Customs, Excise and Gold Tribunal - Mumbai
Collector Of Customs vs Hargovindas And Co. on 15 December, 1986
Equivalent citations: 1987(29)ELT975(TRI-MUMBAI)
ORDER K.G. Hegde, Member (J)
1. This appeal arises under the following circumstances. The Respondent M/s. K. Hargovindas & Co. Exports Pvt. Ltd. imported 995 bags of Skim Milk Powder valued at Rs. 1,07,3147- c.i.f. and sought clearance against Licence No. 2796882 dated 11-8-77. The licence in question was an 'INITIAL LICENCE' issued to the manufacturing exporters for raw materials, components, consumer stores, in accordance with para 106(1) of Part C, Section 1 of Red Book, Volume 2 for 1977-78. The said licence was issued to build up stock. The licence did not indicate the export product. The Customs authorities objected for the clearance on the ground that as per paragraph 106(1) (C) the import is permissible only against exports of specified product but the goods imported, viz., skim milk powder was listed at serial No. 47 of the List at Annexure II to Part B of the Policy Book, Vol.11, A.M. 1978 and the licence produced was not valid against clearance of the goods in question. The respondent sent a reply interalia contending that the interpretation placed by the Customs authorities was erroneous. The Collector of Customs, Bombay who held the enquiry did not accept the contentions of the respondent herein and he ordered confiscation of the imported goods but allowed redemption on payment of a fine of Rs. 1,50,000/-. He also imposed a personal penalty of Rs. 15,000/-.
2. It appears the respondent herein also imported another consignment of Spray skim milk powder which were also ordered to be confiscated. The redemption on payment of fine was allowed besides the Collector imposed a penalty of Rs. 10,000/-. Being aggrieved by the orders of the Collector, the Respondent herein preferred two appeal before the Central Board of Excise & Customs. The Board combined the two appeals and by its Order bearing Nos. 999 and 1000 of 1980 dated 29-11-1980. The Board allowed both the appeals and set aside the orders of confiscation as well as the penalties imposed.
3. The Central Government in exercise of its powers vested in it Under Section 131(3) of the Customs Act (as it then stood) issue a show cause notice to the respondent herein stating among other things, that the Central Government was tentatively of the view the decision of the Board was not proper, legal and correct. It was further stated that the Board fell in error in applying the ratio the Supreme Court decision in AIR 1976 S.C. 2221-1978 ELT (J 457) (S.C.) to the facts of this case. It was also stated that the relevant policy applicable to the goods is A.M. 1978 the Schedule appended to the Imports and Exports (Control) Act, 1947 as amended upto 31-3-1978 has been designed on the basis of the First Schedule to the Customs Tariff Act, 1975 and the Brussels Tariff Nomenclature now known as "CCCN". In Appendix 57 of Volume I of the Policy A.M. 1978, it has been clearly provided that the revised ITC Schedule has been based on Brussels Tariff Nomenclature heading. In the same Appendix Brussels Tariff Nomenclature heading has been given which are in fact the revised heading of the ITC Schedule as well. Under Chapter 4 dairy product etc. are included. The product 'milk powder' falls under heading 04.0 in the Notes to the Chapter, it is provided that the expression "Milk" means full cream or skimmed milk, butter milk, whey, kephir, tog-hourt and similar fermented milk. Accordingly, wherever the expression "milk" has been used in the Schedule in the Policy Book whether it is Volume I or Volume II it will have to be construed as defined in the notes to the Chapter. In other words, the expression "milk" becomes in generic term and all other species of milk would fall within its ambit. Obviously it appears that the skimmed milk powder would fall within the scope of milk powder as a generic-expression.
4. The Respondent, herein was called upon to show cause within thirty days of the receipt of the notice as to why the Board's order in appeal should not be set aside and Collector's two orders be not restored.
5. The Respondent herein appears to have not sent any reply to the show cause notice After the Customs Act was amended which Act came into force with effect from 11-10-1982 the proceedings which were pending before the Central Government statutorily stood transferred to the Tribunal for being heard as an appeal. Hence this appeal.
6. Shri. pal, SDR, who appeared for the appellant put forward the following contentions.
(1) The licences produced were governed by para 106(1) of the Policy A.M. 1978. They did not contend export products. The licences are 'Initial Licences'. As per paragraph 106(1) (C), the licences can be allowed to import only against export of specified products as indicated in list Annexure 11 to Part B of Red Book, Vol.11 and to the extent permitted therein.
(2) The appellants arc not the manufacturers but are only stockists. As per item 47 of Part B Annexure 2 milk powder can be allowed to be imported against export linked items mentioned in column 3 of the said Annexure which are biscuits and factory instant foods, milk products malted foot containing cocoa. The appellants were not the Exporter of any of the above and the licence did not list those items as export products. In the circumstances, the Collector was justified in ordering confiscation and imposing penalty.
