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Collector of Customs Vs. Continental Exporters - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Tamil Nadu
Decided On
Reported in(1984)(18)ELT289Tri(Chennai)
AppellantCollector of Customs
RespondentContinental Exporters
Excerpt:
.....would be valid for the import of industrial stapling machines. the deputy collector held that the goods imported are not industrial stapling machines though they "may even be used to fix staples on the polythene covers in which garments are packed now-a-days, or to, affix price tags, etc. in fact, such staplers are commonly used these days even in packing provisions, etc. sold by more sophisticated retail stores. hd-10 and hd-100 are staplers with multifarious uses some of which may be in industry and trade, but by that token, as observed, they do not become industrial stapling machines." on a finding that max hd-10 staplers are not industrial stapling machines, he held that the import licence produced was not valid for the importation ; he ordered confiscation of the imported goods.....
Judgment:
1. Appeal under Section 129A of the Customs Act, 1962 praying that in the circumstances stated therein, the Tribunal will be pleased to set aside the order-in-appeal No. C. 3/1606/83 dated 22-10-83 passed by the Collector of Customs (Appeals), Madras, and to restore the order of the Deputy Collector of Customs, Madras dated 20-8-83 in No. S8/180/83.

2. This appeal coming up for orders upon perusing the records and upon hearing the arguments of Shri V. Ramachandran, Senior Departmental Representative for the appellant and upon, hearing the arguments of Shri N.C. Sogani, authorised representative for the respondent, the Tribunal makes the following order : 3. M/s. Continental Exporters imported one pallet containing 12,000 pieces of HD-10 Max Stapler, valued at Rs. 38,461.53, from Japan and sought their clearance against licence No. P/L O336788/C/83/X/82 dated 26-6-82 at the port of Madras. The licence would be valid for the import of industrial stapling machines. The Deputy Collector held that the goods imported are not industrial stapling machines though they "may even be used to fix staples on the polythene covers in which garments are packed now-a-days, or to, affix price tags, etc. In fact, such staplers are commonly used these days even in packing provisions, etc. sold by more sophisticated retail stores. HD-10 and HD-100 are staplers with multifarious uses some of which may be in industry and trade, but by that token, as observed, they do not become industrial stapling machines." On a finding that MAX HD-10 staplers are not industrial stapling machines, he held that the import licence produced was not valid for the importation ; he ordered confiscation of the imported goods under Section 1ll (d) of the Customs Act, 1962 ; however, he fixed a fine in lieu of confiscation of Rs. 40,000/-. The case went in appeal to the Collector of Customs (Appeals), Madras. That Collector, for the reasons stated in his order referred to the supra, held that "a stapling machine capable of use in the industry in which the importer is interested is an industrial stapling machine in the context of the provisions of the relevant I.T. C. policy." Accordingly he set aside the order of the Deputy Collector. Hence the present appeal.

4. In support of the appeal, the Senior Departmental Representative made the following points : (i) In terms of Appendix 17 to the Import and Export Policy, April 1983-March 1984 (dealing with the policy for the registered exporters); under SI. No. O.I, which is also applicable to SI. No. D. 2.2, goods allowed for import in respect of the licence under consideration is, "(ix) Pearl headed pins/stapling pins and industrial stapling machines." Appendix 1 of the Policy Book, dealing with a list of banned items of capital goods specifically bans the import of stapling machines (SI. No. 16 under heading No. 6). Thus what is permissible for import is only an industrial stapling machine and not each and every type of stapling machine.

(ii) One of the meanings given for the word 'industrial' in the Concise Oxford Dictionary (New Seventh Edition) is, Webster's Third New International Dictionary (1976 Edn.) indicates the word 'industrial' means : "used or designed or developed for use in industry (...fabrics) (an ...diamond) (wrapping, building, and other...papers)." These definitions would show that to be classified as industrial goods have to be specially designed or developed for uses in an industry or made fit only for use industrial-wise. A reference to the catalogue would show that HD-10 is not developed or designed for use in industry or use only in industry. The product is described in the manufacturer's catalogue as, "Uses : Stitching of thick documents, books, leather, sealing of foodstuff sacks" "stitching of Kraft paper bags of cement or fowl droppings.

