Customs, Excise and Gold Tribunal - Delhi
Parekh And Co. vs Collector Of Customs on 11 October, 1993
Equivalent citations: 1995ECR178(TRI.-DELHI), 1994(71)ELT310(TRI-DEL)
ORDER Lajja Ram, Member (T)
1. This is an Appeal filed by M/s. Parekh & Co. Bombay, against the Order-in-Original No. 38/Collr/1989 dt. 24-7-1989, passed by the Collector of Customs, Rajkot.
2. The points for our consideration in this appeal are the following:
(1) Whether the goods imported by the appellants locks and accessories were covered for proper importation, by the REP Licences under paras 175 & 177 of the Import - Export Policy, 1988-91.
(2) Whether the invoice value was the correct price for the purposes of levying the duty of customs, under the provisions of the Customs Act, 1962.
3. The appellants had imported a consignment of 3,000 pieces of locks and accessories. They sought clearance of the said goods under REP Licences, which were endorsed for flexibility as per para 175 read with para 177 of the Import - Export Policy 1988-91. These licences were valid for import of Appendix 3-A items, and it was claimed by the importers that the imported goods were covered by the description against Sl. No. 569 of that appendix. In the show-cause notice dt. 11-5-1989, it was however, alleged that the goods were door fittings i.e. door-knobs/handles with in-built locking mechanism packed in consumer packing, containing handles and the locks along with screws, fittings, accessories and keys. It was further alleged that the goods fall under Sl. No. 145 of Appendix 2B, and were not covered by the licences produced for clearances.
4. The goods were invoiced at the rate of US $ 10 per dozen. It was alleged on the basis of market enquiries that the declared value was not the correct value.
5. The Collector of Customs, Rajkot, who adjudicated the matter observed that the goods imported were door-fittings /door-knob with locking mechanism, and were not the goods mentioned in Sl. No. 569 of appendix-3A, but were covered under the generic category of consumer goods mentioned in Sl. No. 145 of the appendix 2B, whose import was restricted. He held that the importers' claim to clear the goods in question under replenishment licences in terms of the flexibility clauses under para 175 and para 177 of the Import policy for 1988-91, was not permissible, as the import under such flexibility clause was permissible only of the goods falling under appendix 3A and 5, and that the goods under consideration fall under appendix 2B of the Import Policy.
6. As regards the valuation it was observed that the importer had neither tiled the price-list of the manufacturer to cross verify the paltry value of the goods declared nor had he filed the copy of the L/C to ascertain actual payment. He added that although the importer has challenged the mis-declaration charge on the ground that the show cause notice did not indicate the nature and basis of enquiry based on which the market price as indicated therein has been alleged, the importer have not indicated the extent to which the value/market price alleged was wrong.
7. The Collector of Customs, Rajkot ordered absolute confiscation of the goods, and imposed a penalty of Rs. 40,000/- on the appellants.
8. The case was posted for hearing on 24-8-1993. Shri. B.B. Gujral, Advocate appeared for the appellant. Sh. Prabhat Kumar, SDR represented the respondent.
9. Sh. B.B. Gujral, the learned Advocate stated that the goods imported were door/furniture locks. The import licences, under which the goods were sought to be cleared were produced at the time of clearance. Their details were mentioned in the Bill of entry. The importer had claimed clearance under Sl. No. 569 of Appendix- 3A, while the department had contended that the goods were covered by Sl. No. 145 of Appendix 2B. The learned Advocate submitted that as locks were specified under Sl. No. 569 of Appendix 3A, and that entry No. 145 of Appendix 2B being a residuary entry and the description under Sl. No. 569 being specific, the entry No. 569 should prevail over the general entry under Sl. No. 145.
10. The learned Advocate referred to the provisions of Section 14 of the Customs Act, 1962, and pleaded that under the customs valuation rules which had been amended on 16-8-1988, the concept of market value was out of date. In any case in the circumstances of the case, only Rule 7 of the Customs Valuation Rules could be considered as relevant. For deductive value concept, 90 days condition was relevant. In this case the requirement of the rule 7 have been fulfilled. The details of market enquiries had not been disclosed to them and as such the order was bad in law.
11. He submitted that the goods were with the customs department having been absolutely confiscated, and that they had already paid the amount of penalty on 16-8-1989.
12. The learned Advocate cited a number of decisions in support of his argument that in the circumstances of this case the burden of proof that the prices have not been correctly declared was on the deptt.
