Customs, Excise and Gold Tribunal - Delhi
Dynamatic Hydraulics Ltd. vs Collector Of Customs on 12 March, 1990
Equivalent citations: 1990(30)ECR412(TRI.-DELHI), 1990(50)ELT85(TRI-DEL)
ORDER I.J. Rao, Member (T)
1. These four appeals have common facts and arguments. We, therefore, heard them together and proceed to dispose of them by the common order.
2. For easy reference the particulars of the 4 appeals are given below:
-----------------------------------------------------------------------------
Appeal No. Collr's adjn. Order No. C I F Model
Value
-----------------------------------------------------------------------------1 2 3 4
-----------------------------------------------------------------------------
C/621/87- S/10-2/86 SUB Rs. NASHUA 1231
SB(WR) dt. 8-6- S/9-58/86 SUB 9754797- (8030)
87 Dt. 26-11-86
C/622/87- S/10-1/86 SVB 3105793/- KALLE9030
SB(WR) dt. 8-6- S/9-59/86 SVB
87 Dt. 26-11-86
C/623/87- S/10-3/86 SUB 414067/- NASHUA 1290
SB(WR) dt. 8-6- S/9-60/86 SUB
87 Dt. 26-11-86
C/624/87SB S/1Q-4/86 SUB 3065491/- NASHUA 5130
(WRB)dt. 8-6-87 S/9-61/86SUB
Dt. 26-11-86
-----------------------------------------------------------------------------
Qty. Fine in lieu of Penalty Status of Clearance
confiscation
-----------------------------------------------------------------------------5 6 7 8
-----------------------------------------------------------------------------
73 Nos. Rs. 400000/- (paid) Rs. Cleared and sold out 50000/-
(paid) 200 Nos. 1550000/- 200000/- Un-cleared (paid) 45 Nos. 414067/- 25000/- Cleared (paid) 100 Nos. 1500000/-(not paid) 200000/- Un-cleared (paid)
-----------------------------------------------------------------------------
3. The facts relevant to those matters are that that the appellants, a Public Limited Company, manufacture among other things, Photocopying Machines. They entered into an agreement with NASHUA Corporation of U.S. (hereinafter referred to as NASHUA). The DGTD registered them for the manufacture of 8000 Photocopying Machines and Developers. A licence dated 30th April 1982 for components (as per list attached) was issued to the appellants for a face value of Rs. 3.73 crores. On 31-3-1984 the appellants applied for issue of a fresh licence of a value of Rs. 2.08 crores which was equivalent to the unutilised portion of the earlier licence. They obtained a licence for Rs. eighty lakhs on 5-1-1985 and this licence permitted the goods to be imported as "As per list attached". Thereupon the appellants placed a purchase order on M/s. Bairo A.G. Zurich for the supply of components for the plain paper copier. The purchase order was for 73 Nos. of various components/sub-assemblies of Nashua Dynamatic 1231 model. The goods thereafter arrived but were not allowed clearance as proceedings were initiated.
4. Customs issued a show cause notice to the appellants making the following allegations:
(1) On examination the goods imported were found to be 73 complete photocopying machines of Model IN FOTEC 8030 in which some of the parts like plastic cover parts, clamps, screws, paper cassettes, were found to be packed separately. Out of 52 parts shown in the exhibit attached with the purchase order only 48 were shown in packing list. 17 parts were not even shown in the packing list and not packed separately. They were fitted with the main machine.
(2) The parts had all been manufactured by Ricoh, Japan and on a comparison of the price with Ricoh price list, it was found that invoiced values were lower.
(3) Though the collaboration agreement is with M/s. Nashua Corporation, USA, the supplier was Balro AG and no invoice of the manufacturers was produched.
4. The Chief Executive admitted undervalutaion.
5. 3 selerium drums were found in excess.
For these reasons the appellants were threatened with confiscation of the goods under sub-sections (d) (1) (m) of Section 111 of the Customs Act, 1962, and also with a penalty.
5. After due process the Collector came to the conclusion that the goods were not covered by the import licence and confiscated them. He also imposed penalties as mentioned supra.
6. Shri Srinivasan, the learned Consultant for the appellants recalling the facts of the matter submitted that in the original licence granted to the appellants in 1982 there was no detailed list attached but there were 31 group (main) heads. Detailed list was not given. When a fresh licence was issued in 1984 for the unexpired part of the licence, the CCIE left out the descriptions of main group heads from the list but endorsed the descriptive details of individual parts. These were components for photocopying machines as imported. According to the learned Consultant the goods were covered by the licence. He argued that the Collector proceeded not on the evidence but on surmises. He referred to the findings of the Collector about Phased Manufacturing Programme (PMP for short) and submitted that this was an extraneous consideration by the Collector as he had to proceed on the validity of the licence and not on the basis of the PMP, which was not a condition of the licence.
