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Basant Export Corporation Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1989)(43)ELT65TriDel
AppellantBasant Export Corporation
RespondentCollector of Customs
Excerpt:
.....to the learned counsel sodium vapour lamp cannot be considered as consumer goods, for the lamps imported create utility and not its destruction. further they required necessary fittings like ballast, ignitor and capacitor. these lamps are of non-domestic utility and cannot satisfy human wants. shri nankani added that sodium vapour lamps form part of the lighting system and should be treated as components. several other components are used in its manufacture to make it as a unit. mercury vapour lamp is specifically listed in appendix-3 (page 107) and not sodium vapour lamp. if the intention was to ban sodium vapour lamp under o.g.l. the government would have stated so. he also urged that identical goods under identical description have been allowed to*be imported through bombay.....
Judgment:
1. The present appeal is preferred against the order of the Collector of Customs, Cochin, dated 18-11-1983. By the above order the Collector ordered confiscation of the imported goods under Section 111(d) of the Customs Act, 1962 read with Section 3(2) of the Import & Export (Control) Act, 1947, as amended. The appellant importer was given an option to redeem goods on payment of a fine of Rs. 1,50,000/- within three months. A personal penalty of Rs. 75,000/- was also imposed under Section 112(a) of the Customs Act, 1962.

2. The appellants imported 2,000 pieces of 250 watts high Pressure Sodium Vapour Lamps from Hong Kong. They filed the Bill of Entry No.683 dated 29-7-1983. They declared the value of the imported goods at Rs. 1,82,741-12. The appellants sought clearance of the goods under OGL in terms of Appendix-10 of AM - 84 Policy Book. Part III of List-8 reads: "All other items permitted under OGL in terms of the Import Policy in force, other than those covered by Appendices I and II above." Any item which is not covered by a specific or general description in any of the appendices from 1 to 9, 15 and Parts (I) and (II) of List-8 of Appendix 10 could be imported by the actual user and also others for stock and sale. The appellants submitted that Sodium Vapour lamp was not covered by any of the appendices mentioned and could therefore claim clearance under O.G.L. The heading of list-8 of Appendix 10 reads "raw materials, components and consumables". These items are allowed to be cleared under the O.G.L. The imported goods were sought to be cleared as 'components'. The contention of the appellants is that Sodium Vapour lamps could be used only with a ballast and hence they cannot be considered 'consumer goods'. Regarding the price the appellants submit that the price declared by them works out to US $ 9 per piece. A show cause notice was issued to them on 25-8-1983 alleging that the goods in question would merit consideration as consumer items, hit by serial number 93 of Appendix 4 of the Policy.

The show cause notice alleged that the importation was unauthorised and was in contravention of Section 3(2) of Import and Export (Control) Act, 1947 read with Section lll(d) of the Customs Act, 1962. In respect of the value the department has alleged that according to the price list issued by M/s. Iwasaki Electric Co. Ltd., Japan the CIF price of Sodium Vapour lamps of similar rating worked out to Japanese yen 3714 per piece. In other words, the price declared by the importer works out to Rs. 90/- per piece while the comparable price of M/s. Iwasaki Electric Co. Ltd., Japan, works out to Rs. 158/-. Therefore under-valuation of the imported goods by Rs. 1,33,250/- was also alleged.

3. The appellants sent a reply stating that the lamps in question have been imported to be used as components for street lighting system. In regard to the value they stated that the price list of M/s. Iwasaki Electric Co. Ltd., was not proved. The Collector of Customs, Cochin, after enquiry passed orders as set out above.

4. Mr. S.D. Nankani, Advocate, appeared for the appellants, while Mr.

A.K. Jain, SDR, represented the Department.

