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Phillips Carbon Black Ltd. Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Calcutta
Decided On
Reported in(1984)(18)ELT635Tri(Kol.)kata
AppellantPhillips Carbon Black Ltd.
RespondentCollector of Customs
Excerpt:
.....of customs, calcutta, who had upheld the finding of the dy.collector to the extent that the unit imported was a complete unit in itself andthis could not be treated as spare parts and had also upheld the confiscation.he had, however, quashed the penalty in full. being aggrieved from theaforesaid order, the appellant has come in appeal before this court.3. shri r.n. bajoria, the learned sr. advocate along with shri k.k.ganguly, advocate, has appeared on behalf of the appellant and has reiteratedthe facts. he has pleaded that the item imported by the appellant is a spareand not a complete unit. he has given the examples of electric motor regulatorsand other machineries which are, though complete units in themselves, to betreated as spare parts for a particular unit. there are.....
Judgment:
1. Phillips Carbon Black Ltd., 31, Netaji Subhas Road, Cal. 1,had filed a revision petition before the Additional Joint Secretary, Governmentof India, Ministry of Finance, Department of Revenue, New Delhi beingaggrieved from Order-in-Appeal No. 2730/79 dated 5th November, 1979 passedby the Appellate Collector of Customs, Calcutta. After coming into existenceof the Tribunal, the said revision petition stands transferred to the Tribunalunder Section 131-B of the Customs Act, 1962 and is being disposed of as anappeal.

2. Briefly, the facts of the case are that the appellant had imported aBag Closing Unit Style 91800HA with sewing head valued at Rs. 60,455.00ex.s.s. Pearl Merchant, Rot No. 546/78, Line No. 88 and had sought itsclearance against licence No. 2208893 dated 2nd August, 1977 which is forpermissible spare parts for maintenance of imported machinery or importedparts used in the licence holder's factory. The goods were declared on theBills of Entry as spares for bag closing machine (sewing and single head)-parts of industrial sewing machine over 1/4 H.P. whereas in the invoice it was described as a complete bag closing unit. The learned Dy. Collector hadobserved in his order that after examination it was found that it is a completebag closing unit and the machine was complete in all respects. He had givena finding that it appeared to him that the importer had deliberately mis-declar-ed the goods on the Bills of Entry for getting it cleared against a wrong licence.The appellant had contended before him that the mistake was committed by one of their junior officers and was not intentional. The learned Dy. Collector had held that the goods were imported without a proper licence there by violating Section 11 of the Customs Act, 1962 read with Section 3(2) of the Imports and Exports (Control) Act of 1947 and Government of India, Ministry of Commerce and Industry's Order No. 17/55 dated 7-12-1955 and had confiscated the goods under Section 11 l(d) and lll(m) ibid. However,he had given an option to the appellant under Section 125 ibid to redeem thegoods on payment of a fine of Rs. 15,000/- in lieu of confiscation. He had alsoimposed a penalty of Rs. 5,000/- under Section 112 ibid. Being aggrieved fromthe aforesaid order, the appellant had filed an appeal before the AppellateCollector of Customs, Calcutta, who had upheld the finding of the Dy.Collector to the extent that the unit imported was a complete unit in itself andthis could not be treated as spare parts and had also upheld the confiscation.He had, however, quashed the penalty in full. Being aggrieved from theaforesaid order, the appellant has come in appeal before this court.

3. Shri R.N. Bajoria, the learned Sr. Advocate along with Shri K.K.Ganguly, Advocate, has appeared on behalf of the appellant and has reiteratedthe facts. He has pleaded that the item imported by the appellant is a spareand not a complete unit. He has given the examples of electric motor regulatorsand other machineries which are, though complete units in themselves, to betreated as spare parts for a particular unit. There are particular units whichcannot work without electric motors and electric motors are duly fitted withthem and as such the same have to be treated as spare parts, though actually ititself is a complete unit. He has pleaded that facts and circumstances of eachcase vary, if the electric motor or any other unit or spare is imported for thepurpose of resale the position is different but in a case where any machineryor spare though it itself may look like a complete unit, is imported it cannot betreated as a complete unit and has to be treated as a spare. He haspleaded that appellant Company's expert engineer had appeared before theAppellate Collector and he had duly explained the working to him. TheAppellate Collector has also observed the same in his order : "Shri Bose who is an engineer, explained to me on the basis of adrawing which he brought with him, that there are a number of operationsrequired for filling up and stitching the bags after filling them withcarbon black. The first operation is of filling in a five ply sack,craft paper that is special type of paper bag which has got valve and afterfilling the carbon black the valve is automatically sealed..." Shri Bajoria has also referred to a drawing which appears on page 13 of thePaper Book which is Sewing M/C Type : 80-800 and 91-800. He has submittedthat in view of the drawing and the working of the machine as explainedabove, the machine imported by the appellant has to be treated as spare partsand not as a complete unit. He has also given example of Nut Bolt and haspleaded that nut bolt must be prohibited under some Appendix of the ImportPolicy but no machinery can be made without using nut and bolt and theimport of the same is duly prohibited.

Lastly, he has referred to the Supreme Court judgment in the case of Commissioner of Income Tax, Madras v. Mir Mohammad Ali reported in AIR 1964 S.C. 1693. In that case the assessee was a bus owner and transport operator and had replaced the petrol engines in two of his motor buses by new diesel engines. The Hon'ble Supreme Court had held that the word 'machinery' occurs in cls. (iv), (v), (vi) and (vi-a) of Section 2 of the Income-tax Act, 1922 and the same meaning must be given to the word in all these clauses. If a machine is machinery for purposes of giving an allowance inrespect of insurance or for repairs or in respect of normal depreciation, for the purpose of para one of cl. (vi), it must also be machinery for the purposeof second para of cl. (vi) and cl.

