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Sarada Industries Vs. Joint Secretary to the Government of India - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtChennai High Court
Decided On
Case NumberW.P. Nos. 2631, 2632 and 3464 of 1977
Judge
Reported in1981(8)ELT262(Mad)
AppellantSarada Industries
RespondentJoint Secretary to the Government of India
Appellant AdvocateK.C. Rajappa, Adv.
Respondent AdvocateU.N.R. Rao, Adv.
DispositionPetition allowed
Cases ReferredCarborandom Universal Ltd. v. Assistant Collector of Customs
Excerpt:
- .....were unfit for use as component parts of any other machine, in other words, that the particular dies imported were not of interchangeable character, and hence they ought to have been classified only under the first part of item 72(3), and not .under the exclusion clause. but the appellate collector rejected all the said contentions and dismissed the appeals, confirming the orders of the assistant collector. therefore, the petitioner preferred further revisions to the respondent herein raising similar contentions as raised before the appellate collector, but the said revisions were also not successful. it is only as against the said orders passed in the revisions by the respondent, these writ petitions have been now preferred.4. the common questions that arise for consideration in.....
Judgment:

Ratnaval Pandian, J.

1. These writ petitions have been filed by one and the same jpjrson, viz, one M/s. Sarada Industries, Ambattur Industrial Estate, Madras-58, seeking writs of certiorari quashing the orders of the Joint Secretary to the Government of India, Ministry of Finance, Department of Revenue and Insurance, the respondent in all the three petitions, made in (1) Order No. 1571 of 1974, dated 11-4 1974, confirming, on revision the order passed by the Appellete Collector of Customs, Madras, in App No.C. 3/369/73, dated 6-8-1973 (subject matter in W.P. 2632 of 1977) and (2) Order No. 3671 of 1975, dated 10-10-1975, commonly made in two revisions, confirming the orders passed by the Appellate Collector of Customs, Madras in App. No.C. 3/2256/73 (subject matter in W.P. No. 2631 of 1977) and C. 3/1911/74 (subject matter in W.P. No. 3464 of 1977).

2. The petitioner is a partnership firm carrying on the business of manufacture and sale of automobile parts, bolts, nuts and screws, at Madras. Among the various machines, installed at this factory, there is a Thread Rolling machine imported from Tsugami Corporation, Japan. The writ petitioner imported a consignment of thread roll dies and knurl dies for the working at the said machine, which dies are the component parts of, and essential for the working of, the machine. The dies so imported were assessed under item No. 71(a) of the First Schedule to the Indian Customs Tariff (Indian Customs and Central Excise Tariff, Volume I), by the Assistant Collector of Customs, Madras, at the rates which were prevailing during the relevant periods of importation, viz. in March 1972, March 1973 and March 1974.

3. According to the petitioner, the imported goods should have been classified and assessed under item 72(3), and not under item 71 (a) as done by the Assistant Collector, since these goods are only the component parts of the thread rolling machine, and therefore, they filed refund applications on 21-7-1972, 25-6-1973 and 30-5-1974, before the Assistant Collector of Customs, Refund Section (Appraising), Madras-1. The Assistant Collector Tejected the said claims, holding that the dies fall within the exclusion clause of item 72(3) and as such they were assessable under iiem 71(a). Aggrieved by the said order, the petitioner preferred appeals before the Appellate Collector of Customs, Madras, contending that the Thread rolling dies in question were component parts of and essential for the working of the machine and were unfit for use as component parts of any other machine, in other words, that the particular dies imported were not of interchangeable character, and hence they ought to have been classified only under the first part of item 72(3), and not .under the exclusion clause. But the Appellate Collector rejected all the said contentions and dismissed the appeals, confirming the orders of the Assistant Collector. Therefore, the petitioner preferred further revisions to the respondent herein raising similar contentions as raised before the Appellate Collector, but the said revisions were also not successful. It is only as against the said orders passed in the revisions by the respondent, these writ petitions have been now preferred.

4. The common questions that arise for consideration in these writ petitions are :-(1) What is the correct amount of import duty chargeable on. the thread rolling dies which were admittedly imported from Japan in 1972, 1973 and 1974 (2) Whether the consignments of the thread rolling dies fell within item72(3) or within item 7l(a) of the First Schedule to the Indiaa Customs Tariff ?

