ORDER
P.C. Jain, Member (T)
1. Brief facts of the case are as follows :
1.1 The appellants herein have imported a consignment of 480 Nos. of goods described as A.C. Generators. Particulars of generators as given in the bill of entry and in the invoice are as follows :-
“ISA 32L9/2 KVA /50 Hz RPM
ISA/32L5150 /1.3Kva/50HZ/3000 RPM”
Since the generators are occurring at S. No. 12 of list J of the restricted items list of April-March 1992-1997 ITC Policy, the appellants herein were asked to explain or to produce the valid import licence. Description of S. No. 12 of list J is as follows :-
"Sl. No. Description of Items Nature of restriction
--------- ---------------------- ----------------------
1. .................... ....................
2. .................... ....................
3. .................... ....................
4. .................... ....................
5. .................... ....................
6. .................... ....................
7. .................... ....................
8. .................... ....................
9. .................... ....................
10. .................... ....................
11.
12. Electric portable gen- Permitted to be imported only
erators up to 3.5 KVA against a licence or in accordance
with a Public Notice issued in
this behalf."
1.2 The appellants explained vide their letter dated 24-6-1992 that the goods imported are not complete electric portable generators. The following items are required for the manufacture of portable electric generators, namely;
(a) Internal combustion engine as a prime mover or driver
(b) Alternator
(c) Instrument and control panels
What they have imported are merely alternators. It was further stated by the appellants that manufacturers’ catalogue as well as the name plate, description of items imported by them reads “alternator and not electric portable generators”.
1.3 The adjudicating authority, however, has not accepted the contention of the appellants. It has stated that entry at S. No. 12 of the list J does not say whether it is with or without prime movers and other accessories since the portable A.C. Generator imported by the appellants is in fully assembled condition. The lower authority has held that it is hit by the entry and the appellants need a licence for its import.
1.4 The appellants had also claimed the benefit of Notification 155/86 which reads as follows :
” … the Central Government being satisfied that it is necessary in the public interest so to do, hereby exempts parts required for the purpose of initial setting up or for the assembly or manufacture of any article specified in column (2) of the Table hereto annexed, when imported into India and proved to the satisfaction of the Assistant Collector of Customs, to be so required for such setting up, assembly or manufacture, from so much of that portion of duty of Customs leviable thereon which is specified in the corresponding entry in column (3) of the Table subject to the following conditions, namely :-
(1) The authorities mentioned below are satisfied and certify in each case that the description and quantity of the parts in question as are or will be required for the purpose specified above and recommend grant of the above exemption:-
(i)…
(ii) The Director of Industries, or the Commissioner of Industries, or any officer not below the rank of Joint Director of Industries specifically authorised by the Director of Industries or the Commissioner of Industries of the State concerned in the case of firms which are classified as falling in the small scale sector
(iii)…………………. (xix)………………….
(iv)....................... (xx).......................
(v)........................ (xxi)......................
(vi)....................... (xxii).....................
(vii)...................... (xxiii)....................
(viii)..................... (xxiv).....................
(ix)....................... (xxv)......................
(x)........................ (xxvi).....................
(xi)....................... (xxvii)....................
(xii)...................... (xxviii)...................
(xiii)..................... (xxix).....................
(xiv)...................... (xxx)......................
(xv)....................... (xxxi);....................
(xvi)...................... (xxxii)....................
(xvii)..................... (xxxiii)...................
(xviii).................... (xxxiv)....................
(xxxv).....................
(2)........................
TABLE
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Sl. No. Description Rate of
duty
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(1) (2) (3)
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1. Any Article falling under the following head-
ing Nos. and sub-heading Nos. of the First
Schedule to the Customs Tariff Act, 1975 (51 of
1975), namely:-
------------------------------------------------------------------
(1) (2) (3)
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(a)................... (i)...................
(b)................... (j)...................
(c)................... (k)...................
(d)................... (1)...................
