ORDER
S. Kalyanam, Member (J)
1. This appeal is directed against the order of the Additional Collector of Customs (Appraising), Madras, dated 30-3-1991 imposing a fine of Rs. 40,0007- in lieu of confiscation of certain goods such as ball point pen refills, ball point pen knobs and caps and ball point pen barrels imported by the appellant herein under the provisions of the Customs Act, 1962, the ‘Act’ for short.
2. The appellant imported 3 consignments against 3 invoices goods such as ball point pen refills, ball point pen knobs and caps and ball point pen barrels. The 3 consignments were on the basis of 3 different orders placed and the importation also was made on different dates against 3 Bills of Entry. For purpose of convenience I am giving hereunder the extract of purchase order No. , Invoice No. “& date, description of goods, Date of shipment, Date of filing of Bill of Entry, Date of arrival, and the Entry under which the importers claimed the clearance of the same.
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Purchase Invoice No. & Date Description of goods Date of shipment
Order
No.
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(1) (2) (3) (4)
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(1) EMSB/ EMSB/1003/90E Plastic Extruded Ball 30-10-90.
001/90/ES dated 30-10-90 Pen Barrels. Vessel ILOVIK
(2) EMSB/ EMSB/1002/90E Plastic Extruded Ball 19-10-90 Vessel
002/90/ES dated 19-10-90. Pen Knobs & Caps. ALCOR
(3) EMSB/ EMSB/1001/90E Ball Point Refills 5-7-90 Vessel M.V.
003/90/E5 dated 5-7-90 TIGER RIVER
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Date of Filing of Date of arrival Licence Produced Entry under which B/E Licence covered.
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(5) (6) (7) (8)
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26-11-90. 22-11-90. P/L/3444665/C/XX/16 Entry No. 665-Ap-
/M/89/64 0001-00-9 pendix 3, Part A
dated 25-6-90.
P/L/3310814/C/XX/15
/Z/89 dated 18-1-90
31-12-90 1-11-90. P/L/3444665/C/XX/16 Entry No. 665-Ap-
/M/89/64 0001-00-9 pendix 3 Part A.
dt. 25-6-90.
27-7-90 21-7-90 P/L/3444665/C/XX/16 Entry No. 647-Ap-
/M/89/64 0001-00-9 pendix 3 Part A.
dt. 25-6-90.
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3. Proceedings were instituted against the appellant by the Department by issue of a show cause notice alleging that the goods imported would be covered by SI. No. 173 of Appendix 2, Part B of the Import Policy AM 1990-93 under which all consumer goods in SKD condition including sub-assemblies, assemblies would require a specific licence and the REP licences produced by the importer seeking clearance of the goods in question under Appendix 3, Part A SI. No. 647 and 665 would not be legally acceptable and the proceedings ultimately culminated in the impugned order referred to above.
4. Shri Vijayaraghavan, the learned Consultant for the appellants, at the outset submitted that the fact that the goods were imported on the basis of 3 different orders on 3 different dates and the consignments actually reached on 3 different dates and were sought to be cleared under 3 different Bills of Entry is not disputed by the Department and is borne out by the records. It was urged that in the impugned order the learned adjudicating authority has not held that the goods in question were in SKD condition coming within the mischief of SI. No. 173 of Appendix 2, Part B of the Import Policy AM 1990-93. On the other hand the learned Additional Collector has given a clear finding that if “the consignments are taken as parts of Ball point pens in individual consignments, then the import licences produced are valid, since individually they are covered by the licences.” The learned Consultant further submitted that the import has been held in the impugned order as one in contravention of law particularly with reference to SI. No. 172 of Appendix 2, Part B of Import Policy AM 1990-93. It was urged that this finding itself is not tenable legally as well as factually with reference to the evidence on record. The learned Consultant contended that SI. No. 172 of Appendix 2, Part B of the Import Policy in question would exclude from its purview and application goods appearing individually in Appendix 3, Part A and 5 and also goods specifically listed for import under Open General Licence. It was further submitted that Appendix 3, Part A of the Policy in question under SI. No. 647 covers metal caps, clips and barrels for pens (including ball point pen), pen nibs (for handwriting) and ball point refills. Likewise, SI. No. 665 of Appendix 3, Part A of the same Policy would cover Plastic extruded/moulded/fabricated components. The learned Consultant, therefore, submitted that what has been expressly excluded by SI. No. 172 cannot be brought under SI. No. 172 for penal proceeding* against the appellant in the factual background of this case. The learned Consultant also assailed the reasoning of the learned adjudicating authority, who has placed reliance on the ruling of the Supreme Court in the case of Sharp Business Machines Pvt. Ltd. v. Collector of Customs, reported in 1990 (49) ELT 640 (S.C.). The learned Consultant contended that the learned adjudicating authority has misdirected himself in construing the ratio of the ruling of the Supreme Court in the said case by holding that what cannot be done