ORDER
P.K. Desai, Member (J)
1. This appeal is directed against the order in original No. S/10-12/85 CIU dt. 25-7-1986 of the Addl. Collector of Customs, Bombay ordering confiscation vide Section 111(d) of the Customs Act, 1962, of the consignment declared as Motor Vehicle spares – Ball Bearings below 60 mm. sought to be cleared under 8 Bills of Entries, but granting the importers option to pay fine in lieu of confiscation (separately quantified against each Bill of Entry) as decided in the order and also imposing personal penalty of Rs. 1,50,000/- on the appellants – importers, vide Section 112 of the same Act.
2.1 The appellants imported the subject goods and filed Bills of Entry seeking clearance thereof against Import Licence dt. 21-5-1983 issued for import of spare parts needed for the purpose of providing warranty coverage or after sale service to their customers. The Appraising group completed the assessment on the basis of the declaration but it was pointed out at that time, that the said goods could not be used in manufacture of vehicles. The appellants stated that identical bearings were used in manufacture of vehicles, and also contended that it was not the stipulation in the licence that spares of only such items which were imported and used as original components in Motor vehicles could alone be imported. The goods were permitted clearance under provisional assessment and on execution of ITC bond.
2.2 Subsequently however, the Customs authorities received information that certain importers were importing banned type of ball and roller bearings as warranty spares against licences issued in that regard, and that the appellants had also imported such items under the licence, and had either allowed various dealers to utilise them or had sold them to traders in the market. Information was also received that the ball bearings so imported had multifarious uses. Further enquiry revealed that out of the eight consignments as aforementioned, imported by the appellants, three had been delivered to them at their factory premises and five others were lying at CWC warehouse and that the three consignments received by the appellants were sold to the Associated Auto Parts (P) Ltd. who were styled as the jobbers. Visit to the said company resulted in recovery of certain documents relating to sale, and the goods sold to them were found to have been kept in the custody of M/s Punjab Timber Traders. The said goods were therefore put under detention. The goods at CWC godown were also put under detention.
2.3 At the conclusion of the investigation, it was felt that with no proof showing that such ball bearings were used as original equipments in the vehicles manufactured by the appellants, they had not satisfied the condition of licence and further it could also not be ensured that the goods imported were to be used for the purpose for which they were said to have been imported, and that, otherwise, the subject ball bearings were covered under App. 3 and App. 4 of the Policy Book AM 84-85 and even vide Para 58(3) of AM 83 Policy, non-permissible spares could be allowed only upto the value of Rs. 1 lakh. The import was accordingly termed as unauthorised and notice to show cause dated 25-3-1986 against proposed confiscation vide Section 111(d) and imposition of penalty vide Section 112 of the Customs Act, 1962, was served, amongst others, to the appellants.
2.4 In their reply dated 6-5-1986, while denying the allegations levelled against them, the appellants inter alia, contended that they held the subject licence and that the subject ball bearings fell within the category of items permissible under the licence. They further stated that identical ball bearings manufactured within the country were fitted in the motor vehicles manufactured by them and that they were compelled to import those items only because of shortage of the local components. They further contended that they were not controlled by the provisions of Para 58(3) of the Policy Book AM – 83 but were covered under Para 59 thereof, and it was not essential that they ought to have used the same type of imported items as original components and it would be sufficient if identical parts were used as components. According to them, they manufactured large number of vehicles, playing all through out India and that because they themselves did not provide any after sales services, they had worked out a net of dealers and part jobbers, who would supply the spares and that the Associated Auto Spares Parts (P) Ltd. were their authorised jobbers. They denied the allegation of having sold the licence, and pleaded that the licensing authority had also served them with a show cause notice alleging sale of licence, but had subsequently dropped the same,
2.5 The adjudication proceedings were thereafter conducted and the impugned order was passed.
3.1 Mr. V.S. Nankani, the ld. advocate for the appellants, while initiating his submissions on the appeal, has declared that out of the several contentions raised as grounds in appeal, he is advancing his submissions only on one of them and is not pressing any other ground. He has pleaded that the only issue for determination here, which he is pressing for appropriate determination is,
“Whether the import of 8 consignments of ball bearing is valid against the licence produced, which is issued in terms of Para 59 of the Policy Book AM 82-83.”
