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Krishna Sales (P) Ltd. Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Judge
Reported in(1985)LC1052Tri(Delhi)
AppellantKrishna Sales (P) Ltd.
RespondentCollector of Customs
Excerpt:
1. the appellants sought the clearance of one "used bevel gear generator" valued at rs. 7,16,742/-.under b/e no. 481/67, dated 19.5.1983. they sought clearance against open general licence under appendix 2 of the policy bonk for a.m. 84.2. the customs, however, were of the view that the machine was not a bevel gear generator but was a 'straight bevel gear planer'. besides they believed that the machine was manufactured on august 10, 1956, whereas it was declared by the importers that it was manufactured in the year 1973.3. machines not more than ten years old enjoy the facility of importation of o.g.i. and automatic straight bevel gear generators can avail the benefit of notification no. 40/78 in the matter of customs duty. therefore, it was alleged that there was misdeclaration as to.....
Judgment:
1. The appellants sought the clearance of one "Used Bevel Gear Generator" valued at Rs. 7,16,742/-.under B/E No. 481/67, dated 19.5.1983. They sought clearance against Open General Licence under Appendix 2 of the Policy Bonk for A.M. 84.

2. The Customs, however, were of the view that the machine was not a Bevel Gear Generator but was a 'Straight Bevel Gear Planer'. Besides they believed that the machine was manufactured on August 10, 1956, whereas it was declared by the importers that it was manufactured in the year 1973.

3. Machines not more than ten years old enjoy the facility of importation of O.G.I. and Automatic Straight Bevel Gear generators can avail the benefit of Notification No. 40/78 in the matter of customs duty. Therefore, it was alleged that there was misdeclaration as to the age and description of the machine now imported.

4. A show cause notice was issued to the appellants threatening confiscation of the imported goods. The appellants denied the allegations and made the following grounds in their defence before the Collector: (a) That they have imported one second hand straight bevel gear generator model K 4A, No. 297061, as per B/E No. 481/67 under O.G.I. appendix 2 (SI. No. 16). They have also submitted Chartered Engineer's certificate as required under O.G.T. 2, para 8 showing that the year of manufacture of the said machine is 1973. Therefore, at the time of import it was only 10 years old and the import is well within O.G.L. policy regulations.

(b) That technical opinion of the Appraisers, one of whom was working under the same A.C. was not independent. Further, even the opinion of two Appraisers of Customs cannot be treated as majority opinion and not at all as independent opinion. That the opinion of the panel comprising departmental experts cannot be accepted.

(c) That the so-called telex message received by M/s. Francis Klein, the local agents for the manufacturer has not been supplied to them.

(d) That the opinion of a well-known expert in the field has not been accepted though he categorically stated that the imported item is a straight bevel gear generator.

(e) That in the matter of age of the machine, the qualified Chartered Engineer's opinion has been ignored.

(f) That the department has not been able to say or prove that the said certificate is fake. Therefore, it should be accepted.

(g) Even if M/s. Francis Klein have given any such certificate, that should be under the circumstances not accepted. They normally try to discourage sale of old machines.

(h) If the age of the machine is more than 27 years, it will have no residual life and normally in the market it is treated as junk. None will import such machines.

(i) The Chartered Engineer's certificate will show that it has a residual life for another 15 years.

(j) That they had applied for Industrial Licence in time but it was due to the Licensing Authority's delay that they were not holding the Licence at the time of import of the same. There is no condition in the policy that one must possess an Industrial Licence at the time of applying for/or import.

5. The Collector ultimately held that the imported machine was gear planer and that templates were imported along with the machine even though they could be called "cam", He further held that the machine was about 27 years old without, practically, residual life. He confiscated the machine and gave option for redemption on payment of line of Rs. 70,000/-and imposed a penalty of Rs. 10,000/-. He denied the duly concession. Aggrieved by this order, the appellants came up in appeal which is now before us.

6. With regard to the licensing, the appellants submitted that the machine is not 27 years old as claimed by the Customs. The appellants submission in this regard was that the Collector wrongly assumed that the telex (page 69 of the paper book) which said that the subject machine was manufactured on August 10, 1956 emanated from the manufacturers whereas it was only from the German agents to the manufacturers. They further submitted that the telex issued from (he local Agent in Bombay (p. 67) and the telex in reply were obtained behind the appellants' back and copies of these were not enclosed to the show cause notice. They further submitted that the covering letter signed on 20.2.1984 was given to them only at the time of personal hearing. Father they argued that at no lime were they told as to why and in what circumstances, the local agent in Bombay sent the telex to the German agent. In this context they also cited a CEGAT decision in the case of Mangla Brother v. Collector of Customs, Bombay and staled that telexes should not be relied upon.