(3) The Board also committed an error in applying the ratio of decision of the Supreme Court reported in AIR 1977 page 2221 to the facts of the appeal before the Board.
(4) The Board Committed an error making a distinction between the skimmed milk powder and milk powder per se.
(5) The Board had failed to take into consideration that the ITC Schedule has been, based on Brussels Tariff Nomenclature headings. This was made clear in Appendix 57 of Volume I.
7. In support of his contentions, the expression 'milk powder' would take with in its ambit skimmed milk powder, Shri. Pal relied on Chapter 4 under Appendix 57 and particularly to the Note 1. In this note it was stated that "the expression milk means full cream or skimmed milk, powdered milk, whey, kephir, tog hourt and similar fermented milk. Shri Pal further contended, the policy did not make any distinction between the milk and the skimmed milk or milk powder or skimmed milk powder and the expression "milk" powder would include skimmed milk powder and therefore the skimmed milk powder could be imported only against a linked export item. He therefore urged that the order of the Board be set aside and the orders of the Collector may be restored.
8. Shri. Nankani, appellant's learned Advocate, on the other hand, contended that admittedly the licence produced did not contain shopping list. It did not contain because during the policy April 1977 and March 1978 the system of shopping list of import items for different export products had been done away with. In support of this contention, Shri Nankani drew our attention to the preface to Volume II of Import Trade (Control) Policy AM 78 the relevant portion reads:
"We have taken a radical step in the direction of liberalisation of policy for import of all tradeable inputs for export production. The System of "shopping lists" of import items for different export products, which was an important feature of the Policy hitherto, has been done away with".
Shri Nankani then referred to para 29. Vol.11 which is to the effect "under the policy upto the year 1976-77, Section II contained the items of import against each export product. These items were given in column 4 in the policy statement in Section II (formerly known as the shopping list). This has now been dispensed with. Consequently, Section II in this book does not contain any shopping list against individual export products. In the absence of shopping list, REP licences issued to different categories of exporters and their nominees/transferres will be valid for import of raw materials, components, packing materials and consumable stores as laid down in this policy. Shri Nankani then referred to Section I, Part B 'scope and contents of REP licences' the relevant provision reads:
"REP licences issued in 1977-78 will have no list of raw materials, components, consumable stores and packing materials except items which are specifically endorsed on the licence. Import licences will be automatically valid for import of items in accordance with the relevant provisions of the import policy for Registered Exporters".
9. Shri Nankani further contented that the policy as the Notifications clearly make a distinction between skimmed milk powder and milk powder. He particularly drew our attention to serial No. 12 in Central Excise Notification No. 170 dated 1-3-70. The said serial number reads 'milk powder including skimmed milk powder, but excluding such powder specially prepared for feeding of infants. Shri Nankani contended that if there was no distinction between milk powder and skimmed milk powder it would not have been necessary to state in the Notification milk powder including skimmed milk powder. He urged "milk powder would not ordinarily include skimmed milk powder". In support of his contentions, he relied upon the Supreme Court's decision referred to in the Board's order. Shri Nankani then referred to page 79, Volume I of the Policy A.M. 1978. This page contains Section III and it relates to list of items, import of which were canalised through the State Trading Agencies. The item canalised was skimmed milk powder. Shri Nankani also relied upon the subsequent policy in support of his contention that there is a distinction between milk powder and skimmed milk powder. In that connection he referred to Appendix 3 item 333 which reads "milk powder (all types)". Shri Nankani urged that Appendix 3 of A.M. 1979 contains list of banned items. The policy makers have specifically mentioned milk powder "all types" but similar entries were not found in A.M. 1978. Therefore, the Policy A.M. 1978 did not prohibit import of skimmed milk powder. The export linked item was required only to import milk powder and not skimmed milk powder.
10. Shri Nankani further contended that Appendix 57 relied on by the Department is a schedule to Import (Control) order and not the schedule attached to the Policy A.M. 1978. It was also contended by Shri Nankani that the definition given in Appendix 57 relates to the "milk powder" and therefore, it has no relevance in construing of item No. 47 of Annexure 2 of Part b of A.M. 1978. It was further contented by Shri Nankani that when the policy was ambiguous there was no justification to impose the penalties and the fine imposed in lieu of confiscation are also excessive. Finally, Shri Nankani urged that in exercise of the suo moto revisionary power, the Central Government cannot lightly interfere with order passed by the Board particularly when the Board's order was based on the judgment of the Supreme Court and when the policy was ambiguous.
11. We have carefully considered the submissions made on both the sides. The two points that would arise for our consideration are:
(1) Whether the skimmed milk powder was an export-linked item during the Policy A.M. 1978, (2) Whether the Central Government in exercise of its suo moto revisional power could interfere with the Board's order even if it comes to the conclusion that there was an error of law commuted by the Board.