5. Mr. Nankani argued that goods that are consumed should be interpreted as goods which could directly satisfy human needs without further processing. According to the learned counsel Sodium Vapour lamp cannot be considered as consumer goods, for the lamps imported create utility and not its destruction. Further they required necessary fittings like ballast, ignitor and capacitor. These lamps are of non-domestic utility and cannot satisfy human wants. Shri Nankani added that Sodium Vapour lamps form part of the lighting system and should be treated as components. Several other components are used in its manufacture to make it as a unit. Mercury Vapour lamp is specifically listed in Appendix-3 (page 107) and not Sodium Vapour lamp. If the intention was to ban Sodium Vapour lamp under O.G.L. the Government would have stated so. He also urged that identical goods under identical description have been allowed to*be imported through Bombay Customs House. On an earlier occasion the Cochin Customs House allowed the clearance of identical Sodium Vapour lamps as an item of O.G.L. He drew our attention to the decision reported in -1984 (17) E.L.T. 50 (Bombay) (Gujarat State Export Corporation Ltd. and Anr. v. The Union of India and Anr.) Their Lordships of the Bombay High Court had held that an import cannot be held to be in contravention of the provision of Section lll(d) of the Customs Act if there was long-standing practice of the Customs House having effected the imports on previous occasions. He also relied on the decision of the Central Board of Revenue passed in June 78 wherein past practice of the Customs House allowing import of similar goods was approved. In a ruling reported in order-in-appeal No. 338 of 81 the West Region Bench in the matter of (Wintercraft Ltd. v. Collector of Customs, Bombay) held that it was fair and just that the same treatment should be given to the importers in the light of the past clearances made by them.

6. On the question of valuation, Mr. Nankani argued that the department has not furnished adequate particulars about the price list relied on by them. The burden is on the department to prove that there was under invoicing. He sought support by relying on the decision of the Tribunal in Western Electronics v. Collector of Central Excise, Bombay (Order No. 165 & 166/84-A dated 1-3-1984 in Appeal Nos.l999/83-A and 2323/83-A) and also in the case of Rakesh Press (Order No. 573/84-A dated 7-8-1984 in Appeal No. 345/84-A). According to the learned counsel, the contract price cannot be ignored unless there is an allegation of extra commercial consideration (vide 1984-ECR-729 Sanghvi Swiss Refills P. Ltd. and Anr. v. J. Datta, Collector of Customs, Bombay.) 7. Mr. A.K. Jain stated that the import was without a licence and the O.G.L. heading included a large number of consumer goods like drugs, medicines, needles, pulses, spices, etc. He urged that one should not go by the heading and should decide whether a particular item is a consumer goods on the facts of each case. He also stated that there is no equity in taxation matters (AIR-1965-SC-1216 Commissioner of Income Tax, Madras v. Firm Muar). He argued that the Sodium Vapour lamp may require a ballast for use but that would not render the item a part or a component. In commercial parlance Sodium Vapour lamp is not treated as a component, it must be one of the parts which together with others make out a manufactured product. The bulbs themselves are finished items and are known in the trade parlance as such. Therefore bulbs are consumable goods though they are being used without ballast. If they are to be treated as component parts it must be established that they are parts from which a manufactured product is made of. In regard to the other import Mr. Jain pointed out that others were either actual users or the imports took place on occasions when no licence was required.

8. In regard to the valuation, Mr A.K. Jain pointed out that the appellant has not rebutted the plea put forward by the Department. The respondent has produced the price list based on the manufacturer's catalogue and the value mentioned therein should be accepted.

(i) whether Sodium Vapour lamps imported by the appellants could be considered as component parts as contended by them; and (ii) whether the valuation given by the respondent should be accepted.

10. It is not disputed that the appellants have imported 2,000 pieces of high pressure Sodium Vapour lamps. They have imported the goods under the provision of List No. 8, Part No.III of Appendix-10 AM-84 Policy Book for stock and sale. The appellants contend that the lamps in question have been imported to be used as component parts for street lighting system. We have to find out whether the goods could come within the ambit of "components" as defined in para 5(1) of the Policy Book for the year AM-84. The main contention of the appellants is that Sodium Vapour lamps could be used only with other fittings, like ballast, ignitor and capacitor and unless the entire items are assembled there can be no product. We do not accept this contention.

The term 'component' means one of the parts that has to be assembled.