(However, this observation does not How from the case law cited and in the said judgment it was merely observed that quotations contained in the telex messages referred in the cited judgment have not been co-related with any actual importations made).

7. Arguing about the age of the machine, the learned Departmental Representative supported the telex messages and submitted that even if the German agent gave the information about the date of the machine, and not the manufacturer, this information could be relied upon inasmuch as it has not been shown that the Agent had deliberately given wrong information about the same. The Agents (F. Klein) arc the best sources of information. He submitted that the appellants did not protest before the Collector in this regard.

8. We have considered the arguments of both sides. In so far as the age of the machine is concerned, in accordance with the provisions of paragraph 8 of the Import Policy AM 84 the import of second-hand items may be allowed under O.G.I. provided that the importer will produce to the Customs authorities at the time of clearance a certificate from a professionally independent Chartered Engineer/equivalent institute in the country from Which import is made indicating therein the name of the manufacturer, year of manufacture, present condition of the plant and machinery and its residual life and CIF value equivalent to capital goods if purchased new. There is no dispute here that the appellants produced such a certificate from a Chartered Engineer, issued on 8th December, 1982. The Collector came to the conclusion that the machine was of 1956 make disregarding the certificate of the Chartered Engineer. While doing so he merely stated that "as per the stock-list and telex received from the manufacturer, the year of manufacture of the machine is 1956 and therefore the Chartered Engineer's certificate cannot be accepted as true." No reasons were given as to why and on what basis the certificate has been held to be not worthy of reliance.

The Collector merely relied on the telex messages which, in our opinion, do not conclusively prove the age. We already observed that the telex from Germany was from the agents of the manufacturers and not from the manufacturers themselves. It is not the case of the Department that the machine itself bears any indication of the date of manufacture. In the circumstances we have to hold that the Department has not disproved the statement made by the appellants that the machine was manufactured in 1973. We therefore set aside the Collector's finding in this regard.

9. The next question that is to be examined is whether the imported machine was bevel gear generator as claimed by the appellants or bevel gear planer as held by Customs. The way in which this question was dealt with by the learned Collector is shown best by reproducing that part of his order concerned with the question: There is no dispute about the fact that in this case with reference to a specific query in respect of the antecedents of the imported machine through local indenter that a specific reply has been received through postal/telex communication. Though it was alleged that copy of this telex communication was not given, the importer has since received the same during the personal hearing on 9.3.1984 and thereafter no further objections with regard to the bona fide of this correspondence have been raised. In this case I am also inclined to notice that though in the requisition for this information, the Customs department wanted to know the age of the "Gear Generator", the manufacturer has replied as if the same is only a "Gear Planer." Copies of these correspondence would show that the imported machine is only a gear planer. This was supplied to importer by A.C. Appraising Group 'H's letter dated 28.2.1984 which was received on the same day by the importer. Therefore it stands conclusively proved that the machine is only "Gear Planer" and not "Gear Generator" and it is of 1956 make as the stock list above also shows, However, even if it is disputed that it was technically a gear generator the same has practically no meaning when the manufacturer himself has submitted that it is a gear planer of 1956 make.

However, I have also gone through the technical point raised in this behalf by the importer that the imported machine is a gear generator. the dispute was not possible to be ended as the importer was holding repeatedly that it was a gear generator as the cradle fixed with the gear cutting tool was possible to be moved or/swiveled in a rolling motion because of the templates. As a result bevel gears are possible to be cut by a reciprocal motion of the cutting tool, mounted on the said cradle. Because of the swiveling motion of the cradle, a rotational movement would be possible to be generated to cut gears despite reciprocal movement of the tools. It is clear from this discussion that this machine with the help of the templates are in a position to cut bevel gears in the same way, a straight bevel gear generator is able to do or achieve this end. Therefore, it is not in doubt that the present machine is in a position to cut bevel gear with the help of templates, as any other bevel gear generating machine would be able to do. But the moot point in dispute is whether the machine as such for that matter can be called as bevel gear generator or it is a bevel gear planer.