(vi-a). The word 'machinery' when used inordinary language prima facie, means some mechanical contrivances, which, by themselves or in combination with one or more other mechanicalcontrivances, by the combined movement and interdependent operation of their respective parts generate power, or evoke, modify, apply or directnatural forces with the object in each case of effecting so definite and specifica result. Prima facie the ordinary meaning of the word 'machinery' - and the word machinery is an ordinary and not a techinical word-must, unless there is something in the context, prevail in the Income-tax Act also. The Hon'ble Court had held that the diesel engine is clearly a machinery. The learned Advocate has pleaded that apparently machinery looks like a spare part ofan engine but under the Income-tax Act the Hon'ble court had given a wider, meaning. He has pleaded that similarly, in this case though it is a machinery and unit in itself but if the plant, as a whole, is considered it should be treated as a spare part. The learned Sr. Advocate has pleaded for acceptance of the appeal or in the alternative has pleaded for reduction of fine keeping inview the peculiar circumstances of the case.

4.In reply, Shri A.K. Sarkar, the learned Sr. D.R., has pleaded that the machine imported by the appellant is a complete machine and not as pare part.

5.After hearing both the sides and going through the facts and circumstances of the case, I feel that the argument of the Sr. Advocate that theimported item viz. stitching unit is a spare part and not a machine is not tenable. The judgment of the Hon'ble Supreme Court in the case ofCommissioner of Income Tax, Madras v. Mir Mohammad AH does not helphim, when specific definitions as to capital goods, spare, accessory, or part,have been given in the Import Policy April 1978-March 1979. The definitions as given in the Import Policy have to be applied in respect of the importeditem. In the said judgment the Hon'ble Supreme Court had held that where an assessee who is a bus owner and transport operator owning a fleet of buses,replaces in the account year relevant to the assessment year 1950-51 the petrolengines in two of his motor buses by new diesel engines, he is entitled toextra depreciation admissible under Section 10(2)(vi) and 10(2)(vi-a) of theIncome-tax Act, 1922. The Hon'ble Court had passed its judgment on thefindings of the Privy Council in the case of Corporation of Calcutta v. Chair-man, Cossipore and Chitore Municipality (AIR 1922 PC 27).

Paras 13 and 14from the judgment of the Hon'ble Supreme Court in the case of Commis-sioner of Income Tax, Madras v. Mir Mohammad AH are reproduced as under : "(13) What then is the test for determining whether a mechanical contrivance is machinery for the purposes of second para of cl. (vi) andcl. (vi-a) The Privy Council in the case of ILR 49 Cal 190 ; (AIR 1922PC 27) hazarded the following definition of 'machinery' : 'The word machinery when used in ordinary language prima facie,means some mechanical contrivances which, by themselves or in combina'tion with one or more other mechanical contrivances, by the combinedmovement and interdependent operation of their respective parts generate power, or evoke, modify, apply or direct natural forces with the object in each case.of effecting so definite and speoific a result.' They had already observed that the word 'machinery' must mean morethan a collection of ordinary tools. The Privy Council case was not a taxcase but prima facie the ordinary meaning of the word 'machinery'-and the word'machinery' is an ordinary and not a technical word-must,unless there is something in the context, prevail in the Indian Income-tax Act also.

(14) According to the above definition, a diesel engine is clearly'machinery'. Indeed, R. 8 of the Income-tax Rules treats aero-engines separately from aircraft. It is true that this rule cannot be used to inter-pret the clauses in the Act but it does show that components of an aircraft,which are machinery, can be treated separately." In the instant case, the appellant had imported stitching unit. The appellanthad imported the item in the relevant year 1978-79 and the import PolicyApril 1978-March 1979 is applicable. The definitions of 'capital goods', 'spare','accessory' and 'part' have been given in paras 8, 11, 13 and 14 on page 2 ofthe said Policy. The same are reproduced as under : "(8) 'Capital Goods' means any plant, machinery or equipment requiredby an investor for installation in his premises or for use incidental there to,including those required for replacement or expansion.

(11)'Spare'means a part or sub-assembly for substitution, i.e. ready to replace an identical part or sub-assembly, if it becomes faulty or wornout and includes an accessory (or attachment) in the same regard.

(13) 'Accessory' (or 'Attachment') means a part, sub-assembly or assembly that contributes to the effectiveness of a piece equipment without changing its basic functions.

(14) 'Part' means an element of a sub-assembly or assembly, notnormally useful by itself and not amenable to further disassembly for maintenance purposes. (It could be a component, spare or accessory depending upon the nature of its use/requirement)." The appellant had sought the clearance of the goods against the importlicence No. 2208893 dated 2-8-1977, which permits importation of followinggoods: "Permissible spare parts meant for the maintenance of imported machi-nery or imported parts for indigenous machinery installed or used in thelicence holder's factory, including spare parts of ancillary equipments,laboratory equipments and safety appliances." As per drawing filed before the learned Appellate Collector, stitching unit is acomplete unit itself and in view of the definitions given in the Import PolicyApril 1978-March 1979, I hold that the importation of the same is not coveredby licence 2208893. Accordingly, I confirm the findings of the lower authorities. I feel that the bona fide of the appellant being an Actual User shouldnot be doubted in this case keeping in view the peculiar facts of the case.To meet the ends of justice, I reduce the fine in lieu of confiscation toRs. 9,000/- (Rupees Nine Thousand) only. Thus, the appellant is entitledto a refund of Rs. 6,000/- (Ruppes Six Thousand) only. The Revenue isdirected to refund the fine paid in excess after making necessary verificationas to its payment within three months from the date of this order. Except forthis modification, for statistical purposes, the appeal is rejected.


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