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Salgaocar Industrial Gases Private Limited Vs. Assistant Collector of Customs, Bombay and Others - Court Judgment

LegalCrystal Citation
SubjectCustoms
CourtMumbai High Court
Decided On
Case NumberWrit Petition No. 40/B of 1980
Judge
Reported in1987(30)ELT666(Bom)
ActsCompanies Act, 1956; Customs Act, 1962 - Sections 2(23), 46, 47 and 157; Indian Tariff Act, 1934 - Sections 2A; Customs Tariff Act, 1975 - Sections 3
AppellantSalgaocar Industrial Gases Private Limited
RespondentAssistant Collector of Customs, Bombay and Others
Excerpt:
.....controller of imports and exports that endorsement as required by the petitioners be made in their import licence. 3. petitioners challenge the levy of duty under two different items on the on the aforesaid empty dissolved acetylene cylinders as well as the levy of the countervailing duty on the said cylinders. further, by his letter dated 6th february, 1976 addressed to the petitioners, the deputy chief controller of explosives had again reiterated the same position and clearly stated that the cylinder shell shall be filled with coyne type monolithic porous mass 90-92% porosity charged with appropriate quantity of acetone and saturation gas. on the contrary, the said items, in the circumstances, were clearly falling under item 72(c) which refers to apparatus and appliances not to be..........if the said cylinders had some quantity of saturation gas, the said gas was not an independent item imported by the petitioners but was a part and parcel of the said cylinders. this being so, according to the learned counsel, it was not open and correct for the customs authorities to charge separately the gas cylinders under item 72(c) and the saturation gas under item 28 of the indian customs tariff. the learned counsel placed reliance in support of this submission in the decision of the supreme court in a. v. venkateswaran, collector of customs, bombay v. ramchand sobhraj wadhwani and another, : 1983ecr2151d(sc) . in that case, the question was as to whether fountain pens were to be charged as fountain pens complete on as articles plated with gold and silver since the customs.....
Judgment:

Couto, J.

1. Petitioner challenge by way of this writ petition the orders dated 7th August, 1976, 18th April, 1977, 16th June, 1979, 17th December, 1976, 19th April, 1977 and 17th September, 1979, hereby the import of Empty Dissolved Acetylene Cylinders had been charged with levy under Item 72(C) of the Customs Tariff and Item 28. They further challenged the levy of countervailing duty and seek the refund of an excess of import duty to the tune of Rs. 9,634.80 and the countervailing duty of Rs. 1,47,091.67.