Fastening rubbered sheet or nylon coated sheet." The latter two could be indicative of industrial use but not the first one.

(iii) According to para 14 of the Policy Book, April 1983-March 1984, "save as otherwise indicated earlier the rules for interpretation of the First Schedule in the Customs Tariff, 1975 (I.C.T.) contained therein will apply to the clearance of consignments imported under this policy." Stapling machines are classified in the I.C.T. under heading No. 84.51/55. All the items referred to in that heading cover office machines of one type or the other. The practice of assessment in the Custom House is to classify the imported goods under this heading.

Further, according to Note 5 under Chapter 84, "a machine which is used for more than one purpose is, for the purposes of classification, to be treated as if its principal purpose were its sole purpose." In the present case the principal purpose of the stapler HD-10 is clearly for uses in offices and home; hence it cannot be treated as an industrial machine.

(iv) For the purposes of Central Excise Tariff, stapling machines are office machines under Item 33-D of the Tariff.

(v) Referring to paragraphs 4, 5, 6 and 7 of the order of the Collector, the S.D.R. argued that the finding of the Collector that "the word 'industrial' cannot be chosen in isolation leaving aside the context involved", is not quite correct. In fact the Collector has not appreciated the context involved fully. Again the observation, "the design of a stapling machine is with reference to its specific job to which it is put to and not on two broad categories as industrial and non-industrial types. It follows, then, any attempt to distinguish them as for exclusive industrial application and for other application will result in a classification which is not logically sound" is also not the correct view of the matter. The literature itself indicates the areas of use of the various stapling machines and the design of the article is a necessary criterion in interpreting its nature. Further the observation of the Collector that the Deputy Collector has observed that the machine is capable of use in the garment industry is incorrect. A reference to the order of the Deputy Collector would show that all that he had said is "I do not deny that these may even be used in garment industry to fix staples ...." (emphasis supplied). All that the Deputy Collector has done is to refer to the possibility of use and not the capability of use in the garment industry. He added that the reference to the spirit of import replenishment being taken into account is hardly a valid justification for interference with the order of the Deputy Collector. The Import Policy is set out in specific terms. There is no need or case for resorting to the perceived intention in licensing.

(vi) He also referred to the decisions of this Tribunal in Special Bench 'B' in the case of M/s. Kanwar Sewing Machine Co., New Delhi v. Collector of Customs, Bombay 1983 E.L.T. 804 (CEGAT)-wherein the Tribunal has quoted with approval a decision of the Government of India-1982 E.L.T. 540A (GOI). The Tribunal has observed, "The fact that such machines may be used in industrial establishments would not detract from the position that they are basically domestic sewing machines. This view is supported by the Gujarat High Court judgment in the case of Viswa and Co. referred to by Shri Iyer (1967) 17 STC 581 (Guj.)." Applying this principle in the present case, the use of HD-10 stapling machine for purposes of packaging of garments would not change its basic character as an office machine used in offices and for domestic uses.

5. (i) Shri Sogani appearing for the respondent drew our attention to para 128 of the Policy Book to set out the objective in the grant of R.E.P. licences namely, "The object is to provide to the Registered Exporters, by way of import replenishment, the materials (all or some) required in the manufacture of the products exported." The object is to supply articles used by an exporter. In the present case the stapling machines are used in the packaging of garments. This interpretation is further strengthened even if one refers to the other items which are allowed import under SI. No. 0.01, Entry-(ix) : these include "Pearl headed pins/ stapling pins and industrial stapling machines". So long as the goods are put to use in or in connection with an industry it would be in keeping with the objective of the licensing policy.

(ii) I.S. : 5349-1969 lays down specifications for staplers. It deals with two types, "Desk Type" and "Plier Type" staplers. That the goods imported are not of the desk type does not detract from their being considered as industrial machines.

(iii) A further factor in support of the claim that goods should be allowed clearance under the licence is that staples used in the very stapling machines (MAX-10) are allowed clearance under a licence for 0.1 of Appendix 17 hence the machines with which the stapler is sold should also be allowed clearance.

