Bombay High Court
M/S. Prabhat Publicity Thru. ... vs Union Of India Thru. Secty. & 2 Ors on 29 June, 2017
Author: M.S.Sanklecha
Bench: M.S.Sanklecha, Manish Pitale
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
NAGPUR BENCH, NAGPUR
CUSTOMS APPEAL NO.1 OF 2007
M/s. Prabhat Publicity,
R/o. 2662, Kuchachella,
Darya Ganj, New Delhi-110 002.
through its Proprietor
Mr.Vinod Gupta. ......... APPELLANT
// VERSUS //
1.Union of India,
through the Secretary,
Ministry of Finance,
New Delhi.
2.Commissioner of Customs and
Central Excise, Nagpur. ........... RESPONDENTS
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Mr.Sunil Manohar, Senior Counsel with Mr.Nikhil Gaikwad, Advocate
for Appellant.
Mr.S.N.Bhattad, Advocate with Mr.K.K.Nalamwar, Advocate for the
Respondents.
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CORAM : M.S.SANKLECHA
& MANISH PITALE, JJ.
DATE : 29.6.2017.
ORAL JUDGMENT (Per M.S.Sanklecha, J) :
1. This appeal under Section 130 of the Customs Act, 1962 (the Act) challenges the Order dated 24.8.2006 passed by the Customs, Excise and Service Tax Appellate Tribunal (the Tribunal). By the impugned order, a second had offset Printing Machine (Printing Machine) imported by the appellant was held to be not a 'Capital good'. Therefore, not freely importable under the EXIM Policy-2002- 07 and Foreign Trade (Development and Regulation) Act, 1992. Thus, in the absence of necessary authorisation/licence from the Import Control Authority, for the import, confiscation of the imported Printing Machine under Section 111(d) of the Act by the Commissioner of Customs was upheld. However, the redemption of the Printing Machine was allowed on payment of redemption fine of Rs.10 Lakhs alongwith penalty of Rs.1 Lakh under Section 112(a) of the Act.
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2. This appeal was admitted on 14.8.2008 on the following substantial questions of law :
1.Whether in the facts and circumstances of the case and in law the Tribunal erred in holding that the printing machine is not "Capital Goods" when the definition of the capital goods itself covers any plant, machinery, equipment or accessories required for manufacturer or production either directly or indirectly of goods for rendering services in terms of para 9.10 of the EXIM policy ?
2.Whether in the facts and circumstances of the case and in law the Tribunal has rightly interpreted the definition of Capital Goods while excluding the printing machines from the purview of the said definition when the said Tribunal subsequently has given a finding in the matter of CCE Nagpur versus M/s.Goyal Printing Press that printing machine was a capital good under EXIM policy and have given a finding that the goods are freely importable ?
3.Whether in the facts and circumstances of the case and in law the Tribunal was right in not considering the three classifications of printing ::: Uploaded on - 15/07/2017 ::: Downloaded on - 28/08/2017 08:25:04 ::: 4 capl1.07.odt machines under Central Excise Tariff, Customs Tariff as well as ITCHS under EXIM code, when under Central Excise Rules, all goods falling under chapter 84 covers only the Capital Goods which includes the printing machinery ?
4.Whether in the facts and circumstances of the case and in law the Tribunal was right in not quashing the confiscation and penalty under Section 112 of the Customs Act, 1962 when the Printing Machinery is freely importable good under the EXIM policy ?
3. The brief facts leading to this appeal are as under :
(a) The appellant is a printing and publishing house. In 2004, the appellant imported a second hand Printing Machine (manufactured in 1995) for the purposes of its business. On
4.03.2004, the appellant filed the Bill of Entry for clearance of the Printing Machine classifying it under Chapter 84, Heading 84.43 of the Customs Tariff Act, 1975 valuing it at Rs.19.96 Lakhs. The clearance of the Printing Machine was sought without any license/authorisation ::: Uploaded on - 15/07/2017 ::: Downloaded on - 28/08/2017 08:25:04 ::: 5 capl1.07.odt from the Import Control Authorities as, according to the appellant, it was freely importable being a Capital goods, less than 10 years old in terms of paragraph 2.33 of the EXIM Policy 2002-2007.
(b). However, according to the Revenue, the Printing Machine was undervalued and also not freely importable. Therefore, the Commissioner of Customs issued a show cause notice to the appellant inter alia calling upon the appellant to show cause why Printing Machine should not be confiscated under Section 111(d) of the Act as the same did not satisfy the meaning of 'Capital Goods' in the EXIM Policy 2002-07. Thus, in the absence of a license/authorisation from the Import Control Authorities, the import contravened the provisions of Section 3(3) of the Foreign Trade (D & R) Act, 1992 r/w. 11(1) of the Act rendering it liable for confiscation under Section 111(d) of the Act.