13. Sh. Prabhat Kumar, the learned SDR stated that Bill of entry was filed under the new valuation rules which came into force on 16-8-1988. He referred to the amendment of Rule10 vide Notification No. 44/90-Cus., dt. 3-8-1990 and stated that this amendment has retrospective effect. He submitted that Rule 7 of the Valuation rules was not quoted but added that it will not make any difference. As regards the import policy he stated that the goods imported were finished consumer goods and appendix 3-A was only for raw materials, components and consumables. He submitted that the goods were correctly covered by Sl. No. 145 of Appendix 2B.
14. He admitted that the details of market inquiries had not been disclosed to the Appellant and to that extent the principles of natural justice have been violated.
15. In support of his arguments the learned SDR also referred to a number of decisions. Referring to the Supreme Court decision in the case of G. Claridge and Company Ltd. v. Collector of Central Excise 1991 (52) E.L.T. 341 (SC) paras 9 and 10, he submitted that the more general was restricted to a sense analogous to a less general. In the case of Basant Export Corporation. v. Collector of Customs 1989 (43) E.L.T. 65 (Tribunal) it has been held that consumer goods are consumption goods which can directly satisfy human needs without processing. He also referred to the Tribunal decision in the case of Collector of Customs, Bombay v. East Punjab Traders 1992 (38) ECR 600 (CEGAT) wherein it has been observed that as per para 21 (d) of AM 90-91 a generic description in appendix 2B would prevail over a generic description in appendix 3A.
16. In reply the learned Advocate submitted that the manufacturer's invoice was not made available as goods were not imported from the manufacturers. He again stated that the results of market enquiries were not available and thus the order passed by the Collector of Customs, Rajkot was illegal. He pleaded that the specific description should prevail over the general description and that the goods were covered by the import licences produced by them before the customs authorities at the time of filing the Bill of entry. The goods were with the customs having been absolutely confiscated.
17. We have carefully gone through the facts and circumstances of the case, and the submissions made by both the sides. A number of citations have been quoted by both the sides, they have been looked into.
18. M/s. Parekh & Co., Bombay had imported locks and accessories, and sought their clearance under appendix 3A Sl. No. 569 of Import Export Policy 1988-91. Appendix 3-A contained the "list of limited permissible items of raw materials, components, consumables, tools and spares (other than iron & steel and Ferro alloys)". Sl. No. 569 read as "locks, suitable fittings and metal fittings (other than stainless steel fittings) including spectacle hinges." On examination the goods were found to be door fittings i.e. door-knobs/handles-with inbuilt locking mechanism, packed in consumer packing on which the description given was as "eplock cylindrical lock set made in Japan for front door and office use." The deptt. classified the goods under Sl. No. 145 of the appendix 2B which covered "all consumer goods howsoever described of industrial, agricultural or animal origin, not appearing individually in appendix 3 part A and 5 or specifically listed for import under open general licence".
19. Lock is a device that prevents a door or other object from being opened or moved. There are many kinds of locks. Common types include (1) Mortise locks (2) Rim locks (3) Cylindrical locks (4) Tabular locks (5) Combination locks (6) Pad locks and (7) Electronic locks. Each type works differently.
20. Cylindrical locks are the type most commonly found on household doors. The cylindrical locking mechanism is part of the door-knob. Cylindrical locks have a key-hole in the door knob. Most Cylindrical locks have a spring bolt. Some called pick-resistant locks have dead bolts. A key unlocks the door from the outside, and a small knob or key unlocks it from the inside.
21. The goods have been described in the order-in-original as door-fittings i.e. door-knobs/handles with inbuilt locking mechanism. Each unit pack contained handle and the lock along with the screws, fitting accessories and keys. As per product description they were Cylindrical locks set for front door and office use. Instructions for operational use were placed with the goods and the following instructions were given for their fitting :
(1) Mark correct centers for the lock and the latch according to the sketch on the top of the box.
(2) Make holes of 55 mm. diameter for the lock and 22 mm diameter for the latch.
(3) Make a groove for the front plate and insert the latch. (4) Pull out the knob with a pin (push button knob) and insert the lock from out-door.
(5) The back plate and the rose must be tightened by screws first, then cover it with the rose.
(6) Attach the knob and make it sure that the lock is in good order.
(7) Place the latch case at the same height of the latch. Be sure of the dead locking, be careful that the centers must be taken correctly so that the lock is connected in a right way. Use epoler for easy installation.
22. It is seen from the above that the goods fit in with the description of lock.
23. Even the general expression "metal fittings" will take their colour from the specific expression 'locks'. There are certain types of locks that do not require a key. They include combination locks, time locks, chain locks and some electronic door-locks. Chain locks have a metal chain that fastens to the inside surface of a door and to the door frame.
24. According to the doctrine of noscitur A sodis, when two or more words which are susceptible of analogous meaning are clubbed together, they are understood to be used in their cognate sense. They take as it were their colour from each other, the meaning of the more general is restricted to a sense analogous to a less general.