2. A few may be mentioned. Petitioners are a company incorporated under the Companies Act, 1956 and having their registered office at Vasco-da-Gama, Goa, under a letter of intent dated 1st May, 1972, the Government of India had a authorised the petitioners to set up a project for the production of Industrial Oxygen and dissolved acetylene in Goa. Later on, the said letter of intent was converted into an industrial licence on or about 28th December, 1974. The Petitioners required containers of special kind for the production of the dissolved acetylene at their plant and since such containers were not produced or manufactured in India, they had to import them from abroad. Accordingly, they applied to the Government for an import licence in respect of the said containers which are known as 'empty dissolved acetylene cylinders'. The Central Government allowed the import of the said containers, inter alia, on the conditions that the cylinder to be imported should conform to the specifications approved by the Chief Inspector of Explosives, Nagpur. The Chief Controller imposed the condition that each cylinder shell shall be filled with Cone type monolithic porous mass 90-92% porosity, charged with appropriate quantity of acetone and saturation gas. The petitioner placed an order for 750 empty dissolved acetylene cylinders with a firm of Austria. They made a query to the Appraiser of Customs, Marmagoa, in respect of the levy to be paid by them on the import of such empty dissolved acetylene cylinders. The Appraiser of Customs informed the petitioners that the cylinders were assessable to duty under Item 72(C) of the Indian Customs Tariff and the rate of duty then prevailing was 40% and valorem and that no countervailing duty was chargeable. The petitioners also applied for an endorsement in the import licence that the said empty dissolved acetylene cylinders were for a project import and were therefore, assessable under Item 72(A) of the Indian Customs Tariff. The Directorate General of Technical Development, Government of India, recommended to the Chief Controller of Imports and Exports that endorsement as required by the petitioners be made in their import licence. The imported 750 empty dissolved acetylene cylinders were duly shipped by the Austrian firm and on receipt of the advice of shipment and expected date of arrival of the vessel, petitioners presented the bill of entry to the Bombay Customs seeking clearance of the empty dissolved acetylene cylinders for home consumption under the provisions of Sections 46 and 47 of Customs Act, 1962. Petitioners claimed assessment to customs duty under Item 72(C) of the Indian Customs Tariff. The Assistant Collector of Customs, Bombay by his order dated 7th August, 1976 directed that the aforesaid cylinder be assessed as empty cylinders under Item 72(C) of the Indian Customs Tariff and that the small quantity of saturation gas filled in the cylinders be assessed on merit, to duty under Item 28. He further directed that the empty dissolved acetylene cylinders were to be assessed to countervailing duty under Section 2A of the Indian Tariff Act, 1934 or under Section 3 of the Customs Tariff Act, 1975. Accordingly, the Bombay Customs levied duty on the empty dissolved acetylene cylinders under Item 72(C) to the tune of Rs. 3,04,327.80 and a further duty of Rs. 24,085.80 on acetone and saturation gas contained in the empty dissolved acetylene of assessment, this under Item 28. For the purpose of assessment, the value of the empty dissolved acetylene cylinders was calculated at Rs. 6,76,284.00 and that of the acetone and saturation gas at Rs. 32,144.00. Petitioners, therefore, according to them, had paid an excess duty of Rs. 9,634.80 as a result of this approach to the problem by the Customs Authorities. Petitioners paid the said excess duty under protest, and therefore, they preferred an appeal to the Appellate Collector of Customs, who by his order dated 18th April, 1977, rejected the appeal. Aggrieved petitioners preferred a revision application to the Central Government from the aforesaid order of the Appellate Collector of Customs. This revision application, however, was also rejected by order dated 16th June, 1979. Thereafter, on or about 13th December, 1976, petitioners supplied to the Assistant Collector of Customs for refund of the countervailing duty to the tune of Rs. 1,47,091.77 collected on the consignment of empty dissolved acetylene cylinders. By his order dated 17th December, 1976, the Assistant Collector of Customs rejected the aforesaid claims of refund as untenable. An appeal was preferred by the petitioners against the said order of the Assistant Collector of Customs and appeal was rejected by the Appellate Collector of Customs by order dated 19th April, 1977. Finally, the petitioners preferred a revision application to the Central Government against the order of the Appellate Collector of Customs, by order dated 17th September, the Central Government, however, rejected the said revision application.

3. Petitioners challenge the levy of duty under two different items on the on the aforesaid empty dissolved acetylene cylinders as well as the levy of the countervailing duty on the said cylinders. It is their case that they never intended to import the saturation gas or acetone and what they sought from the Central Government was a licence to import containers for the production of acetylene in their plant. However, the Central Government while granting licence had imposed a condition that the said cylinders or containers should satisfy the condition mentioned in the Appendix 32 to the ITC Hand Book of Rules and procedure 1975-76. Inter alia, such conditions was namely, that the cylinders should be complete in all respects, that is, charged with acetone and saturation gas. In compliance with the terms of the licence, the petitioners had placed an order of import with Messrs Jos. Heiser Vermals J. Winters Sohn, a firm of Austria. According to the said order, the aforesaid firm shipped 750 empty dissolved acetylene cylinders, which were satisfying the specifications as required by the Chief Inspector of Explosives, Nagpur and the conditions laid down in the import licence. Therefore, according to the petitioners, the article imported by them was the one for which licence had been granted and they did not, at any import two different articles or goods. It is further their case that the saturation gas or acetone is, in the circumstances of the case particularly in view of the terms of the import licence, an integral part of the empty dissolved acetylene cylinders. As such, according to the petitioners, the said cylinders could have been assessed for levy under one item and not under two items, as done by the customs authorities. It is further the case of the petitioners, that the said cylinders were assessable for duty under Item 72(A) of the Indian Customs Tariff since the said cylinders constitute apparatus for a specific industrial plant, namely, the plant of the petitioner for manufacture of oxygen and acetylene gas. Therefore, and in view of the Notification No. 122 dated 20th August, 1965, they were entitled to the exemption granted by the said notification and no countervailing duty could have been charged on the import of the said cylinders.

