Customs, Excise and Gold Tribunal - Mumbai
Indian Card Clothing Co. Ltd. vs Collector Of Customs on 19 September, 1986
Equivalent citations: 1987(10)ECR264(TRI.-MUMBAI), 1987(29)ELT93(TRI-MUMBAI)
ORDER K. Gopal Hegde, Member (J)
1. The Revision Application filed before the Government of India against the order-in-appeal bearing No. S/49-1/82L dated 3-4-82 passed by the Appellate Collector of Customs statutorily stood transferred to the Tribunal for being heard as an appeal.
2. The brief facts necessary for the disposal of this appeal may be stated as under :
"The appellants M/s. Indian Card Clothing Co. Ltd. imported 'D.C. Drive & Gear Box' as spares for Hydraulic Spooler under OGL Appendix 10(4) during AM 1981 Policy. The Customs, however, objected for the clearance on the ground that the imported goods fell under E/No. 4 of Appendix 30 and therefore non-permissible spare parts. The Dy. Collector of Customs who held the adjudication rejected the appellants' contention that Appendix 30 covers Motor and Gear Box by separate entries and the imported goods an integral unit meant for Hydraulic Spooler. Having regard to his finding, the Dy. Collector ordered confiscation but allowed redemption on payment of fine of Rs. 23,000/-. On appeal, the Collector (Appeals) confirmed the order passed by the Dy. Collector."
3. In the memorandum of appeal it was stated that they had imported the original Hydraulic Spoolers in 1968 alongwith 4 complete Hardening & Tempering Machines for Metallic Card Clothing, and these machines have been working for 24 hours a day for 6 days a week, and therefore, replacement of worn out spare parts was essential. The machines imported by them are D.C. Drive and Gear Box, complete with Electronic Control Panel, for main drive of Hydraulic Spooler. Since the D.C. Drive unit, coupled with gear box forms an integral part of Hydraulic Spooler which work with special electronic control panel fitted with them so as to give uniform winding of the wire on the spool while varying the speed automatically and keeping the tension and torque constant during the complete process of winding, and since these were not available indigenously they had imported the same under OGL which permitted import of spare parts by the Actual Users. It was contended that Appendix 30 bans import of Electrical Motors and Gear Boxes individually, but then what had been imported is an integral unit and therefore Appendix 30 is not applicable. Further, the Hydraulic Spooling Machine itself is not an independent machine. It functions as an integral unit of the imported Hardening and Tempering Machine for Metallic Card Clothing, and the D.C. Drive Unit and the Gear Box forms an integral part of the Hydraulic Spooler. The D.C. Drive and the Gear Box are not two independent units, but is an integral unit controlled by an Electronic Control Panel that enables giving uniform winding of the wire on the spool while varying the speed automatically and keeping the tension and torque constant during the entire process of winding.
4. During the hearing of the appeal, Shri Shah reiterated the contentions raised in the appeal memo. He urged that what was imported was neither gear box nor motor but an integral unit having a single shaft connecting motor and gear box. Therefore, the Customs authorities were not justified in holding that the items imported fell within Appendix 30. Shri Shah also contended that the motor and the gear box cannot be assembled. He urged that in the case of an ordinary motor the speed is always constant but in the case of an integral unit the speed is variable. Shri Shah also submitted that before the issue of the Public Notice dated 19-8-80 the import of the items imported were permitted under OGL.
5. Shri Pal, the learned S.D.R. however, contended that the opening of the letter of credit and the shipment were all made after the Public Notice dated 19-8-80 and after the Policy AM.81 was issued and therefore the import was governed by the Policy AM.1981. Shri Pal further urged that permissible spares allowed for import under OGL Appendix 10(4) are those spares which were not included in Appendix 3 and 30. Shri Pal also urged that what was imported are Gear Boxes. The Gear Boxes could be with or without motors, just because the imported items combined gear box and motor, it does not fall outside Appendix 30. Shri Pal also contended that the imported item can also be considered as an electrical motor falling under Item 591 of Appendix 3 and therefore the import is impermissible. Shri Pal further submitted that the imported item whether considered as electrical motor, geared type or gear box, would still be not permissible to be imported under OGL. In this connection, Shri Pal placed reliance on para 197(e) of the Policy AM.81 and also on the decision of the Tribunal in Appeal No. CD(T)(Bom) A.No. 418/80 (Kirloskar Cummins Ltd., Pune v. Collector of Customs which was decided on 21-3-1985. Finally, Shri Pal submitted that the Dy. Collector had shown considerable concession in the matter of imposition of fine and no further concession is called for.