25. Seen in this light also the goods under consideration are covered by the description of locks and metal fittings.
26. Appendix 3A covers items in the nature of raw materials, components, consumables, tools and spares (other than iron and steel and Ferro Alloys). The way these locks are described, the way they are used and the way they operate they could be well considered as components for the doors. Once fitted they became a part of the door.
27. Further Sl.No. 569 under this Appendix 3-A specifically covers locks and metal fittings. Entry No. 569 is specific to the locks and metal fittings, while entry No. 145 under appendix 2B is only general in nature covering all consumer goods howsoever described, of industrial, agricultural or animal origin, not appearing individually in appendix 3 part A and 5 or specifically listed for import under open general licence.
28. It is seen that the goods appearing individually in Appendix 3-A are excluded from the purview of entry No.145 of Appendix 2B.
29. Further para 21 (C) of the Import & Export Policy April, 1988 - March 1991 Vol. -1 (page 6) lays down the principle which will apply to the inter se interpretation of the entries in the various appendices as well as imports under O.G.L. It provides that an item with a specific description in Appendix 2 part B or 3 part A will prevail over an item with a generic description in any of those appendices.
30. There can be no doubt that the lock has been specifically described in entry No. 569 of appendix 3A and therefore this entry will prevail over entry No. 145 of appendix 2B which is generic in nature.
31 According to the maxim "Generalibus Specialia Derogant" if a special provision is made on a certain subject, that subject is excluded from the general provision.
32. There is no dispute that the import of the goods falling under Appendix 3A of the Import Policy was allowed under import replenishment licences in terms of the flexibility clauses under paras 175 and 177 of the import policy for 1988-91.
33. Accordingly we find that the goods imported were covered by the licences produced by the importer for the clearance of the said goods.
34. As regards valuation also we find that although the prices declared by the importer were much lower than the prices ascertained as a result of market enquiry after the representative sample was shown in the market, no cogent reasons and specific evidence has been adduced for adoption of the market value. There is no evidence of any deduction even of the customs duty from the market prices adopted for demanding the duty.
35. Further the details of market enquiries were not made known to the importer. The date on which the market enquiry was made, the place where made, the person who made the enquiry and from whom the enquiry was made etc. are neither on record nor disclosed to the party nor discussed in the order-in-original.
36. It is a settled legal position that in case the transaction value is rejected then the burden of proof is on the customs department that the value adopted by them for assessment is the value as per Section 14 of the Customs Act 1962.
37. Further, suspicion howsoever grave cannot take the place of legal proof (refer Babcock Venkateshwara Pvt. Ltd. v. Collector of Custom -1985 (20) ELT 335 (Tribunal).
38 In the case of Sandip Agarwal v. Collector of Customs 1992 (62) ELT 528 (Cal.), the Calcutta High Court has observed that if the transaction value is available i.e. the price actually paid or payable is available, then the assessable value shall be determined by accepting the price actually paid or payable unless it is found to be not genuine. In the case before the High Court as there was no evidence of any contemporary imports of identical goods of identical quantity at higher rate, and since there was no evidence that the appellant remitted to the foreign supplier any amount clandestinely more than the amount the appellant actually paid, they held that the transaction value under the provisions of Rule 4 of the Valuation Rules, 1988 was available and as such the same had to be accepted by the authority concerned.
39. The High Court summed up that where the transaction is at arm's length and price is the sole consideration for sale or offer for sale and there is no evidence of any clandestine remittance made over and above the invoice value should be the value of assessing the goods imported. The burden to prove misdeclaration of prices in the Bill of entry lies on the department and cannot be discharged by mere suspicion and that the charge of under-invoicing has to be supported by the evidence of prices of contemporaneous imports of like-kind goods.
40 In the case before us except mentioning that the market prices were higher and other evidence has been placed on record by the Revenue to sustain the charge of under-invoicing and in support of the prices adopted for assessment. There are no details of the market enquiries.
41. We find that the goods have been absolutely confiscated and a personal penalty of Rs. 40,000/- has been imposed.
42. As we have discussed above the goods imported were covered by the licencing provisions and that the department has not been able to substantiate the charge of under-invoicing in accordance with the provisions of the law.
43. The learned SDR had admitted that the details of market enquiry had not been disclosed to the appellant and as such principles of natural justice have been violated. On this ground he submitted that he did not mind remanding the case back to the adjudicating authority for de novo adjudication.
44. To our mind no purpose will be served by remanding the matter back to the adjudicating authority as the type of infirmity/deficiency in the show cause notice cannot be made good at this stage.
45. Taking all the relevant considerations into account we vacate the impugned order and allow the appeal with consequential relief to the appellants.