12. Before answering the above questions, it would be useful to refer to certain paragraphs of the Board's order. In para 6 the Board referred to the contentions urged by Shri Nankani. It was stated the rein: The argument is that "the milk powder" is different from "skimmed milk powder", as the former would refer only to whole milk powder. Further, the very fact that the ITC authorities in the same policy have chosen to use both the terms would indicate that they too had differentiated between milk powder per se and skimmed milk powder. This would be fortified by the entry 333 to Appendix 3 in the subsequent policy April-March 1979 which at serial No. 333 specifies "milk powder (all types)".
13. The paragraph 7 of the Board's order reads: "It has to be conceded that there is force in the argument. The Advocate also referred to the Ruling of the Supreme Court in the case Health-ways Dairy Products v. Union of India (AIR 1976 SC 2221) where the Supreme Court drew a line of distinction between 'condensed milk' and 'condensed skimmed milk'. To quote the Supreme Court. It is well-established by several authorities of this Court that for the purpose of levy of excise duty or any other similar tax the description of goods as popularly and commonly understood has to be taken as the description of the same goods in the relevant provisions of the Statute or the Rules. In this case, there are materials to show that condensed milk and condensed skimmed milk are two different items of milk preparations. In common parlance milk means the full cream milk as milched from the cattle. It becomes skimmed milk when cream i.e. fat is extracted from milk. Thereafter the skimmed milk which also can be called a form of preparation of milk is known as such. It becomes easy to digest and is used in preparation of other milk products which are different from the milk products prepared from full cream milk".
14. The Board took the view that skimmed milk powder at the relevant time was distinguishable from milk powder per se.
15. As seen earlier, in the show cause notice the Central Government has taken a view that the decision of the Supreme Court was inapplicable to the facts of the appeals which were before the Board. The reasons given by the Central Government for the above proposition was: "this observation of the Supreme Court would have been applicable even in respect of these cases provided the statute had not assigned a specific meaning to the expression 'milk powder'. The test of commercial parlance as laid down by the Supreme Court in that case would have no application for a particular reason where a particular tariff in a particular statute". The above observation implies that the relevant import policy contains definitions of the expressions of 'milk powder' and 'skimmed milk powder' and the definitions so given should prevail. The Central Government had then referred to the Appendix 57 of Volume I of the Policy A.M. 78. It referred to Chapter 4 contained therein. Shri Pal, the learned Departmental Representative had also relied upon that chapter.
16. Since great reliance has been placed on Appendix 57, particularly to Chapter 4, we shall refer to the wordings contained therein. Chapter 4 deals with dairy produce, bird's eggs; natural edible products of animal not elsewhere specified or included, Note I which has been extracted earlier reads: "the expression milk" means full cream or skimmed milk, butter milk, whey, kephir, tog-hourt and similar fermented milk. Note 2 and the rest of the things stated in this Chapter are not relevant for the purpose of this appeal. It is seen now that the definition given is only of the expression 'milk' and not milk powder. Neither the Central Government in its show cause notice nor Shri Pal had pointed out to any definition of the expressions milk powder or skimmed milk powder in the Policy. In the absence of such a definition the Central Government and Shri Pal were not justified in contending that the Board committed an error in relying upon the ratio of decision of the Supreme Court in Healthways Dairy Product's case.
17. We shall proceed to consider the Policy A.M. 1978 made a distinction between 'milk powder' and 'skimmed milk powder'. The export linked item is described in Annexure II to part B as 'milk powder'. As stated earlier, the expression 'milk powder' is not defined or explained in the Policy A.M. 1978. In the same policy, the policy makers have used the expression 'skimmed milk powder' (see Section III page 79, Volume I). Thus it is clear that the policy makers themselves have been made a distinction between 'milk powder' and skimmed milk powder'. Further in the subsequent policy, namely A.M.1979 while listing the banned items in Appendix 3, the policy makers have stated "milk powder all types". If there had been no distinction or if the definition of milk given in Appendix 57 was to apply there was no need for the policy makers to state milk powder all types. Having regard to the facts that in the policy 1978 the policy-holders have used two expressions 'milk powder' and 'skimmed milk powder' and having regard to the fact that in the subsequent policy the policy makers have specifically stated 'milk powder all types' the Board in our opinion was justified in accepting the contentions of Shri Nankani namely that 'milk powder is different from 'skimmed milk powder. The Board in our opinion was also justified in applying the ratio of the decision of the Supreme Court in Healthways Dairy Products we therefore see no reason to interfere with the order passed by the Board.