The ld. advocate has submitted that the licence is issued during the Policy period AM 82-83, and it specifically mentions to have been issued “in terms of para 59 of AM. 83 Policy Book” which para is verbatim same as para 60 of the Policy Book AM 84.
3.2 Briefly explaining the working pattern of the appellants and adding that all the manufacturers of motor vehicles in the country follow the same pattern, the ld. advocate has submitted that the appellants manufacture motor vehicles and sell them ex-factory to their authorised dealers, who in turn sell them to the customers and that, for after sale services and warranty and making spare parts available, the appellants provide spares to the authorised jobbers by sale of parts to them, who in turn, supply to their stockist for being made available as spares. He however admits that there is no gravity of contract between the appellants and the stockist.
3.3 Referring to the licence, the ld. advocate has submitted that the endorsement on the licence is verbatim same as the provisions contained in Para 59 of the Policy Book AM 83. He has read the provisions of Paras 57 and 58 as also 59 of the Policy Book, and has submitted that the very reading indicates that provisions contained in Para 59 are not controlled by the provisions of the preceding paragraphs, and as such, even the non-permissible spares covered under Para 58 could be imported under licence issued vide Para 59. He has then pleaded that Para 59 permits import of such components as spares, which are used as original components, but does not stipulate that the original components also should be those which were imported. He has conceded that the ball bearings used as original components were not the imported one but were those manufactured in India, but asserts that they were of the same type. He has also pleaded that provisions of only Section 111 (d) and not of Section 111(o) are invoked and hence, actual use of the items imported need not be examined and that the only point would be whether the items stand covered under the licence. Concluding, the ld. advocate has pleaded that even the licensing authority has taken the lenient view, and same approach ought to be taken here.
4. Mr. KM. Mondal, the ld. SDR has pleaded that by the very admission of the appellants, the imported items are sold to others, who though branded as jobbers, are no more than the dealers, who are not bound to restrict the sales only as spares for the automobiles manufactured by the appellants. In his submission even if provisions of Para 59 of AM 83 Policy Book are taken as independent of Paras 57 and 58, the words “only such of the spares” makes it fairly clear that spares of only such of the items which were imported and used as original components, could stand covered under the licence. Referring to the provisions in the Policy Books AM 82-83 and AM 83-84, the ld. SDR has submitted that the ball bearings were otherwise non-permissible items and as such the concession given should be strictly construed and flouting the provisions could not be encouraged. As regards the approach of the licensing authority, the ld. SDR has submitted that the said authority was also not convinced of the bona fide and have only given benefit of doubt.
5. Considering the submissions made, there is no dispute about the identity of goods imported. There is also no dispute, that the ball bearings otherwise figure under the category of non-permissible spares and but for the subject licence, the appellants could not have imported them, except to the extent as permissible vide Para 58 of the Policy Book AM 83. The appellants have also accepted that the ball bearings used as original components, were not the imported ones. Their contention however is that those used as original components were identical in all respects, to those imported.
6.1. The issue for determination, as indicated above, however is whether the subject ball bearings could be imported under the licence. The licence, specifically mentions to have been issued in terms of Para 59 of AM 83 Policy Book. Said para 59 reads thus :
“Spares needed for the purpose of providing warranty coverage or after sale service to their customers, only such spares shall be permitted as were/are used by unit as components of the said items at the time of manufacture. Subject to the condition that the goods imported against this licence shall be used only for servicing and maintenance (whether free of cost or at a price) of the machinery equipment/vehicle manufactured by the licencee.”