directly cannot be done indirectly by the importers. It was contended that the essential distinguishing feature in the case before the Supreme Court was that more than 62% of the components of the copiers was not permissible for import under the relevant Policy as it stood at that time and in that particular case the fact remains that the import was 100% clearly over and above 62%. The learned Consultant further urged that the ruling of the Supreme Court in the case of Union of India v. Tarachand Gupta & Bros., 1983 (13) ELT 1456 (S.C.), which has not been overruled by the Supreme Court by any Larger Bench, would squarely govern the facts of the case. The learned Consultant also adverted to the definition of ‘consumer goods’ in the Policy AM 1990-93 Vol. I in Chapter I at Para 18 and urged that when what has been imported is only components, they cannot be construed to be ‘consumer goods’ coming within the mischief of SI. No. 172 of Appendix 2, Part B of AM 1990-93. The learned Consultant further contended that the validity of the licence is decided with reference to the date of shipment/despatch of goods from supplying country and not the dale of arrival of the goods at an Indian airport as per Para 16, Clause (2) of Chapter II of the Policy relating to General Licensing Matters. It was, therefore, submitted that what has been imported as individual components at different points of time cannot be clubbed for the purpose of judging the validity of the import. In developing this argument the learned Consultant urged that whenever individual components are imported and the Bill of Entry is filed the Customs authorities would assess the same under the Customs Act read with Customs Tariff Act and such completed assessment cannot be reopened in the event of the Department finding the same importer importing different sets of component parts at different points of time. In other words it was urged there cannot be one standard by the authorities for making assessment under the Customs Act to duty of the components imported and a different standard for construing the scope of the licence vis-a-vis the component parts imported. The learned Consultant also placed reliance on the ruling of the West Regional Bench of the Tribunal in the case of Susha Electronics Industries v. Collector of Customs & Central Excise, reported in 1989 (39) ELT 585 (Tribunal), and contended that the Tribunal has taken the view that as per definition given in the Policy ‘consumer goods’ would mean consumer goods which can directly satisfy the needs without further processing and the components imported would not directly satisfy the human- needs without further processing and, therefore, cannot be construed to be ‘consumer goods’. He further submitted that the Tribunal held in that case that the components of TV if clubbed even though would constitute TV set in SKD condition could not be construed to be TV set imported in contravention of law.
5. Shri Namasivayam, the learned DR, vehemently contended that the goods imported though at different times in the nature of components would, if assembled, result in Ball point pen viz. the ‘consumer goods’ which would squarely come within the mischief of SI. No. 172 of Appendix 2, Part B of the Policy dealing with restricted items requiring a specific licence. The learned DR further urged that as rightly held by the learned adjudicating authority following the ratio of the Supreme Court ruling in the case of Sharp Business Machines Pvt. Ltd. cited supra, what is not directly permissible cannot be indirectly done. The learned DR distinguished the ratio of the ruling of the Supreme Court in Tarachand Gupta’s case and urged that in. regard to the goods dealt with in that case viz. parts of motor cycle and scooter and also regarding the import of motor cycle there was no absolute ban or prohibition. The Supreme Court in Tarachand Gupta’s case had to consider only the permissibility of import against certain specific entries. The learned DR further urged that entry 647 deals only with metal caps and parts made of metal and would not cover plastic and, therefore, the plastic refill would not be covered by the same. The learned DR further urged that SI. No. 665 in Appendix 3 Part A relating to plastic extruded/moulded/fabricated components is generic in nature and not specific in referring to the components of Ball point pen. It was further urged by the learned DR that individual licences cannot and should not be looked into and the entirety of the product as to whether the import of the same is permissible or prohibited will have to be looked into in the context of a particular case and urged that in the present case the Ball point pen being a consumer item would not be permissible for import. The learned DR submitted that the reference by the learned Consultant to the date of shipment has no relevance in this case and the date of shipment is relevant only for ascertaining the validity of the licence period and also referred to Para 86 of the Handbook. Finally, the learned DR urged that the ruling of the Calcutta High Court in the case of Collector v. Misuny Electronic Works reported in 1987 (30) ELT 345 was overruled by the Supreme Court on the ground that one should not look into merely the respective licences but to the totality of the goods imported.