It is the admitted case that the petitioner imported these dies from Japan,, to be used in Tsugami Thread rolling machines, under three consignments which arrived at Madras Port in March 1972, March 1973 and March 1974, and that these imported goods were assessed under item 71 (a), levying the duty at the rates which were prevailing during the relevant periods of importation. It was only after the payment of the duty, the petitioner filed revision applications on the ground that the consignments imported would fall only within item 72(3} and not under item 71(a). This plea of the petitioner was not accepted by the. Customs authorities and finally by the Government of India and the claims for refund of the differential duty collected from the petitioner were rejected.

5. Before launching a discussion on the submissions made by the respective counsels, I would like to reproduce below items 71(a) and 72(3) of the First Schedule to the Indian Customs Tariff. Item 71 (a) reads-

'71. Hardware, ironmongery and tools, and parts thereof, all sorts,, not otherwise specified, including incandescent mantles, but excluding, machine tools and agricultural implements-

(a) tools and parts thereof'. m 72(3) reads :-

'72. (3) Component parts of machinery as defined in item Nos. 72,. 72(1) and 72(2) and not otherwise specified, namely, such parts only as. are essential for the working of the machine as apparatus and have been given for that purpose, some special shape or quality which would not be essential for their use for any other purpose, but excluding small tools like, twist drills and reamers, dies and taps, gear cutters and hacksaw blades : Provided that articles which do not satisfy this condition shall also be-deemed to be component parts of the machine to which they belong if they are essential to its operation and are imported with it in such quantities as. may appear to the Collector of Customs to be reasonable'.

I think that a description of the imported die would be relevant for rendering a decision on the question whether the particular die imported would fall under item 72(3) or under item 71(a) by the operation of the exclusion clause of item 72(3). The relevant portion in the brochure issued by the Tsugami Trading Corporation in respect of the design, specifications and quality of the thread rolling dies imported, reads thus-

'Each set of dies are to be designed and manufactured in accordance with specifications of thread etc. to be rolled. In respect of width of dies-which corresponds with rolling length, ROL 6 accepts dies of two standard' widths,1 40 mm and 60 mm, and ROL 15 those of six standard widths,. 40 mm, 60 mm, 80 mm, 100 mm, 120 mm and 150 mm. Wider dies can spe- cialiy be prepared but in this case the machine must be modified for oversize spindles. Actual rolling length is several millimetres less than the width of dies.

Materials of dies are very special steel alloy developed by Tsugami to meet the requisition of strength and wear resistibility'.

Thus, the above passage shows that the dies in question were specially designed and made out of special metal of high quality to suit particular sizes of shafts fitted on the Tsugami Thread Rolling machines and the said dies could be used only for the working of machines like the ones imported by the petitioner, on being mounted on the shafts fitted on the said machines. When once this position is accepted, then it can be said that these dies could in no circumstances be used for any other purpose excepting for the purpose for which they were imported. In other words, if there is any deviation in the design, specification, quality or size, in the dies, they would be of no use to the; particular machine and the purpose for which they were imported would be completely defeated.

5. Mr. U.N.R. Rao, learned Senior Standing counsel for the Central Government, appearing for the respondent, would not seriously question the specifications of the dies imported and their essentiality for the working of the machine, but he would urge that since 'dies' notwithstanding their essentiality for the working of the machine, are brought under the exclusion clause of item 72(3) specifically, the duty could not be levied under item 72(3), but only under item 71 (a). When a specific question was put to Mr. Rao as to whether the imported dies are not the component parts of the machinery, essential for the working of the said machine and as such an indispensable and integral part of the machinery, he would straightaway answer it in the affirmative, but yet, he would argue that item 73(3) specifically excludes these dies, bringing them within the category of 'small tools' as adumbrated in the exclusion clause of item 72(3) and that the petitioner has not proved that these dies are not outside the exclusion clause of item 72(3), and therefore, these consignments had become exigible to import duty under item 71(a).