But the requirement under the definition of the Policy Book is that the component should be one of the parts of a manufactured product. The appellant should prove that he is using this component for the purpose of manufacturing a product. It cannot be that the appellant is bringing into existence any product. There is no manufactured product in the case of street lighting. Sodium Vapour lamps are used in street lighting with other accessories and fittings but that factor alone will not make the Sodium Vapour lamp a component within the mean-ing of paragraph 5(1). The learned counsel for the appellant stated that Sodium Vapour lamp could not be considered as a mere bulb like other ordinary electric bulb. But even an ordinary electric bulb requires a holder, a wire, switch etc. before it is put into use. It can be said that even an ordinary lighting bulb is part of a lighting system - domestic or otherwise. But it does not become a component of any manufactured product and remains a consumer item. Hence Sodium Vapour bulbs cannot be considered as components.

11. Let us now see whether Sodium Vapour lamps imported could be considered as consumer goods. Shri Nankani argued that goods that are consumed or where the utility is destroyed alone could be treated as consumer goods. But the definition of con-sumer goods in Para 513 of the Import Policy for AM-84 defines consumer goods as consumption goods which can directly satisfy human needs without further processing. In this case, the Sodium Vapour lamp satisfies the human needs of electrification without any further processing to the bulb itself. It may require a ballast or a capacitor but these bulbs will continue to be consumer goods because they can be used without further processing.

The bulbs themselves are finished goods and are known in the trade parlance as sodium vapour bulbs. The technical write-up furnished by the appellant mainly deals with the road lighting system and does not advance the case of the appellant in regard to the questions involved in this proceedings.

12. Mr. Nankani argued that on earlier occasions such Sodium Vapour lamps were allowed to be imported without any objection. A close perusal of the Bill of Lading in respect of those imports shows that the contention of the appellant cannot be accepted. The import by GENELEC Ltd. Bombay dated 6th December 1982 contains a declaration that the importers required the goods for bonafide use as an integrated component of light fittings manufactured by them (the emphasis supplied by us). Similarly, the import on 22nd July 1982 by GENELEC Ltd. Bombay also contained a similar endorsement. It is to be noted that these imports were not under identical import policy now under scrutiny. In regard to the Import permitted by the Cochin Customs on 16-8-1983 we find that the same was imported under the Export House Licence and not under O.G.L. So it cannot be said that identical goods were permitted to be imported on previous occasions under the same import policy treating them as components. Since the actual users imported the goods and the Bills of Entry contained declarations to that effect the appellants cannot rely on those documents.

13. Thus on a careful consideration of the materials placed we are of the view that the lower authorities have correctly held that the imported lamps in question cannot be treated as components for street lighting system. We do not also accept that the bulbs being not capable of domestic use would make any difference in regard to the issue.

14. We next considered the question of valuation. The appellant declared the price at Rs. 90A per piece. The value according to the price list relied upon by the department works out to Rs. 158/- per piece. In the show cause notice the department has only stated that "Rs.158/- appears to be the fair price for the item". The appellant wanted the department to make available the correspondence on this aspect. In fact, when he wrote to the department for the details there was a vague reply that the price list was an official price list obtained by Bombay Customs House in 1983, that it was "understood to be" the latest one, and that the department considered the price list to be valid for Indian market. We therefore consider that the respondent has not adduced sufficient evidence to hold that there was any under-invoicing.

15. A penalty has been imposed on the appellants. If the materials produced by the appellant were enough to hold that the value declared in invoice was just, the onus would be on the department to prove that the goods were undervalued. There is also no evidence or proof that the price quoted in the price list filed by the appellant was not the real value and that the transaction was motivated by extra commercial considerations. In the absence of such proof we are of the view that the value mentioned by the appellant has to be accepted. The contentions of the respondent on this aspect is not tenable.

16. In view of our Finding that the items are not components, the import would not be covered by valid licence.

17. The contravention under Section lll(d) of the Customs Act read with Section 3(2) of the Import and Export (Control) Act, 1947 has been made out. The fine of Rs. 1,50,000/- cannot be considered excessive in the circumstances of the matter.

18. The Collector imposed a penalty of Rs. 75,000/- under Section 112(a) of the Customs Act. We notice that the appellant has paid duty of Rs. 5,43,559/- and a demurrage of Rs. 22,641.88/-. We have held that there is no under-valuation. Considering all these circumstances, we are of the view that this is a fit case in which the penalty could be reduced to Rs. 40,000/-.

19. In the result the penalty is reduced from Rs. 75,000/- to Rs. 40,000/-. In another aspect the appeal fails and is dismissed.


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