6. I have carefully considered the submissions made before me. The question that arises for my consideration in the appeal is whether the goods viz. components of Ball point pens are permissible for import under the REP licences produced by the appellant or not. It is not disputed before me that the goods were imported at different times and sought to be cleared at the different Bills of Entry as the extract furnished above would indicate. The learned adjudicating authority has also not disputed this factual position in the impugned order. It is further not disputed and has indeed been also found by the learned adjudicating authority that if the consignments were taken as parts of Ball point pens in individual consignments the import licence produced is valid, since individually they are covered by the licence. The import is held as in contravention of law in the impugned order on the ground that the case would come within the mischief of SI. No. 172 of Appendix 2, Part B of the relevant Policy prohibiting the import of consumer goods without a specific licence. The allegation in the show cause notice against the appellant is that the goods in question were imported in SKD condition falling under Appendix 2, Part B, vide SI. No. 173 of the relevant Import Policy. The relevant para of the show cause notice for the purpose of convenience is extracted hereunder :
“The import of Ball Point Pen in SKD condition falls under Appendix-2, Part-B, vide SI. No. 173. But the importers have sought clearance as components as if the goods are falling under Appendix-3, Part-A against production of REP licences. The licences produced are not valid for import of item falling under Appendix-2B.
Therefore, it appears that the importers have attempted to clear Ball Point Pens without producing a valid Import Licence, as the goods are falling under Appendix-2, Part-B, SI. No. 173.”
In the entire impugned order no finding against the appellant has been given on the ground that the goods were in SKD condition coming within the mischief of SI. No. 173 of Appendix 2, Part B, in regard to which alone there was a specific charge against the appellant in the show cause notice as would be evident from the extract given above. Be that as it may, assuming for the purpose of argument that the Department would be entitled to proceed against the appellant even otherwise, let me find out as to whether the goods imported can be brought within the mischief of SI. No. 172 Appendix 2, Part B, for which admittedly there was no specific allegation in the show cause notice against the appellant. SI. No. 172 of Appendix 2, Part B of AM 1990-93 reads as under :
“172. All consumer goods, however described, of industrial, agricultural or animal origin, not appearing individually in Appendices 3 Part A and 5 or specifically listed for import under Open General Licence.”
SI. No. 172 excludes goods appearing in Appendices 3, Part A and 5 or specifically listed for import under Open General Licence. Appendix 3, Part A, SI. No. 647 reads as under:
“647. Metal caps, clips and barrels for pens (including ball point pen), pen nibs (for handwriting) and ball point refills.”
SI. No. 665 reads as under :
“665. Plastic extruded/moulded/fabricated components.”
A perusal of SI. No. 647 reveals that the same deals with metal caps, clips and barrels for pens (including ball point pen) and ball point refills (emphasis supplied). Therefore, in the present case it is not disputed that the appellant has imported Ball point barrels, caps, knobs and refills. SI. No. 665 deals with goods of plastic extruded/moulded/fabricated components. The goods have been described in the Bill of Entry as ‘Plastic extruded Ball point refills, knobs, caps.” Therefore, a plain reading of SI. No. 647 and 665 would show that they would cover the goods imported and the two SI. Nos. are excepted from the operation and mischief of SI. No. 172 of Appendix 2, Part B, dealing with restricted items extracted above. Let me now take up the applicability of the ruling cited by either side. The learned adjudicating authority has placed reliance on the ruling of the Supreme Court in the case of Sharp Business Machines Pvt. Ltd. cited supra, in holding against the appellant. One important factor one has to take note of in regard to the applicability of the ratio of the ruling in the Sharp Business Machines’ case by the Supreme Court, … in that case more than 62% of the components of the copiers was not permissible for import and factually the importer in that case had imported 100% of the components of a fully finished and completed goods. Apart from it, it has been found by the Supreme Court in para 13 of its judgment in the said case that the goods in that case were covered by 3 Bills of Entry all dated 3-2-1987 and had been shipped from Hongkong on the same day i.e. on 21-1-1987 and the entire goods arrived on the same day and by the same flight on 30th January, 1987 and the goods covered by the Bills of Entry had been supplied by the same supplier viz., M/s. Paralax Industrial Corp. Hongkong, and the goods were in SKD/CKD condition. It is in that context the Supreme Court held that the licence produced was valid only for certain components and was not valid “for fully assembled copiers”. The ratio of the Supreme Court in Tarachand Gupta’s case, in my view, would apply to the facts of the present case and it should be noted that Tarachand Gupta’s case has also been decided by a Bench of two Judges of the Supreme Court as the case of Sharp Business Machines referred to in the impugned order. The Supreme Court in Tarachand Gupta’s case had to construe the scope of Entry 295 and 294. Entry 294 dealt with import of motor cycles and scooters in CKD condition and Entry 295 dealt with articles for use as parts and accessories of motor cycles and scooters. The Supreme Court repelled the contention of the Department that by importing parts of motor cycles and scooters in CKD condition the importer had contravened Entry 295 and also the argument that the importer had done indirectly what was prohibited to be done directly. The Supreme Court in para 15 of the judgment has observed as under :
“If Dr. Syed Mohamed’s contention were to be right we would have to import remark (ii) against Entry 294 into Entry 295, a thing which obviously is not permissible while construing these entries. Further, such a condition, if one were to be implied in Entry 295, would not fit in as it is a restriction against import of motor cycles and scooters in C.K.D. condition and not their parts and accessories. There is, therefore, no question of a licensee under Entry 295 doing indirectly what he was not allowed to do directly was importing motor cycles and scooters in C.K.D. condition under a licence under which he could import complete motor cycles and scooters only. That restriction, as already observed, applied to a licensee in respect of goods described in Entry 294 and not a licensee in respect of goods covered by Entry 295.”
