Madras High Court
S. Balu vs Union Of India (Uoi) And Ors. on 14 August, 1990
Equivalent citations: 1993(43)ECC145
ORDER Kanakaraj, J.
1. The petitioner-company is a Small Scale Industry engaged in the manufacture of Solidaire Television sets. The petitioner was granted a licence on 18-3-1981 for the import of VTR Deck mechanism, electronic components and raw materials under Appendix V of the 1981 Policy Book by the controller of Imports and Exports, Madras. The 5th respondent, by his letter dated 20-5-1981 fixed the capacity limit of the production at 500 numbers per annum of VTR/VCR. The petitioner imported the goods allegedly in accordance with the licence issued to him. The third respondent, however, refused permission to clear the goods and instead issued a show cause notice dated 12-8-1981 under Section 124 of the Customs Act, 1962, hereinafter called the Act. By a letter dated 10-12-1981, the Assistant Collector of Customs requested the petitioner to make arrangements for a detailed examination of the consignment by the Customs Department before the adjudication proceedings. After such inspection, the 4th respondent issued a letter dated 21-12-1981 stating that the petitioner had imported Video Tape Deck, raw materials and components like sub-assemblies of electronic components for VTR/VCR, when actually the petitioner had no licence to import such items. A supplementary show cause was issued under Section 124 of the Act on 17-2-1982. The petitioner sent, a reply on 23-2-1982 reiterating that the sub-assembles imported by them fell under the scope of components subassemblies of Entry 486(2) of Appendix 5 of AM 81 and therefore, the imports were covered by valid licence. By an order dated 11-3-1982, the third respondent confiscated the goods under Section 111(2) of the Act read with Section 3(2) of the Imports and Exports (Control) Act, 1947. The petitioner-company was given an option to redeem the goods for home consumption on payment of a fine of Rs. 1,75,000/-. There was a personal penalty of Rs. 25,000/- under Section 112 of the Customs Act. The petitioner filed an appeal to the second respondent. By an order dated 24-7-1982, the Appellate Authority held that the confiscation and levy of penalty were valid and proper. The Appellate Authority, however, modified the assessment directing only the invoice value to be adopted. The petitioner, after clearing the goods on payment of the said fine and penalty, has come forward with this writ petition to quash the order of the second respondent dated 24-7-1982 and for a further direction to refund the redemption fine and personal penalty.
2. Mr. Habibullah Badsha, learned senior counsel appearing for the petitioner, raises the following two points: (1) Respondents 2 and 3 have not taken into consideration the contention of the petitioner that the following items were not imported and without such items, it cannot be alleged that a complete VCR had been imported:--
i. VCR play back Video Amplifier ii. VCR play back Video Modulator iii. VCR play back Audio Amplifier iv. VCR play back Audio Modulator v. Decorative front panel for VCR vi. Leather case vii. Hardware and fittings to incorporate items Nos. 1 to 5.
xi. (sic) Components of Monitor.
(2) If parts imported can be described only as components and VTR Deck mechanism, the mere fact that if put together it will form VTR by itself cannot be a ground to come to the conclusion that the import was without licence, and therefore liable for confiscation.
3. In view of certain decisions cited before me, and which decisions were not cited before the second and third respondents, the learned Senior counsel argues that it may be necessary to remand the case back [to] the authorities for a reconsideration of the whole issue. Learned counsel appearing for the respondents accepts the facts that these decisions were not considered by the authorities, but however maintains that the orders of the second and third respondents are perfectly valid. After going through the said authorities, I am satisfied that the case has to be remanded back to the authorities. I will therefore restrict myself to indicate the ratio of the said judgments without expressing my view on the merits of the instant case.
4. The licence dated 18-3-1981 describes the goods which can be imported as follows:--
(1). V.T.R. Deck Mechanism 3,00,000 Rs.3,00,000/-
(2). Electronic components and raw materials permissible
under Appendix 5 of the Am. 81 Policy Book. 2,00,000 Rs.2,00,000/-
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Rs.5,00,000/-
The third respondent in his order dated 11-3-1982 has held that the goods imported are not Video Tape Deck mechanism, raw materials and components as declared on the bill of entry but complete Video Cassette Recorders in a semi-knocked down condition. For coming to the said conclusion, the third respondent says that the contents of the 12 packages being item 2 of the bill of entry are in the nature of sub-assemblies kept ready to assemble with the main almost complete units contained in 60 packages which is item 1 of the bill of entry. The 2nd respondent Board in its order says that the import licence covers only VCR Deck mechanism and electronic components and raw-materials permissible under Appendix 5 of the Import Policy for 1980-81.