6. Shri Shah, in reply contended that gear box will have more than one gear it will not have motors and therefore the imported goods cannot be considered as a gear box. He further submitted that what was banned under Item 591 of Appendix 3 is A.C. Motors but what had been imported is a combination of motor and gear box and the motor is a D.C. Motor. Finally Shri Shah urged that the banning of certain items in the ITC Policy is intended to encourage indigeneous industries. But then the items imported were admittedly not manufactured in India and therefore it cannot be said that the Policy prohibited the import of the item in question.
7. I have carefully considered the submissions made on both the sides. There is no dispute that the imported machines are governed by the Policy AM.81. The imported goods is described in the invoice as "spare D.C. Drive and Gear Box for main drive of Hydraulic Spooler, complete with Electronic Control Panel, giving base torque and tension control." Under Appendix 10(4) the Actual Users (Industrial and Non-Industrial) are permitted to import permissible spares other than those included in Appendix 3 as OGL items. The non-permissible spares cannot be imported by the Actual Users (Industrial and Non-Industrial) under Appendix 10 as OGL. The Actual Users (Industrial and Non-Industrial) also cannot import spares which are included in Appendix 3. The appellants contended that the items imported by them do not fall either under Appendix 3 or under Appendix 30. They urged that what had been imported is not a gear box or a motor individually but they are an integral unit connected by a common shaft. Therefore, the imported item cannot be treated either as gear box or motor. It was also contended that the imported item is not included in Appendix 3. It was urged that Item 591 of Appendix 3 is intended to cover electrical squirrel cage motors which are A.C. Motors and not D.C. Motors. For the Department, it was however contended that the imported item can be either classified as complete gear box fitted with the motor or electrical motor of geared type. In either case, the import requires licence having regard to the fact that the motors and gear boxes are non-permissible spares and geared type motors are banned items falling under Item 591 of Appendix 3.
8. It is not contended by the Department that the D.C. Drive and Gear Box imported by the appellants were not required as spares for their Hydraulic Spooler. It is also not contended by the Department that the D.C. Drive and Gear Box imported by the appellants can be made use of for any purpose other than the purpose for which it was imported. Admittedly, the imported items are an integral unit connected by a common shaft. Neither the motor nor the gear box is detachable. The gear box and the motor are not assembled so that they can be dis-assembled. What was imported is one integral unit. If the motor and the gear box were to be detached by breaking the shaft both will become functionally useless.
9. The Import Policy for spares is enumerated in Chapter 9 of the Policy AM.81. Paragraph 54(1) of the Policy reads:
54(1) "Actual Users (both Industrial and Non-Industrial) will be permitted to import under Open General Licence 'permissible' spares i.e., all those parts required as spares, other than the items appearing individually in the Banned List and which are required by them for operation and maintenance of the Capital Goods, including accessories, ancillary equipment, control and laboratory equipment and safety appliances, installed or in use by them as on 1.4.1980."