7. The learned Consultant submitted that the Collector's finding that the "main frame" refers to only bare frame was wrong. The correct description of the item is "copier frame" which is the heart of the machine accounting for over Rs. 1.27 crores in the present importation, and referred to the first licence issued to the appellants on 30-4-1982 submitting that when they applied for the second licence in August 1984 the same list was filed as they did on the earlier occasion. He argued that the licensing authorities condensed the list for the sake of brevity but maintained the GIF value which shows that the copier frame or main frame is not bare frame as held by the Collector but in fact an assembly and an important component of the copier. He further argued that the Collector was wrong in holding (paragraph 13) that apart from 17 items included in the list attached to the licence there were other parts not listed in the licence but imported as parts of the main frame. He submitted that all the imported articles were parts of the main frame including main control unit (with the printed circuit board assemblies), the halogen lamp and the lense system, the power supply unit, motors and gears including pulleys and chains, the soleniod, contact relays, blowers, capacitors, etc. Referring to para 12 of the Collector's order Shri Srinivasan submitted that the parts mentioned therein are small parts and it was only for the sake of safe transport they were brought as assembled components. They were tested prior to importation in assembled condition and were not disassembled so as to prevent damage during transit.
8. Submitting that the Collector was wrong in holding that (para 15) operation panel cannot include PCBs, the learned Consultant submitted that this panel contains operational controls, keys to give commands, the exposure control unit and the print switch. Without the PCBs it would cease to be an operational panel and would remain only as a hard-ware.
9. Referring to the Collector's repeated allusions to Appendix 3A, Sl. No. 451 Shri Srinivasan submitted that the operating panel for plain paper copier is not an entry in any of the appendices and explained that since the appellants have applied for a supplementary licence they have indicated the Appendix in Sl. No. 451 to show that the panel was a component of the copier machine.
10. Submitting that the Collector was wrong in holding that Developer Tank was a mere tank, the learned Consultant argued that the description of the group heading in the licence application was Developer Tank and Electrode and the components included, Developer Tray, Hardware for Developer and Developer Tank and was, therefore, covered by the licence.
11. Opposing the Collector's finding that the Clearing Unit assembly was imported with six parts assembled, Shri Srinivasan argued that all the six components were licensed to be imported and they formed, "clearing section". The import was in assembled section for protection in transit. He further explained that the various parts mentioned by the Collector (para 17) are parts of plain paper copier of Nashua Dynamatic model 9031, all being parts of various assemblies and sub-assemblies imported.
12. The learned Consultant submitted that the purpose of showing Sl. Nos. on the main frame was only to facilitate claiming of damages/compensation in case of failure. He denied that the 8 parts shown in paragraph 17 of the Collector's order were not shown in purchase order or invoice. He explained that the licence and the list of goods were prepared system wise and the oil reservoir is part of the drive assembly. Similar explanation was made in respect of cassettes and fillers and other parts.
13. Shri Srinivasan argued that the Collector was wrong in holding that for ITC and valuation purposes the importation consisted of photocopying machine. He submitted that there were complications further in the manufacturing operations before the copiers could be made.
14. Shri Srinivasan submitted that except the cover glass (not 13 numbers as found by the Collector, in fact 73 Nos., 589 in all) there was no importation over and above what was ordered. He finally pleaded that the difference in nomenclature should not lead to refusal of the licence and confiscation of the goods and emphasised that the word parts includes components, accessories or spares.
15. In respect of value Shri Srinivasan submitted that Nashua Corporation is not a related person of the appellants. Nashua Corporation manufacture selerium drums and were collaborators but not associates. In this context the learned Consultant strongly relied on a judgment of the Tribunal in Collector of Customs, Bombay v. Maruti Udyog Ltd. [1987 (28) ELT 390 T] . He submitted that the collaboration agreement which was placed before the Collector contained only 4% royalty on indigenous components and this royalty was not paid. While reiterating that the Collector's finding about the supplier and the importer being related persons was wrong, Shri Srinivasan submitted that even if the parties were related, under valuation had to be proved as also malafides. The learned Consultant submitted that the rejection of the Ricoh invoice was wrong and argued that some of the components supplied by Ricoh were even costlier. He denied any misdeclaration of the value and submitted that the rejection of the invoice merely on the ground of technical collaboration between the parties and in the absence of mutual interest was wrong. He pleaded that the transaction was at arms length and there was no finding or even allegations to the contrary. Submitting that the customs did not notice any other imports at higher prices, the learned Consultant pleaded that under Rule 8 of the Customs Valuation Rules there cannot be arbitrary or capricious fixation of the value.
16. For these reasons Shri Srinivasan argued that there can be neither confiscation nor penalty.
17. Shri Krishnamurthy, the learned SDR opposing the arguments submitted that the licence did not cover the main frame parts as only main frame was permitted. He argued that operation panel was not covered by the licence which covered only developer tank but not developer unit. Referring to paragraph 11 of the Collector's order, Shri Krishnamurthy argued that some of the parts were mentioned in the purchase order and invoice but not in the packing list. The learned representative also argued that according to the Phased Manufacturing Programme, the appellants could import only 8% of the parts in the fifth year of their existence but in the present case nearly 100% parts were imported. Supporting paragraph 14 of the Collector's order Shri Krishnamurthy argued that electric parts were not allowed and, therefore, the PC assembly was unauthorisedly imported. Emphasising that the goods imported consisted nearly complete machines, Shri Krishnamurthy submitted that the main frame assemblies had even number plates. In the result according to the learned representative as components were not covered by the licence the Collector correctly invoked Section 111(d). He pointed out that the licence covered 52 non-electric specified components and not the imported goods.