(c). The appellant responded to the same and pointed out that the imported Printed Machine would satisfy the definition of 'Capital Goods' as defined in para 9.10 of the EXIM Policy. Therefore, being ::: Uploaded on - 15/07/2017 ::: Downloaded on - 28/08/2017 08:25:04 ::: 6 capl1.07.odt second hand capital goods, it was freely importable in terms of para 2.33 of EXIM Policy 2002-2007.
(d) However, the Commissioner of Customs by an order dated 30.8.2005 did not accept the appellant's contention and held that the Printing Machines do not fall in the definition of 'Capital Goods', as it does not find mention in the inclusive part of the definition as found in paragraph 9.10 of the EXIM Policy 2002-07. Further, he held that, in terms of paragraph 2.33 of the Handbook of Procedures (Vol.1) of the EXIM Policy 2002-2007, which list out second hand goods which could be imported without license and in that list, Printing Machinery is not mentioned. In the above view, he held that the imported Printing Machine is liable for confiscation under Section 111(d) of the Act. Besides, the Commissioner also enhanced valuation of the Printing Machine from Rs.19.96 Lakhs as declared to Rs.42 Lakhs. Consequently, the Printing Machine was confiscated under Section 111(m) and (d) of the Act on account of both valuation as well as on goods being imported without appropriate license/authorisation from the Import Control Authorities. However, the Printing Machine was allowed to be redeemed on consolidated payment of fine of ::: Uploaded on - 15/07/2017 ::: Downloaded on - 28/08/2017 08:25:04 ::: 7 capl1.07.odt Rs.15 Lakhs and consolidated penalty of Rs.5 Lakhs was also imposed upon the appellant on both counts i.e. undervaluation and absence of licence/authorisation from the Import Control Authorities.
(e) The appellant, being aggrieved, filed an appeal to the Tribunal on both the issues i.e. undervaluation and free importability of the Printing Machine. The Tribunal by the impugned order dated 24.8.2006 held in favour of the appellant in respect of valuation and found that the value declared by the appellant of Rs.19.96 Lakhs for the import of Printing Machine was appropriate. Consequently, confiscation on account of valuation under Section 111(d) r/w. (m) of the Act was set aside. However, so far as the EXIM Policy issue is concerned, the impugned order of the Tribunal upholds the view of the Commissioner of Customs holding that the Printing Machine is not a capital good in terms of paragraph 9.10 of the EXIM Policy. Thus, the impugned order of the Tribunal upholds the findings of the Commissioner on confiscation of Printing Machine for EXIM Policy violation. However, the consolidated redemption (on valuation and EXIM Policy) fine was reduced from Rs.15 Lakhs to Rs.10 Lakhs. ::: Uploaded on - 15/07/2017 ::: Downloaded on - 28/08/2017 08:25:04 :::
8 capl1.07.odt Further penalty under Section 112(a) of the Act was reduced from Rs. 5 Lakhs to Rs.1 Lakhs.
4. Being aggrieved, the appellant/assessee is in appeal before us.
5. Regarding Question No.1 :
(a). The impugned order of Tribunal upheld the view of the Commissioner of Customs. This on the ground that, a plain reading of paragraph 9.10 of the EXIM Policy 2002-07, Printing Machinery would not fall within that definition of 'Capital goods'. Further it places reliance upon a Notification No.31/2005, dated 19.10.2005 to conclude that Printing Machine is not capital goods.
(b). For a proper appreciation of the controversy at hand, it may be appropriate to reproduce the relevant provisions of the policy and the handbook which would have a bearing on the question arising for our consideration. The relevant provisions are as under :::: Uploaded on - 15/07/2017 ::: Downloaded on - 28/08/2017 08:25:04 :::
9 capl1.07.odt Para No. 9.10 of the EXIM Policy 2002-2007 is as under : "9.10. "Capital Goods" means any plant, machinery, equipment or accessories required for manufacture or production, either directly or indirectly, of goods or for rendering services, including those required for replacement, modernisation, technological upgradation or expansion.
Capital goods also include packaging machinery and equipment, refractories for initial lining, refrigeration equipment, power generating sets, machine tools, catalysts for initial charge, equipments and instruments for testing, research and development, quality and pollution control. Capital goods may be for use in manufacturing, mining, agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, and viticulture as well as for use in the services sector. "
Para Nos. 2.17 and 2.33 of the EXIM Policy 2002-2007 are as under :
"2.17. All second hand goods, shall be restricted for imports and may be imported only in accordance with the provisions of this Policy, ITC (HS), Handbook (Vol.1), Public Notice or a License/certificate/permission/Authorisation issued in this behalf "
"2.33. Import of second hand capital goods, which are not more than 10 years old, shall be allowed freely."
