in the same form as . imported (or by mere assembly of the different components imported) as the item satisfying his need. To view it from other angle, whether a trader in consumer product would or could put such an item in the consumer market. This appears a simple proposition to be answered and there could be no scope for any hypothetical stretch or theoretical assumptions.
7. Though the adjudicating authority mentions of having got some market enquiry done, but refrains from specifying the nature of enquiry and the outcome thereof, precisely on the point, whether any ball point pen with empty Ink cartridge therein is accepted in the market as a consumer product, or whether any class of consumer has accepted such ball point pens as satisfying their needs.
8. Ballpoint pens are essentially used for the purpose of writing and flow of ink is an essential requirement. It has virtually no utility if there is no ink flowing therefrom.
9. The items imported are the components of Zebra Brand Ballpoint Pen of Japanese make and there is a positive assertion that the process of filing of ink in the cartridges, to provide a flow of ink, has to be done by injecting ink by special type of machine. (This part of the plea is even accepted by my learned brother in the order proposed by him). This indicates that filling of the ink in the cartridge has to be done by a special type of process. This thus rules out the possibility of filling of the ink by any human hand, by an ordinary device of pumping of the ink into the cartridge. Even otherwise, no evidence is available on record to show that such a possibility exists.
10. In the olden days, there were only fountain pens, where filling could be manually done, and no special type of ink was required. With the advancement of technology, the items like ball point pens, filter tip pens, sketch pens and alike have entered the consumer markets, and each one has separate or specified types of devices for the purpose of inking. There are some types of ball point pens or filter tip pens, where filling of or refilling of the pen can be done manually and there are certain other types, where the cartridges have no device for refilling of the ink and the entire cartridge has to be replaced, and in those categories of ball point pens, it could be practically impossible to hold that a consumer would accept them as consumer items, which could straightaway cater to their need. It would, in my opinion, too hypothetical and highly improbable to hold that a common consumer could buy a ball point pen with cartridge empty, and then get the cartridge filled up. It is also unconscionable, that a person can buy this ball pen and cartridge with ink separately. Further when the filling of the cartridge requires a special type of machine, the common consumer would not accept such an item and then move in search of any consumer service centre from where he can get the cartridge filled with the aid of some machine. Even such consumer service centres are not heard of.
11. Some illustrative items, as pleaded, would also not provide an apt anology here. The fountain pens without ink have been, for the generations, accepted as consumer product. A torch light without cells have also been acknowledged as consumer product, and an ordinary or average consumer buys that from the market, whereas for ball point pen without cartridge filled with ink is not reported to have been ever accepted by a consumer. Even the illustration of tyre and tube (with due deference to my brother) does not prove any guideline, as, besides having been accepted as the consumer goods in the same state, there are instruments practically at every nook and corner to inflate them.
12. To repeat, the criteria to ascertain whether an item is a consumer goods or otherwise is, whether a common consumer accepts it as an item directly satisfying his needs, and if the answer thereof is in affirmative, the item goes as consumer goods, but if that ex facie, is in negative, by a mere stretch of imagination or hypothetical probabilities, the same cannot be brought within the ambit of consumer goods.
13. Further, the definition of the consumer goods, as given in the policy book, as is reproduced hereinabove, mentions that the same to be classified as consumer goods, the item should be such which could go to the consumer market in the same condition as it is and no further processing is required to be done. Mere assembly has been held as not an act of further processing and as such, the criteria is whether the item so imported or the components with mere act of assembly, could go to the market as consumer goods or that any further processing is required to be done. The word "processing" used in the policy book does not appear to be a synonym of the word "manufacture", and as such the word processing based herein, has to be read as the one which is essential in making an item as marketable, as consumer goods. With the opinion expressed by me hereinabove, the ballpoint pen of the type, becomes marketable only after the ink cartridge is filled with ink, the injecting of the ink, has to be held as an act of "processing" and when such processing has to be done, the components imported, on mere assembly, cannot be taken as bringing into existence, a consumer item.
14. One may be inclined to view that the appellants have virtually imported Zebra Brand ballpoint pens in CKD conditions, but they have done so by keeping them within the bounds of the policy provisions and have only taken the advantage of those provisions, and could not be taken to have committed any fraud. It can also not be overlooked that ballpoint pens are writing material and ink is one of the most important material for any writing.