The Supreme Court ultimately found in favour of the importer by observing as under :
“24. The respondents’ licence admittedly authorised them to import goods covered by entry 295. They could, therefore, legitimately import, on the strength of that licence, all and several kinds of parts and accessories of motor cycles and scooters. The only question, therefore, before the Collector was whether the respondents’ licence covered the goods imported by them i.e. whether the goods were parts and accessories. If they were, the imports were legitimate and no question of their being not covered by the licence or the respondents having committed breach of Section 3 of the Imports and Exports (Control) Act or Section 167(8) of the Sea Customs Act could possibly arise. What the Collector, however, did was that he put the two consignments together and held that they made up 51 ‘Rixe’ Mopeds in C.K.D. condition and were, for that reason, not the articles covered by entry 295 but articles prohibited under remark (ii) of entry 294. But entry 294 deals with motor cycles and scooters complete and assembled. Remark (ii) against that entry prohibits an importer who held a licence to import motor cycles and scooters from importing motor cycles and scooters in C.K.D. condition. Remark (ii) containing that prohibition had nothing to do with entry 295 which did not contain any limitations or restrictions whatsoever against imports of parts and accessories.
25. That being so, if an importer has imported parts and accessories, his import would be of the articles covered by entry 295. The Collector could not say, if they were so covered by entry 295, that, when lumped together, they would constitute other articles, namely motor cycles and scooters in C.K.D. condition. Such a process, if adopted by the Collector, would mean that he was inserting in entry 295 a restriction which was not there. That obviously he had no power to do. Such a restriction would mean that though under a licence in respect of goods covered by entry 295 an importer could import parts and accessories of all kinds and types, he shall not import all of them but only some, so that when put together they would not make them motor cycles and scooters in C.K.D. condition.”
I should like to note that the ratio of the Supreme Court ruling in Tarachand Gupta’s case is by a Bench of two Ld. Judges and has been only distinguished by the Supreme Court in Sharp Business Machines case by a Bench of the two Judges. The ratio of the West Regional Bench of the Tribunal in Susha Electronics Industries case also deals with similar aspects and the ruling also would govern the facts of the case in favour of the appellant. Though not cited in the Bar I should like to refer to the ratio of the Division Bench ruling of the Bombay High Court in the case of Bussa Overseas and Properties (P) Ltd. reported in 1991 (53) ELT 165 (Bom.) where the Bench has made a reference to Tarachand Gupta’s case (cited supra) and has observed as under :-
“.. On the other hand, the Supreme Court has held in the case of Union of India v. Tarachand Gupta and Bros., AIR 1971 SC 1558 that the Collector of Customs, while examining the goods imported under the licence covered by an entry, has only to ascertain whether the goods are of the description in that entry. His going beyond this would be non-compliance of the entry. In that case the entry involved was 295. There was no dispute that the parts imported were covered by that entry. The case of the Customs Authorities was that on assembling, the parts would become other articles, namely motor cycles and scooters. It was held that such a process, if adopted by the Collector, would mean that he was inserting in entry 295 a restriction which was not there. That power he obviously did not have. This decision is applicable in the case before us. Ethyl Alcohol appearing at SI. No. 165 in Appendix 3, Part A is without any restriction. The goods imported are covered by this entry. The Customs Authorities contend that even though the goods imported are covered by the entry Ethyl Alcohol, they would not be covered by the entry, as the Ethyl Alcohol imported is not of the kind which is used as raw material in the manufacture of Dyes and Dye-intermediates. As held by the Supreme Court, this is not permissible.”