In this connection the opinion of the departmental expert which was communicated to the importer at the time of serving of the show cause notice is quite relevant. Though the department's expert did not agree with the expert Mr. Ghosh, he had given reasons in detail.

No such detailed reasons have been given by Mr. Ghosh in this connection. I cannot also overlook the fact that though this machine is of 1956 make, the Chartered Engineer's certificate produced by the importer showed that it was only made in 1973. Therefore, the opinion of Mr. Ghosh is also subject to scrutiny and doubt.

The present machine is gear planer for the simple reason that a gear planer cuts straight bevel gear by template process. Existence of templates not originally disclosed in the invoice is very relevant to understood not only the exact nature of the machine imported, but also the purpose of keeping this accessory a secret from Customs till inspection. The gear planer works on reciprocal motion of the tool head in this system. The gear blank is maintained stationary during the process and it moves only when indexed. Gear planer cannot yield a rotary motion like bevel gear generator does. The gear cutting process of a planer is therefore, a based on reciprocal process by which blank and the cutting tool rotate concurrently.

Though due to templates, swiveling motion to the cradle or tool is possible to be achieved but that has nothing to do with the basic rolling motion of the cradle and that of the blank gear in a general or. For rotator motion of this type the cradle is to be round whereas in the instant case it is rectangular. Therefore, swiveling motion which is possible to be achieved by a rectangular cradle has nothing to do with the basic and original principle of rolling motion of the cradle in bevel gear generating machine. This swiveling motion to cradle of a gear planer as in the present case, is required not for cutting the gear as such, but to avoid rubbing of the tool of the gear during the return motion (that is not cutting motion of the tools).

9. The grounds on which the Customs concluded that the imported goods was a bevel gear planer are made clear in the Collector's orders. These grounds, inter alia, consisted of the opinion of the two experts of the Custom House. The opinion of one Mr. M.K. Ghosh was also obtained by the Customs. On November 22, 1983 the Collector rejected this expert's views saying "Though the Departmental expert did not agree with the expert Mr. Ghosh he has given reasons in detail. No such detailed reasons have been given by Mr. Ghosh in this connection. 1 cannot also overlook the facts that though this machine was of 1956 make the, Chartered Engineer's certificate produced by the Importer showed that it was only made in 1973. Therefore, the opinion of Mr. Ghosh is also subject to scrutiny and doubt," We have perused the copy of the report dated 22.11.1983 of Shri M.K. Ghosh. The learned Departmental Representative argued before us that the opinion of Mr. Ghosh was cryptic. Our perusal of the report of Mr. Ghosh does not show that it was cryptic. Besides, it does not appear that the Collector called on Mr. Ghosh to give detailed reasons as to why he Mr. Ghosh differed from the report of the Appraiser. Therefore, there could be no reason for Mr. Ghosh giving "reasons in detail" as was done by the Appraiser. It would appear that the opinion of Mr. Ghosh an outside expert which was called for by the Customs on their own initiative cannot be ignored. At the least it must help to create a doubt.

10. Many technical arguments were put forward by both the parties but none of them have been conclusive. We have necessarily to depend on the available documents concerning the importation and the other circumstances to come to a decision on this technical question.

11. The records placed before us consist, inter alia, of proforma invoice dated 26.11.1982 in which "automatic bevel gear generator model K 4a new 1973" was mentioned. The commercial Invoice 83024 from Walter Kames, dated March 30, 1983 speaks of "used bevel gear generator make Oerlikon model K 4a of 1973" and refers to proforma invoice dated 26.11.1982. The bill of lading also describes it in similar terms. None of these documents have been disproved by the Customs and the finding that the imported machine is a gear planer was arrived at by relying on the opinion of the two Customs experts while rejecting the opinion of an outsider Mr. M.K. Ghosh, an expert, whose opinion was invited by Customs. We have already stated that the opinion of Mr. M.K. Ghosh must be given value. Taken together with the details in the documents reference to which has been made earlier, we are of the opinion that the benefit of the doubt has to be extended to the importers. We therefore hold that the imported goods be considered to be bevel gear generator and given consequent benefits available under the law.

12. We have already given the finding that the imported machine was made in 1973. We allow the appeal on both these points and order that consequential relief be extended to the appellants.


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