Point No. 2: Even assuming for the sake of argument, the 'skimmed milk powder' was an export-linked item during the policy period A.M.1978, the Central Government, in our opinion, would not be justified in revising the order of the Board in exercise of its suo moto revisionary power. The preamble to the policy and according to para 29 the system of shopping list was dispensed with during the policy A.M.1978. That may be the reason why no list was attached to the licences issued. Besides the policy was ambiguous. Item 47 of Annexure 2 Part B was described as 'milk powder' without any addition or qualification. As observed earlier, the policy makers knew the distinction between 'milk powder' and 'skimmed milk powder'. For the purpose of canalisation they had canalised only 'skimmed milk powder. Further in the subsequent policy in the list of the banned items it was specifically mentioned milk powder 'all types'. In these circumstances, if the Board had thought fit to interpret item 47 in the manner it has interpretted, it cannot be said that the Board Committed a grave error of law. The error of law which could be corrected by the Central Government in exercise of its suo moto revisional should be a grave error of law and that error should result in miscarriage of justice. The power of review cannot be exercised unless there is flagrant violation of law which should result in miscarriage of justice. In the present case, as has been stated, the policy itself was vague. A citizen should not be entrapped by ambiguity.
18. On consideration of all the aspects, we see no reason to interfere with the order of the Board. We accordingly reject this appeal.
Bombay, Sd/-
12th June, 1986 (K. Gopal Hegde)
Member (Judicial)
K.S. Dilipsinhji, Member (T)
19. I have very carefully gone through the order proposed to be issued by Brother Hegde. But for reasons to be recorded hereafter I am unable to persuade myself to agree with the same. Hence this dissenting finding.
20. M/s. K. Hargovindas & Co. Exports Pvt. Ltd. imported 995 bags of skimmed milk powder valued at Rs. 107314/- cif under B/E No. 2290/35 dated 16.1.78 per s.s. United Vulcan. The same were sought to be cleared against Licence No.P/L/2796882/CXX/64B/77 dated 11.8.77. The appraiser SIIB issued a show cause notice to the importers alleging that the licence was not valid as it was an initial licence issued to a manufacturing export house for raw materials etc. in accordance with Para 106(1) of Part (C) of Section 1 of the Policy Book Volume II for 1977-78. A condition of sub-para (C) of Para 106(1) stipulated that only those items appearing in the export-linked import list Annexure II to Part B could be imported against exports of specified products as indicated in the said list. Since the goods imported were, skimmed milk powder, the import was permissible against the export of products appearing in column No.3 of the Annexure. The licence produced was an initial licence issued to the importers to build up stocks. No export product was shown on the licence and hence it was held that the importation did not satisfy the condition laid down at sub-para (c) of Para 106(1) and hence the licence was not valid for the clearance of the aforesaid consignment. Accordingly, the importers were asked to show cause to the Collector against the alleged offence. The appellants in their reply dated 17.1.79 addressed to the Collector of Customs denied the contravention of the law and explained that the spray dried skimmed milk powder imported by them was different from milk powder as known to the trade. They further submitted that the import of spray dried skimmed milk powder was canalised through the Indian Dairy Corporation as per Serial No. 6 Section 3 Group A Volume I, of the Policy Book 1977-78. They therefore argued that for the purposes of Import Trade Control, milk powder would mean whole milk powder and it was different from skimmed milk powder. They further argued that in the subsequent policy for the year 1978-79, the term "milk powder (all types)" had been listed at Serial No. 335 of Appendix 3 of the policy. They therefore submitted that milk powder did not include both whole as well as skimmed milk powder. The importers therefore requested for dropping the show cause proceedings. The Collector in his order dated 5.2.79 did not accept the aforesaid explanation and held that the import of skimmed milk powder being canalised through Indian Dairy Corporation, the same could not be imported under the licence in question and ordered confiscation of the consignment and levied a fine of Rs. 1,50,000/- in lieu of confiscation of the goods and a penalty of Rs. 15,000/- on the importers. The importers filed an appeal under old Section 128 of the Customs Act to the Board who vide their Order No. 999-1000 of 1980 under F. Nos. 381/236/79-AU(B) and 381/57/80-AU(B) dated 29.1180 allowed the appeal of M/s. K. Hargovindas & Co. inter alia on the ground that milk powder was different from skimmed milk powder on the basis of the canalisation on policy for skimmed milk powder, the changes brought out in the subsequent policy for the year 1978-79 and on the basis of the Supreme Court's decision in the case of Healthways Dairy Products v. Union of India AIR 1976 SC 2221-1978 ELT p. 457). Hence the Board set aside the Collector's order of confiscation and remitted the penalty amount. However, the Govt. of India issued a notice under old Section 131(3) of the Customs Act proposing review of the aforesaid order of the Board and restoration of the Collector's order dated 15.2.79 vide the Notice F.No. 374/3/81-Cus.II dated 24.1.81. M/s. K. Hargovindas & Co. Exports Pvt. Ltd. were sked to show cause against the proposed action within 30 days of the receipt of the notice. It was admitted during the course of the hearing by the Respondent's advocate Shri S.D. Nankani that no reply was sent to this notice. On the creation of this Tribunal, the pending proceedings initiated by the Govt. were transferred to the Tribunal in terms of Section 131 B of the Customs Act and have to be treated as an appeal before this Tribunal.
