Ajit Kumar Sengupta, J.
1. This application under Article 226 of the Constitution of India is directed against the order dated 9th May, 1984 passed by the Collector of Customs, Calcutta, confiscating the goods under Section 111(d)/111(m) of the Customs Act, 1962 and giving an option to the petitioner under Section 125 of the said Act to clear the goods on payment of fine of Rs. 50,000. This application has been moved upon notice.
2. Mr. Amjad Ali, learned Advocate appearing for the respondents, has produced the records. It is agreed that the matter can be disposed of without any affidavit as the point involved in this application is purely a question of law. Mr. Ali has, submitted that the respondents, however, do not admit the correctness of the allegations made in the petition save as would appear from the records.
3. The facts which are appearing from the records and the petition are stated hereinafter. The petitioner, M/s. Orissa Oil Industry Limited, Calcutta had imported on 19th March, 1984 two double pumps (hydraulic equipment) and one hydraulic motor by air from West Germany. The hydraulic double pump was described as a component of a hydraulic excavator engine. By a letter dated 9th April, 1984, the petitioner-company clarified that the double pump is a hydraulic pump used in Demag H.36 Excavator. It develops a maximum pressure of 300 bars. It builds up hydraulic pressure for different operations of the excavator. By a letter dated 26th April, 1984 addressed to the Collector of Customs, the petitioner informed that the said pumps were required by actual user, M/s. Hindustan Motors Ltd., who would utilise those pumps as components for the manufacture of hydraulic excavators.
4. The clearance of the said consignment was sought to be made against a split up licence dated 27th December, 1983 bearing No. P/W/0487989. The said split up licence was issued against the original additional licence bearing No. P/W/ 2965407/C dated 25th November, 1982. The said split up licence was endorsed for importation of items as permissible under paragraph 186 of the 1983-84 Policy. The said licence was issued subject to the condition that the imported materials shall be disposed of to the eligible actual users. The conditions as laid down in paragraphs 186 and 232 of the Import and Export Policy Book for the period 1983-84 would also be applicable to the said licence. The validity period of the said licence expired on 30th November, 1983 and the licence was revalidated for a further period of six months subject to the condition that items which are not permissible for import against the additional licence during April-March, 1983-84 Policy period are not allowed to be imported during the extended period of validity of the licence. The goods were shipped on 16th March, 1984 and the importation falls within the extended period of validity of the licence. In other words, the items which are not covered by the said split up licence during 1983-84 Policy would not be allowed to be imported. The Collector of Customs held that the items in question are not covered by the licence and are, therefore, liable to confiscation. But in lieu of confiscation an option was given to the petitioner-company to pay a fine and get the goods released. Mr. Goutam Mitra, learned Advocate appearing for the petitioner submitted that the goods in question are covered by serial No. 411 of Appendix 5 of 1983-84 Policy period. Mr. Amjad Ali on the other hand has contended that the Collector of Customs in his order has given the reason why the goods are not covered. He has supported the reasoning and the order of the Collector of Customs.
5. The additional licence against which the split up licence was issued was subject to the restriction contained in paragraphs 186 and 232 of the Import and Export Policy Book for the period 1983-84. Paragraph 186(4), inter alia, provides as follows:
The additional licence so granted to Export Houses will be valid for import of the items appearing in Appendices 5 and 7 excluding however, the items appearing in Appendix 26 and subject to the condition that the import of a single item shall not exceed Rs. Ten lakhs in value.
Paragraph 186(10) reads as follows:--'Goods imported by export houses against additional licences will be disposed of by them in the same manner and subject to the same conditions, as laid down in para. 185 above.
Paragraph 185(4)(ii) reads as follows:--'Raw materials, components and consumables will be disposed of to eligible actual users (industrial) and intimation about the same shall be given by the export house in the periodical returns to be furnished under para. 192 of this policy.
6. The said licence is, therefore, valid for import of the items appearing in Appendices 5 and 7 excluding however Appendix 26. Such items shall be, however, disposed of to actual users. Appendix 5 contains the list of raw materials, components, consumables, tools and spares (other than iron and steel ferro alloys). Serial No. 411 of the said list is in the following terms:--
Hydraulic equipment (like pumps, motors, cylinders, valves, accumulators and power units) and components thereof.' But Appendix 5 excludes the items appearing in Appendix 26 and contains the list of automatic permissible items import of which would not be allowed to export houses against the additional licence. Item No. 65 of Appendix 26 is in the following terms:--
Items covered by Appendix 30 not separately appearing in this appendix.
7. It, therefore, follows that the items which are appearing in Appendix 30 would not be allowed to be imported by the export house against the additional licence. Appendix 30 contains the list of spares to be treated as non-permissible. Item No. 3 of the said list mentions pumps (all types). Appendix 5 contains the list of automatic permissible items of raw materials and components, etc. Hydraulic equipment (like pumps, motors, cylinders, valves, etc., and components thereof) are allowed to be imported under item No. 411 of Appendix 5 subject to the restriction contained in Appendix 26. Appendix 26, however, imposes restriction on the entitlement of the export house for import of certain items inter alia under Serial No. 65. Serial No. 65 of Appendix 26 refers to Appendix 30. In other words, the items appearing in Appendix 30 cannot be imported against the additional licence. Appendix' 30 specifically refers to the list of spares to be treated as non-permissible including pumps (all types). Chapter 22 of the relevant Import Policy contains the clarification and interpretation of the policy. Paragraph 239(5) provides that Appendices 3 and 5 do not refer to spares anywhere, but some entries therein relate to components, consumables, sub-assemblies or modules. Paragraph 5(10) defines 'component' as follows:--
'Component' means one of the parts sub-assemblies or assemblies, of which a manufactured product is made up and into which it may be resolved and includes an accessory (or attachment).