15. With this being my view, it does not appear necessary to go in details, on various judgements of the Supreme Court, or to draw any distinction or streamline the views expressed by the Apex Court. Suffice it to mention that in Sharp Business Machines Pvt. Ltd. v. Collector of Customs 1990 (31) ECR 117 (SC), the Supreme Court had before them, the case of import of components which when assembled together, formed a full and complete piece of machine, which by itself was a marketable item and was being so accepted by the trade as ready to go into action. The judgement of the same court in Girdharilal Bansidhar v. Union of India 1984 ECR 491 (SC) also may stand distinguished on the same ground and neither of these two decisions nor the judgement of the same Court in Union of India v. Tarachand Gupta ECR C 539 SC : ECR C Cus 779 SC : 1983 ELT 1465 (SC) had the issue involved where the finding was required to be given as to whether an assembly of components, that would bring out an item, could be accepted as 'consumer goods" as defined in the policy book prohibiting the import.
16. In the result, the department has failed to establish that the components imported, when assembled, would bring into existence, a consumer goods, namely the ballpoint pens, so as to attract the prohibition imposed against import vide Entry in Appx. 2B. The components imported would not (on assembly) fall within the category of "consumer goods" as defined in Para 5(13) of the policy book AM 1984, and when the import is not objected to on any other ground, the order holding the consignment as liable to confiscation cannot be sustained and has to be set aside. The appeal in the result stands allowed, with consequential reliefs.
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Bombay (P.K. Desai) Dt. 28.2.1994 Member (J) Difference of Opinion
With the Two Members having not agreed on the issue, the matter is required to be placed before the Third Member. The President be required to order Third Member Reference, on the point of difference between the two Members on the following issue:
"Whether, the components imported by the appellants could be taken as import of a Ball Point Pen in CKD condition, so as to fall within the ambit of "consumer goods" as defined in Para 5(13) of the Policy Book AM 1984".
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(P.K. Desai) (R. Jayaraman)
Member (J) Member (T)
Gowri Shankar, Member (T)
1. The point of difference between the two Members which has been referred to me for decision is whether, the components imported by the appellants to be considered as ballpoint pens in CKD condition so as to fall within the ambit of "consumer goods" as defined in para 5(13) of the applicable policy. There is no disagreement between the members that the goods when assembled would result in the emergence of a ballpoint pen containing a cartridge for storage of ink which is empty. There is no dispute that, in addition to assembling the components, the cartridges has to be filled with ink of a special kind, for which a particular type of injecting machine has to be used. The Member Technical is of the view that ballpoint pen does not cease to be a ball point pen only because ink is required to be filled into its cartridge and that "inking done, whether manually or through mechanical device cannot change the nature of the article, as a ballpoint pen". The item "remains as consumer item and can be bought or sold as ballpoint pen." (para 6.8). The Member (J) is of the view that, since specially designed machinery has to be employed in order to fill the cartridge with ink, this cannot be done by any consumer. The act of filling the cartridge with ink therefore is an act of "processing" as the term is employed in para 5(13) in the form which the goods are imported, he says they are not consumer goods.
2. The arguments which were raised before me were essentially those which were raised before the Two Member Bench. The Advocate for the appellant contends that the goods were imported under 6 bills of entry and one for the cartridges and this cannot be clubbed for determining the identity of the product. He relies on the decision of the Supreme Court in Union of India v. Tarachand Gupta & Bros. ECR C 539 SC : ECR C Cus 779 : 1983 ELT 1456 (SC). The goods imported under OGL cannot be clubbed with the goods imported with specific licence (citing Susha Electronics Industries v. Collector of Customs & C.E. 1989 (39) ELT 585 (T). The id. Advocate for the appellant placed reliance on a number of citations on the ground that imported items covered under different bills of entry would not be clubbed together for considering the identity of the product which would emerge by assembling these components. He challenges reliance placed by Member Technical on Sharp Business Machines Pvt. Ltd. v. CC
