1. Appeals under Section 12A of the Customs Act, 1962 praying that in the circumstances stated therein, the Tribunal will be pleased to set aside the order of the Central Board of Excise and Customs dated 27-4-1981 in No. 296A of 1981 in appeal No. 203/81 and the order of the Collector of Customs, Cochin, dated 4-9-1982 in No. SIB 5/81 in appeal No. 37/82.
2. These appeals coming up for orders upon perusing the records and upon hearing the arguments of Shri V. Ramachandran, Senior Departmental Representative for the appellant in appeal No. 203/81 and for the respondent in Appeal No. 37/82 and upon hearing the arguments of Shri Habbibulla Badsha, Advocate for the appellant in Appeal No. 37/82 and for the respondent in Appeal No. 203/81, the Tribunal makes the following Order : 3. M/s. Rajan Trading Company [since named Rajan Universal Exports (Mfrs.) Private Ltd.], hereinafter referred to as the Company respondents in No. 203/81 and appellants in No. 37/82 imported 41 pallets containing 776 cartons of ball roller and taper roller bearing valued at Rs. 4,72,516/- from Australia and claimed their clearance against licence No. P/L 2893196/C/XX/71/C/79/F. 13, dated 11-4-1979.
The licence was one transferred in favour of the respondents, the goods being of Russian origin, and shipped as per instructions from Company's suppliers in Japan, from Australia where they were lying for over seven years, the goods having been originally packed in Russia between 1968 and "1972. The order has been concluded "n the basis of two "stock lists" Nos. 1 and 2 sent by the Japanese suppliers. The lists refer to various taper bearing with their code number, the individual quantity available for sale being in odd numbers (and not multiples of ten or of dozens and the like). However, the price quoted is per piece and the lists contain an entry prices shown are for "one lot" and goods will be shipped from any Australian port to Indian port. In a covering letter sent by the Japanese supplier to his indenting agent at Bombay (Ortheiler International) it was indicated 'if you are interested in confirming any of the items in the stock please revert to us most immediately as goods are subject to a prior sale-Please note that the minimum order per shipment shall be acceptable to us is U.S. $ 3000." The goods were eventually supplied on the basis of a contract between M/s. Ortheiler International, Bombay, on behalf of Genemaci Corporation, Japan, and the company by a letter No. MT 1205, dated 9-4-1979. This order is for a total number of 20392 pieces, comprising 20285 pieces from List I and 107 from list II. The Collector of Customs, Cochin, felt that the licence produced was not specifically endorsed to cover "lot goods". He held that as per Appendix 30 of the Import Policy for AM 178-79, goods imported against any licence shall be new goods other than disposal goods, in the circumstances of the sale, he held that the supply was not made in the usual manner followed in the sale of new goods ; the term disposal goods would cover 'stock lots' or 'job lots' even if the lots are factory fresh or used goods.
He, thus, held the importation as not covered by the licence produced and ordered confiscation of 776 cartons of ball roller and taper roller bearing under Section 111(d)of the Customs Act, 1962 read with Section 3(2) of the Import and Export (Control) Act, 1947, as amended. He, however, fixed a fine of Rs. 1 lakh in lieu of confiscation. Though a notice was given for imposition of penalty under Section 112, the Collector held that there was no mala fide, otherwise noticed, he did not impose any penalty. The order of the Collector was taken in appeal to the Central Board of Excise and Customs. The Board held that it did not find any evidence in the Collector's order for arriving at the conclusion that the goods are disposal goods. There was no finding as to whether the goods have become otiose and hence should be considered as 'disposal goods', it had not been disputed that the goods are new.
There was nothing to show that the Collector had come across imports at substantially higher price in the case of similar bearings of comparable quantity. Thereupon the Government issued a notice under Section 131(3) of the Customs Act, 1962, prior to its amendment, calling upon the Company to show cause why the order of the Board should not be set aside for reasons set out in para 4 of memo F. No, 374/27/81-Cus. II, dated 4-8-1981. The Company sent a reply to Government. At this stage the proceedings have been transferred to the Tribunal for disposal in terms of Section 131B of the Act.
