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Western India Garments Ltd. Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Decided On
Reported in(1985)LC22Tri(Mum.)bai
AppellantWestern India Garments Ltd.
RespondentCollector of Customs
Excerpt:
.....bombay airport by air on 1-1-1983. the appellants have sold the goods on high seas basis to m/s. kiran products of pune, who according to the appellants were engaged in assembling, testing and supplying such pumps. when the appellants sought clearance of the imported goods against the above referred two additional licences, the customs objected for clearance on the ground that the goods imported are complete equipments and they are not raw materials, components, consumables, tools or spares and not covered by the licences.3. during the adjudication proceedings, m/s. kiran products who have purchased the goods on high seas sale basis contended that the goods under import were covered by sr. no. 433 in appendix 5 of am 83-84 policy and sr. no. 504 of am 82-83 policy and the licences.....
Judgment:
1. This appeal arises out of and is directed against the Order-in-Original bearing No. s/10-3889/85 ACU dated 6-1-1984 passed by the Collector of Customs, Air Cargo Complex, Bombay.

2. The material facts required for the disposal of this appeal are not in dispute. The appellants M/s. Western India Garments Ltd., a recognised export house were the holders of two additional licences bearing Nos. 2930289/82 dated 5-8-1982 and 2855286/83 dated 19-10-1983.

The said licences permitted import of items appearing in Appendices 5 and 7 excluding the items appearing in Appendix 26 of the Policies AM 82-83 and AM 83-84. The appellants placed an order for 75 pieces of power driven pumps in semi-knocked down condition. The suppliers supplied 3 packages. The consignment arrived at Bombay Airport by air on 1-1-1983. The appellants have sold the goods on High Seas basis to M/s. Kiran Products of Pune, who according to the appellants were engaged in assembling, testing and supplying such pumps. When the appellants sought clearance of the imported goods against the above referred two additional licences, the Customs objected for clearance on the ground that the goods imported are complete equipments and they are not raw materials, components, consumables, tools or spares and not covered by the licences.

3. During the adjudication proceedings, M/s. Kiran Products who have purchased the goods on High Seas Sale basis contended that the goods under import were covered by Sr. No. 433 in Appendix 5 of AM 83-84 Policy and Sr. No. 504 of AM 82-83 Policy and the licences covered the imported goods. They also urged before the learned Collector who held the enquiry that they were supplying the identical goods to various industries, such as NOCIL, CAFI, ROUSSEL, INDIAN ORGANIC CHEMICALS, etc. They further contended before the learned Collector that as per the literature produced by them from the manufacturer that the pumps in question have not been described as centrifugal pumps, and that imported pumps have to be used as part of a machinery and cannot be used independently by themselves, though some of their customers may decide after purchase to use them as pumps for transfer of liquids from one container to another container or for any other particular use. The learned Collector after consideration of the material placed before him came to the conclusion that the goods under import were only in the nature of capital goods and not components or spares. He, therefore, held that the import of the subject goods require a specific import licence and that the licence produced did not cover the import., The learned Collector further held that M/s. Kiran Products are not the actual users of the goods under the import, and thus there was violation of the licence condition, and as such, the import become unauthorised and liable for confiscation. Having regard to his findings he ordered confiscation of the imported goods, but gave an option to redeem in lieu of confiscation on payment of fine of Rs. 4,00,000/-.

Feeling aggrieved by the said order, M/s. Western India Garments Ltd. have filed this appeal.

4. Shri T.V. Krishnamurthy, Consultant, who represented the appellants urged the following grounds : (1) The additional licences were valid for the import of all the items listed in Appendix 5 of the Policy AM 82-83 and AM 83-84. The imported goods, namely, the power driven pumps specifically appears at item 504 in Appendix 5 of the Policy AM 82-83 and at item 433 of Appendix of the Policy AM 83-84, and therefore, the learned Collector had committed an error in holding that the licences were not valid for import of the goods in question.

(2) The learned Collector totally misunderstood the submissions made by M/s. Kiran Products at the time of personal hearing. What had been submitted at the time of personal hearing was that M/s. Kiran Products were engaged in assembling, manufacturing and testing of the pumps and possess the necessary wherewithal, expertise and equipments in their factory and it is only after assembling and testing they in turn disposed of the pumps to the eligible actual users.

(3) The learned Collector failed to appreciate that in respect of the previous import of identical goods against identical licence the clearance was permitted and when that was so the objection now taken amounts to discrimination.

(4) The imported goods are components, and therefore, the learned Collector was unjustified in holding that the additional licences produced did not cover the imported goods, and lastly.

(5) The redemption fine imposed by the learned Collector was highly excessive.