(e)................... (m)...................
(f)................... (n)...................
(g)................... (o)...................
(h)................... (p)...................
(q) 85.01 and .85.02 "
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The adjudicating authority has denied the benefit of the said notification. It has held that what has been imported are not the parts but are fully assembled A.C. generators and as such the appellants are not eligible to avail the benefit of the said notification. The item imported, holds the adjudicating authority, at best can be categorised only as a sub-assembly and not parts or assembly of A.C. Generators.
1.5 In view of the above findings, the goods were confiscated with an option to redeem the goods on payment of a fine of Rs. 5 lakhs. No penalty was, however, imposed keeping in view the fact that the manufacturer is an SSI Unit and an actual user and this being the first case of ITC contravention noticed against them.
2. Learned advocate, Shri T.P.S. Kang has now urged that it is admitted after examination of the goods that no prime movers have been imported alongwith the alternator which is loosely called a ‘generator’. He, therefore, submits that the imported goods are not hit by S. No. 12 of list J of ITC Policy AM 1992-97. What is hit by S. No. 12 is a complete generator upto 3.5 KVA. An alternator by itself will not produce any electricity unless there is a prime mover attached to it. He, therefore, submits that the goods can be imported without licence and, therefore, confiscation of the goods is, therefore, not warranted.
2.1 On the question of eligibility to Notification 155/86, learned advocate draws attention to Tariff Headings 85.01 and 85.02. Description of Tariff Headings 85.01 and 85.02 reads as follows :-
——————————————————————
"Heading Sub-heading No. Description of articles
No.
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(1) (2) (3)
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85.01 Electric motors and generators
(excluding generating sets).
8501.10 -Motors of an output not exceeding
37.5 W
8501.20 -Universal AC/DC motors of an
output exceeding 37.5 W
-Other DC motors; DC generators :
8501.31 -Of an output not exceeding 750 W
8501.32 -Of an output exceeding 750 W
but not exceeding 75 KW
8501.33 -Of an output exceeding 75 KW
but not exceeding 375 KW.
8501.34 -Of an output exceeding 375 KW.
8501.40 -Other AC motors, single-phase.
-Other AC motors, Multi-phase.
8501.51 -Of an output not exceeding 750 W
8501.52 -Of an output exceeding 750 W
but not exceeding 75 KW.
8501.53 -Of an output exceeding 75 KW
-AC generators (alternators):
8501.61 -Of an output not exceeding 75
KVA
8501.62 -Of an output exceeding 75 KVA
8501.63 -Of an output exceeding 375 KVA
but not exceeding 750 KVA.
8501.64 -Of an output exceeding 750 KVA.
85.02 Electric generating sets and rotary
converters.
-Generating sets with compres
sion-ignition internal combustion
piston engines (diesel or
semi-diesel engines):
8502.11 -Of an output not exceeding 75
KVA
8502.12 -Of an output exceeding 75 KVA
but not exceeding 375 KVA.
8502.13 -Of an output exceeding 375 KVA
8502.20 -Generating sets with spark-igni-
tion internal combustion piston en-
gines.
8502.30 -Other generating sets.
8502.40 -Electric rotary converters."
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He submits that the appellants have imported alternators to be assembled into electric generating sets which fall under Tariff Heading 85.02. This has been so duly certified by the concerned Director of Industries, as required under Notification 155/86. The appellants are, therefore, fully covered, according to him, by the terms of the said notification and alternator is clearly a part of generating set. The reasoning of the Collector that alternator is not a part but a sub-assembly is giving a meaning to the part beyond its normal term. Generating set admittedly comprises (i) alternator (ri) prime mover (iii) panels and controls. An alternator, therefore, is clearly a part of generating set.
