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Zenith Optical Lens Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Decided On
Reported in(1986)(6)LC588Tri(Mum.)bai
AppellantZenith Optical Lens
RespondentCollector of Customs
Excerpt:
.....order, 1955. the customs authorities issued a show cause notice to the appellants as to why the goods imported should not be confiscated under section iii(d) of the customs act. in reply to this show cause notice, the appellants contended that opthalmic blanks imported by them are first quality, new goods in original packing and as per their selection found the ready stock available and as such they are fully covered by the actual user's import licence. the deputy collector of customs who held the inquiry did not accept the appellant's explanation. he held that the goods imported are 'stock lot1 goods and there was no specific endorsement on the licence for the import of 'stock lot' goods. he, therefore, ordered confiscation but allowed redemption on payment of fine of rs. 12,000/-......
Judgment:
1. The Revision Application filed before the Government of India against the Order bearing No. S/49-397/80L dated 17.3.1981 passed by the Appellate Collector of Customs, Bombay statutorily stood transferred to the Tribunal for being heard as an appeal.

2. The facts necessary for the dispoal of this appeal are few and simple and they are as under:- The appellants M/s. Zenith Optical Lens Mfg. Co. imported a consignment of Optical Rough Blanks valued at Rs. 45,875/- cif and sought clearance against their Import Licence No. 1923713 dated 11.10.1979. The Customs, however, did not allow clearance on the ground that the imported goods fell under the category of "stock lot" or "disposal goods" the import of which is prohibited in terms of Clause 5(3)(iii) of Import Control Order, 1955. The Customs authorities issued a show cause notice to the appellants as to why the goods imported should not be confiscated under Section III(d) of the Customs Act. In reply to this show cause notice, the appellants contended that Opthalmic Blanks imported by them are first quality, new goods in original packing and as per their selection found the ready stock available and as such they are fully covered by the Actual User's Import Licence. The Deputy Collector of Customs who held the inquiry did not accept the appellant's explanation. He held that the goods imported are 'stock lot1 goods and there was no specific endorsement on the licence for the import of 'stock lot' goods. He, therefore, ordered confiscation but allowed redemption on payment of fine of Rs. 12,000/-. On appeal, the Appellate Collector of Customs rejected their appeal on the ground that the order passed by the lower authority is maintainable. Feeling aggrived, as stated earlier, the appellants preferred a Revision Application before the Government of India.

3. During the hearing of this appeal, Shri V.N. Deshpande, the learned advocate for the appellants contended that the aurhorities below treated the imported goods as 'stock lot' or 'disposal goods' without there being any evidence to that effect. He urged that the foreign suppliers are not manufacturers but stockists. In the said circumstances, the goods cannot be considered as 'disposal goods' of "stocklots". He further urged that 'Rough Blanks' which are made of glass can never become useless or substandard even after several decades of storage. They also cannot become useless for opthalmic purpose unless some new intentions takes place. He submitted that Rough Blanks being of glass the same cannot be used unless processed by grinding and polishing according to a particular prescription when the same becomes lenses. He urged in their imported condition they cannot be used. The imported goods are raw materials for manufacture of lenses.

4. It was further contended by Shri Deshpande that as per the trade parlance, the term 'disposal goods' refers to U.S. Army Surplus Stores mainly consisting of Motor Vehicle Parts.

5. It was then urged by Shri Deshpande that the finding of the Deputy Collector was that the imported goods are 'stocklots' whereas the Appellate Collector had held that they are 'disposal goods'. Shri Deshpande urged that the Appellate Collector had relied on certain observations of the Central Board of Excise & Customs found in their Order No. 255-256 of 74 dated 31.7.1974 but then the appellants were not given an opportunity to controvert those observations and the said document was not made available to the appellants at any stage.