5. After hearing the arguments of Shri Krishnamurthy at great length, we did not call upon Shri Jain to address arguments on the merits of the case as we were satisfied that this appeal has to fail. But however, we called upon Shri Jain as to whether the Customs did allow import of similar goods against similar licences. Shri Jain submitted that the appellants except filing a photostat copy of a Bill of Entry have not produced any document covering the import and in the said circumstances it would not be possible for him to make any submissions as to whether the goods imported under the Bill of Entry now produced are identical goods or that they are cleared against identical licences. Shri Jain also submitted that the fine imposed is not excessive and that the Collector had taken into consideration the margin of profit and at the relevant time the margin of profit was 100%.

6. We have given our anxious consideration to the submissions made by Shri Krishnamurthy, and also taken into consideration the arguments advanced by Shri Jain.

7. The one and the only question that arises for consideration in this appeal is whether the order passed by the Collector of Customs, Air Cargo, requires to be interfered with.

8. The appellants, M/s. Western India Garments Ltd. are the registered exporters and they hold export house licence. They were issued two additional licences referred to earlier. They placed orders with LUTZ, a foreign supplier for import of 75 electric drum pumps in semi-knocked down condi tion. They however, sold the consignment on High Seas sale basis to M/s. Kiran Products, Pune. The two licences were valid for import of items specified in Appendices 5 and 7 of the Policies AM 82-83 and AM 83-84, but other than the items included in Appendix 26. .

Appendix 5 dealt with raw materials, components, consumables, tools and spares other than iron and steel and ferro alloys. There is no need to refer to Appendix 7 because oi the specific contention taken by the appellants that the goods imported is a specific item covered by item 504 of Appendix 5 of AM 82-83 Policy and item 433 of Policy AM 83-84.

There was no controversy between the parties that the goods imported are covered by the above two items. Before the learned Collector an attempt was made that the imported goods need not satisfy the condition of it being raw materials, components, consumables, tool and a spare as the entry did not state so. But before us Shri Krishnamurthy did not contend that the Policy or the licence permitted import of anything other than raw materials, components, consumables, tools, and spares.

He contended that the power driven pumps imported by the appellants are components. We questioned Shri Krishnamurthy as to the manufactured product of which the imported goods is a component and as to whether M/s. Kiran Products are the manufacturers of the product of which the imported goods are the components. Shri Kirshnamurthy could not state the manufactured product of which the imported goods are the components, but he generally stated that they are the components of a plant and when further questioned he stated that M/s. Kiran Products are hot the manufacturers of the plant of which the imported goods are the components. The expression 'component'is defined in paragraph 5(10) of Chapter 2 of the Policy AM 82-83.

" 'Component' means one of the parts or sub-assemblies or assemblies, of which a manufactured product is made up and into which it may be resolved and includes an accessory (or attachment)".

Shri Krishnamurthy was not able to enlighten us as to the manufactured product of which the imported goods are components. We cannot accept his contention that the imported goods are components. Even assuming that the imported goods are components of a manufactured product since M/s. Kiran Products are not manufacturing the product of which the imported goods are components, they cannot be considered as 'Actual Users'. The expression 'Actual User' is however defined in paragraph 5 of Chapter 2 of the Policy AM 82-83.

'Actual User' means a person who applies for/secures a licence for the import of any item or an allotment of an imported item required for his own use, and not for business or trade in it. Thus, in the case of an industrial undertaking, the item concerned shall be utilised for the manufacturing processes or operations conducted within its authorised premises (or made available to jobbing units or other units outside for intermediate processing only as part of such production effort). "..." (the rest of the definition is not relevant for our purpose) " 'Actual User' (Industrial) shall mean an industrial undertaking, be it in the large scale, small scale or cottage industrial sector, engaged in the manufacture of any goods for which it holds a licence or Registration Certificate from the appropriate Government authority, wherever applicable." 9. Shri Krishnamurthy contended that M/s. Kiran Products assembled the parts of the power pumps and tested them and thereafter supplied to the eligible actual users, and therefore, the actual users condition was satisfied. He further contended assembling of semi-knocked/down condition products amounts to manufacturing. The registration / certificate of M/s. Products issued by the Government of Maharashtra, Directorate of Industries did not contain registration for manufacturing or assembling of power driven pumps. Shri Krishnamurthy contended that this registration was amended and amended registration specifically included manufacturing and assembling, and tasting of LUTZ, drum and container, and therefore, M/s. Kiran Products should be treated as actual users. It is true that the registration granted on 13-10-1983 was amended on 13-2-1984 and it included manufacturing, assembling and testing of LUTZ, drum and container pumps, but then this amendment cannot be of any help because at the time of placing of orders and when the goods arrived in India, M/s. Kiran Products were not registered for the imported goods.