Para 2.33 of the Handbook of Procedures 2002-07 : ::: Uploaded on - 15/07/2017 ::: Downloaded on - 28/08/2017 08:25:04 :::
10 capl1.07.odt "2.33. Import of Second Hand Capital Goods :
Import of second hand capital goods including refurbished/reconditioned spares, shall be allowed freely, subject to conditions for following categories : Import of second hand computers including personal computers and laptops is restricted. Import of refurbished/reconditioned spares will be allowed on production of a Chartered Engineer certificate that such spares have atleast 80 % residual life of original spare. In case a capital goods is imported in parts at two customs stations, on account of bonafide logistical reasons, said imports may be allowed after satisfying that both consignments put together constitute a single capital goods."
(c). Mr.Sunil Manohar, learned Senior Counsel for the appellant, in support of the appeal, submits that the definition of 'Capital goods' as set out in Para 9.10 of the Policy is very wide and has been defined to mean any plant, machinery, equipment or accessories required for manufacture, production or rendering of services. In the present facts, it is not disputed that the Printing Machine is being used for the purposes of printing and would, therefore, be a machinery/equipment required for production/ manufacture and/or for rendering of services. Thus, it would be covered by the definition of "Capital goods". It is submitted that the ::: Uploaded on - 15/07/2017 ::: Downloaded on - 28/08/2017 08:25:04 ::: 11 capl1.07.odt impugned order of the Tribunal has not examined the definition of "Capital goods" as given in paragraph 9.10 of the EXIM Policy and merely upheld the view of Commissioner of Customs. It is submitted that the Commissioner of Customs has, while dealing with the definition of 'Capital goods', completely ignored the first para of definition of 'Capital goods' and rejected the claim of the appellant on the ground that it is not mentioned in the inclusive part of definition as reproduced hereinabove. It is submitted that, in terms of para 2.33 of the Policy, import of second hand Capital goods, which are not more than 10 years old, are allowed freely. The Printing Machine as imported does satisfy the above test. Therefore, the basis of the impugned order holding that the Printing Machinery is not Capital goods itself will not stand scrutiny. Further the reliance upon a Notification No.31/05, dated 19.10.2005 is inappropriate as it is post the import of the Printing Machine and could have no application. In any case, it is submitted that, in the present facts, the redemption fine and penalty should be nominal, if at all.
(d). As against the above, Mr.S.N.Bhattad, learned Counsel appearing for the Revenue supports the impugned order of the ::: Uploaded on - 15/07/2017 ::: Downloaded on - 28/08/2017 08:25:04 ::: 12 capl1.07.odt Tribunal for the reasons mentioned therein as well as for the reasons in the order of Commissioner dt.30.8.2005. It is submitted that no interference with the impugned order is warranted.
(e) From the definition of 'Capital goods' as set out hereinabove, it is evident that it has been defined in two parts. The first part defines 'Capital goods' to mean any plant, machinery etc required for manufacture/production/rendering services. While the second part which is an inclusive part lists out various machines which would also be classifiable as 'Capital goods'. The impugned order of the Tribunal has not examined the definition of "Capital goods' as provided in para 9.10 of the Policy; but, it merely upheld the view of the Commissioner of Customs. In turn, the Commissioner of Customs in his order dated 30.8.2005 has completely ignored the first part of definition of "Capital goods" and only as on account of the fact that Printing Machine is not listed in the inclusive part of that definition, concludes that it is not capital goods. It is a settled position in law that when the definition in Section is defined to "mean" such and such then such a definition would be prima facie restrictive and exhaust the entire universe of the thing defined. The word "includes" is prima facie ::: Uploaded on - 15/07/2017 ::: Downloaded on - 28/08/2017 08:25:04 ::: 13 capl1.07.odt extensive/expansive and the particular items referred to after the word 'includes' would only be illustrative and not exhaust the universe of the word sought to be defined. In this case, the first part of the definition of capital goods in para 9.10 of the EXIM Policy uses the word 'means' and the second part of the definition uses the word 'includes'. Therefore, in the first part of the definition the plant, machinery, equipment or accessories which are required for manufacture/ production/rendering services, would be Capital goods. In this case, it is not disputed before us that the Printing Machine would be a machinery required for manufacture/production of goods as it falls under Chapter 83 of the Customs Tariff Act, 1975 or in any event, it would be used in rendering services. Therefore, the Printing Machine would fall within the first part of the definition of 'capital goods' as set out in paragraph 9.10 of the EXIM Policy.