4. In their affidavit-in-reply, the Customs Authorities denies that acetone or acetylene are inert gases and that without the presence of a small quantity of such gases, the empty dissolved acetylene cylinders would be dangerous, involving fire hazards. They submitted that for the purpose of duty, the cylinders are to be considered as metal containers and the saturation gas and acetone brought inside the said cylinders are different commodities which are, therefore, assessable for duty also. They further contend that opinion given by the Appraiser of Customs House, Marmagoa, is not binding on an officer of any other customs house and even on himself. They further contend that, in view of the explanation to Section 2A, the said cylinders were assessable for countervailing duty.

5. As regards the first point, Mr. S. K. Kakodkar, learned counsel appearing for the petitioners, submitted that the empty dissolved acetylene cylinders are a commercially and in the trade considered as containing a small percentage of saturation gas. This fact, though not established in the petition by documentary evidence, is nevertheless made clear and accepted by the concerned authorities of the Central Government itself since when the petitioners applied for a licence to import the said cylinders, the Central Government was pleased to grant such licence, inter alia, on the condition that the containers or cylinders would satisfy the specifications as required by the Chief Controller of Explosives. The Chief Controller of Explosives had by his letter dated 20th September, 1975 stated that the cylinders were to be of BS : 401 specification and should be filled with Coyne 90-92% porous mass, inspected and certified by Bureau Veritas fitted with valves conforming to BS : 341 for Dissolved Acetylene service, and further, that the cylinders imported into the country should be completed in all respects, that is, should be charged with acetone and saturation gas. Further, by his letter dated 6th February, 1976 addressed to the petitioners, the Deputy Chief Controller of Explosives had again reiterated the same position and clearly stated that the cylinder shell shall be filled with Coyne type monolithic porous mass 90-92% porosity charged with appropriate quantity of acetone and saturation gas. In the circumstances, petitioners placed the order for the import of 750 empty dissolved acetylene cylinders with the specifications as required in the licence and the Austrian firm had supplied and shipped the said cylinders satisfying all the specifications as laid down in the import licence. In the circumstances, therefore, according to Mr. Kakodkar, the petitioners had not imported at all two different goods but they had merely imported the empty dissolved acetylene cylinders. If the said cylinders had some quantity of saturation gas, the said gas was not an independent item imported by the petitioners but was a part and parcel of the said cylinders. This being so, according to the learned counsel, it was not open and correct for the Customs authorities to charge separately the gas cylinders under Item 72(C) and the saturation gas under Item 28 of the Indian Customs Tariff. The learned counsel placed reliance in support of this submission in the decision of the Supreme Court in A. V. Venkateswaran, Collector of Customs, Bombay v. Ramchand Sobhraj Wadhwani and another, : 1983ECR2151D(SC) . In that case, the question was as to whether fountain pens were to be charged as fountain pens complete on as articles plated with gold and silver since the Customs Authorities held the view that the fountain pens had nibs gold plated and, therefore, were to be levied under Item 61(8) of the Customs Tariff. The Supreme Court, upholding the view of the High Court, held that the Customs Authorities were wrong and that the duty was to be levied as fountain pens complete since the gold plated nip was an integral part of the fountain pen.