10. Shri Krishnamurthy vehemently urged that the Customs Authorities have no power or jurisdiction to go into the question of utilisation of imported products and since the Export Houses are entitled to effect sales on High Seas sale basis, the Customs cannot object for the import in question. The import facilities available to the Export Houses are set out in paragraph 183 of the Policy AM 82-83. One of the facilities available to them is issuing of additional licences. But then Clause 5(3) of Imports (Control) Order, 1955 provides 'It shall be deemed to be a condition of every such licence that :- (i) no person shall transfer and no person acquire by transfer any licence issued by the licensing authority except under and in accordance with the written permission of the authority which granted the licence or of any such person empowered in this behalf by such authority.

(ii) that the goods for the import of which a licence is granted shall be the property of the licence at the time of import and thereafter upto the time of clearance through Customs.

Provided that the conditions under items (i) and (ii).. (the rest of the definition is not relevant for our purpose).

Provided further that the conditions under items (i) and (ii) of this Sub-clause shall also not apply in relation to licences issued to eligible export houses for import of goods meant for disposal to actual users under the import policy for registered exporters.

The above provisions require that the eligible Export Houses are required to dispose of the imported goods to the "actual users". Since M/s. Kiran Products are not the "Actual Users" within the meaning of that expression as given in the Policy, the learned Collector was justified in holding that the import violated the condition of the licence, and therefore, the goods became liable for confiscation, 11. It was next contended by Shri Krishnamurthy that utilisation of the imported goods by the Actual Users is a post import condition and the Customs have not been authorised to go into the utilisation, and therefore, the import could not have been objected to by the Customs.

12. The appellants had filed a paper book and it contains a document purported to be an agreement between tie appellants and M/s. Kiran Products. It is at page 27 of the file, dated 7-9-1983. The appellants have stated that they had agreed to make their additional licences available to M/s. Kiran Products for the import of items as required by them as per the Policy on the terms and conditions set out in that document. The following are some of the terms and conditions -M/s.

Kiran Products are required to use the material as per the Policy in force. They are required to indent strictly in conformity to the Import Policy. It is explicitly understood between them that if penalty is imposed by any Government Authorities, due to wrongful import done to M/s. Kiran Products or their suggested Actual Users, they shall be fully responsible for the same and shall indemnify the appellants against the said claims. The appellants as well as M/s. Kiran Products were well aware that the imported goods should be utilised subject to the Actual Users condition. The Import (Control) Order exempted the condition (i) and (ii) set out in Clause 5(3) in the case of Export Houses if the import of goods were meant for disposal to the Actual Users. M/s. Kiran Products also contended before the Collector as well as before us that they are the Actual Users. The Collector did not accept that contention. We are also not convinced that M/s. Kiran Products are the Actual Users of the imported goods. We have held that they are not the Actual Users. We have also held that the registration certificate issued to the appellants did not require the imported goods at the relevant time for their manufacturing activities. Though we may agree with Shri Krishnamurthy's contention that at the time of clearance the Customs are not required to make any enquiry as to whether the imported goods would or would not be utilised in the manufacture of end products, but we are of the view that the Customs are entitled to enquire whether the importers are either the Actual Users (Industrial) or that the goods would be required for the manufacture of the registered end products. The registered end products of M/s. Kiran Products at the time of import did not require the imported goods. In the circumstances the Customs have jurisdiction and power to call the importers to satisfy them that the import was meant for disposal to 'Actual Users'.

13. From the agreement entered into between the appellants and M/s.

Kiran Products one could safely come to a conclusion that there had been a transfer of licences itself. In the guise of High Seas sale basis the appellants virtually transferred their licence to a concern who are not the Actual Users of the imported goods. However, it is not necessary to go into that question in this appeal.

14. The two other aspects that remained for consideration are : (1) that there had been discrimination in the matter of clearance of import and (2) that the fine imposed is harsh and excessive. So far as the first aspect is concerned except filing a Bill of Entry the appellants have not chosen to produce any other document in support of their contention. In the absence of the relevant documents we cannot accept the contention of the appellants that the Customs had allowed clearance of similar goods against similar licences. In any case, if by inadvertance or mistake an illegal import had been permitted, that cannot be made a ground to clear the subsequent illegal import. There is no question of estoppel operating against the Customs.

15. Coming to the complaint of fine being excessive, Shri Jain had submitted that the Collector had taken into consideration the margin of profit. In the matter of imposition of fine in lieu of confiscation, the Act gives discretion to the concerned authority. The appellants have filed to satisfy us that the discretion has been improperly or arbitrarily or capriciously exercised by the learned Collector. In the circumstances we see no reason to interfere with that part of the order also.

16. After careful consideration of all the aspects, we see no merit in this appeal, and accordingly we reject the same.


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