ORDER
C.T.A. Pillai, Member
1. This is a transferred appeal in terms of Section 131B of the Customs Act, 1962 (hereinafter referred to as the ‘Act’), the proceedings having started with the issue of a show cause notice under Section 131(3) of the Act by the Government of India seeking review of the orders in appeal Nos. 617A of 1980 dated 14.3.1980 and 1058A of 1980 dated 9.5.1980 passed by the Central Board of Excise and Customs. These orders have been passed on appeal by the present respondents (M/s. Continental Exporters, Bangalore) against Order Nos. S8/194/79-Ap. Gr. II dated 10.8.1979 and S8/418/79-Ap. Gr. II dated 26.9.1979 respectively passed by the Collector of Customs, Madras. In the first case the respondents had imported goods described as ‘Max HD-10 staplers’ valued at Rs. 2,88,793.10 against four R.E.P. licences for the clearance of the goods claiming them as capital goods in the terms of para 175 of the Import Trade Control Policy for April-March 1978-79. The Collector noted that what was permitted under that para was for the import of capital goods appearing in part A of Appendix 2 in the said Policy for AM 1978-79. The goods imported are ordinary small appliances used in office and homes and shops; they are not used in industries; they cannot therefore be treated as capital goods or as packing machines falling under Sl. No. 6(68) of part A of Appendix 2 referred to above. The goods are in the nature of consumer goods falling under Section No. 750 of Appendix 3 of the I.T.C. Policy for April-March 1979 and banned for import. He did not accept the contention of the respondents that the goods are intended for the fastening of packages in which garments are packed. Accordingly he ordered their confiscation under Section 111(d) of the Act read with Section 3(2) of the Imports and Exports (Control) Act, 1947; he however allowed the goods to be redeemed on payment of a fine in lieu of confiscation of Rs. 4,30,000/-. He also imposed a penalty of Rs. 10,000/-on the respondents under Section 112 of the Act–vide his order dated 10.8.1979 referred to supra.
2. In the second case goods imported have been described as ‘staplers’ valued at Rs. 5,07,576/- and covered by five Bills of Entry; 38 licences were presented to cover the clearances; all these licences excepting two, had been issued under the I.T.C. Policy for AM 1978; clearance of the goods were claimed under para 123(1) of the Policy for AM 1978 Vol II which allows Export Houses to import O.G.L. items allowed for Actual Users. In respect of the other two licences issued for AM 1978-79 the provisions of para 175 of that Policy was invoked. In this case also the goods were sought clearance as packing machines. Following the earlier order, the Collector found that in the present case too the goods do not conform to the description of either capital goods or packing materials. He ordered their confiscation (vide order dated 26.9.1979) under Section 111(d) of the Act and fixed fines in lieu of confiscation in respect of each Bill of Entry and imposed penalties under Section 112 in respect of the consignment covered by each Bill of Entry, the details of which are indicated below:
_________________________________________________________________________________
S. No. Bill of Entry. Cif value of goods. Redemption fine Personal
fixed. penalty imposed
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Rs. Rs. Rs.
1. Rot No. 158/79 2,53,788/- 3,80,000/- 10,000/-
Line No. 44
dated 23.5.1979.
2 Rot No. 338/79 71,061/- 1,07,000/- 7,500/-
Line No. 129
dated 25.5.1079
3. Rot No. 338/79
60,909/- 91,000/- 7,000/-
Line No. 127
dated 25.5.1979.
4. Rot No. 338/79 60,909/- 91,000/- 7,000/-
Line No. 128
dated 25.5.1979.
5. Rot No. 338/79 60,909/- 91,000/- 7,000/-
Line No. 126
dated 25.5.1979.