4. The facts relating to Appeal No. 37/82 in which M/s. Rajan Universal Exports (Mfrs.) Private Ltd. are appellants, referred to herein as 'Company, are more or less the same except they refer to 8 strapped pallets ball roller and taper roller bearings, valued at Rs. 4,72,516/-, the present goods being the balance of goods remaining after the shipment referred to in the earlier paragraphs had been effected. Here too the Collector felt that the goods imported are 'disposal goods' and hence not covered by a valid licence. He accordingly confiscated the goods but allowed them to be redeemed on payment of a fine of Rs. 50.000/- in lieu of confiscation. The Company have come up in appeal against the order of the Collector before the Tribunal direct. In the appeal the Company have urged that the goods being on par with one dealt with earlier by the Board, which set aside the order of the Collector in the first instance, the present appeal also deserves to be allowed.
5. Adverting to the review proceedings, the SDR pointed out that the goods were of Russian origin and had been packed in 1968-72. They were held in Australia for a considerable period of time and were sold by an indenting agent in Bombay for their principals in Japan, shipment being from Australia itself. The age of the goods, the unusual manner of supply, invoicing of the goods in Japanese yen, the comparatively low value compared to that of similar goods, all would show that the goods have not been sold as per normal rules of business. Stock list 1 and 2 show that the prices indicated are for-the whole lot. According to a Letter No. ITC(HB)-Chap/70/2008 dated 17-5-1971 from the Chief Controller of Imports and Exports to the Collector of Customs, Bombay, it has been indicated that on the basis of an inter-departmental meeting it was decided that 'job lot' and 'stock lot' goods are to be treated as 'disposal goods'. On this basis, the Appraising Department of the Bombay Customs House, under the hand of the Deputy Collector of Customs issued a departmental circular stating that the term 'disposal goods' mentioned in the Imports (Control) Second Amendment Order, 1970, will cover 'stock lots' and 'job lots', irrespective of the fact that the lots may be factory fresh or used goods. Though there is a reference to clearance of similar goods at Bombay, no original bill of entry has been produced in support. Hence the claim of the Company of clearance of such goods at Bombay cannot be verified. In their reply the Company have relied on the decision in the case of Abdul Husein Mohammedally Master v. Union of India and Ors., reported in 1981 E.L.T.936 (Bom.). The SDR urged that the rational, of that decision is not applicable in the instant case in view of the clarifications referred to above.
6. The Advocate for the Company referred to the show cause notice issued by the Government of India and indicated that the reasons for which the Government sought to set aside the order of the Board are that when a particular supplier wants to dispose of a stock lot by way of clearance sale, such goods would be in the nature of disposal goods only. The goods have been manufactured long ago and could not be used for a number of years. They have been disposed of as stock lot. From the quotation it is seen that the goods were disposed of as 'stock list' and the price was for the whole lot. Though the quotations are on the basis of stock list (emphasis supplied) it has been presumed from this that they form a stock lot and thereafter an inference drawn that they constitute disposal goods. There is no warrant for such a deduction. What is indicated in the stock list is that the price given is for the whole lot. But there was a proviso that the minimum order should be for not less than $ 3.000/-. It would indicate that a person can choose quantities constituting a total value of not less than $ 3,000/- from the stock list. Hence the plea that the goods have been sold as scrap and in a lot is not supported by evidence. The question of value being of a lower order than that of comparable goods is not set out in the show cause notice by citing the basis for such a statement. On the basis of a comparative statement filed in Court, it was indicated that in the case of 10 items at least the price paid by the Company was higher than the prevailing price of Russian goods as offered by the agents, Parry's (Eastern) Pvt. Ltd. In the case of bearings age is no criterion. At the time of their manufacture, they are greased and packed in grease proof paper and can be left for years.
It is not uncommon for these types of bearings to be bought as spare parts though they might have been manufactured years ago.