3. Opposing the contentions of the learned advocate Shri B.K. Singh, learned SDR, on the other hand, reiterates the findings of the adjudicating authority. He submits that what has been imported are electric generators as commercially known, conceding as a matter of fact that prime mover has not been imported alongwith the alternator, he urges it does not take away the alternators from the category of the description ‘generator’. Generator and prime mover combined together is commercially known as generating set. S. No. 12 of list J, submits the learned SDR, restricts importation of electric portable generator upto 3.5 KVA without import licence. This serial number should be interpreted according to him, in the light of description of goods against S. No. 11 which restricts importation of “diesel generating sets upto 1500 KVA”. He submits that the list uses two expressions separately – ‘generating sets’ and ‘generators’. Therefore, a distinction has to be made between these two expressions. Generating set, as admitted to the appellants themselves, consists of an alternator/D.C. generator and prime mover. Therefore, the expression ‘generator’ in S. No. 12, according to the learned SDR, would cover only alternator/DC generator. In this view, the learned SDR submits that the goods require a licence. Since it has not been produced by the appellants the goods have been rightly confiscated by the adjudicating authority. On the question of eligibility to Notification 155/86, learned SDR draws attention not only to Tariff Headings 85.01 and 85.02 but also to Tariff Heading 85.03 which reads as “parts suitable for use solely or principally with the machines of Heading No. 85.01 or 85.02. He, therefore, submits that the parts referred to in Notification No. 155/86 should have fallen under Tariff Heading 85.03 whereas A.C. Generators (alternators) fall specifically under Tariff Heading 85.01 and sub-heading 8501.61.
4. We have carefully considered the pleas advanced on both sides. ITC Policy and Customs Tariff are two different enactments. Each is, therefore, required to be interpreted on the basis of their own schemes and not necessarily in conjunction with one another. It is no doubt true that S. No. 11 of list J uses the expression ‘generating sets’ whereas S. No. 12 uses the expression ‘generator’ but they are in different contexts. Generating sets referred to in S. No. 11 of list J are in the context of diesel generating sets upto 1500 KVA whereas expression ‘generator’ used at S. No. 12 is in the context of electric portable generators upto 3.5 KVA. On the basis of the literature, namely, World Book 1990, Edition produced by the learned SDR, it is clear that an alternator on its own cannot produce electricity. This is clear from the Section ‘How a generator works’ on page 169 of the World Book. It reads as follows :
“Basic principles – A generator does not create energy. It changes mechanical energy. Every generator must be driven by a turbine, a diesel engine, or some other machine that produces mechanical energy. For example, the generator in an automobile is driven by the same engine that runs the car.”
[Emphasis supplied]
Accordingly, expression ‘generator’ used at S. No. 12 of list J of ITC Policy AM-1992-97 must be taken to have been used in the sense of being a complete generator capable of producing electricity. Admittedly no prime mover has been imported by the appellants. The imported goods, therefore, cannot be treated as generators. The expression ‘generator’ used in connection with alternators is merely a loose expression. We are, therefore, of the view that the goods imported are not hit by S. No. 12 of list J. No import licence is, therefore, required. Confiscation of the goods is, therefore, set aside.
4.1 Next question is regarding the eligibility of the goods to the Notification 155/86. It is not doubted that the imported goods are to be used by the appellants in the assembly and manufacture of generating sets falling under Tariff Heading 85.02. An alternator is a part of generating set inasmuch as it is admitted to be a sub-assembly by the adjudicating authority itself. A sub-assembly is also a part of the whole assembly. For example, a piston assembly is a part of internal combustion engine in a motor vehicle although a piston assembly is a sub-assembly of the engine. An engine is a part of motor vehicle. With the alternator, prime mover and other control and panel parts will have to be manufactured and assembled by the appellants.on the plain language of Notification 155/86, the benefit cannot be denied to the appellants. The meaning attempted to be given by the learned SDR to the effect that parts referred to in the said Notification 155/86 must necessarily fall under Tariff Heading 85.03, is not borne out by the language of the said notification.
5. In view of the aforesaid discussion, appeal is allowed with consequential relief to the appellants.