21. On behalf of the appellants, the learned SDR Shri Pal contented that the licence submitted by the importers was an initial licence and the product permissible to be imported thereunder could be allowed clearance only if the licence holder had exported the items shown in list in Annexure II to Part B of the Policy Book Vol.11 for the period 1977-78. Shri Pal further submitted that since the importers did not export any of the items mentioned in the Annexure, namely biscuits, instant foods, milk products etc. they could not utilise the licence for import of milk powder. Shri Pal generlly adopted the arguments contained in the show cause notice dated 24.1.81 issued by Govt. of India. The salient considerations which weighed with the Govt. of India in tentatively holding that the Board's decision was not proper, legal or correct were that the ratio of the Supreme Court's decision in the case of Healthways Dairy products would not apply as the Imports (Control) Order had assigned specific meaning to milk powder. Hence the meaning of milk powder in common parlance was not relevant for the purpose of deciding the validity of the licence produced by the importers. Another important argument advanced by the Govt. was that the Schedule to the Imports & Exports (Control) Act 1947 was based on the Customs Tariff Act and the B.T.N. Nomenclature. Appendix 57 to Volume I of the Policy Book 1977-78 clearly provide that the revised ITC schedule had been based on Brussels Nomenclature Headings. Under Chapter IV, in Headnote 1, the expression "milk" included the full cream or skimmed milk, powder milk, etc. Therefore Heading 04.02 relating to milk and cream, preserved, concentrated or sweetened included both the varieties of milk powder namely whole milk powder and skimmed milk powder. In other words, the Govt. was of the view that "milk" was generic term and included all species of milk within its ambit including "skimmed " milk powder. Accordingly replying on the arguments of the Government. Shri Pal submitted that the order of the Board was not correct and that the same should be set aside and that the Collector's order should be restored.
22. On behalf of the Respondent, Shri Nankani urged the contentions which had been taken up by the appellants earlier. Briefly, these are that milk powder and skimmed milk powder are two different commodities and in this behalf he relied on the entries at Serial No. 6 Section III Group A Volume I of the Policy Book for 1977-78, and Serial No. 47 of Annexure II to Part B Vol.11 of Policy Book 1977-78. He further drew sustenance from the Board's Order in Appeal dated 29-11-80 and particularly on the Supreme Court's decision in the case M./s. Healthways Dairy Products which held that condensed milk did not include condensed skimmed milk. Shri Nankani also discussed the omission of the policy which had done away with the shopping list against REP licences and the change in the subsequent policy for the year 1978-79 vide Serial No. 333 of Appendix 3 of the Policy which covered milk powder of all types. Shri Nankani therefore urged that the licence submitted by the importers was valid and that the Board had correctly allowed the importer's appeal under old Section 128 of the Customs Act. He therefore submitted that there was no reason for the Govt. to initiate the proposed review of the Board's order under old Section 131(3) of the Customs Act. Shri Nankani further submitted that the review could be initiated only when there was gross illegality or impropriety which was not the case with the present imports and hence the Govt. should not have exercised the powers vested in them under old Section 131(3) of the Customs Act. Accordingly Shri Nankani submitted that the present appeal by the Collector of Customs Bombay before the Tribunal should be rejected.
23. I have considered the submissions made on both the sides. The main question which calls for determination is the correct interpretation of milk powder at Serial No. 47 of Annexure II of Part B of the Policy Book Vol.II for the year 1977-78. The appellant argues that this includes skimmed milk powder also. In support of this interpretation, the appellants have relied on the Headnote to Chapter 4 of the BTN which is incorporated in Appendix 57 to Volume I of the Policy Book for the same year. In preference to this interpretation, the appellants agrue that the common parlance test of milk powder and the Supreme Court's decision in the case of Healthways Dairy Products should not prevail. Scrutinising these submissions it is seen that under the Supreme Court's decisions in the case of DCM AIR 1963 SC 791-1977 ELT (J 199) and South Bihar Sugar Mills AIR 1968 SC 922-1978 ELT (J 366) S.C. the Supreme Court prescribed the market nomenclature as the criterion for the levy of duty of Central Excise as per the Schedule to the Central Excise & Salt Act 1944. In their decision in the case of Healthways Dairy Products, the Supreme Court was merely following the aforesaid ratio in deciding the dutiability of condensed skimmed milk under Item 1 B "Prepared or preserved foods, put up in unit containers and ordinarily intended for sale including preparations of milk" etc. read with Notification No. 17/70 CE dated 1.3.70. The relevant entry against Serial No. 13 of this Notification at that time covered only condensed milk and condensed skimmed milk was not in existence at that time but was added subsequently. Since this was a taxing statute and since as per numerous decisions of the Supreme Court, the taxing statutes and the Notifications have to be construed strictly, the Supreme Court in the case of Healthways Dairy Products correctly held that the entry of condensed milk at Serial No. 13 of this Notification did not include condensed skimmed milk as both were known