6. This view was, however, opposed by Mr. P. K. Patkar, learned counsel appearing for the respondents. He contended that if one of the conditions of the import licence was that some quantity of saturation gas should exist in the imported cylinders, nevertheless the duty to be levied was on the articles which were imported into India. He submitted that the empty dissolved gas containers are essentially containers and, therefore, they should be charged for duty under the respective item. And since some gas has also been brought into the container, duty is also payable on such gas. Mr. Patkar further contended that the cylinders do not lose their individuality and their identity only because some quantity of gas had been added, nor the gas loses its own identity. Therefore, according to the learned counsel, two separate items had been imported into India and, therefore, both of them were assessable to duty.

7. It is not disputed that the petitioners had applied for licence to import the empty dissolved acetylene cylinders for the purpose of manufacturing acetylene in their plant. The Central Government, while granting the said licence, had specifically stated that the licence was subject to the conditions mentioned in the Appendix 32 to the ITC Hand Book of Rules and Procedure, 1975-76. It appears that the conditions mentioned in the said Appendix 32 were in respect of the safety measures which are required for the control of the explosives, namely, that the shell of the cylinders should be filled with Coyne type monolithic porous mass 90-92% porosity, charged with appropriate quantity of acetone and saturation gas. This becomes clear from the letters dated 20th September, 1975 and 6th February, 1976 (Exhibit P-4 collectively to the petition). It becomes, therefore, patent from the terms of the import licence and the conditions imposed therein that the petitioners had been granted licence to import the empty dissolved acetylene cylinders on the specific condition that they should satisfy the specifications as laid down by the Chief Controller of Explosives. Among such conditions, the one which is relevant for our purpose is that the Chief Controller of Explosives imposed the condition that the imported gas cylinders should be complete in all respects in the sense that they would have the adequate quantity of acetone and saturation gas. Petitioners placed that order of import with the Austrian firm in the precise terms of the specifications as laid down by the import licence. It is not challenged that the gas cylinders which were received by the petitioners were not conforming strictly with the specifications as laid down in the import licence. Therefore, it cannot be successfully challenged that petitioners had actually imported the article for which licence had been granted to them.

8. Indisputably, duty is to be levied and assessed on the item that is imported. Thus, the question to be considered is whether actually the petitioners are to be assessed for duty both on the containers and on the small quantity of gas that had been filled into it. We already observed that Mr. Patkar has contended that duty is to be assessed on any article that is brought into India. It is no doubt true that Section 2(23) of the Customs Act definers 'import' with its grammatical variations and cognate expressions, as bringing into India from a place outside India and Section 2(25) defines 'imported goods' as meaning any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption. These definitions may give the impression that the submission of Mr. Patkar is correct. However, the question to be considered is what are the goods which are brought into India. In the case before us, a licence has been granted by the Central Government to import empty dissolved acetylene cylinders and some particular specifications to such item had been given in the import licence itself. Therefore, whatever is the name given to the goods which were imported, the important and material point to be considered is whether the article that was brought into India under the said import licence was or not conforming with the conditions laid down in the licence and was or not the article permitted to be imported. We already observed that it is not disputed that the cylinders, supplied by the Australian firm to the petitioners and which are subject matter of this petition, were strictly satisfying the requirements of the licence. If this is so, irresistibly, it follows that the items or goods imported by the petitioners under the label of empty dissolved acetylene cylinders were the goods for which the licence was actually granted. Petitioners, therefore, imported only the goods as specified and with the characteristics given in the import licence. If in he said goods there is some quantity of gas or of some metal, then that fact is irrelevant, for what is material is the nature of the said goods as a whole. We are, therefore, of the opinion that the petitioners are correct in the view that the small quantity of saturation gas that was existing in the imported cylinders constitutes an integral part thereof. In the circumstances, we feel and we are of the clear view that the said cylinders could have been assessed for duty only under one particular item of the Indian Customs Tariff and not under two items, as it has been done by the Customs Authorities. We are to some extent supported in this view by the decision of the Supreme Court in the aforesaid case of Venkateswaran, for it was held therein that if a particular item constitutes an integral part of the imported article, that other item, which is secondary, should not be assessed for duty separately.