Paragraph 5(11) defines 'spares' as follows:--' 'Spares' means a part or subassembly for substitution, i.e., ready to replace an identical siilar part of sub-assembly or assembly, if it becomes faulty or worn out, and includes, an accessory (or attachment) in the same regard.
8. Thus distinction has been made in the policy itself between 'component' and 'spares'. It is no doubt true that pumps of all types are included in Appendix 30 but they are included as spares. They are to be treated as 'non-permissible' items when imported as spares. 'Spares' as defined by the policy itself means a part or a sub-assembly or an assembly for substitution, i.e., ready to replace an identical similar part or a worn out part and includes an accessory (or attachment) in the same regard. But a component is one which is required for the purpose of manufacture of an end-product. Appendix 5 permits the import of components. When an item is to be used as a component and not as a spare, such an item will be under Appendix 5 and it will not come within the mischief of appendix 26 read with Appendix 30. The policy itself has made it quite clear that Appendix 3 or 5 does not refer to spares anywhere but they relate to components, consumables, etc. Hydraulic pumps are included in Appendix 5. This shows that the hydraulic pumps are basically components to be utilised by the manufacturers for manufacturing their end-products. Such items may be imported by the importer also as spares to replace the identical similar parts. In that case, it will not be a component but merely a spare. The said pumps are used as components for the manufacture of certain other items. Under no stretch of imagination it can be said that such pumps are used only as spares and not as components. It has not been disputed that Hindustan Motors Ltd. requires the said hydraulic pumps for manufacture of excavators. In their letter dated 26th April, 1984 being Annexure 'E' to the petition, Hindustan Motors have stated as follows:--
We, M/s. Hindustan Motors Ltd., having our factory at Hindmotor, Hooghly, hereby solemnly declare that:--
1)We are actual users of the above materials which will be purchased by us for our own consumption from M/s. Orissa Oil Industries Ltd. on local sale basis (relating to Invoice No. 26727 dated 16th March, 1984 of M/s. Mannesmann Demag Baumaschinen, West Germany), will be solely used in production of excavators at our works. Above materials will not be disposed off as it is in the market in any manner.
2) We are registered with the D.G.T.D., New Delhi, and are holding Ind. Licence No. L/II/N-II/59 dated 17th August, 1959. A photo copy of the same is enclosed herewith and we certify that the same has neither been cancelled nor withdrawn or otherwise made inoperative.
Per Pro Hindustan Motors Limited
Sd. (A.G. Dhargaya)
9. It has not been disputed that the items which have been imported are required as components for the manufacture of excavators by Hindustan Motors Ltd. It is not a case of replacement of an identical similar part or sub-assembly. It is a case where the pumps are required for the purpose of manufacturing excavators. The prohibition contained in Appendix 26 read with Appendix 30 is with regard to the import of spares by an export house. It does not contain any restriction so far as the import of the components as mentioned in Appendix 5. The licence of the petitioner is endorsed for import of components, etc., which would be utilised by the actual user only. Hindustan Motors Ltd. are the actual users of the hydraulic pumps imported by the petitioner and they have given a declaration that such pumps, are not used as spares but they are the components for the purpose of manufacturing excavators. If that be the position, then it cannot be said that the licence did not permit the importation of the goods in question.
10. When an item can be used both as a spare to replace an identical similar part or sub-assembly and as a component for manufacture of a product, in that event, it has to be ascertained how such an item is used by an actual user. The importer can only sell the item imported under the additional licence to an actual user and no one else. Therefore, the decisive factor to determine the nature and character of the item will be whether such item is used by the actual user as a component or as a spare. The authorities cannot determine the validity of the import solely on the basis of the restriction imposed under Appendix 26 read with Appendix 30. A distinction has deliberately been made in the policy itself between a spare and a component. It is clear from the policy itself that the same item can have different uses depending on the purpose of the actual user. In this case it is not disputed that the pumps would not be used as spares by Hindustan Motors Ltd., but as components for the manufacture of excavators. In the premises, the contentions of the respondents that pumps of all types are excluded from the purview of the additional licence in view of the provision of Appendix 26 read with Appendix 30 cannot be accepted.
11. It is well settled that if the interpretation of any fiscal enactment is open to doubt, the construction most beneficial to the subject should be adopted, even if it results in its obtaining an advantage. On a reasonable construction of the relevant provisions of the policy in the light of the facts mentioned above. I am of the view that in this case hydraulic pumps which having been imported by the petitioners for being used by the actual user (Hindustan Motors Ltd.) in the manufacture of another product (excavators), such items would come within the purview of components and not spares. The pumps in question are permissible items for import under Appendix 5 and cannot be treated as spares within the meaning of Appendix 26 read with Appendix 30.
12. For the aforesaid reasons this application succeeds. The order dated 7th May, 1984 passed by the Collector of Customs imposing a penalty of Rs. 50,000 is set aside. The order dated 9th May, 1984 on the bill of entry dated 29th April, 1984 is also set aside. The respondents are directed to release the two hydraulic pumps covered under licence No. P/W/0487989 dated 27th December, 1983 and the bill of entry dated 20th April, 1984 upon payment of the assessed duty. The consignment shall be released by the Customs authorities within 48 hours from the date of payment of the assessed duties. The respondents are directed to make necessary assessment and issue challans to the petitioner within 48 hours from the date of communication of this order. The respondents are also directed to issue wharfage rent exemption certificate in respect of the aforesaid goods from the date of noting of the bill of entry till the date of release.
13. Let a plain copy of this order, counter-signed by the Assistant Registrar (Court) be handed over to the learned Advocates for the parties.