differently in the market. The present appeal of the Collector of Customs Bombay does not cover any aspect of taxation of levy of duty. Therefore, the ratio of the Supreme Court's decision in the case of Healthways Dairy Products is of no avail in interpreting the import policy. Besides as alleged in the show cause notice dated 24.1.81 issued by the Govt. of India, the interpretation of any item for the Import Trade Control purpose is available statutorily only. The Schedule to the Customs Tariff Act 1975 had been annexed as Schedule I to the Imports (Control) Order 1955 as amended. Note 1 to this Schedule clarifies that each heading corresponds to the heading number of the first schedule to the Customs Tariff Act and each entry has the same scope and meaning as the corresponding headnote and Chapter of the First Schedule to the Customs Tariff Act. Therefore, the Head note to Chapter 4 in the BTN defining milk to include full cream or skimmed milk would govern the entry at Serial No. 47 to Annexure II to Part B in the Import Control Policy Book 1977-78 Vol.11. The contention of the learned advocate Shri Nankani that this entry has to be read along with the entry relating to the canalisation of skimmed milk powder through the Indian Dairy Development Corporation in interpreting the respective entries is not correct or acceptable. What had been canalised under the relevant 1977-78 policy was only spray dried skimmed milk powder. It cannot mean that the other entry at Serial No. 47 would not therefore cover skimmed milk powder also. For this very reason, it is not necessary to accept Shri Nankani's contention that it was only in the subsequent year 1978-79 that this entry was expanded to cover milk powders of all types and that till then this entry did not cover skimmed milk powder. Were these contentions of Shri Nankani to be accepted, it would go against the statutory interpretations provided in the Imports (Control) Order 1955 as amended. The licence produced is therefore not valid and it does not satisfy the conditions of Paragraph 106(1) (c) of the Policy. It has been admitted on behalf of M/s. K. Hargovindas & Co. Exports Pvt. Ltd. that they had not exported the products-which permitted the import of milk powder. The licence in question was an initial licence and is not valid for the import in question. In this view the fact that the earlier practice of the policy to include shopping list had been done away with or that the preamble to the policy contained the intention of the Govt. behind framing this policy are not relevant for the purpose as the intention alone cannot be taken into account for interpreting the policy. In the aforesaid view, I find that the order of the Board dated 29.11-80 was not correct, legal or proper and that accordingly the same is set aside, and the Order No. SG-34/78A dated 5.2.1979 S/10-105/78 L SIIB of the Collector of Customs, Bombay is restored.
24. This still leaves one argument of the advocate of M/s. K. Hargovindas & Co. Exports Pvt. Ltd. open. Shri Nankani has contended that the present case was not one of grave illegality or impropriety and therefore the Govt. should not have exercised the powers vested in them under old Section 131(3) of the Customs Act and therefore they should not have issued the Show Cause Notice dated 24.1.81. Old Section 131(3) merely lays down that the Central Government may of its own motion annul or modify any order passed Under Section 128 or Section 130 of the Customs Act. There is therefore no qualification that these powers should be exercised by the Central Govt. in grave cases of illegality or impropriety. It is the discretion and prerogative of the Central Govt. to exercise these powers. The exercise of these powers cannot be questioned by any authority like the Tribunal. It had been already held by this Tribunal that the Tribunal cannot exercise any powers under the Act which are assigned to the Board or the Central Govt. When this is the position it cannot question the discretion of the Govt. to exercise the powers of revision under old Section 131(3). There is no qualification for the exercise of these powers and hence Shri Nankani's contention that the present case was not one of grave irregularity is not correct. As held above the Board's order was illegal and improper and the Central Government has taken the correct step to remedy this illegality and impropriety by issue of the Notice dated 24.1.81.
Sd/-
Bombay (K.S. Dilipsinhji) 17.7.86 Member (Technical)
Since there has been a disagreement between the Member (T) and the M(J) this matter is referred to the President in terms of Section 129C(5) of the Customs Act for deciding the following points:-
(1) Whether the appeal of the Collector of Customs Bombay should be allowed as held by M(T) or rejected as held by M(J);
(2) Whether the proposed interference by the Central Govt. to issue a show cause notice No. 374/3/81-Cus.II dated 24.1.81 with the Board's Order No .999-1000 of 1980 dated 29-11-80 was proper in the circumstances of this case even if the Central Govt. held that there was an error of law committed by the Board.
Sd/-
22-5-1986 (K.S. Dilipsinhji)
Member (Technical)
No. CD(T) (BOM) A 98 of 79.
As there is difference of opinion between M(T) and M(3) on the points set out below, the records are submitted to the President for referring the points of difference to one or more other Members of the Appellate Tribunal as provided in Sub-section 5 of Section 129-C. Points of difference (1) Whether the skimmed milk powder was an export-linked item during the Policy A.M. 1978, and (2) Whether the Central Government in exercise of its suo moto revisional power could interfere with the Board's orders even if it has come to the conclusion that there was an error of law in the order passed by the Board.