Further, even those observations, have no application to the facts of the present case in that there was no evidence that the foreign supplier was anxious to get rid of the goods or that the goods were sold in "as-is-where-is" condition. Finally, Shri Deshpande submitted even assuming that the goods are, 'stocklot' what is prohibited under the Import Control Order is "disposal goods" which necessarily means second hand or used goods and the expression disposal goods in trade parlance applies to motor vehicle parts, machinery parts or watch parts which become rusty or outdated owing to passage of time or change of models in which the same are used. He, therefore, prayed that the orders passed by the authorities below may be set aside and that there may be an order for refund of the fine amount.

6. Shri Rajagopalan for the Respondent Collector however submitted that there is no difference between 'stocklot' or 'disposal goods'. He urged that the show cause notice was issued to the appellants alleging that they had committed an offence under Section 111(d) and/or clause (1) or (m) of the Customs Act, 1962. In their reply, the appellants had admitted that goods of German Origin were imported by them through Singapore exporters at reduced price. Thus, their admission established that the goods imported are either 'disposal goods' or 'stocklot' goods. Shri Rajagopalan further submitted that the goods imported are of different size and by weight at reduced price and these factors clearly establish that the goods are "stocklot" or "disposal goods". It was further submitted by Shri Rajagopalan that Rough Optical Blanks are normally imported in pieces and the price vary according to the dimensions of the pieces but the appellants have imported blanks of assorted shapes, sizes, and colour tints. He, therefore, prayed that the appeal may be rejected. Alternatively, Shri Rajagopalan submitted that in case it is held that the goods are not "stock-lot" or "disposal goods", the matter may be remanded to the Deputy Collector for taking action under Section 111(m) which was one of the Sections included in the show cause notice and there was an admission by the appellants they they secured the goods at reduced price.

7. I have carefully considered the submission made on both sides. I have looked into the records of the case. The short question for consideration is "whether the imported goods are prohibited in terms of Clause 5(3)(iii). of the Import (Control) Order, 1955"? 8. In order to consider the above question, it would be necessary to refer to the show cause notice, reply to the show cause notice, the order-in-original, the order-in-appeal and the relevant Clause of the Import (Control) Order. The show cause notice is dated 11.7.1980. It was alleged in the show cause notice that the goods is in assorted quantities and designs supplied by a stockist in Singapore on weight basis. The goods are "stock-lot" or "disposal goods" and the import of which are prohibited in terms of provisions of Section 5(3)(iii) of the Import Trade (Control) Order 1955. It was further alleged that the licence produced is not valid to cover the goods imported and that the appellants' act, constituted an offence under Section 111(d) and/or Clause (1) or (m) of the Customs Act, 1962, read with Section 3 of the Imports & Exports (Control) Order 1947.

9. In their reply dated 17.7.1980 the appellants contended that the Rough Opthalmic Blanks imported by them are first quality, new goods in original packing and as per their selection found the ready stock available and as such they are fully covered by their A-U. Import Licence. They further stated that they are a small unit having a small workshop and their production was held up for want of raw materials.

10. The Deputy, Collector of Customs, Appraising Department held the enquiry. After referring to the show cause notice, the reply and the statement made during the personal hearing, the Deputy Collector recorded a finding as under :- "I have gone through the records of the case and the arguments made by the importers during the course of personal hearing. I find that the explanation is not quite satisfactory. Hence importation has to be treated as unauthorised and penal action taken as the import licence' produced is not valid to cover the release of stocklot goods unless it is specifically endorsed to that effect vide provisions contained in paragraph 5(3)(iii) of the Import Trade (Control) Order 1955 dated 7.12.1955".

"I have carefully considered the appeal as well as pleas both oral and written. The appellants have pleaded that being raw materials these cannot become old and cannot be disposed of, as in the case of Motor vehicle parts. I observe that job-lot or stocklot goods are those which accumulate with the manufacturer/vendor and are not easily saleable due to overstocking or such other reasons. Even items like Rough Opthalmic Blanks may become stocklots in this way.