The contention of the Ld. DR that there was no prohibition of the goods concerned in Tarachand Gupta’s case and that would distinguish the present case cannot be accepted, because as I have held earlier, in the present case the goods in question are clearly excepted from the purview of SI. No. 172 by express exclusion by SI. No. 647 and 665 of Appendix 3, Pt. A. The plea of the Ld. DR that only metal barrels and components would be permissible for import and not plastic refills would lead to an anomaly, because apart from goods of plastic covered by SI. No. 665 dealing with plastic extruded/moulded/fabricated components, there is no reason as to why the plastic refill alone should be discriminated against. To a specific query in this regard, the Ld. DR was not able to satisfactorily offer any explanation. In view of the ratio of the Supreme Court in Tarachand Gupta’s case and also the view taken by the West Regional Bench of the Tribunal in the case of Susha Electronics Industries, I do not find any force in the contention of the Ld. DR that the entirety of the product has to be looked into and individual sense cannot be looked into. As rightly contended by Shri Vijayaraghavan, the Ld. Consultant, the Department cannot for the purpose of duty assessment under the Customs Act treat parts separately and for the purpose of judging the validity try to correlate the various parts imported at different points of time by two Bills of Entry and to give a finding that all the parts and components should make for a full Ball Point pen. If the contention of the DR were to be accepted, it may lead to an anomalous position of the Department not being in a position to assess the goods as and when imported and Bill of Entry filed and to wait to find out as to whether the imports of other component parts have already taken place or likely to take place at a future date and dovetail all together for assessment. In fact this aspect of the matter has been succinctly referred to in the judgment of the Hon’ble Supreme Court in the case of Union of India v. Tarachand Gupta & Bros, reported in 1983 (13) ELT 1456 (S.C.) where the Supreme Court has held as under:
“Therefore, the mere fact, that the goods imported by them were so complete that when put together would make them motor cycles and scooters in C.K.D. condition, would not amount to a breach of the licence or of Entry 295. Were that to be so, the position would be anomalous as aptly described by the High Court. Suppose that an importer were to import equal number of various parts from different countries under different indents and at different times, and the goods were to reach here in different consignments and on different dates instead of two consignments from the same country as in the present case. If the contention urged before us were to be correct, the Collector can treat them together and say that they would constitute motor cycles and scooters in C.K.D. condition. Such an approach would mean that there is in Entry 295 a limitation against importation of all parts and accessories of motor cycles and scooters. Under that contention, even if the importer had sold away the first consignment or part of it, it would still be possible for the Collector to say that had the importer desired it was possible for him to assemble all the parts and make motor cycles and scooters in C.K.D. condition. Surely, such a meaning has not to be given to Entry 295 unless there is in it or in the licence a condition that a licensee is not to import parts in such a fashion that his consignments, different though they may be, when put together would make motor cycles and scooters in C.K.D. condition. Such a condition was advisedly not placed in Entry 295 but was put in Entry 294 only. The reason was that import of both motor cycles and scooters as also parts and accessories thereof was permitted, of the first under Entry 294 and of the other under Entry 295. A trader having a licence in respect of goods covered by Entry 294 could import assembled motor cycles and scooters, but not those vehicles in C.K.D. condition, unless he was a manufacturer and had obtained a separate licence therefor from the Controller of Imports who, as aforesaid, was authorised to issue such a licence on an ad hoc basis. Thus the restriction not to import motor cycles and scooters in C.K.D. condition was against an importer holding a licence in respect of goods covered by Entry 294 under which he could import complete motor cycles and scooters and not against an importer who had a licence to import parts and accessories under Entry 295.”
The goods as imported would not satisfy the definition of consumer goods’ which would mean for the purpose of Import Policy consumption goods which can directly satisfy the human needs without further processing. Before parting with this case, I should like to add that it is well settled proposition of law and canons of interpretation that if a Policy is capable of two different interpretations in a given context, the benefit of the same should go to the importer or the assessee as the case may be. Therefore, on consideration of the entire evidence on record and for the reasons set out above, I am inclined to think that the import cannot be said to be in contravention of the law and in my view the goods imported would be covered by the REP licence produced by the appellant. As I mentioned earlier, when there is no doubt with reference to the applicability of the licence to the goods in question vis-a-vis the relevant provisions of the Policy the benefit of the same should be given to the importer. In this view of the matter, I set aside the impugned order and allow the appeal.