18. Supporting the valuation ordered by the Collector Shri Krishnamurthy submitted that the suppliers and the importers/appellants were related persons and that the prices of Ricoh were higher than those at which the goods were imported by the appellants. He also submitted that there were no details of negotiations between Nashua Corporation and the appellants made available.
19. In his brief rejoinder Shri Srinivasan submitted that the imported goods were strictly according to the purchase order which was in agreement with the list submitted to the licensing authorities. He reiterated that the switch board is part of the main frame and the PCB is an integral part of the control unit.
20. We have considered the submissions of both sides. In so far as licensing is concerned elaborate submissions made by the learned Consultant for the appellants led to the claim that the imported parts of the photocopier were covered by the licence and that the list attached to the licence in question should be interpreted to mean assemblies and sub-assemblies which go with the specified parts. The learned Consultant is correct in submitting that in interpreting a licence and judging its suitability extraneous consideration like PMP should not be taken into consideration. But we cannot accept his plea that the nomenclature should not stand in the way of the Adjudicator deciding on the validity of the licence. The list attached to the licence consisted of nomenclature. This nomenclature has to be interpreted strictly. Our perusal of the licence shows that there are 52 specified components which the appellants could import. The import of these components is subject to the following conditions (mentioned in the Collector's order and not disproved before us).
(i) Quantity - 589 each
(ii) Value restriction as mentioned against each part
(iii) All these parts should be covered under Sl. No. 451 of Appendix 3A of Import Policy 84-85, which covers "Components of Photocopying Machine excluding Electronic Components.
21. The list attached to the licence also shows that these parts cannot make a photocopier. The statement of 7-11-1986 given by Shri A.V. Athley, Chief Executive of the appellants clearly owned that the components imported in these consignments constitute complete photocopying machines "more or less". According to this statement only some electrical parts were required and plugs, cables, voltage stabilizers could be some of them.
22. We examined the list of imported goods in the light of the list attached to the licence. The elaborate argument that the main frame includes, several other components, that the selerium drums include selerium drum assembly have to be rejected for reasons that the items as listed in the list attached to the licence do not cover them. There is no question of elaborate interpretation of these words in the list. If the list says main frame, it should be main frame only and nothing else. Similarly, the list simply mentions drums and we do not agree that this should be interpreted to mean drum assembly and to include several other items. The licence is clearly for non-electric items. The items are clearly mentioned. Viewed in this light, we do not find any infirmity in the Collector's order. Therefore, we reject the arguments in this regard and hold that the Collector correctly held that the licence did not cover the goods. Consequently the confiscation under Section 111 (d) is upheld.
23. Coming to the value the Collector proceeded on the basis that the suppliers and importers are related persons and, therefore, the price is not to be accepted. The learned Consultant's reliance on the ratio of Maruti Udyog Ltd. is well taken. A perusal of the judgment leads us to the conclusion that in this case there is only technical collaboration and royally has not been paid. Where there is no evidence to show any mutual interest, it cannot be held that these two parties are related persons. Therefore, the rejection of the invoice does not seem to be correct. It is not as if the Customs noticed other imports of similar goods at higher prices. Shri Srinivasan more than once stated that the importation of this kind took place for the first time. Therefore, the basis for increasing the value is not sound. Mutuality of interest not having been established we set aside the findings on valuation and order that the invoice value should be accepted.
24. The appellants themselves accepted that the cover glass was imported over and above the order. They however, pleaded against its valuation. There is nearly 1000% difference in the value claimed by the appellants that fixed by the Customs. We direct that in view of the discrepancy and in view of the absence of any evidence the Collector may get the goods appraised and refix the value if necessary on the basis of such appraisal preferably by an outsider.
25. As a result we dismiss the appeal in so far as the validity of the licence is concerned but allow it on the question of valuation. The value of the cover glass should be re-examined by Customs.
26. As a consequence, keeping in mind that the appeal has been allowed in respect of valuation, we order as follows :
(a) In appeal No. C/621/87-A the fine in lieu of confiscation is reduced to Rupees three lakhs and the penalty to Rs. Thirty seven thousand and five hundred only.
(b) In appeal No. C/621/87-A the fine is reduced to Rs. Eleven lakhs fifty thousand and the penalty is Rupees One lakh fifty thousand only.
(c) In appeal No. C/623/87-A, the fine is reduced to Rs. Three lakhs and the penalty to Rs. Eighteen thousand five hundred only.
(d) in appeal No. C/624/87-A the fine is reduced to Rupees Eleven lakhs twenty five thousand and the penalty to Rs. One lakh fifty thousand only.
27. The appeals are allowed partly in the above terms.