As observed by the Central Board of Excise and Customs, New Delhi, in their Order No. 255-256 of 1974 dated 31.7.1974, the main characteristics of disposal goods is that the seller is more anxious to get rid of these, than to get the maximum profit, or even any profit at all, on them, and that "these are normally sold in 'as-is-where-is' condition, at the reduced price. The appellants have not disputed that these were in mixed sizes and were sold at the reduced price. The order passed by lower authority is maintainable. From the records it is seen that the lower authority has already taken lenient view. The redemption fine imposed is not excessive. I, therefore, see no reason to interfere with the order passed. The appeal is rejected accordingly".

12. Now it is seen that the Deputy Collector had not assigned any reason for ordering confiscation. His findind was that the goods are 'stock-lot'. The Appellate Collector, however, had made a distinction between 'stock-lot' or 'job-lot' and 'disposal goods'. According to him, 'job-lot' or 'stock-lot' goods are those which are accumulated with the manufacturer/ vendor and which are not easily saleable due to over-stocking or such other reasons. The 'disposal goods' according to him are those goods which the seller is more anxious to get rid of them, than to get the maximum profit, or even any profit at all, on them. Further they are sold in 'as-is-where-is' condition, at a reduced price. As has been pointed out earlier, the definite finding of the Deputy Collector was that the goods imported are 'stock-lot'. The Appellate Collector had made a distinction between 'stock-lot' and 'disposal goods'. But then, he did not record any finding as to whether the goods imported by the appllants would fall under the cateogy of 'stock-lot' of 'disposal goods'. Since he had maintained the order passed by the lower authority, one has to assume that his conclusion is that the imported goods are 'stock-lots'.

13. What cannot be imported in terms of Clause 5(3)(iii) of Import (Control) Order is 'disposal goods' and not 'stock-lot' or 'job-lot'.

If there is a distinction between 'stock-lot', 'job-lot' and 'disposal goods' as has been held by the Appellate Collector, the order of confiscation passed by the Deputy Collector would be bad in law because there was no finding either by the Deputy Collector or by the Appellate Collector that the goods imported are 'disposal goods'. On this ground alone the appellants are entitled to succeed. But then Shri Rajagopalan, learned departmental representative contended that there is no difference between 'stock-lot' or 'job-lot' and 'disposal goods'.

Though, I am not inclined to accept Shri Rajagopalan's contention that there is no distinction between the 'stock-lot1 and 'disposal goods', let me assume for the purpose of this case that they are the same but then could it be said that the department was able to establish that the goods imported are 'disposal goods'? 14. The expression 'disposal goods' is not defined either in the Imports & Exports (Control) Act or in the Order or in the Import Policy. Since the licence produced permitted import of Opthalmic Rough Blanks, the initial burden of establishing that the goods imported are 'disposal goods' lies on the department. The Department has classified the goods as 'disposal goods' firstly because the goods are in assorted quantities and designs secondly stocked by a stockist in Singapore and thirdly received on weight basis (vide show cause notice).

15 The reasons given by the Appellate Collector who upheld the order of. the Deputy Collector are : (1) the appellants have not disputed that the goods were in mixed sizes and These two criteria would not be sufficient to classify the goods as 'disposal goods'. The finding of the Appellate Collector that the goods were sold at a reduced price is not borne out from the records of the case or the evidence on records. Though in the show cause notice it was alleged that the acts of the appellants constituted an offence under Clause (m) of Section 111 of the Customs Act, there was no allegation of mis-declaration as to the value or there was any allegation as to what was the value of the imported goods. The show cause notice did not contain an allegation that the sale was at a reduced price. During the personal hearing before the Deputy Collector, the appellants' authorised representative submitted that the Rough Opthalmic Blanks of German Origin have been imported through a Singapore Exporter "that the Rough Blanks are of first quality which might be lying with the supplier for some time which were offered at quite a reasonable price.