The appellants have contended that the D.C. Drive and Gear Box imported by them are required as replacement of worn out spare parts of the imported Hydraulic Spoolers and that the Hydraulic Spoolers were imported in the year 1968. They had contended that the D.C. Drive unit, coupled with gear box forms an integral part of Hydraulic Spooler which work with special Electronic Control Panel. As stated earlier, the Department did not dispute that the D.C. Drive unit, coupled with gear box would form an integral part of Hydraulic Spooler. The Dy. Collector, who held the adjudication observed " the arguments that the D.C. Drive and gear box are integral unit and work with special Electronic Control Panel fitted with it, though acceptable does not take it out of the scope of Appendix 30." Thus the Dy. Collector accepted the appellants' contention that the D.C. Drive and Gear Box forms an integral part of Hydraulic Spooler. His finding was that even if the item imported is considered as an integral part of Hydraulic Spooler still the import cannot be permitted because the item falls under Appendix 30. The Dy. Collector, however, did not choose to give any reason how the item imported falls within the scope of Appendix 30. The Collector (Appeals), no doubt, recorded a finding that the impugned goods are complete Gear Box with Electric Motor. He also held that the addition of Electrical Control Panel is immaterial because it does not alter the basic function of the goods. The Collector (Appeals) has not properly appreciated the contention of the appellants. His finding that the impugned goods are complete Gear Box with Electric Motor and therefore fall within Item 4 of Appendix 30, appears incorrect. Appendix 30 contains list of spares to be treated as "Non-permissible". Item 2 in this Appendix is Electric motors. Item 4 is complete gear boxes (as distinguished from individual gears). Admittedly, what had been imported is neither electric motors nor complete gear boxes but a combination of two connected by a common shaft. It can neither be used as electric motor nor as gear box. In the Trade parlour, the imported item is not known as a gear box or a motor. In other words, in the commercial world, the imported commodity is not known as a gear box or an electric motor. As has been stated earlier, the Policy allowed Actual Users (both Industrial and Non-Industrial) to import under OGL permissible spares viz. all those parts required as spares, which are required by them for operation and maintenance of the Capital Goods. The spares in question were imported for the operation and maintenance of the imported Hydraulic Spooler. The Policy did not permit import of items appearing individually in the banned list. The Dy. Collector and the Collector (Appeals) did not hold that the imported item fell within Appendix 3 which contained banned items. During the hearing of this appeal, Shri Pal, the learned SDR had contended that the imported goods fall under Item 591 of Appendix 3. Item 591 of Appendix 3 reads:
"Electric motors totally enclosed fan cooled and screen protected, squirrel cage upto 30 HP other than with insulation class F and H including geared types".
The description of the items imported is given in the invoice as:
"Spare D.C. Drive and Gear box for main drive of Hydraulic Spooler, complete with Electronic Control Panel, giving base torque and tension control".
Having regard to the invoice description, the contention of Shri Pal that the goods imported fall within Item,591 of Appendix 3, cannot be accepted. The further contention of Shri Pai that the ratio of the decision of this Bench in the Appeal No. CD(T)(BOM)418/80., Kirloskar Cummins Ltd. Pune v. Collector of Customs, is applicable to the present appeal also cannot be accepted. M/s. Kirioskar Cummins Ltd. had imported three phase squirrel cage brake motors 415 Volts. Thus it is clear that what had been imported by M/s. Kirloskar Cummins Ltd. were squirrel cage motors though the motors were fitted with regulators to control the speed.
10. The goods imported by the appellants cannot be considered as gear box or motors or greared motors. What had been imported is an integral unit connected by a common shaft required as spares for operation and maintenance of the Hydraulic Spoolers, which the appellants had imported in the year 1968. The imported goods have no other use. If the motor and gear box are separated by applying force individually, they cannot be made use of either as motor or as gear box. What has been considered as impermissible spare under) Appendix 30 is either motor individually or gear box individually and not any item containing gear box or motor. If that be the correct interpretation, all capital goods having motor or gear box would become impermissible for import.
11. After taking into consideration all aspects, I am unable to agree with the finding of the Collector (Appeals) that the impugned goods are complete gear box. They are in my view permissible spares' required for operation and maintenance of the imported Hydraulic Spoolers. Appendix 10(4) read with Chapter 9 permitted import of the said items under OGL by the Actual Users (Industrial). The items imported are not for stock or trade but for the actual use as spares for the earlier imported Hydraulic Spoolers.
12. In the result this appeal is allowed and the orders passed by the authorities below are set aside. The fine, if any, paid by the appellants be refunded to them.