3. These arguments were sought to be rebutted by the Departmental Representative.
4. I do not propose to deal with this question because, as I have discussed above, this is not a point on which there is a difference. The Member Judicial has not expressed any disagreement with the finding of the Member Technical discussed in para 6.7 of the order that what has been imported is a final product in "dismantled condition"
5. As to whether the goods, as assembled would constitute "consumer goods", the Advocate for the appellants contends that the ballpoint pen in the form in which they were imported cannot be used as such because it contained no ink. They cannot be sold with the blank cartridges because no consumer will be able to fill them with the ink. They therefore do not attain commercial identity as ballpoint pens. The term "processing" used in the relevant entry relates to processing carried out by the manufacturer which is distinct from that what can be done by a consumer, and that filling of the ink into the cartridges amounts to such processing. He relies on the judgement of the Calcutta High Court in Kalpa Ghosh v. Collector of Customs 1994 (70) ELT 533 (Cal) where inking of typewriter ribbons has been held to be processing and on that analogy filling of ink into the cartridge would amount to processing. The Departmental Representative seeks to rebut this contention by saying that virtually any consumer goods cannot be used without being subjected to some kind of process by the consumer. Thus, he says a fountain pen has to be filled with ink or a motor car with petrol. These are "processing" and the fact that they have been carried out by a consumer does not render them any other less so. He contends that a ballpoint pen even if not filled with ink, is recognisable in the market as ballpoint pen.
6. Consumer goods have been defined as "consumption goods which can directly satisfy human needs without further processing". It is, doubtless, true that each category of goods which are undisputably consumer goods may require filling ink of some other treatment or manipulation before they are capable of being put to use. Nobody will deny that a fountain pen, a car tyre fitted with tube or various category of vegetables are consumer goods. Yet each of these would not directly satisfy a human need in that form. A tyre has to be filled with air and fitted on to the car. The fountain pen has to be filled with ink. The vegetables have to be cleaned and cooked before they are rendered edible. But no one says that these acts are acts of "processing" as the term is used in the definition in the import policy. In the sense in which it is used "processing" therefore implies something more than a simple treatment which can be rendered to the goods by anybody.
7. There is no dispute that the ballpoint pen in question cannot be used as such. They cannot satisfy the human need for expression in writing. It may be true that the article even without such filling retains its character as a ballpoint pen. It is visually recognisable as one, and would not ordinarily to be put to any other use other than for writing. In my view however, there is a distinction between recognising an article as such, and considering such an article ipso facto as consumer goods. The example of inflating tyres and tubes does not appear altogether apt. The tyres and tubes can be easily inflated with air by use of a pump which is relatively inexpensive or at various convenient points, either free of cost or at very reasonable rate. The accessibility of such filling is wide and easy. It is not disputed however that the ballpoint pens cannot be so filled with ink. It has not been shown that the customer can purchase an equipment for filling ink at a cost which would not be disproportionate to the cost of the pen (unlike filling a tyre), nor has it been shown that various points are available at which he can get the ink filled relatively cheap. It is not in dispute that the machine to fill ink is only at the appellant's factory.
8. In my view, therefore, the "processing" to which the goods are to be put before they acquire the form in which they can directly satisfy the human need of writing is one which is of a relatively sophisticated nature involving use of specially designed machinery for this purpose, with that machinery being available only with the manufacturer. Thus, according to me is the kind of "processing" which is contemplated in the definition. Since the goods cannot be put to use without such processing, they would not be consumer goods. The judgement of the Calcutta High Court in Kalpa Ghosh v. CC coating of ink on ribbon tape is "processing " and uninked ribbon tape is not consumer goods is based on the same reasoning.
9. I would like to add, a note of caution. While, in my view the process of filling of ink in the present case amount to "processing" within the meaning of the policy, what would constitute such "processing" within the meaning of the policy definition, would vary on the facts of each case. In answering the point of difference I have not attempted to lay down any general and hence confined myself to the point of this case.
10 The question is answered as follows:
The goods imported would not constitute "consumer goods" as defined in para 5(13) of AM 1984 policy.
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(Gowri Shankar)
Dt. 27.9.1996 Member (T)
Final Order: 3183/96-WZB Dated 30.9.1996
R. Jayaraman, Member (T)
In view of the majority decision, the appeal is allowed.