9. The learned counsel for the petitioners further contended that the empty dissolved acetylene cylinders were wrongly assessed for duty under Item 72(C) of the Tariff. It has been contended by him that the correct classification for duty was under item 72(A)(i)(d)(1) since the said cylinders constitute apparatus or appliances for a specific industrial plant. It was, however, urged by Mr. Patkar that the petitioners had not registered their contracts of import as required in the proviso of the said item 72(A) and, therefore, at any rate, the said cylinders could not have been assessed under item 72(A) of the Tariff. On the contrary, the said items, in the circumstances, were clearly falling under item 72(C) which refers to apparatus and appliances not to be operated by manual or animal labour, which are designed for use in an industrial system as parts indispensable for its operation and have been given for that purpose some special shape or quality which would not be essential for their use for any other purpose.

10. A careful reading of item 72(C) and 72(A)(i)(d)(1) is enough to show that the empty dissolved acetylene cylinders could have been assessed both under item 72(C) and 82(A), because they are clearly apparatus or appliances for industrial purposes. However, it was contended by Mr. Kakodkar that item 72(A) is having a larger field of application and item 72(C) is attracted in cases more specialized, since in item 82(A)(i)(d)(1), the only requirement is that the apparatus and appliances are for a specific industrial purpose, where as the apparatus and appliances under item 72(C) should be those that are designed for use for industrial purposes and had been given for that purpose some special shape or quality which would not be essential for their use for any other purpose. It appears that the learned counsel is correct in his view, and in fact, item 72(A) is of a larger and general application and that the apparatus and appliances which fall under item 72(C) are those which are part of the machinery utilized for the manufacture of a product. However, there is one aspect to be considered and that is under the proviso to item 72(A), it is necessary that the contract is duly registered. Admittedly, the import licence and the contract for the import of the said cylinders had not been registered by the petitioners and in the circumstances, it would appear that the said cylinders could not have been assessed under Item 72(A). It was, however, submitted by Mr. Kakodkar that the registration of the contract was not done on account of the advice given to the petitioners by the Appraiser of Customs House, Marmagoa. In fact, the petitioners had approached the said Appraiser of Customs House, Marmagoa, and sought to know what was the duty to be paid on the dissolved acetylene cylinders. The Appraiser, by his letter dated 28th November, 1975, had stated that the cylinders were assessable to duty under item 72(C) and that no countervailing duty was payable. In view of this opinion of the Appraiser of Customs, the petitioners felt that the goods were to be assessed under item 72(A). They did not pursue the matter, not only because the rate of duty under both the items was the same, but also because the only benefit that would accrue to them by assessing under item 72(A) was practically given to them by saying that no countervailing duty was to be paid. In the circumstances, according to Mr. Kakodkar, the non-registration of the contract is not of much importance and it is a mere formality which was not complied with. Otherwise, the competent authority, namely, the Directorate General of Technical Development, had recommended that the import licence of the petitioner be endorsed as a project import in order to avail them of the concessional rate of customs duty. Thus, the petitioners could have registered the contract and got the advantage of the exemption granted by notification dated 20th August, 1965. They were not expecting, in the circumstances, that, at a later stage, the customs authorities would change their mind and would charge also countervailing duty, depriving them from the benefits under item 72(A) of the Indian Customs Tariff.