3. The respondents appealed to the Central Board of Excise and Customs against both these orders of the Collector. The Board noted that on earlier occasions such goods had been allowed clearance by the Custom House. The Board also observed in its order No. 617-A of 1980 dated 14.3.1980 in respect of the appeal against order No. S8/194/79-Ap. Gr. II dated 10.8.1979 of the Collector that,
it is difficult to accept the Collector’s contention that the goods would not be covered by the O.G.L. as these are not capital goods but are consumer goods. A strict interpretation of either ‘capital goods’ or ‘consumer goods’ would not cover the goods in question…Moreover, there is no clear dividing line between packing machines and appliances. As for the garment industry, packing machines have been provided for packing would embrace even simple packing of the type that can be done with the help of these staplers,
and the Board extended the benefit of doubt for according to the treatment provided for capital goods to the staplers. In passing, the Board had also observed that,
The quantity involved is large and suggest that these could be diverted to uses other than the approved ones under the Policy but in the absence of any specific evidence of any such diversion the question of verification must be left to the Import Trade Control authorities.
It had also directed the Custom House to alert the licensing authorities for suitable check on the imported goods and hoped that the I.T.C. authorities will no doubt also take such other action as may be necessary in case the quantity involved in the importation suggest any improper utilisation of the licences by the respondents.
4. The show cause notice issued by the Government seeks review of the orders of the Board on the following points;
(i) Staplers are items of stationery and are not used in the garment industry as in that industry certain other automatic stapling machines which are bigger in size are used;
(ii) Staplers are only appliances which are consumer items and are banned for import;
(iii) Earlier release of the goods wrongly allowed does not entitle the respondents to clearance of the goods in the present case;
(iv) The large quantity of staplers imported will indicate that there were possibly meant for diversion to other spheres, a factor taken note of by the Board itself.
The notice sought to set aside the orders of the Board and to restore the orders of the Collector referred to supra.
5. The Senior Departmental Representative supporting the proposed action by Government, urged that stapling machine is too small even if it is used for pinning together packets, and cannot be treated as a packing machine. It is an item of common use in offices, homes etc. for the stapling of a few sheets of paper, bags etc and is thus consumable goods The earlier releases should not be accepted as a precedent, as in those cases, the licences specifically covered ‘stapling machines’ by mention as such.
6. The Representative of the respondents, at the outset pointed out that in so far as order No. 617-A of 1980 dated 14.3.1980 of the Board is concerned, the proposed review under Section 131(3) of the Act is barred by limitation in view of Section 131(4) of the Act. He pointed out that under I.T.C. Policy for AM 1978-79 packing machines are allowed clearance as capital goods vide SI. No. 68 of Section 6 of Appendix 2, The term ‘packing machine’ has not been defined. The Collector has gone by the size of the item used in other places and by the general observation that they are consumer goods. An examination of the various items allowed clearance under Appendix 2 would show that size is no criterion, nor use in other places. He disputed the finding that these are either stationery items or are consumable goods.
7. Continuing he referred to the case of State of Orissa v. Balaji Wood Industries SIC 1978 (42) 178–dealing with the term ‘packing material’. Their Lordships of the High Court observed,
in the absence of a definition, the meaning in common parlance afforded to the term must be accepted.
and in the circumstances of that case, the learned standing counsel conceded that keeping the processed goods in view, cable drums could be packing material. From this he sought to urge that in the absence of a definition for packing machine whatever machine is used in the process of packing goods would be treated as packing machine.
8. Next he referred to the case of Commissioner of Sales Tax v. Agarwal and Co. 1983 ECR 65D (Bombay). In interpreting the term ‘milk’ the Bombay High Court held that.
in any fiscal legislation the general term so used covers that commodity or item or article in all its forms and varieties.
He therefore urged that the size of the items imported should not make any difference in treating the goods as packing machines.
9. Next he referred to the case of M.S. Co. Pvt. Ltd. v. Union of India and Ors. 1985 ECR 110 (SC)–wherein the term ‘industry’ has been commented on by Their Lordships of the Supreme Court; it indicated that ‘industry’ in ordinary parlance means a place where process of manufacture or production of goods is carried on. In the process of manufacture and production of garments packing is a process of completion. Their Lordships have observed that,
while construing a word which occurs in a statute or statutory instrument, in the absence of any definition in that very document, it must be given the same meaning which it receives in ordinary parlance or understood in the sense in which people conversant with the subject matter of the statute or statutory instrument understand it.
In packaging industry stapling machines are accepted as packing machines.