The end-product for which the import licence was issued is accepted to be video cassette recorders. The Board has accepted the findings of the Collector of Customs that the goods imported were complete Video Recorders Akai model VS 9700 EG in Semi-knocked down condition. So far as the claim that a VCR is not complete without a monitor, the Board rejects the concerned plea on the ground that it is too far-fetched and besides the point.
5. In the Counter-affidavit filled on behalf of the respondents, reliance is placed on the facts that there were 60 units almost complete video cassette recorders in 60 packages and the outer cardboard cartons in which the units had been packed contained the following printed descriptions:
Akai Pal System VS 9700 EG--Akai Elec. Co. Ltd., Video Magneto Scope, a cassese video cassette recorder.
The packages also contained sufficient copies of Akai 9700 operation manual with warranty cards etc. The department also obtained clarification from the Department of Electronics to say that "Video Tape deck mechanism" is a mechanical assembly with motor and heads and all other mounted electronic components on PCB from the different sub-assemblies which get covered under serial.No. 666 Appendix 3 of the I.T.C. Policy 1980-81. The question is whether on the above pleadings, the import was contrary to the licence.
6. Now we will turn to the decisions on which reliance is placed by the Learned Counsel for the petitioner. The first decision is in Union of India v. Tarachand Gupta And Bros . In this case, the importer had an import licence permitting them to import parts and accessories of motor-cycles, scooters. The importer had imported certain items which arrived in two consignments. The authorities held that they constituted 51 sets of Rixe Mopeds complete in a knocked down condition. The ratio of the Supreme Court is contained in paragraph 15 which is quoted below:
15. The result is that when the Collector examines goods imported under a licence in respect of goods covered by Entry 295 what he has to ascertain is whether the goods are parts and accessories, and not whether the goods, though parts and accessories, are so comprehensive that if put together would constitute motor-cycles and scooters in C.K.D. condition. Were he to adopt such an approach, he would be acting contrary to and beyond Entry 295 under which he had to find out whether the goods imported were of the description in that entry. Such an approach would, in other words, be in non-compliance of Entry 295.
The Supreme Court proceeded to say as follows:-- That being so if an importer has imported parts and accessories, his import would be of the articles covered by Entry 295. The Collector could not say, if they were so covered by Entry 295, that when lumped together, they would constitute other articles, namely, motor-cycles and scooters in C.K.D. condition. Such a process, if adopted by the Collector, would mean that he was inserting in Entry 295 a restriction which was not there. That obviously he had no power to do. Such a restriction would mean that though under a licence in respect of goods covered by Entry 295 an importer could import parts and accessories of all kinds and types, he shall not import all of them but only some, so that when put together they would not make them motor-cycles and scooters in C.K.D. condition.
7. In Ghanshyam Chejra v. Collector of Customs [1989] 24 1989 (44) E.L.T. 202(Cal), 600 pieces of Tape Deck Mechanism were purchased from an "Export House" and 600 pieces of VCR top cover, bottom plates and Chassis Front Panel from another Export House on the basis of High Seas purchases and the part had also imported two consignments of Printed Circuit Board, Sub-Assembly, Remote Control and Miscellaneous Hardware. The authorities took the plea that the goods were imported in semi-knocked down condition and not covered under import licence and therefore are liable for confiscation. The contention was that the consignments were not sub-assemblies but they were complete VCR sets in semi-knocked down condition and hence not covered under upon general licence. Relying on the Supreme Court judgment cited above, the Calcutta High court observed as follows:-- Each consignment has to be separately assessed. Even if one importer brings different items which are admittedly spare parts and components, the Revenue authorities cannot take the plea that if those are assembled together, there would be complete V.C.R. set. This is exactly what has been done in this particular case, notwithstanding the decisions of the courts and Tribunals as mentioned earlier.
In Sharp Business Machines (Pvt.) Ltd. v. Collector of Customs , the Tribunal held as follows:-- On our careful consideration we find that on the facts and circumstances of the case the Collector erred in treating in SKD/CKD packs of the copiers imported as assembled copies for the purpose of Schedule-I to the Imports (Control) Order, 1955 and the case of Union of India v. Tarachand Gupta & Bros. applies on all fours to the instant case, wherein it was held that the action of Collector in putting up the two consignments together and then to hold that they made up 51 'Rixe' Mopeds in CKD condition was not correct.
8. In view of these judgments, I am clearly of the opinion that the impugned order of the second respondent confirming the order of the third respondent requires reconsideration. I am also not accepting the view of the second respondent when he says that the plea that VCR is not complete without a monitor is too far-fetched and besides the point. The authorities must give a finding whether without the items mentioned by the writ petitioner, a VCR can be operated. I, therefore, allow the writ petition, quash the impugned order and remit the case back to the Collector of Customs, third respondent herein with a direction to reconsider the matter, in the light of this judgment and pass a fresh order. There will be no order as to costs.