Sd/-
Bombay (K. Gopal Hegde) 22nd July, 1986 Member (Judicial) ORDER
In view of the opinion of the majority of the Members, this appeal is allowed. The order of the Board is set aside. The order of the Collector of Customs, Bombay, is restored.
Sd/- Sd/-
(K.S. Dilipsinhji) (K. Gopal Hegde)
Member (Technical) Member (Judicial)
Bombay, 15.12.86.
Appeal No. 98/1979
K.L. Rekhi, Member (Technical) for himself and on behalf of S/Shri H.R. Syiem and M. Santhanam
25. As there was difference of opinion between our learned brothers who heard the appeal earlier at Bombay, the President has assigned the matter to us for hearing and disposal under Sub-section(5) of Section 129C of the Customs Act, 1962.
26. Since each of our learned brothers at Bombay had formulated the points of difference separately, under orders of the President we re-formulated the points of difference as under:-
(1) Whether the export-linked item "Milk Powder" (in the Import Policy for April 1977 - March 1978, Vol.11) covered "skimmed Milk Powder" also.
(2) Whether in the facts and circumstances of the case, the show cause notice issued by the Central Government Under Section 131(3) of the Customs Act, 1962 for suo moto revision of the Board's order-in-appeal was valid."
27. The points of difference as re-formulated by us were communicate both parties. They were then heard on the points of difference. During the hearing, it occured to us that the Division Bench judgment of the Bombay High Court reported at 1983 ELT 116 (Bom). The commissioner of Sales Tax v. Aggrawal & Company was also relevant to the point at (1) above. In this judgment, the Bombay High Court had discussed the Supreme Court judgment in the case of Healthways Dairy Products Co. v. Union of India [reported at AIR 1976 S.C. 2221 which has been relied (sic)assessed a number of other Supreme Court judgments also and thereafter arrived at the conclusion that in a fiscal legislation a general term used for any commodity covered all its forms and varieties. We invited attention of both the parties to this judgment of the Bombay High Court and adjourned the hearing for a while to give them time to study the judgment. After both parties informed us that they had read the judgment and were ready for resumption of the hearing, we re-assembled in the court to resume the hearing. We heard both sides at length and reserved our others.
28. We have since given our careful thought to the matter. We find that the respondents insist on the export-linked entry "Milk Powder" being interpreted according to its meaning in trade parlance and in support cite the Supreme Court judgment in the case of Healthways Dairy Products Company. We do not agree with them. This Supreme Court judgment was in the context of the central excise tariff and concerned the meaning and scope of the entry "condensed milk" in an exemption notification issued thereunder. The entry "condensed milk" was not defined either in the central excise tariff or in the exemption notification. Applying the common parlance test, the Supreme Court held that it did not include condensed skimmed milk which was regarded commercially as a separate product. The respondents say that following the same logic, "milk powder" should not include "skimmed milk powder". We find it difficult to agree with them for the simple reason that unlike the central excise tariff the import schedule itself provided a statutory basis for interpretation. The controversy before us relates to a period during which the Imports (Control) Order, 1955, issued under the Imports and Exports (Control) Act, 1947, had a separate import schedule annexed to it. This import schedule was aligned with the import schedule of the Customs Tariff Act, 1975. The import schedule under the Import (Control) Order itself did not contain any rules of interpretation, section notes and chapter notes. However, a statutory Note at the beginning of the import schedule stated that the scope of various terms and headings in it was to be the same as in the import tariff schedule in the Customs Tariff Act, 1975. Thus the elaborate statutory scheme Of the customs tariff import schedule got applied to the import schedule as well. It is by now well known that the customs tariff import schedule hardly left any scope to go in for trade parlance or common parlance because it statutorily defined almost everything with the help of rules of interpretation and explanatory notes. In such a scheme, the statutory definitions must prevail over trade parlance or any other aides to interpretation 1985 (20) ELT 222 (S.C.) - Khandelwal Metal and Engineering works and Anr. etc. v. Union of India and Ors., paragraphs 31 to 35].
29. The respondents contended that definitions were contained, by virtue of alignment with the customs tariff schedule, in the import schedule which was a part of the Imports (Control) Order while the controversy before us is concerned with interpretation of "Milk Powder" which occured in the import policy. They added that the policy itself did not define "milk powder". We do not agree with them. The import schedule annexed to the Imports (Control) order covered everything out of which the import policy drew up lists of permissible, banned and restricted items. If, therefore, doubt arose in respect of the meaning and scope of an expression occuring in the policy, one had naturally to turn to the parent document, i.e., the statutory import schedule to ascertain the said meaning and scope. There was no need to define words and expressions in the import policy again once they stood defined in the statutory import schedule. Both the Imports (Control) order as well as the import policy were under the Imports and Exports (Control) Act. While the Imports (Control) Order was a piece of delegated legislation and hence had statutory force, the policy was an administrative decision which was liable to undergo changes time to time. We hold, therefore, that meaning and scope of "milk powder" occuring in the import policy (list of export-linked items) had to be ascertained from the statutory import schedule i.e., by a reference to the statutory definition in the customs tariff schedule.