10. Next he referred to the decision of this Tribunal in the case of Collector of Customs, Madras v. Continental Exporters, Bangalore wherein he stated that this Bench of the Tribunal has taken the view that similar goods as ‘capital goods’.
11. Next he referred to the case of Mysore Acetate and Chemical Co. Ltd. v. Assistant Collector of Central Excise, Mysore , at paras 15 and 16 The Mysore High Court has referred to the principle of contemporaneous exposition and held that a circular issued by the Central Board of Direct Taxes interpreting a notification of statute should be entitled to considerable weight and is highly persuasive. The earlier clearance of goods would fall on somewhat similar basis indicating contemporaneous exposition of the licensing policy by the Custom House itself.
12. Next he referred to the case of ‘Collector of Central Excise Hyderabad v. Uma Laminated Products (P) Ltd. 1984 ECR 2028 (Cegat). It again deals with the principle of contemporaneous exposition in paras 19, 20, 21 and 23. In para 4 of the notice the Government has referred to ‘other automatic stapling machines which are bigger in size being used’; no proof/evidence in support of this had been adduced.
13. Next he assailed the findings that the goods are stationery items. Levy of customs duty is not relevant to classification of the goods for the purposes of I.T.C. Policy at the relevant time.
14. He disputed the point that the goods are consumer goods and according to Websters New Collegiate Dictionary ‘consumer goods’ mean goods that directly satisfy human wants. In the present case the goods are used in production and hence they are not consumer goods.
15. Next he referred to the case of ‘Gujarat State Export Corporation Limited and Anr. v. Union of India and Anr. 1984 ECR 886 (Bom). In this case the Bombay High Court has held that where there is longstanding practice of the Custom House to release similar goods against similar licences which showed two views were possible about the validity of import, in such a situation the precedent regarding release should prevail. Finally he referred the case of National Machinery Manufacturers Ltd. v. Union of India and Ors. 1980 ELT 717 (Bombay). In this case the Bombay High Court has held that when-
import of certain raw materials have been allowed by wrongly describing the raw materials as component parts to certain machinery, the authorities cannot impose penalty or confiscate such raw materials if imported under another licence which described raw materials not as components but as components as per the first licence.
16. Lastly the representative urged that the order of the Board extending the benefit of doubt to the respondents is an appropriate course in the light of the above does not require interference.
17. In regard to the personal penalty he said that no mens rea exists and hence the imposition of penalty is not warranted particularly when the first consignment was released without action in October 1978 whereas the Letter of Credit was opened in the present case some time in November 1978.
18. In reply the S.D.R. referred to the decision of the Supreme Court in the case of Geep Flashlight Industries Ltd. v. Union of India and Ors. the Supreme Court has held that the provisions of Sub-section (3) of Section 131 of the Act are independent of Sub-section (5) thereof. Similarly action under Section 131(4) would also be independent of the time bar. In the present case there is no proposal for enhancement of a fine in lieu of confiscation or penalty but only restoration of the orders of the Collector.
19. He reiterated that earlier clearances cannot act as estoppel or be treated as a precedent if it was a wrong one. The theory of precedents would not apply to a wrong decision. Referring to the list of ‘capital goods’ permitted clearance under ITC Policy for April-March 1977-78, he referred to Part III of AM 1977-78 which specifically deals with ‘List of machinery required by garment industry…articles allowed to Actual Users under O.G.L….” SI. No. 6 of Appendix 2 Policy for AM 1979 again refers to ‘machinery for garment/hosiery industry’. In interpreting this list one has to go by the Industrial Policy for the industry for which it is needed and not for items from other sub-classification and argue that they are small in size or not. In the case of Collector of Customs, Madras v. Continental Exporters –the Tribunal has held that ‘Max-HD-10 staplers’ are general appliance.
20. We had asked to see the licence in respect of which similar goods were claimed to have been cleared earlier to be shown and it took some time; some photostat copy was filed a few months after the date of hearing. It is, however, noticed that the description of the goods as noted therein is hardly legible from the copy filed and there are some overwritings. We do not therefore propose to take that document into account.