6. At this juncture, I would like to point out that even the Appellate Collector of Customs, while meeting the arguments of the writ petitioner that the dies are only the component parts of the Tsugami thread rolling machines, has recorded the following finding-

'May be, as contended, the tread roll dies imported in sets of 4 are capable of being used only on Dyana Rol Form and Thread Rolling machine T. Rol. 15. It is however seen from the invoice produced at the time of personal hearing, different sets of dies are required for working, the machines depending upon the thread specifications, diameter and length of the work material involved and the dies under reference are therefore no different then small tools to be attached to the main machine depending upon the job on hand.'

The above finding makes it clear in unambiguous terms that the Customs authorities in a way have admitted that the imported dies were capable of being used only onthe thread rolling machines, in other words, that the imported dies are the comp'onent parts of the machine, essential for its working, and incapable of being used for any other purpose.

7. The next question that arises is : Can it be said that me imported dies in question could be assessed under item 71 (a), by bringing them within the category of 'small tools' coming under the exclusion clause of item 72(3) irrespective of the admitted fact that they are component parts of the machine and indispensable for the working of the machine and forming an integral part of the same ?

Mr. Rajappa, in support of his submission that when once these dies are proved to be the component parts of the machine, they would fall within the first part: of item 72(3) and that they could not be brought within the exclusion clause of item 72(3), so as to bring them under item 71(a), would rely on the following two decisions, viz., Carborandom Universal Ltd. v. Assistant Collector of Customs, 82 L.W. 28, and Siemens Engineering and . v. Union of India, : AIR1976SC1785 .

8. In Carborandom Universal's case, 82 L.W. 28, the facts were-The petitioner therein imported from manufacturers in Switzerland for use in the manufacture of coated and bounded abrasives, an article known as 'silk bloting cloth' which according to them, was an indispensable component part of the machinery designed to affect the proper seiving of grains which were used in the manufacture of abrasives. The petitioner wanted to pay customs duty under item 72(3) contending that the imported 'silk bloting cloth' is an essential part of the machinery, used for the manufacture of abrasives and it was intended for that purpose and that its suppliers had also cut the cloth into the specified measurements for the purpose of fitting into frames and that the fact that it had been cut into standardised measurements would be a strong indicia to show that it became specifically adopted for its use as a component part of the machinery. The respondent therein resisted the claim stating that the goods imported had got a larger use in other than flour mills and that there was a possibility of its being used as a wearing apparel and hence it was liable to be assessed under item 48(c). Rejecting the objection raised by the respondent as irrelevant, the learned Judge accepted the case of the petitioner, holding that there was no question of any classification, but that the goods fall under the earlier part of item 72(3), being a component part of the machinery.

The facts of the decision in Siemens Engineering and ., under the strength of a licence issued in its favour, imported Rayon Spinning frames excluding pot motors, from Japan. But, so far as pot motors were concerned, they authorised the appellant therein to import from Germany 4000 of those motors for initial installation of the Spinning frames. Pursuant to the authority so given, the appellant placed orders for 4000 pot motors with manufacturers in Germany and imported the same in seven different consignments under the Import Licence of Kesoram Industries and Cotton Mills Ltd. These consignments arrived at Calcutta port between September and December 1961. The appellants claimed before the Customs authorities at the time of assessment of import duty on these consignments, that pot motors imported by them fell within item 72(3) of the First Schedule to the Indian Customs Tariff and were chargeable to import duty under that item at the rate of 15 per cent of their accepted value. The claim was accepted by the Customs authorities who allowed the goods to be cleared on payment of import duty under item 72(3). However, within a short time thereafter, the Assistant Collector of Customs issued seven separate notices of demand in respect of these consignments, claiming that customs duty at the rate of 15 per cent had been short-levied, on the ground that pot motors were assessable at the rate of 20 per cent, and requiring the appellants to pay the difference. The appellants objected to the above claim and made representations stating that the pot motors imported were vital com- ponent parts of the Rayon Spinning machine already imported, that the said motors were of very high speed and specially designed for use in spinning frames for manufacturing Rayon thread, that they could in no circumstances be used for any other purpose excepting for the purpose for which they were imported and thac the accessories of these motors were specially designed to suit particular size of spinning pots as well as spinning chambers. On the above submission, they claimed that the proper assessment would be only under the proviso to item 72(3). But, this claim was rejected throughout and ultimately by the Government of India. It was as against this order rejecting their claim, the appellant took the matter to the Supreme Court. The Supreme Court, having regard to the facts of the case, accepted the contentions of the appellants therein and held- 'The pot motors, therefore, fell within the description given in item 72(3).'