(iv) The Custom House is allowing models MAX-30 and MAX-45. These are intended for stitching together 40 and 50 sheets of good quality paper respectively. MAX-10 is used for stitching of 20 sheets of good quality paper. "Packaging" is said to be one of the uses of Max Stapling machines generally. That MAX-10 is used for stitching of paper should not be held against its clearance. MAX-30 or MAX-45 which are allowed clearance are used for packaging and packaging is one of the indicated uses of MAX-10 as well.

(v) Dealing with the classification of MAX-10 stapler machine under heading 84.54 I.C.T., Shri Sogani observed that the classification of the product is not disputed. Classification per se is thus not a matter for consideration in dealing with the coverage of the import licence in question.

(vi) The reference to Webster's dictionary has been made. As correctly observed by the Collector, the dictionary refers to the term 'industrial' as : "of, connected with, or resulting from industry or industries" as well as "for use by industries".

(vii) The reference to the decision of the CEGAT which in turn refers to a decision of the Gujarat High Court in the case of sewing machines . is not relevant to the present issue as the B.T.N. or the Customs Tariff does not distinguish between industrial and non-industrial stapling machines whereas in the case of sewing machines there is a distinction between domestic and industrial ones.

(viii) The Collector has summed up his view in para 8 of his order observing, "The issue here is a question of choosing the interpretation for the word 'industrial' that is logically and legally sound and consistent with the spirit of the Import Policy and takes cognizance of the circumstances of the case. For the reasons explained a stapling machine capable of use in the industry in which the importer is interested is an industrial stapling machine in the context of the provisions of the relevant ITC policy." This decision of the Collector is a possible view of the situation.

It is not a perverse one. Hence it would not be proper on the part of the Tribunal to interfere with it.

(ix) In dealing with a case of onion skin paper imported for use in the packaging industry, His Lordship Justice Shri Ramanujarn of the Madras High Court has held that the possibility of use of onion skin paper as base paper for the manufacture of wax paper for use as packing material will have to be kept in view in interpreting an I.T.C. Entry which cover the import of "wax carton printed. Master carton printed and the raw material required for manufacture of packing materials like cardboard, corrugated cardboards waxed or otherwise for exports." Applying the above principle to the present case, the machines are capable of use for packaging; and these uses could be recognised as industrial; the goods should thus be classified as "industrial machines".

6. (i) In reply Senior Departmental Representative referred again to para 128 of the Policy Book and stressed that not all goods imported needed by a registered exporter were to be allowed under the REP scheme. The para specifically provides 'all or some' that would be allowed.

(ii) The ISI specification does not distinguish between industrial stapling machine and others, the point at issue before the Tribunal.

(iii) The decision of Special Bench 'B'of CEGAT in relation to industrial sewing machines is not apt in the present context where the Tribunal had to interpret the term 'industrial sewing machines' as distinct from domestic sewing machines, both of which were specifically referred to in the Tariff.

(iv) With reference to the clearance of certain types of stapling machines such as HD-12 and HD-3D, of the same manufacturer, he referred to the invoice description of the goods which reads as follows : It would thus be seen that the manufacturer who was a supplier in that case specifically distinguished between industrial stapling machines and others. Though this is not shown in the literature itself, a reference to the catalogue would show that HD-3D is a desk type of stapling machine with a base for use on desk and the indicated use is for stitching of thick vouchers. HD-12 as such is not illustrated in the catalogue but HD-12L is described as "heavy duty stapler- can use 4 different length of staple from 10 mm to 17 mm" with its own sole use as stitching of thick documents, mounting bags and swathes and book-binding. These two have a base for use on a desk.

(v) The reference to clearance of staples by the Custom House has no relevance. Staples are shown without any differentiation under the relevant heading whereas in the case of stapling machines, the entry is specifically confined to 'industrial'. There should therefore be no question of linking the import of staples with that of stapling machines.

(vi) Referring to earlier clearance of HD-10, by way of orders-in-appeal by Board, Senior Departmental Representative stated that the case had been referred to Government of India in revision ; quite apart from this factor, that case dealt with a situation prior to the alignment of the ITC Schedule with the B.T.N., the alignment having been indicated in the Policy Book for April-March 1977 onwards.