11. The proviso to item 72(A) lays down that the items mentioned therein will be assessable at 40% ad valorem provided they are imported under one or more specific contracts, which have been registered with the appropriate Customs House in the manner prescribed by regulations which the Central Board of Excise and Customs may make under Section 157 of the Customs Act, 1962 (52 of 1962) and such contract or contracts has or have been so registered before any order is made by the proper officer of customs permitting the clearance for home consumption, or deposit in a warehouse of such items, components or raw materials. The proviso requires, as such, not only the registration of the contracts with the appropriate customs house but, further, that such registration is done before any order is made by the customs officer for the clearance of the said goods. It is thus clear that unless and until an order is made for the registration of the contract, the goods which may fall for duty under item 72(A) cannot be assessed under the same item. Admittedly, such registration did not exist in the case before us and in the circumstances, whatever may be the reasons that caused the petitioners not to register the contract, the fact remains that no registration exists and a condition precedent laid down in the said proviso had not been satisfied. Therefore, in our view, the customs authorities had no way out and had necessarily to assess the gas cylinders under the only other item which was applicable to them, namely item 72(C).

12. Mr. Kakodkar further submitted that, in any event, the fact remains that the empty dissolved acetylene cylinders were clearly falling within the purview of item 72(A) of the Tariff and but for the non-registration of the contract, they would have been assessed under the said item. Mr. Kakodkar submitted that the Directorate General of Technical Development (Industrial Gas, etc.) had clearly recommended that the import licence of the petitioners be endorsed as a project import and, therefore, it was only natural that the concerned authority would have endorsed the said licence as project import, if the matter had been duly pursued by the petitioners. However, on account of the aforesaid advice of the Appraiser of Customs, the petitioner did not pursue the matter. However, it is clear that they were fulfilling all the conditions and were actually entitled to get the benefit of the notification dated 20th August, 1965, that is exemption for the payment of countervailing duty leviable under Section 2A of the Indian Tariff Act. It is no doubt true that the Appraiser of Customs, Marmagoa, by his letter dated 28th November, 1975, had informed the petitioners that the cylinders were assessable to duty under item 72(C) ICT and that the rate of duty was 40% ad valorem, and further, that no countervailing duty was payable. He also further informed that no formalities/requirements other than the usual were to be complied with. Surprisingly, however, by their letter dated 21st July, 1976, the petitioners approached the aforesaid Directorate General of Technical Development and sought their recommendation that their import licence should be endorsed as a project import. The said Directorate by letter dated 4th August, 1976 made the said recommendation in order that the petitioners could avail themselves of the concessional rate of customs duty. One fails to understand as to why the petitioners approached the aforesaid Directorate General of Technical Development, if they were missed by the advice given to them by the Appraiser of Customs. In fact, the Appraiser of Customs gave his advice on 28th November, 1975 and it was many months after, that is in July, 1976, that the petitioners approached the aforesaid Directorate General. This shows that actually the petitioners were not misled by the opinion or advice of the Appraiser of Customs. Thus, the question that arises is why, after having taken pains to move the said Directorate General to get their import licence endorsed as project import, the petitioners did not pursue the matter. Was it for the advice of the Appraiser, or was it for some other reason, is a question that remains unanswered. It may be pointed out that one of the possibilities is that, perhaps, they were satisfied that the endorsement would not be made. In the circumstances, therefore, the fact that remains is that the licence was not endorsed at all as project import and on the other hand, the contract for the import of the cylinders was not at all registered. This being the case, it is clear that on one hand, the gas cylinders could not be assessable under item 72(A) for want of registration of the contract and on the other, it is not established that the said items, even if falling under the purview of item 72(A), were to be exempted by virtue of the provisions of the notification 122 of 20th August, 1965. In the circumstance, therefore, in our view, it is not possible to hold that the customs authorities had erred by levying countervailing duty on the aforesaid empty dissolved acetylene cylinders.

13. In the result, this petition partly succeeds and consequently, the rule is made absolute only insofar as the duty on acetone and saturation gas was levied under item 28 of the Indian Customs Tariff. The respondents are, so such ordered to refund to the petitioners the excess import duty paid to them to the tune of Rs. 9,634.80 within one month from today. There will be no order as to costs.

14. The learned counsel for the respondents orally applies for leave to the Supreme Court on the ground that Substantial questions of general importance arise out of the judgment just delivered. Leave rejected since, in our view, no such questions arise.


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