Post – import utilisation being not raised as a ground in the show cause notice issued, that aspect need not be considered but the post importation condition may certainly provide an indication as to what is intended to be permitted for import under the subject licence.
6.2 The licence is basically granted for import of spares and the ‘Spare’ is defined in the Policy Book as “a part or sub-assembly or assembly for substitution i.e. ready to replace an identical similar part or sub-assembly or assembly, if it becomes faulty or worn out…”. Thus, the spare is an item which is meant to replace an item which has already gone as original component in the item manufactured. The spare, under the circumstances, is an item related to a component which has gone into the manufactured product.
6.3 Para 59 of the Policy Book AM 83, and the subject licence issued in confirmity with the said provision, permits import of spares, but then qualifies the entitlement to only such spares “as were/are used as components.” The definition of word ‘spare’ as reproduced above, by itself specifies that the spares are the replacements for components and even without addition of the rider as is done here, it would have conveyed virtually the same meaning as is now attempted to be given by the respondents. The policy framers have, even then, thought it necessary to add the qualifying clause as indicated above which obviously has to be looked at as conveying some specific meaning. No clause is used if it does not convey any specific meaning and any clause or qualifying provision inserted, could not be overlooked as redundant.
6.4 The only inescapable conclusion that can be drawn, therefore, is that the provisions are not intended to permit import of all or any type of spares and the words “only such spares shall be permitted as were/are used by them as components” has to be read as permitting import of spares of “such imported items” which have been used initially as component/equipment. Thus if and only if, the item used as original equipment/component is also an imported item, the import of such an item as spares, is made permissible. If the intention was otherwise, insertion of the condition was absolutely unnecessary, and the phraseology would have been either different or the qualifying condition would not have been inserted.
6.5 Post importation condition also ensures that the imported items should go only as replacements and makes explicit the intention of the policy that such spares should necessarily be utilised only for such machines which contain the same type of item as original component.
6.6 To reiterate, the ball bearings otherwise fall within the category of non-permissible spares, and the policy framers could never have intended and by putting specific qualifying clause have actually not intended, to permit import thereof, irrespective of whether such imported items have gone as original components.
6.7 Even assuming that provisions of Paras 58 and 59 of the Policy Book AM 83 were independent of each other, it cannot be assumed that by insertion of Para 59, the effect of Para 58 is intended to be entirely done away with, and only conclusion that can be drawn is that some further concession is intended to be given, subject to specific restrictions incorporated, to the manufacturers who have used the imported item as original components.
6.8 In this view of the matter, when the appellants accept the position that imported ball bearings have not gone as original components, the import thereof as spares under the licence produced, has to be held as non-permissible.
7. The evidence on record also indicates that the goods imported are being sold to the “jobbers” who themselves are not the persons engaged in repair of the vehicles and the items virtually go to the open market.
8. Under the circumstances, as discussed herein above, the issue as formulated by the ld. advocate for the appellant has to be answered in negative.
9. Submission is made that in any case, the appellants be given the same benefit as is given by the licencing authority, which, in the proceedings conducted on allegation of sale of licence, has not taken any further action by extending benefit of doubt. Here however so far as applicability of the provisions of Section 111(d) are concerned, there is absolutely no scope to adopt such an approach. When the goods are not importable under the licence, consequential order for confiscation has to follow.
10. Fine in lieu of confiscation, as assessed by the Adjudicating authority also does not appear to be disproportionate. The Ball bearings have high margin of profit and when no evidence is led to show that the same is excessive, the same is not interfered with.
11. As regards the personal penalty, though there is no scope to assume that the appellants had acted in an bona fide, because the licensing authority had also felt that there is some scope of doubt as to the mala fide in the transactions undertaken by the appellants, some leniency is extended and the personal penalty is reduced to Rs. 1,00,000/-.
12. Thus, with the modification that the personal penalty is reduced to Rs. 1,00,000/- (one lakh), the rest of the order in original is confirmed. The appeal is disposed of accordingly. Consequential relief, if any, to follow.