7. The Advocate for the Company then referred to the judgment of his Lordship Shri Justice M.L. Pendse of the High Court of Bombay in the case of Abdul Husein Mohammedally Master v. Union of India and Ors., reported in 1981 E.L.T. 936 (Bom.) which he urged was directly relevant to the present proceedings. His Lordship has observed : "The expression 'disposal goods' occurring in Sub-clause (3)(iii) of clause 5 of Import (Control) Order must be read in the context of expression 'new goods' used n the same clause. The expression 'disposal goods' is used as 'contra distinction to new goods'. Once it is found that the goods are imported are new, then the mere fact that they are not of uniform type and size is not sufficient to warrant the conclusion that they are 'disposal goods'. Shri Hidayatullah is right in his submission that the three authorities did not even challenge the facts that every item imported was new and unused. The authorities below proceeded on a Wrong assumption that as the petitioners have purchased the goods in lot and goods are not of uniform type and size, they are to be treated 'disposal goods' The assumption is unwarranted and contrary to the plain reading of sub-clause 3(iii) of clause 5 of the Import (Control) Order. The orders under challenge in these circumstances cannot be sustained and the order of confiscation requires to be set aside." In the present case too, it is not disputed that the goods are new. The other factors such as their age, circumstances of sale etc. do not convert them into disposal goods, as mentioned in the Import Control Order.
8. In reply the SDR pointed out that new goods would mean fresh goods and not unused goods. He referred to the observations of Justice Shri Pendse in the same judgment itself wherein he has observed in case the respondents have found that the price paid by the petitioners was less than the price for the lot of variety type of goods, then it may have been possible to claim that the goods imported are not new goods.
According to his instructions, the total price was cheaper by 40%.
'Disposal goods' does not mean the same thing as goods not usable.
9. Referring to Appeal No. 37/82, the Advocate for the Company mentioned that there was a total profit of about Rs. 23,109/- or so in the transaction to the Japanese buyer. While reiterating what has been said in respect of the earlier case, he relied on the judgment of the Bombay High Court referred to above and contended that the present goods cannot be treated as disposal goods. In fact he urged that the reference in the show cause notice to the earlier consignment which has been the subject-matter of proceedings before the Collector, prejudiced the case of the party in that all the factors have not been set out fully again. Responding, the SDR queried whether the profit made by the Japanese Company was substantial enough considering the total value of the transaction. He found nothing wrong in the show cause notice referring to the earlier case and relying on points already made in the proceedings.
10. We have considered the arguments of both the parties. In both these proceedings the point for decision is whether goods which were packed in Russia 7-8 years prior to their being imported into the country, taken to Australia, kept there for a while and shipped from there to India on the basis of a contract entered into with a Japanese supplier, would constitute 'disposal goods'. The term 'disposal goods' has not been defined in the I.T.C. Schedule. There is a reference to some inter-departmental discussion according to which 'disposal goods' would cover 'stock lots' and 'job lots', irrespective of the fact that the lots may be factory fresh or used goods. However, the trade does not seem to have been put on notice in regard to this aspect. In fact the importation is of 1979 whereas the decision taken in the Bombay Custom House is in late December 1970. No particular reasons have been given in the departmental circular to hold why 'stock lot' or 'job lot' goods should be treated as 'disposal goods'. For want of reason as well as the nature of the document viz. inter-departmental communication, we do not feel that we should take note of it for the purpose of the present proceedings.
11. The case decided by the Bombay High Court referred to above also dealt with a situation where the goods were of a mixed variety and were purchased in a lot. In fact there was even a finding that because the goods have been purchased as an assorted lot and price was somewhat lower than the price of a lot consisting of uniform size and type of goods, they could not be termed as 'disposal goods'. Though a claim was made before us by the SDR that the prices of goods now under consideration are 40% lower than the new goods, no particular data has been left in to substantiate the same, whereas, on the other hand, the Company had brought in evidence to show that they had made a profit in the transaction. Hence the observation of His Lordship of the Bombay High Court relied upon by the SDR would not be also of much help in the present case.
12. In the circumstances, we consider that it has not been established that the goods under consideration are 'disposal goods' whose importation is not permitted under the I.T.C. Policy. Accordingly we discharge the notice issued to M/s. Rajan Trading Company in Appeal No.203/81 and allow the appeal in No 37/82, with consequential relief to the Company.