21. We have considered the arguments of both sides. To take up the case of the plea of time bar first, we note that Section 131(4) of the Act at the relevant time read as,
131(4)–No order enhancing any penalty or fine in lieu of confiscation or confiscating goods of greater value shall be passed under this section-
(a) in any case in which an order passed under Section 128 or Section 130 has enhanced any penalty or fine in lieu of confiscation or has confiscated goods of greater value, and
(b) in any other case, unless the person affected by the proposed order has been given notice to show cause against it, within one year from the date of the order sought to be annulled or modified.
Thus no order enhancing the penalty or a fine in lieu of confiscation or confiscation of goods of greater value can be passed in exercising the powers of review unless notice has been given within one year from the date of the order sought to be annulled or modified. No doubt in the present case the Collector of Customs had imposed personal penalties and ordered confiscation of goods with fine in lieu of confiscation; however when the Board set aside these orders of the Collector, what is now left with is a situation where there is no effective penal action in respect of the goods concerned. The proposal to set aside the orders itself implies that what has been set at nought by the Board is going to be restored; this would result in enhancement of a fine in lieu of confiscation or enhancement of a penalty from nil figure to the one already set out by the Collector in his order. In this sense we agree with the representative of the respondents that proceedings in respect of order No. 617A of 1980 dated 14.3.1980 of the Board cannot be continued and will be hit by limitation under Section 131(4)(b) of the Act. Accordingly we discharge the notice of the Government in so far as that notice is concerned.
22. In respect of order No. 1058-A of 1980 dated 9.5.1980 the principal point for decision is whether the goods described as staplers or stapling machines are packing machines or not In the Policy for AM 1978-79 ‘capital goods’ have been denned as,
any plant, machinery or equipment required by an investor for installation in his premises for use incidental thereto, including those requited for replacement of expansion.
The term ‘equipment’ occurring as it is, along with the term ‘plant and machinery’ would suggest that the goods in view are items such as ‘plant and machinery’; it would not refer to an item like a stapler which is more in the nature of an appliance though called a stapling “machine” at times. The goods allowed to be cleared under the term ‘capital goods’ in terms of Appendix 2 is packing machine. The Shorter Oxford English Dictionary defines ‘packing’ as-
The action of Pack; Any material used to fill up a space or interstice closely or tightly;
‘Pack’ itself has been explained as-
To make into a pack or package; to put together as a bundle, or in a box, bag, etc. for transport or for storing. In Commerce: ‘To prepare and put up (meat, fish, eggs, fruits etc.) in tins, glasses, etc. so as to preserve them.
The other definitions given are not relevant
“Stapling Machine” has been defined as-
a machine for binding papers together with staples
and ‘staple’ itself is defined as-
A short rod or bar of iron, etc, bent into the form of a U or of three sides of a rectangle, and pointed at the ends, to be driven into a surface, in order to serve as a hold for a hasp, hook, or bolt to secure a door or box, or as an attachment for a rope or the like.
A stapling machine could be a machine used for stapling and to staple, as generally noticed from the dictionary is an act of putting together things with a pin. Thus the act of stapling is different from the act of packing, and the “stapling machine”–even if the goods imported are treated as a machine and not a mere appliance–is different from a packing machine.
23. There is a good deal of force in the points set out in the notice of the Government that stapler is really an article of stationery used by all and sundry for the purposes of putting together sheets of paper or even cardboard in an effort at putting things together. If a stapler is considered as a packing machine, on analogy one could say that a sewing m; chine used to stitch bags is also a packing machine, or gumming kit used for closing a packet as a packing machine. Though the term ‘packing machine’ is used with a wide amplitude in meaning, when we deal with goods which have specific connotative sense as in the, present case, we would not be justified in holding that such a specific machine or appliance is covered by the general term ‘packing machine’. Stapling machines use staples and stapler is a consumable item; the staplers are what one could term as ‘consumer durable’. They are also items normally bought and sold in a stationery shop and in this sense could be treated as an item of stationery. So far as the largeness of the quantity of the goods imported is concerned though it may be indicative of its possible misuse, one would have deal with the goods at the time of importation and not a possible diversion. We would therefore not consider this point decisive in deciding whether the goods imported are packing machines or not. However, in the light of what we have observed earlier, this would lend support, however light such support may be, to the view that the goods imported are not for use as claimed by the respondents.