7. It is clear that in terms of Appendices 1 and 17 to the Import Policy Book April-March 1984 that what is permitted clearance under a REP licence is an industrial stapling machine. Thus we have to determine whether MAX HD-10 stapler is such a machine or not. The varied meanings of the term 'industrial' occurring in the different dictionaries do not help us in coming to a definite conclusion ; whereas one dictionary-the Concise Oxford-confines the meaning of the word to goods "designed or fit only, for industrial use (industrial alcohol)" ; another-the Webster's Third International-gives a broader meaning to the term. There is no reason as to why one particular meaning should be taken in preference to the other.

8. The policy regarding the issue of REP licence is of no help either.

Though para 128 of the Policy Book states that "the object is to provide materials required in the manufacture of products exported," as rightly contended by the S.D.R., replenishment May be in respect of all such requirement or some of it.

9. The ISI specification, IS 5349-1969, laying down specifications for staplers does not deal with industrial staplers as distinct from other.

It covers the desk type and the plier type staplers. Either could be an industrial stapler depending upon such factors as to the design, intended use and the general uses to which the goods are generally put.

10. The plea that staples for these very machines are allowed clearance under Appendix 17 (Entry 0.1) is not significant in the present context. There is no adjective to the word 'staples' unlike in the case of stapling machines. That all types of staples are allowed clearance does not affect the distinction sought to be drawn by the department between industrial stapling machines and others.

11. The claim of clearance of MAX-30 and MAX-45 models under the same type of licence does not assist the respondent. Some of the models (HD 12L and HD 3D) have been invoiced by the manufacturer himself as industrial stapling machines we see from the catalogue that the use of the goods described as industrial stapling machines is for heavy duty and any operation such as stitching of thick documents, mounting bags and swathes and book-binding. We have therefore to decide the nature of each machine- whether industrial or not-on the evidence relating to its design and use.

12. The reference to classification of the goods for the purposes of duty and the provision in para 244 of the Policy Book that Rules of Interpretation of the First Schedule in the Customs Tariff Act will apply to clearances of consignments imported under the policy are also not helpful. Relevant entry in the CTA Schedule deals with office machines with the various machines shown in brackets. In the 1TC also stapling machines are shown along with various office machines. This by itself would not mean that all types of stapling machines are either classifiable as office machines or are included in the ITC Schedule under the head 'stapling machines'. In fact unlike the Customs Tariff, the Import Policy, as we have noted earlier, distinguishes industrial stapling machines and other types of stapling machines.

13. The nature of the machine has therefore to be decided on the basis of what it is, what it is designed for and how it is ordinarily used. A reference to the catalogue submitted shows that MAX HD-10 is a machine dealing with lightest of jobs in stapling; it is intended for stapling 20 sheets of good quality paper ; it is possible for use as a tacker : the uses are indicated as office use, home use, packaging of handicraft purposes. Compared to the stapling capacity of the other types of machines referred to in the catalogue, the stapling capacity of HD-10 stapler is about the least. If one were to go by the use indicated by the literature, the manufacturer has designed it for office use, home use and packaging handicraft. In fact in the present case it is claimed that they will be used for fixing price-tags or closing polythene covers in which garments are packed. We, therefore, find that MAX HD-10 stapler, designed for light stapling work, with the indicated use in offices and home (or perhaps in the bazaar) for packaging, cannot be treated as an industrial stapling machine. We are strengthened in this view when we look at the intended use of some other machines such as HD-12L and HD-3D.14. In view of the above finding, the clearance, if any, on any earlier occasion should be deemed to have been in error, if they were so cleared and in identical circumstances. (There is a suggestion that policy had changed in the meantime). It has been held in the case of sewing machines that such machines may be used in industrial establishments would not detract the position that they are basically domestic. Here too that the present model of stapling machine may be used in an industrial establishment should not detract from the basic nature of the article that it is a general purpose machine intended for light tacking work.

15. The decision of the Madras High Court cited by the Respondents does not alter the position. In that case cited, the Court has confined the examination to the issue of capability of use of an imported item as a raw material for manufacture of end-products irrespective of the other qualities of that raw material with particular reference to the manner in which the description in the licence. In the present case capability is not the main criteria.

16. In the result the order of the Collector (Appeals) is set aside and the order of the Deputy Collector restored.


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