Even in their reply to the show cause notice the appellants had contended that the Rough Opthalmic Blanks imported by them are first quality, new goods in original packing. Thus it is seen that there is no basis whatsoever for the Appellate Collector to hold that the goods were sold at a reduced price. If that part of the order is not supported by the evidence, the only other criterion that prevailed with the Appellate Collector to uphold the Deputy Collector's order is that the goods are in mixed sizes. This criterion, in my opinion, would not be sufficient to classify the goods as 'disposal goods'. Interestingly, the order of the Appellate Collector refers to the decision of the Central Board of Excise & Customs dated 31.7.1974. The main characteristics of 'disposal goods' given in the Board's order are (1) the sellers' anxiety to get rid of the goods than to get the maximum profit, or even any profit at all on them. (2) They are normally sold in 'as-is-where-is' condition and (3) at a reduced price.

16. In the instant case the department did not bring on 'record any evidence to establish that the stockist was anxious to get rid of the stock or that the goods were sold in 'as-is-where-is' condition or that the goods were sold at a reduced price. In the absence of such evidence there is no scope to contend that the goods imported are 'disposal goods'.

17. Admittedly, the goods imported are Opthalmic Blanks. They are raw materials for the lenses. They cannot be uniform in size. Lenses are made by the process of grinding and polishing according to a particular prescription. The appellants had stated in their reply to the show cause notice that the imported goods were of first quality and they had come in original packing. The department did not dispute the same.

Storage of Opthalmic Rough Blanks for any length of time would not result in deterioration in quality. They would not become useless or obsolete or outmoded because the Opthalmic Rough Blanks could not be used as lenses. They should undergo the process of grinding and polishing according to a particular prescription in order to become lenses.

18. Imports & Exports (Control) Act was enacted in the year 1947.

Import Control Order, 1955 was made in exercise of the powers conferred by the Imports & Exports (Control) Act, 1947. It appears, after IInd World War there was a large scale disposal of military stores by the Army, Navy and Airforce. The disposals were made mainly of Motor Vehicles and their parts. It appears the disposals were for a throw away price. Probably with a view to restrict import of such goods, it was specifically provided in Clause 5(3)(iii) of the Import (Control) Order that the goods to be imported against a licence should be new goods other than disposal goods.

19. As has been observed earlier, in the Act of 1947 or in the Order of 1955 or in the Import Policy there is any definition of the expression 'disposal goods'. As the phrase consists of two words it will not be easy to find a dictionary meaning. Further, in the matter of interpretation of the Import (Control) Order placing reliance on the dictionary meaning would not be appropriate. Commercial transactions are intended to be controlled by the Import (Control) Order. Therefore, the meaning which the trade attaches would be relevant in interpretation of the phrase 'disposal goods'. But then neither party thought fit to adduce evidence in that regard. In the circumstances one has necessarily to resort to dictionary meaning.

20. In the Book "Words and Phrases Legally, defined" by John B.Saunders the meaning of the word "disposal" is given as under:- "the word 'disposal' is sometimes used with a meaning wide enough to cover destruction, e.g. I disposed of my rubbish by burning it".

21. In Oxford Concise Dictionary the meaning of the word "disposable" is given as : "that can be disposed of, get rid of, made over or used". The meaning of the word "disposal" is given as : "disposing" of, getting rid of".

22. Having regard to the dictionary meaning of the word disposal it is reasonable to hold that the 'disposal goods' are those goods which the owner is anxious to get rid of either because the cost of storage would be more than the price they would fetch or the goods are so deteriorated fit for destruction or become so old or out dated or out moded may not find any market at all.

23. In the present case the department on whom the burden lies had not brought on record any evidence to establish that the Singapore Exporter was anxious to get rid of the goods in question. There was no evidence that the goods were sold at throw away price or even for reduced price.

The statement of the importer that the goods were of first quality, they came in original packing and purchased for a reasonable price remains uncontraverted.

24. On Careful consideration of all the aspects, I hold that the department has failed to establish that the goods imported by the appellants are 'disposal goods'. I, therefore, allow this appeal and set aside the orders passed by the authorities below and direct that the appellants be granted consequential relief.


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