24. A number of decisions have been cited on behalf of the respondents. We shall now deal with them seriatum:
25. The case of ‘Geep Flashlight Industries’ cited by the S.D.R. is distinguishable from the facts of the present case. In that case Their Lordships of the Supreme Court were considering a notice for revision of an order sanctioning a refund and hence considered the effect of Section 131(5) of the Act in the light of Section 131(3). They observed that Section 131(5) refers only to cases where a duty has not been levied or has been shortlevied and not a case where an order of refund has been passed but not given effect to; hence they found that Section 131(3), worded broadly as it is, would come into play. However, in the present case Section 131(4) specifically refers to fines and penalties with a limitation built in the sub-section itself.
26. In the ‘Balaji Wood Industries’ case all that the Division Bench of the Orissa High Court has stated is that in the absence of a definition, the meaning in common parlance afforded to the term must be accepted. We respectfully agree. The only point is that in the present case a stapler is not a packaging machine but an appliance or contrivance for stapling things together–a far cry from packaging as such.
27. In the case of ‘Agarwal and Co.’ Her Lordship of the Bombay High Court was considering the manner of interpreting a general term used for describing any commodity in any fiscal legislation. She held after examining some judgments in the matter, that milk in powder form would be included in generic term ‘milk’. What we deal with here is not a generic term but a term indicating a particular activity, namely packaging. The decision in the Agarwal case is thus not relevant to the present case.
28. The observation in the case of ‘M.S. Co. P. Ltd.’ is really a reiteration of what has been stated by the Bombay High Court in the ‘Agarwal Case’ cited.
29. The interpretation of the decision of this Bench of the Tribunal in CD(MAS) 584/83 (incidentally of the same respondent in regard to Max-HD 10 stapler) is misconceived. In that case the Tribunal was considering not the status of a stapler as a machine or an appliance, but as to whether the article was an industrial unit or a non-industrial unit. The decision therein is thus of no avail in the present case.
30. In the case of ‘Mysore Acetate Chemicals and Co. Ltd.’ reference has been made to the theory of contemporaneous exposition. Clearance of some goods on an earlier occasion is not the same as contemporaneous exposition of the term used in the I.T.C. Policy. It is not as if some instructions or some clarification have been issued by the Policy making authority namely Chief Controller of Imports or the Government of India explaining the scope of the term ‘packing machine’. This case is thus not relevant to the present proceedings.
31. What we have observed above applies to the decision in the case of ‘Uma Limited Products Ltd.’
32. The next case referred to is that of ‘Gujarat State Export Corporation Ltd. The point made therein is that the longstanding practice of the Custom House in allowing clearance of goods has to be respected. There is no data in the present case to show that there have been earlier clearances under conditions or circumstances similar to the present one, much less to speak of any longstanding practice. For a longstanding practice to exist there must be a series of transactions spread over a period of time–no material on this score has been presented in this case.
33. In the case of ‘National Machinery Manufacturers Ltd.’ His Lordship of the Bombay High Court had indicated that where there is an ambiguity or doubt as to the interpretation of the description of the goods in an import licence, it must be resolved in favour of the importer. The question arises whether there is an ambiguity or doubt. We see no ambiguity in the description of the term ‘packing machine’ nor do we have any doubt in our minds about the scope of that item.
34. We therefore set aside the order of the Board in No. 10S8-A of 1980 dated 9.5.1980 and restore the order No. S8/418/79-Ap. Gr. II dated 26.9.1979 of the Collector. In doing so, however, we note that there is hardly any scope for sustaining the personal penalty imposed on the importer in respect of the consignment. Accordingly while we restore the order of the Collector, we maintain the order of confiscation of the goods under Section 111(d) of the Act with a fine in lieu of confiscation totalling Rs. 7,60,000/- in respect of the Bills of Entry referred to in para 2 above though not the personal penalty imposed under Section 112 of the Act.