30. When we turn to chapter 4 of the customs tariff schedule, we find that it defined "milk" to mean, inter alia, full cream or skimmed milk. In view of this statutory definition, reliance of the respondents on the Healthways Dairy Products Company judgment which held, in the context of the central excise tariff which contained no difinitions, that condensed milk did not include condensed skimmed milk, is misplaced. In the setting of the statutory definition applicable to the matter before us, if milk in liquid form included both whole or skimmed milk, it is logical to say that milk in powder form also included both - whole as well as skimmed. We have it on the authority of the Bombay High Court judgment (supra) that milk powder is nothing but milk. The Bombay High Court came to this conclusion after noticing the meaning of "milk powder" as given in the Concise Oxford Dictionary and also "A Dictionary of Dairying" by J.G. Davis, the preface of which stated that it was "a work of ready reference that would be of interest to, and understood by, any scientist in other fields and any intelligent layman in the dairy industry". After considering this trade understanding, the Bombay High Court held that "milk powder" was nothing except milk in powder form or milk from which water had been removed. There is nothing in the import schedule or in the customs tariff schedule which says that milk powder means only full cream milk powder or whole milk powder.
31. We arrive at the same conclusion on the basis of the ratio decidendi of the Bombay High Court judgment (supra), which was reached by the High Court after considering a number of Supreme Court judgments - that in a fiscal legislation, a general term used for any commodity covers all its forms and varieties. Here the meaning given in the fiscal legislation i.e., the custom tariff schedule, is also the meaning to be given to the import schedule. When we see the matter in this perspective, which is statutory as well as based on understanding of "any intelligent layman in the dairy industry", the so called contradiction in the import policy, of which much has been made by the respondents, evaporates into thin air. No doubt, the policy used the expression "milk powder" in the export-linked list but used the different expression "skimmed milk powder" in the canalised list. This only means that while "milk powder" included all varieties of "milk powder", just one variety of it, namely, skimmed milk powder was canalised for import through the State Trading Corporation. In the next year's policy, when the expression "milk powder all types" was used it was quite evidently done as a measure of abundant caution to allay any unnecessary doubts and controversies which certain interested parties may have been trying to kick up.
32. We now come to the other point of difference, namely, the validity of the show cause notice issued by the Central Government under the then Section 131(3) of the Customs Act, 1962. This section read as under:-
"The Central Government may on its own motion annul or modify any order passed Under Section 128 or Section 130".
We find nothing in the above provision to the effect that it could be invoked only in cases of grave error of law which would result in miscarriage of justice. The provision occurs in a fiscal legislation where the controversy that often arises relate to the question whether the lower order assessed nil duty or the lower duty correctly or not. As applied to import control legislation, the type of cases thrown up would generally be involving the point whether the goods imported were banned, restricted or permissible or whether they were covered by the import licence produced or not. It happens that the lower authority may have taken a particular view which the Government of India found was not correct. Now, if Government could not proceed to revise the lower order Under Section 131(3), in such cases, the provision itself would, for the most part, be rendered useless. Considering the type of matters it was required to deal with, the provision was quite understandably not hedged in with any conditions or restriction. The controversy in the present case was that the Central Board of Excise and Customs, sitting as the Appellate Authority held that skimmed milk powder could be imported in terms of the import licence produced by the respondents. The Central Government, on the other hand, felt that the Board's conclusion was not correct and that the licence was not valid for import of skimmed milk powder. We hold that the Central Government was competent to proceed Under Section 131(3) and the show cause notice issued by it was valid. The respondents stated that it was not permissible to go beyond the reasons stated in the revision show cause notice. We have not done so. In the paragraphs, we have upheld the tentative view taken in the revision show cause notice precisely on the grounds stated in that notice.
33. Summing up, our findings on the two points of difference of opinion are:-
(1) The export-linked item "Milk Powder" covered skimmed milk powder also.
(2) In the facts and circumstances of the case, the revision show cause notice issued by the Central Government was valid.
34. In our view, therefore, the impugned order-in-appeal has to be set aside and the original orders restored. We so order.
35. The matter is now remitted back to the West Regional Bench, Bombay for further disposal.
Sd/-
K.L. REKHI) Member Sd/-
(H.R. SYIEM) Member Sd/-
November 26, 1986. (M. SANTHANAM)
'AS' Member.
ORDER
36. In view of the opinion of the majority of the Members, this appeal is allowed. The order of the Board is set aside. The order of the Collector of Customs, Bombay, is restored.