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With regard to the ITC classification the importers stated that classification of goods under S. No. 462(a) of Appendix 3A was without any proper substance. They submitted that the goods imported were dielectric heater components for heat tracing system and this item was being regularly imported by them in the past. It was sophisticated heating material for non-domestic purposes, whereas S. No. 462(a) of Appendix 3A was meant for all types of electrical cables and wires for rating upto and including 132 KV but excluding flat/flat flexible cables. By definition an electrical cable is an assembly on one or from conductors either sold or standard, which is covered with a layer of insulting material throughout their length. The heater components imported by the importers, on the other hand, was an assembly of two copper conductors not individually insulated. The two conductors in this case interact with each other and thus are not a cable. Finally an electrical cable only transmits electrical energy from point to point, whereas heat tracer was not a carrier of electrical energy. It is a self-consumer of electrical energy and simultaneously dissipates it later. The individual conductors of a cable are fully insulated to avoid any contact between the two conductors otherwise, a short circuit blow out may result. The heat tracer on the other hand has current flowing between the two conductors through the semi-conductive core at each point along the heater length. Tracer resistance in this case varies as a function of its temperature. The cables on the other hand are specially manufactured to have low resistance and heat tracers are designed in a manner so that its resistance is high so as to generate heat.

By characteristic, a cable has a rated voltage or KV rating with which the cable is designed to operate. The heat tracer on the other hand has no KV rating and it has only a temperature rating. It is also flat flexible in nature, therefore, would not get covered under S. No. 462 of Appendix 3A.

The importers also stated that the goods", namely, heat tracing cables were all along being cleared under OGL Appendix 6 and this was the established practice in other Custom Houses, as well as at Delhi. They made a reference to the order passed by the Collector of Customs, Air Cargo Complex, Bombay vide order No. S/10/986/87-ACU, dated 7-9-1987, where the same was allowed under OGL.

The importers stated that they are international distributors and they are falling in the category of stockists and produced different letters issued by M/s. Radiation Technology, Bombay to various customers confirming that M/s. Lloyd Insulation, Delhi, were international distributors of Raychem Auto Tracers.

In view of the above, the importers stated that the value declared by them was quite acceptable under Section 14(1)(a) of the Customs Act, 1962.

The importers also relied upon a xerox copy of the letter, dated 4-4-1988 from M/s. Raychem Cyprus explaining sale pattern of M/s. Raychem Corporation. As a matter of trade policy, the price charged from the stockists and distributors etc. were different from those meant for end-users. For bulk order forecast purchase further discounts are offered.

In the xerox copy of the letter from M/s. Raychem Cyprus addressed to M/s. Econtherm Systems Pvt. Ltd., dated 4-4-1984 (a copy of which was submitted to the department), it was stated that the price of auto tracer sold to Econtherm was based on the price list, dated October 1, 1987 and the price charged was for an annual forecast sale of over US $ 30,000.00 KTV stockists were obsolete and replaced by XTV and, therefore, no price list for the same was available and it was based upon the previous price list with an appropriate discount. Regarding the reference on the price list as meant for "US distribution only", it was stated that price lists were distributed only in USA and did not apply only to US distributors as contended by the department. It was also stated that it was only in USA and in India where Raychem had stocking representatives whose annual forecast were large enough to justify pricing as per column to the right in the price list for QTV and XTV. It was also stated that the same fact could be corroborated by actual invoices issued to US stocking representatives and to international distributors in Korea etc. It was also stated in the aforesaid letter that the products 15 QTV 2C, 20 XTV 2C and 20 KTV 2C were sold only in India and nowhere else in the world.