9. These two decisions are, in my view, squarely applicable to the facts of thess writ petitions. During the course of his argument, Mr. Rajappa incidentally referred to Sec. 1 of the book 'Guide to Members Activities' 1962 Publication issued by the Machine Tool Traders Association viz., 'Index to Products manufactured or supplied by Members of the Machine Tool Traders Association' wherein at page 46, 'taps and dies' and 'thread rolling dies' are shown as separate products. This was referred to by the learned counsel for the purpose of showing that the word 'die' in its ordinary trade parlance is entirely different from 'thread roiling die' .which is a product specifically designed to suit particular machines and made out of special metal of high quality under particular specifications.

10. Now, coming to the submission of Mr. U.N.R. Rao, it may be stated that the exclusion clause of item 72(3) excludes 'small tools By way of illustration for the term 'small tools', twist drills, reamers, dies, taps, gear cutters and hacksaw blades are mentioned in the said clause. Now, the question is whether the imported die in question which has been 'admittedly specially designed and made to particular specifications and imported as a component part of the Tsugamt thread rolling machine and essential for its working' can be brought within the category of 'die' occurring in the list of products given by way of illustration for the term 'small tools' in the exclusion clause.

11. The laxigraphical meaning of the word 'tool' given in the Shorter Oxford Dictionary reads thus-

'Tool-Any instrument of manual operation, a mechanical implement for working upon something, as by cutting, striking, rubbing or other process in any manual art or industry, use one held in and operated directly by the hand, but including also certain simple machines, as the lathe.'

The term 'tool' has been defined in McGraw Hill's Dictionary of Scientific aod Technical terms at page 1517 thus--

'Any device, instrument, or machine for the performance of an operation, for example, a hammer, saw, lathe, twist drill, drill press, grinder, planer, or screwdriver....'

The Corpus Juris Secundum, Volume LXXXVI at page 916, explains the meaning of the word 'tool' thus-

'Originally, the term 'tool' was applied only to instruments of manual operation and the usual meaning of the term is an instrument of manual operation, an instrument to be used and managed by the hand instead of being moved and controlled by the machinery, some simple instrument used by the hand, an implement used by the hand in working a simple mechanism 'f implement, as a hammer, chisel, spade etc., used in working, moving, or transforming material, an instrument of manual operation as a hammer, saw, plane, file, or the like, used to facilitate mechanical operations, as distinguished from an appliance moved and regulated by machinery as implement, any implement or instrument used by a craftsman or labourer at his work, a mechanical implement....In law,! the word 'tool' includes any instrument or apparatus necessary to a person in the efficient prosecution of his trade or calling, any implement commonly used by the hand of one man in some manual labour necessary for his subsistence....'

When such is the meaning given to the term 'tool', can the term 'small tool' be said to include a 'thread rolling die' which has been specially made for the essential working of the Tsugami Thread rolling machine My answer would be that the imported die in this case cannot be brought under the category of'small tools' within the meaning of the exclusion clause. The concurrent and cumulative effect of my above.reasoning in the light of the observations made by this Court and the Supreme Court would be that the real test in this case is whether the imported goods are the component parts of the Tsugami Thread rolling machine and whether such parts only are essential for the working of the machine, having been made for that purpose with some special shape or quality, which would not be essential for any other purpose. When once this test is satisfied, then the goods imported would not fall under the exclusion clause of item 72(3). As I have arrived at the conclusion, for the reason stated above, that the thread rolling dies imported by the petitioner herein are not small tools but are component parts of the Tsugami Thread rolling machine, essential for its working, being made under particular specification and size, I hold that these goods would fall only within the first part of item 72(3) and not under its exclusion clause so as to be brought within item 71(a).

12. In the result, the impugned orders of the Government of India in all these writ petitions are quashed and the petitioners are allowed with costs. The Customs authorities are directed to refund the differential duty collected from the writ petitioner firm in excess, in accordance with their refund applications. Costs one set; counsel's fee Rs. 250/-


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