(f) So far as the second part of that definition is concerned, it is an inclusive definition and it only lists out various items which would be considered to be Capital goods, even if they are not per se used in manufacture/production/rendering of services. Therefore, in the inclusive part of the definition, instruments required for testing ::: Uploaded on - 15/07/2017 ::: Downloaded on - 28/08/2017 08:25:04 ::: 14 capl1.07.odt and research are considered to be Capital goods, even if they are not required for manufacture/production/rendering services.
(g) In fact, the manner in which a definition section which uses the words "means" and "includes" as found in paragraph 9.10 of the Policy, is to be interpreted, is long settled by the Apex Court. Attention is invited to the decision of the Supreme Court in Black Diamond Beverages and another .vs. Commercial Tax Officer, Central Section, Assessment Wing, Calcutta and Others, (1998) 1 SCC 458. We can do no better then not only extract the definition it was considering alongwith its observation/view with regard to the manner in which definitions sections using the words 'means'.... and 'includes' are to be construed as under :
"5. The 1954 Act generally provides for levy of a single- point tax at the first stage on commodities notified under Section 25 of that Act. On the other hand, the 1941 Act is a general statute providing for multipoint levy of sales tax on commodities not covered by the 1954 Act. Sub-clause (d) of Section 2 of the 1954 Act reads as follows :
"2.(d) 'sale-price used in relation to a dealer means the amount of the money consideration for the sale of notified commodities manufactured, made or processed by him in West Bengal, or brought by him into West Bengal from any ::: Uploaded on - 15/07/2017 ::: Downloaded on - 28/08/2017 08:25:04 :::
15 capl1.07.odt place outside West Bengal, or brought by him into West Bengal, less any sum allowed as cash discount according to trade practice, but includes any sum charged for containers or other materials for the packaging of notified commodities;" (emphasis supplied).
6.We shall first deal with the contention of the appellants' counsel based upon the non-inclusion of "freight charges" in the definition of sale price in Section 2(d) of the 1954 Act.
7.It is clear that the definition of "sale price" in Section 2(d) uses the words "means" and "includes". The first part of the definition defines the meaning of the word "sale price" and must, in our view, be given its ordinary, popular or natural meaning. The interpretation thereof is in no way controlled or affected by the second part which "includes" certain other things in the definition. This is a well-settled principle of construction. Craies on Statute Law (7th Edn., 1.214) says :
"An interpretation clause which extends the meaning of a word does not take away its ordinary meaning.... Lord Selborne said in Robinson v. Barton-Eccles Local Board AC at p.801 :
" An interpretation clause of this kind is not meant to prevent the word receiving its ordinary, popular, and natural sense whenever that would be properly applicable, but to enable the word as used in the Act... to be applied to something to which it could not ordinarily be applicable. "
Therefore, the inclusive part of the definition cannot prevent the main provision from receiving its natural meaning". (emphasis supplied) ::: Uploaded on - 15/07/2017 ::: Downloaded on - 28/08/2017 08:25:04 ::: 16 capl1.07.odt
(h). In fact, the Commissioner of Customs, whose view has been upheld by the impugned order of the Tribunal, has restricted the meaning of 'Capital goods' only to those items which find mention in the inclusive part of the definition. It completely ignores the earlier part of the definition of 'Capital goods' which has been defined to mean any machinery, equipments used for manufacture/ production/rendering services. On the above partial reading it concluded that the Printing Machine is not mentioned in the inclusive part and therefore, does not satisfy the definition of 'Capital goods' in paragraph 9.10 of the EXIM Policy. This is not permissible. In fact, Justice G.P. Singh in his book "Principle of Statutory Interpretation"
14th Edition while setting out how a definition, which uses the word 'mean' as well as 'include', is to be understood has stated at page no.199 thereof as under :
" A definition which defines a word to mean A and to include B and C cannot in its application be construed to exclude A and to include only B and C. "
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(i). The Commissioner of Customs as well as the Tribunal have, while construing the definition of 'Capital goods' have proceeded on the basis that it only includes items mentioned in the inclusive part of the definition and completely ignored the earlier part of the definition which begins with the word 'means'. In the above view, we are of the view that the Printing Machinery at the time of import would satisfy the definition of 'Capital goods' as provided in the first part of paragraph 9.10 of the EXIM Policy.
(j) The reliance upon Para 2.33 of the Handbook of Procedures 2002-07 as existing at the time of import i.e. 4 March, 2004 does not in any manner advance the case of the Revenue. Further placing reliance upon subsequent amendments by virtue of Notification No.31/05, dated 19.10.2005 has no application to the present facts.
(k) In the above view, question no.1 is answered in the affirmative i.e. in favour of the appellant/assessee and against the respondent/Revenue.
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6. In view of our answer to question no.1, questions nos. 2 to 4 are not being pressed by the appellant. Therefore, they do not arise for consideration. Accordingly, the appeal is allowed. No order as to costs.
JUDGE JUDGE
jaiswal
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